Rolfe Winkler

Burlington…not so Buffett-like

November 3, 2009

So I thought I’d do a little number crunching on Buffett’s Burlington deal. What does that tell us? That Buffett is paying a full price for a business with mediocre returns on capital, that he’s betting on growth, not value.

Morning Links 11-2

November 2, 2009

CIT files for bankruptcy (Wilchins/Comlay, Reuters) The $2.3 billion they got from TARP? It’s gone. We’ve known that for a while….another dagger in the heart of the we-made-money-on-TARP argument…

Bank failure Friday

October 31, 2009

FDIC closed 9 banks late last night, with a combined $19.4 billion of assets all of which were owned by one holding company and sold to US Bank in Minnesota. From Robin Sidel, WSJ:

Frank changes mind, now favors pre-funding

October 30, 2009

From Alison Vekshin:

Barney Frank, chairman of the U.S. House Financial Services Committee, reversed course and will support requiring financial firms to prepay into a fund the government will use to unwind large firms after they fail.

Cushions are thicker but don’t get comfy

October 30, 2009

In a spot of good news for the economy, banks continued to rebuild their capital cushions in the third quarter. But are they doing so fast enough? One risk going forward may be the size of their securities portfolios, which could expose them to significant interest rate risk when the Federal Reserve finally taps on the brakes.

Rob Johnson’s missing testimony

October 29, 2009

Recently Yves Smith over at Naked Capitalism posted snippets of Rob Johnson’s testimony before the House Financial Services Committee. The testimony he tried to give anyway. Johnson’s commentary was rather trenchant, so I thought I’d click over to get the full version. But it wasn’t where it was supposed to be on the Committee’s website.

Afternoon Links 10-29

October 29, 2009

(Reader note: from here on out, instead of citing the publication in which a piece appears, I plan to cite the writer….where possible anyway.)

Bubble-wrapping the China shop

October 29, 2009

Do you think we should establish a government-backed insurance fund for big banks’ risky trading activities? Probably not. But that’s precisely what the administration and Congress agree should be done. Today Sheila Bair proposed her own variation on the theme. At first glance her idea sounds better, but it’s just as bad as the others.

WaMu’s bank run

October 29, 2009

A fantastic piece from the Puget Sound Business Journal’s Kirsten Grind. It documents WaMu’s final months, noting that the bank suffered two large bank runs that management successfully hid from the press at the time. See chart below.

Sheila throws GMAC a bone

October 28, 2009

GMAC sold more FDIC-backed debt today… (Reuters)

General Motors Acceptance Corp on Wednesday sold $2.9 billion in three-year government-guaranteed notes, according to a market source familiar with the sale. The 1.75 percent notes were priced at 99.991 to yield 1.753 percent, or 31.6 basis points over comparable U.S. Treasuries.

Afternoon Links 10-28

October 28, 2009

Apollo shares plunge on government inquiry (Bloomberg) The for-profit education industry is shady in the extreme. Fully 86% of Apollo’s revenue comes from student loans financed by the government. It’s a great scam. Find a warm body that qualifies for federal student aid, and then sell ‘em as much education as they’re willing to borrow against. And when the government offers to increase aid, companies like Apollo (and private universities) just raise their prices, forcing students to take on more debt for the same education. In the end, its taxpayers that take the hit when student loans default…

Don’t codify too big to fail

October 28, 2009

The new legislation unveiled by Representative Barney Frank doesn’t end “too big to fail” — it codifies it. It also puts taxpayers on the hook for a large portion of future bailouts.

Bond Bears: Beware of “crypto QE”

October 28, 2009

The guys at Variant Perception make a great point. Some reform plans for the banking sector (so-called “narrow banking” being the most extreme) would have banks invest more deposits in government paper in order to keep them safe. To the degree such plans get traction, that could keep a lid on yields despite rising government spending.

GMAC: bottomless pit watch

October 28, 2009

The government has already poured $12.5 billion into GMAC since last December, and now the company is negotiating for $2.8-$5.6 billion more. Oh, and FDIC will allow the company to max out its borrowing capacity under TLGP, bringing the total there to $7.4 billion.

Afternoon links 10-27

October 27, 2009

New York Fed’s Secret Choice to pay for swaps hits taxpayers (Bloomberg) Remember the $13 billion that Goldman got via AIG after the government takeover? Turns out the NY Fed instructed AIG to pay out 100ยข on the dollar. Just another fact to keep in mind next time someone says the banks are “earning” their way through this crisis.