Bailout Fail

U.S. Economy Shrank in First Quarter by Most in Five Years

"The U.S. economy contracted in the first quarter by the most since the depths of the last recession as consumer spending cooled. Gross domestic product fell at a 2.9 percent annualized rate, more than forecast and the worst reading since the same three months in 2009, after a previously reported 1 percent drop. It marked the biggest downward revision from the agency’s second GDP estimate since records began in 1976. Business investment fell at a 1.2 percent annualized rate, compared with a previously reported 1.6 percent annualized drop. Companies reduced their spending on structures at a 7.7 percent pace, and spending for equipment fell 2.8 percent, today’s report showed." Continue reading →

Continue ReadingU.S. Economy Shrank in First Quarter by Most in Five Years

Will SoFi Take Sallie Mae’s Best Customers?

"After the financial crisis proved the government would spend tens of trillions of dollars to keep banks from going belly up, you would think that nothing will kill them. But now the ineffable forces of Stanford-branded reinvention are going after their customers. Do investors in publicly traded lenders need to get out before it’s too late? A case in point is student lending giant, SLM – formed as the Student Loan Marketing Association — which is in the cross-hairs of a San Francisco-based peer-to-peer lending powerhouse, Social Finance, Inc. (SoFi). As CEO Mike Cagney, a graduate of Stanford Business School, explained, SoFi is growing fast." Continue reading →

Continue ReadingWill SoFi Take Sallie Mae’s Best Customers?

ECB: Bank With Us … and We’ll Charge You Interest

"This morning, the ECB took the radical stepof cutting its deposit rate to negative 0.1 percent. It also lowered its benchmark lending rate (similar to the federal funds rate the U.S. Federal Reserve has been raising and lowering for decades) to 0.15 percent from 0.25 percent. Furthermore, it tried to boost the mortgage and business loan businesses by offering to buy Asset Backed Securities (ABS) and by launching more Long-Term Refinancing Operations. While central banks in Sweden and Denmark took tentative steps in the direction of negative rates, the ECB’s move is unprecedented because no major world central bank has ever tried it before." Continue reading →

Continue ReadingECB: Bank With Us … and We’ll Charge You Interest

Bill Bonner: This Hugely Popular Investment Is About to Blow Up

"In a normal world, savers have the choice of staying in cash or quasi-cash and receiving a fair rate of interest. No more. The interest they receive on a 10-year Treasury note is barely over 2.5%. But the real rate of consumer price inflation – according to the most exhaustive survey, done by the MIT, the Billion Prices Project – is 3.91%. What kind of world is it where an honest householder loses nearly 1.5% a year on his savings? It is an odd, rigged-up and dangerously windy one. Investors are stretching out their sails to get higher yields. As a result, bond prices have gone up, reducing yields on bonds rated CCC – below investment grade – to the lowest levels ever recorded." Continue reading →

Continue ReadingBill Bonner: This Hugely Popular Investment Is About to Blow Up

Bailout Banks Made Riskier Loans: Study [2011]

"The government bailout made banks appear safer but actually caused them to take on more credit risk, according to a University of Michigan study released Wednesday. According to a working paper by finance professors Ran Duchin and Denis Sosyura of the university of Michigan's Ross School of Business entitled Safer Ratios, Riskier Portfolios: Banks' Response to Government Aid, banks participating in the government's Capital Purchase Program as part of the Troubled Assets Relief Program, or TARP, 'significantly increased their investments in risky securities,' by 10%, 'displacing safer assets, such as Treasury bonds, short-term paper, and cash equivalents.'" Continue reading →

Continue ReadingBailout Banks Made Riskier Loans: Study [2011]

Five+ Years of Fed Futility Laid Bare for All to See

"It has been five-and-a-half years since Lehman Brothers, AIG, Fannie Mae, Freddie Mac, and other casualties of the credit crisis imploded! We’ve been subjected to more than a half-decade of the Fed’s supposedly useful and appropriate medicine … Unlimited money printing. Zero percent interest rates. Gargantuan bank bailouts. Deliberate attempts to inflate stock and house prices. And for what? More than $3 TRILLION in extra padding on the Fed balance sheet doesn’t look like it’s done much for the broad economy. GDP grew just 0.1 percent in the first quarter. Even that dismal reading was propped up by a massive surge of $43.3 billion in health care spending tied to the Obamacare rollout." Continue reading →

Continue ReadingFive+ Years of Fed Futility Laid Bare for All to See

Western banking regulations could be ‘mutually destructive’: IMF

"Western governments have put in place banking regulations that could be 'mutually destructive' and undermine efforts to prevent bust banks from costing taxpayers billions of pounds, according to a report by the International Monetary Fund. Policymakers representing the world's biggest financial centres have failed to make the banking sector stand on its own feet by ending implicit subsidies and co-ordinating rescue plans when multinational banks go bust, the Washington-based lender of last resort said. Subsidies to the banking sector in some countries are as high as they were before the crash, amounting to $590bn (£355bn), with the eurozone the worst affected." Continue reading →

Continue ReadingWestern banking regulations could be ‘mutually destructive’: IMF

Fund Manager Jeremy Grantham Blasts the Fed

"The Fed can manipulate stock prices. That's perhaps the only thing they can do. But why would you want to get an advantage from the wealth effect when you know you are going to have to give it all back when the Fed reverses course. At the same time, the Fed encourages steady increasing leverage and more asset bubbles. It's clear to most investing professionals that they can benefit from an asymmetric bet here. The Fed gives them very cheap leverage on the upside, and then bails them out on the downside. And you should have more confidence of that now. The only ones who have really benefited from QE are hedge fund managers." Continue reading →

Continue ReadingFund Manager Jeremy Grantham Blasts the Fed

Cyprus Central Bank Governor resigns with $250K golden parachute

"One of the main criticisms directed against Demetriades has been how, under his watch, the now defunct Laiki Bank accumulated around €9.5 billion in emergency liquidity aid, only to buckle and fail when the ECB threatened to pull assistance. 'How much independence can a central banker have when, from his statements, it appears he was serving other expediencies instead of his country’s interest,' President Nicos Anastasiades said last year. For the state to get its €10 billion in bailout funds last March, the president said, it was told to privatise state companies, seize deposits, make painful cuts, and raise taxes." Continue reading →

Continue ReadingCyprus Central Bank Governor resigns with $250K golden parachute

RBS has lost all the £46bn pumped in by the taxpayer

"Royal Bank of Scotland has lost all the money invested in it by the taxpayer six years ago when the lender came close to collapse. The bank has confirmed its total losses since its bailout have now drawn level with the £46bn pumped into it in 2008 in return for an 81pc stake. RBS made a loss last year of £8.2bn, its sixth consecutive annual loss, taking its cumulative losses to £46bn. The scale of the losses means that all the capital provided by the taxpayer has now been used up dealing with the toxic legacy assets on the bank's balance sheet. Despite, the loss RBS said it had put aside £576m to pay staff bonuses for 2013." Continue reading →

Continue ReadingRBS has lost all the £46bn pumped in by the taxpayer