Endgame Near For CIT
by ilene - September 30th, 2009 10:37 am
Endgame Near For CIT
Courtesy of Yael Bizouati at Clusterstock
*****
And don’t miss this, courtesy of Tyler Durden at ZH
Jim Cramer’s Recommendation On CIT From Yesterday: "Primed For Upside. I Would Buy"
One can only hope that at some point irresponsible, speculative and highly destructive stock calls like this would see some regulatory intervention.
Citi and CIT Are Primed for Upside, by Jim Cramer, 9/29/2009, 1:54 PM EDT
Citigroup’s on the move, so is CIT . I think that Citigroup will be the biggest beneficiary of the new plan to buy toxic assets, because it is basically running its SIV as discontinued operations and it could benefit from the new program. CIT is about the possible IndyMac link-up courtesy of John Paulson, a real smart guy who was negative about mortgages before it paid to be negative. Dan Freed on CIT CIT Surges on Report of IndyMac Deal I put both of these up there as examples of companies that won’t die, and because they won’t die, they live. I know that seems a little circular in reasoning, but because Citigroup never suffered a run like Wachovia and Washington Mutual did, it made it and as our flagship site mentioned, it is safe. If it is safe, it can go higher. Because no one forced CIT into bankruptcy, it can live to play again, and when I read in the New York Post that Paulson owns CIT debt, I realized that he’s powerful enough to save this company, particularly because he is one of the investors in IndyMac and knows his way around the bottom of the debt barrel. These two stocks represent lottery tickets that are no longer rip-ups because they have made it out of the "critical care" stage and are recovering. I would buy them both.
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DiggElizabeth Warren: “I’m Not Hearing the Plan” by Government to Fix the Economy
by ilene - September 25th, 2009 4:24 pm
Elizabeth Warren: "I’m Not Hearing the Plan" by Government to Fix the Economy
Courtesy of Washington’s Blog
Elizabeth Warren – Chair of the Congressional Oversight Panel for the Troubled Asset Relief Program – told the Senate Committee on Banking, Housing and Urban Affairs today:
In April, the Panel looked back on the first six months of Treasury’s TARP efforts and offered a comparative analysis of previous efforts to combat banking crises in the past. We found that the successful resolution of past financial crises involved four critical elements: transparency of bank accounting, particularly with respect to the value of bank assets; assertiveness, including taking early aggressive action to improve salvageable banks and shut down insolvent institutions; accountability, including willingness to replace failed management; and clarity in the government response. Without those elements, a financial crisis is likely to create long-term economic problems.
The government, of course, hasn’t implemented any of these recommendations.
Warren told the panel:
The toxic assets remain on the books of the banks, The commercial real estate mortgages are a coming crisis. Small banks are continuing to fail. We were talking a year ago about too big to fail. We are now facing an industry that’s more concentrated than it was a year ago and too big to fail is up on us now in a much larger sense.
Until we get down to dirt, to something that’s solid, that we can put our feet on, our financial institutions are standing in a secure place, we can’t rebuild and know that we are safely past this crisis.
Ron Paul: The Fed “Has More Power Than Congress. The Fed Chairman Probably is More Powerful Than Our President”
by ilene - September 15th, 2009 11:14 pm
George Washington (no, not really) on Ron Paul.
Ron Paul: The Fed "Has More Power Than Congress. The Fed Chairman Probably is More Powerful Than Our President"
Courtesy of Washington’s Blog
Whatever you think of Ron Paul, you have to admire his great quotes.
As he writes in his new book "End the Fed":
The entire federal government is one giant toxic asset at the moment.
Sound like hyperbole?
Well, the Fed has certainly taken a lot of toxic assets onto its balance sheet.
And even the Bank for International Settlements pointed out in December that the bank rescue packages have transferred significant risks onto government balance sheets.
And one of the world’s leading economic historians – Harvard professor Niall Ferguson – warns of huge government debts threatening the solvency of entire nations:
"The idea that countries don’t go bust is a joke… The debt trap may be about to spring … for countries that have created large stimulus packages in order to stimulate their economies."
Yesterday, Paul also told CNN:
[The Fed] is bigger than the Congress, [it] has more power than the Congress. The Fed Chairman probably is more powerful than our president, and yet we refuse to look at it. The time has come for us to look at the Fed.
Is he right?
I’m not sure. But the Fed has violated the Federal Reserve Act and other laws in a number of ways, and refuses to disclose to Congress (or anyone else) where the trillions of dollars it has handed out in bailouts, guarantees and swaps have gone.
The Fed is also refusing to disclose the details of the toxic assets it has taken from the banks and put on its own books.
Christopher Whalen: Citi Still Queen Of The Zombie Dance Party
by ilene - September 1st, 2009 1:54 pm
Christopher Whalen: Citi Still Queen Of The Zombie Dance Party (C)
By Yael Bizouati, courtesy of Clusterstock/Business Insider
Christopher Whalen’s Institutional Risk Analytics came up with his second quarter 2009 stress test results today, and the results aren’t pretty.
Whalen says that the US banking industry is still sinking steadily and neither the Obama Administration nor the Federal Reserve seem to have any more bullets to fire at the “deflation monster.” While there was some improvement in the previous quarter, we are now back to stress patterns of 2008.
With the Fed having spent all the liquidity to prop up the Street’s toxic asset waste pile, Main Street employers , private investors and smaller banks must now go begging for capital and liquidity in a market where the government is the only player left.
The notion that the Fed can even contemplate reversing the massive bailout for the OTC markets, this to restore normalcy to the monetary models that supposedly inform the central bank’s deliberations, is ridiculous in view of the capital shortfall in the banking sector and the private sector economy more generally.
