Signs of trouble in the western economies remain for banks


Whether its Greece, Portugal and the EU financial issues, or the ongoing housing saga in the US, we are clearly not yet out of the woods relative to the 2008 banking crisis. U.S. Plans to Expand Aid to Troubled Homeowners | NYT The Obama administration will announce on Friday a broad new initiative to help troubled homeowners, potentially refinancing several million of them into fresh government-backed mortgages with lower payments. Technorati Tags: economy,banks,Greece,Portugal,US housing,economic crisis,banking crisis Continue reading Signs of trouble in the western economies remain for banks

Memo to the Financial Times – you were wrong to let this one get through


I would say this piece in the usually venerable FT ought to be better placed in the comment section and hardly in the market insight section.  At a minimum read This Time is Different, and stick them both in the opinion section.  Eight centuries of empirical evidence or one mans irrational opinion. Japan’s mythical debt crisis | Peter Tasker – ft.com Far from the next Lehman or the next Greece, the market is rating the Japanese government as the best credit on the planet. Indeed if Sidney Homer’s classic “History of Interest Rates” is any guide, Japanese government debt commands … Continue reading Memo to the Financial Times – you were wrong to let this one get through

Asset value increases hide a rise in Canadian debt levels


Canadian’s balance sheets are improving following increases in real estate values and stock markets.  However in 2009 Canadians also increased debt through mortgages and loans, with the average ratio of household debt to income at 146.2%. Household net worth up 1.6%, StatsCan | Financial Post Canadian household net worth rose from October through December as individuals benefited from a rise in real estate and stock markets. The value of families’ assets, such as houses and savings accounts, minus their liabilities increased 1.6% to $5.86-trillion in the fourth quarter, Statistics Canada said on Monday in Ottawa. Canada’s Standard & Poor’s/TSX composite … Continue reading Asset value increases hide a rise in Canadian debt levels

The need for genuine transparency in security risk assessment | peer-to-peer lending as an alternative


This little nugget from Gillian Tett at the Financial Times last week brought a few thoughts into sharp focus. Is this the lull before the storm for US mortgages?  | ft.com For this spring, something of a paradox is hanging over the mortgage-backed securities world. At the end of this month, the US Federal Reserve is due to freeze its programme to purchase Fannie and Freddie agency MBS that it implemented in the wake of the financial crisis. However, before anyone is tempted to crack open the champagne, they should think – once again – about that “displacement” effect. During … Continue reading The need for genuine transparency in security risk assessment | peer-to-peer lending as an alternative

The Lehman Bothers bankrupcty examiner report


For the record – 2,200 pages in all its glory. Lehman Brothers Holdings Inc. Chapter 11 Proceedings Examiner’s Report Jenner & Block is providing links to the Report of the Examiner in the Chapter 11 proceedings of Lehman Brothers Holdings Inc. The Examiner’s report is divided into nine volumes, which are reproduced below in individual Adobe Acrobat PDF files. Included in this from the introduction that sums up banking, not just investment banking.  Investment banking just happens to be an extreme version of this. Lehman’s financial plight, and the consequences to Lehman’s creditors and shareholders, was exacerbated by Lehman executives, … Continue reading The Lehman Bothers bankrupcty examiner report

“James Stewart is Dead” | New book proposes alternative bank model


The proposal to replace banks with non levered Mutual Funds was floated last December (noted on the blog here) and now here is the book.  This fits with the view of this blog for utility or limited purpose banking providing basic banking and payments services much along the lines of water and electricity.  Reliability over concern for safety. BU economist: U.S. must rethink banks | Boston Herald The basic premise of limited purpose banking, which is beginning to win over some academic adherents, is that banks should be run like mutual-fund companies, such as Boston’s Fidelity Investments, acting merely as … Continue reading “James Stewart is Dead” | New book proposes alternative bank model

Goldman Sachs derivative liability = 33,823% of assets


I have spoken at length here about the insidiousness of derivatives and Credit Default Swaps.  So this new statistical reference frankly awed me.  It is from a Levy paper on the recent shift over the last 50 years to a shadow banking system, that has largely replaced bank balance sheet lending with Money Managers.  As I read this paper, while I am also reading ‘This Time is Different – eight centuries of financial folly’, there is little to feel good about in the apparent economic rebound that the government keeps telling us about. The data on derivatives is impressive. JPMorgan … Continue reading Goldman Sachs derivative liability = 33,823% of assets

The self levelling effect on tinpot dictators catches up eventually


Often I find news headlines are framed in political and ‘we are good and they are bad’ headlines but it is both reassuring and interesting to actually see the impacts of tinpot dictators on their countries, and how corrupt behaviour produces results is a leveling effect on the world.  This from a longer piece outlining how lack of attention and investment means Venezuela is running out of electricity.  His answer of course is to arrest everyone.  Colombia, Venezuela: Offering Power — For a Price | Stratfor (Subscription) While blaming the crisis exclusively on the weather (and ignoring years of lack … Continue reading The self levelling effect on tinpot dictators catches up eventually

China looks at severing dollar peg | and why this will be the biggest economic story of 2010


This is one of those nondescript headlines that is probably the single most important one following the 2007 economic crisis.  It sets the stage for (obviously) currency shifts and (less obviously) price pressures in the west.  Those countries that import from China will pay more for those imports, and therefore will suffer currency and interest rate pressures. Beijing looks at severing dollar peg | ft.com China’s central bank chief laid the groundwork for an appreciation of the renminbi at the weekend when he described the current dollar peg as temporary, striking a more emollient tone after months of tough opposition … Continue reading China looks at severing dollar peg | and why this will be the biggest economic story of 2010