Posts Tagged ‘leverage limits’

Congress Is Blowing It On Financial Reform (Again): Where Are The Limits On Leverage?

Did someone mention leverage? – Ilene

Congress Is Blowing It On Financial Reform (Again): Where Are The Limits On Leverage?

Courtesy of The Daily Bail

Nothing about the single most relevant factor in the blow-up.

Leverage.

Until 2004 (quick refresher) our investment banks had a leverage limit of 12:1.  After Paulson led the multi-year effort to sway the SEC to drop these rules entirely, allowing 5 banks to utilize unlimited leverage, all 5 became effectively insolvent within 4 years.

It’s the most important factor in explaining how this banking crisis was so devastating compared to previous blow-ups, and why it was so widespread — European banks were (and remain) even more leveraged than our own.

And, it’s the easiest part to fix.  Just turn the rule back to pre-2004.

There are only 2 possibilities.

  • Congress is completely, undeniably, captured by Wall Street and so they did not allow leverage limits to make their way into either the House or Senate bill?  OR
  • Congress is so flipping stupid that no one thought to propose a leverage limit?

The obvious answer is ‘captured’, but the more I consider it, the second choice of ‘just plain stupid’ is not out of the realm of possibilities. 

———-

I wrote this short post Friday night; I read this morning that Blodget had a similar thought:

  • Raise capital requirements, forcing the banks to use their tremendous profits to build big cushions against future problems instead of paying huge bonuses.  Given the forced bailouts of last year, why on earth should banks be allowed to pay out normal compensation ratios for the next few years?  Why shouldn’t they be forced to keep this money on hand for a rainy day?
  • In a just world, the way out would be to finally make the bank bondholders pay for their stupidity, converting bank debt to equity and correcting the error made last time.  In the heat of another crisis, however, the government will likely be terrified at the thought of rocking the boat and will fight tooth and nail to give bondholders another free pass.  If this proves politically impossible, the government might actually have to let some firms fail, or risk being run out of town.  And because we have yet to create a system in which banks CAN fail in an orderly


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Geithner Invokes Chicago Cubs’ Battle Cry: “Wait Till Next Year”

Geithner Invokes Chicago Cubs’ Battle Cry: "Wait Till Next Year"

Courtesy of Mish

Geithner admits banks are overleveraged but in his Orwellian world, deleveraging is the wrong thing to do because "the world is fragile".

Please consider New bank capital, leverage limits coming in 2010: Geithner.

Government officials will not set new capital and leverage standards for financial institutions until next year, Treasury Secretary Timothy Geithner said Thursday.

"The world is a little fragile; people aren’t willing to take enough risk now, and we don’t want to do anything that would push people to delever," Geithner said to Fox News Sunday anchor Chris Wallace at an event in Washington hosted by the Atlantic magazine in partnership with the Aspen Institute and the Newseum. "We’ll have the agreement on the numbers, but it won’t happen until next year; in the absence of fragility."

Geithner acknowledged that existing bank-capital restrictions were "too low and easily evaded."

"It’s going to take a while to come out of this because we are saving more money, something we have to do," he commented. "Growth is going to be slower coming out of this, and it is a reasonable expectation that this is going to take a while."

"It’s not a tenable situation for the government to be in the business of running large parts of the economy, and we won’t do it," Geithner said.

Geithner finished speaking the same way he always does, with a lie.

"We won’t do it" is a blatant lie. The government has its direct hand in autos, banks, insurance companies, stock brokers, home builders, and the entire mortgage industry.

The first thing any regulator in his right mind would do would be to dissolve Fannie Mae, Freddie Mac, and the FHA. Instead, leverage was increased to allow loans up to 125% of assessed value and the mortgage lenders of only resort are the GSEs and the FHA.

It was idiotic to take over AIG yet the government did. Cash for clunkers was economic idiocy but the government did that too. Ditto for screwing GM bondholders in favor if the union. We had to do those things under the guise "things were too fragile".

"We’ll have the agreement on the numbers, but it won’t happen until next year; in the absence of fragility."

Chicago Cubs Battle Cry

It’s October, and


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Phil's Favorites

A second COVID-19 wave? Here are 6 lessons from the first

 

A second COVID-19 wave? Here are 6 lessons from the first

A man wearing a face mask to curb the spread of COVID-19 walks past a temporary Pride art installation in Vancouver on Aug. 3, 2020. THE CANADIAN PRESS/Darryl Dyck

Courtesy of Loren Falkenberg, University of Calgary and Jillian Walsh, University of York

As COVID-19 spread across the globe, governments looked to epidemiologists to slow its transmission.