Not surprisingly, Whalen rated Citi, “the queen of the zombie dance party ,” F for the quarter, down from C in the first quarter due to a deterioration in score for loan defaults.
Credit losses at C could require additional injections of capital a la Fannie Mae and Freddie Mac even with the flow if subsidies that has increased C revenue greatly from 2008 run rates.
He also raises the question as to why serious people on the buy side are still seeing value in the doomed bank which is “halfway in the grave via the loss sharing agreement with the FDIC."
Whether or not there is value inside C is not the issue; it is just not kosher, to us, for a manager to put investment grade investors into a situation that is basically a restructuring, with the government as the largest, senior creditor – and one in which the ultimate liabilities are as yet to be quantified.
Bernanke’s Next Parlor Trick
by ilene - June 15th, 2009 6:38 pm
Bernanke’s Next Parlor Trick
Courtesy of MIKE WHITNEY, at CounterPunch
Federal Reserve boss Ben Bernanke is getting ready to pull another rabbit out of his hat and he’s hoping no one figures out what he’s up to. Here’s the scoop; the Fed chief needs to "borrow up to $3.25 trillion in the fiscal year ending Sept. 30" (Bloomberg) without triggering a run on the dollar.
But, how? If the stock market keeps surging, investors will turn their backs on low-yielding US Treasuries and move into riskier securities hoping for better returns. The only way to attract more buyers to US debt is by raising interest rates which will kill the "green shoots" of recovery and make it harder for people to buy homes and cars. It’s a conundrum.
In the next year, China will buy roughly $200 billion T-Bills while the oil-producing states and the rest of the world will add about $300 billion to their cache. That leaves more than $2 trillion for the domestic market where cash-strapped investors are likely to avoid government debt like the plague. So, who’s going buy that mountain of low-yield government paper?
The banks.
The Fed has been helping the banks raise reserves for the last year. In fact, excess bank reserves have skyrocketed from $96.5 billion in August 2008 to $949.6 billion by April 2009. Nearly a trillion bucks in less than a year. But, why? Are the banks expecting to expand lending at the fastest rate in history in the middle of a depression?
Of course not. Master illusionist Bernanke is just arranging the props for his next big trick. The fact is, Bernanke anticipated the current wave of deflation and set up a straw man (the banks) to deal with it so it wouldn’t look like he was simply printing more paper to finance the deficits. As soon as rates on 10 year notes hit 4 per cent, the banks (that are borrowing money at 0 per cent) will probably start to purchase Treasuries and keep the housing and retail markets from crashing even faster. It’s called "the old switcheroo" and no one does it better than the Fed.
Bernanke pulled a similar stunt after Lehman Bros flopped and he and Paulson decided that it was time to dump $700 billion worth of garbage assets on the public.…
RARE INTERVIEW WITH ANNA SCHWARTZ
by ilene - June 10th, 2009 3:31 pm
RARE INTERVIEW WITH ANNA SCHWARTZ
Courtesy of The Pragmatic Capitalist
The following is a very rare interview with legendary economist Anna Schwartz. We’re frequent writers of Schwartz here at TPC and rightfully so – she was Milton Friedman’s right hand woman. In an ironic twist, she is incredibly critical of Ben Bernanke’s approach to the current crisis despite him vowing never to allow the Great Depression to occur again and crediting Friedman and Schwartz for providing the framework to combat a depression. She touches on many of the topics I hammer home here such as the fact that the toxic assets haven’t been dealt with and the fact that you can’t have a functioning capitalist society where the losers don’t lose. If you want to hear it like it is from someone other than myself listen to Schwartz. She knows far better than I do….
Fast forward to the 9 minute mark to hear Schwartz. She is a living legend and this is a must hear interview:
Source: Marketplace.org
The Bank Rescue Plan Is in Limbo. Is This Good News?
by ilene - June 3rd, 2009 2:08 pm
Courtesy of TIME
The Bank Rescue Plan Is in Limbo. Is This Good News?
Treasury Secretary Timothy Geithner testifies on Capitol Hill in Washington, Thursday, May 21, 2009, before a House Appropriations subcommittee. Susan Walsh / AP
When Treasury Secretary Timothy Geithner unveiled the details of his plan to save America’s banks a little over two months ago, the markets raved, the country sighed with relief and Geithner went from punchline to potential hero overnight. Now, the plan is in trouble, as parts of it struggle to get off the ground and others are dead in the water, administration officials say. But oddly that may be good for Geithner, too.
The bank plan is supposed to be getting under way right about now, with private players lining up to tap government lending facilities to buy so-called toxic assets from banks, thereby cleaning up the banks’ balance sheets and facilitating lending across the country. But the banks have never been very enthusiastic about selling the assets, convinced the market was undervaluing them, toxic or not. (See 25 people to blame for the financial crisis.)
The Administration’s stress tests were intended in part to force the banks’ hands. By having regulators officially dictate how much capital big banks needed to raise, the government thought it could make the banks sell the toxic assets into the "public-private" buying scheme.
Instead, the banks just went out and raised capital from private sources: $65 billion in a matter of weeks. On Tuesday Bank of America announced it alone had raised $33 billion of the $33.9 billion the feds had required it to. J.P. Morgan also announced new plans to sell stock. Part of the motivation for the banks is to get out from under government constraints — Congress has passed strict limits on executive salaries, bonuses and other benefits bankers love to love.
As it turns out, that’s part of the reason the banks are still resisting selling into the public-private program. "The government plan continues to face a number of hurdles, including too much government overhang," says Scott Talbott of the industry group the Financial Services Roundtable. Government officials say the language in a recent Senate bill requiring recipients of government "public-private" dollars to submit to oversight by the special investigator of bank-bailout funds…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
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