Without a vaccine, large-scale testing capacity and sufficient critical-care beds, epidemiologists pushed...



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Biotech/COVID-19

A second COVID-19 wave? Here are 6 lessons from the first

 

A second COVID-19 wave? Here are 6 lessons from the first

A man wearing a face mask to curb the spread of COVID-19 walks past a temporary Pride art installation in Vancouver on Aug. 3, 2020. THE CANADIAN PRESS/Darryl Dyck

Courtesy of Loren Falkenberg, University of Calgary and Jillian Walsh, University of York

As COVID-19 spread across the globe, governments looked to epidemiologists to slow its transmission.

Without a vaccine, large-scale testing capacity and sufficient critical-care beds, epidemiologists pushed...



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ValueWalk

Coronavirus stimulus checks talks break over partisan fight

By Michelle Jones. Originally published at ValueWalk.

August 8th update: The likelihood of Coronavirus stimulus checks coming in the near future has dampened. Late Friday, Trump tweeted out that the Democrats were mostly interested in bailing out blue (Democratic) states, which are in deep date. Whatever, ones feelings on the matter the fact that there is public feuding over other crucial details does not bode well for checks anytime soon.

Editor’s note: This article contains the latest news on the coronavirus stimulus package. It’s updated regularly with news about coronavirus stimulus checks and related issues.

August 7, 2020 Update: Americans’ hope of a second round of coronavirus stimulus checks is drying up again as talks between the White House and key Democrats collapse. Although the two sides agree that they should send a sec...



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Zero Hedge

House Ethics Committee Finds Rashida Tlaib Violated Campaign Finance Rules

Courtesy of ZeroHedge View original post here.

Authored by Jack Philips via The Epoch Times,

The House Ethics Committee found Rep. Rashida Tlaib (D-Mich.), a member of the so-called “Squad,” violated campaign finance rules by receiving a campaign salary after she was no longer a candidate.

...



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The Technical Traders

Melt-Up Continues While Metals Warn of Risks

Courtesy of Technical Traders

What a week for Metals and the markets, folks. The Transportation Index is up nearly 4% for the week.  The Dow Jones Industrial Average is up over 3% for the week.  Silver is up over 14% and reached a peak near $30 (over 23%).  Gold is up over 2.5% and trading above $2025 right now – with a peak price level near $2090.  If you were not paying attention this week, there were some really big moves taking place.

MELT-UP WITH HIGH RISKS – PAY ATTENTION

Overall, our research team believes the current “melt-up” price action is likely to continue as global investors continue to believe the US Fed will do everything possible to save the...



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Digital Currencies

Raoul Pal: "It May Not Be Worth Owning Any Asset Other Than Bitcoin"

Courtesy of ZeroHedge View original post here.

Authored by Turner Wright via CoinTelegraph.com,

Raoul Pal, CEO and founder of Real Vision, says Bitcoin may soon become his only asset for long-term investments.

image courtesy of CoinTelegraph ...



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Kimble Charting Solutions

Silver Headed Back To $50, Top Of The Cup & Handle Pattern?

Courtesy of Chris Kimble

Could Silver be creating a multi-decade bullish “Cup & Handle” pattern? Possible!

Did a retest of a handle breakout take place in March at (1), where Silver created one of the largest bullish reversals in decades? Possible!

Could Silver be creating a 40-year bullish pattern? Anything is possible! I humbly have to say share this; I’ve been in the business for 40-years and I haven’t seen anything like this.

Silver looks to have double topped back in 2011 at $50, which was the 1980 highs. After double topping, Silver ...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.



Date Found: Sunday, 29 March 2020, 07:00:37 PM

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Comment: Silver Shorts Are In a Bind | Ted Butler youtu.be/qQc0AoJp-Q8



Date Found: Monday, 30 March 2020, 05:21:45 PM

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Comment: 5 Questions From You for Luke Gromen youtu.be/nVZD_fuxbQE


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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Members' Corner

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

 

Coronavirus, 'Plandemic' and the seven traits of conspiratorial thinking

No matter the details of the plot, conspiracy theories follow common patterns of thought. Ranta Images/iStock/Getty Images Plus

Courtesy of John Cook, George Mason University; Sander van der Linden, University of Cambridge; Stephan Lewandowsky...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
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Promotions

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Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

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