Too Big To Succeed

Why Should Taxpayers Give Big Banks $83 Billion a Year?

"Banks have a powerful incentive to get big and unwieldy. The larger they are, the more disastrous their failure would be and the more certain they can be of a government bailout in an emergency. The result is an implicit subsidy: The banks that are potentially the most dangerous can borrow at lower rates, because creditors perceive them as too big to fail. Economists have tried to pin down exactly how much the subsidy lowers big banks’ borrowing costs. In one relatively thorough effort, researchers put the number at about 0.8%. Multiplied by the total liabilities of the 10 largest U.S. banks by assets, it amounts to a taxpayer subsidy of $83 billion a year." Continue reading →

Continue ReadingWhy Should Taxpayers Give Big Banks $83 Billion a Year?

Congress Asks Bernanke For Full Risk Analysis On Fed’s Soaring Balance Sheet

"In a letter penned by the Chairman of the House Oversight & Government Reform Committee, Jim Jordan, says that he is 'troubled by the corresponding effect that the Federal Reserve's expanding portfolio could have on current and future economic growth' and has asked the Fed what its 'future plans to unwind the [$3 trillion and rising at $885 billion per month] portfolio' are." Continue reading →

Continue ReadingCongress Asks Bernanke For Full Risk Analysis On Fed’s Soaring Balance Sheet

Revel casino’s bankruptcy threatens plans to make Atlantic City a gambling-plus destination

"It was to offer more than just gambling. It would provide a sumptuous, Las Vegas-style experience. And that was the game plan, supported exuberantly by Gov. Christie and strategized by marketers and tourism experts. Now that major piece in the remodeling of Atlantic City is in doubt. Revel said Tuesday that it would seek Chapter 11 bankruptcy protection. If Revel tanks, so, too, might much of the vision of Atlantic City as a year-round resort. The $2.4 billion casino - the most expensive ever built in New Jersey - received more than $300 million in state construction funding." Continue reading →

Continue ReadingRevel casino’s bankruptcy threatens plans to make Atlantic City a gambling-plus destination

U.S. Banks Bigger Than GDP as Accounting Rift Masks Risk

"Applying stricter accounting standards for derivatives and off-balance-sheet assets would make the banks twice as big as they say they are -- or about the size of the U.S. economy -- according to data compiled by Bloomberg. U.S. accounting rules allow banks to record a smaller portion of their derivatives than European peers and keep most mortgage-linked bonds off their books. That can underestimate the risks firms face and affect how much capital they need. Using international standards for derivatives and consolidating mortgage securitizations, JPMorgan, Bank of America and Citigroup would become the world’s three largest banks and Wells Fargo the sixth-biggest." Continue reading →

Continue ReadingU.S. Banks Bigger Than GDP as Accounting Rift Masks Risk

PBS Runs an Article on Government Default

"Should the U.S. government default? Wrong question. The right question: Can the U.S. government avoid defaulting? The answer is clear: no. It will default. It is $222 trillion in the hole. That’s the present value of its future obligations. Of course it’s going to default. Would that be bad? Not for taxpayers. Would it be bad for the Powers That Be who run this country? Yes. Devastating. It’s coming. The mainstream media have ignored this statistically inevitable problem. The problem threatens the Establishment as no other. So, the media pretend it does not exist. But the blackout may at long last be cracking. We read this on PBS." Continue reading →

Continue ReadingPBS Runs an Article on Government Default

How A Rookie Excel Error Led JPMorgan To Misreport Its Risk For Years

"If this glaringly amateur error was present in America's largest bank by assets, and one which proudly boasts a 'fortress balance sheet', an error which just so happens feeds into countless other input cells driven by the firm's VaR calculation, leading to capital allocation, trading, and overall executive decisions many of which have a direct impact on the firm's exposure to $72 trillion in over the counter derivatives, what can one say about the thousands of other banks, which are not as closely 'supervised' by the Federal Reserve as JPMorgan is (supposedly)." Continue reading →

Continue ReadingHow A Rookie Excel Error Led JPMorgan To Misreport Its Risk For Years

TARP: The bailout success story that wasn’t

"The idea that TARP is somehow a wash because a few banks repaid the bailouts with interest is misleading. The reality is that bailed-out firms essentially wrote off their losses on taxes. As of Dec. 30, TARP was still owed $67.3 billion, including $27 billion in realized losses — which is to say, that money is gone and is never coming back. Now, TARP is losing money as it tries to exit the programs. A new report by SNL Financial shows the Treasury Department is taking a beating in auctions of the Capital Purchase Program, one of the pipelines through which bailout money flowed." Continue reading →

Continue ReadingTARP: The bailout success story that wasn’t

Banks, at Least, Had a Friend in Geithner

"As financial adviser to the president in the tumultuous years immediately after the credit crisis, Mr. Geithner had immense sway over the government’s approach to all things economic. For everyday Americans, his major tasks included responding to the home foreclosure mess, unwinding federal bailouts under the Troubled Asset Relief Program and tackling the problem of financial institutions that are too big to manage and too interconnected for America’s good. But in scanning these agenda items, a pattern of winners and losers emerges. Let’s just say the financial institutions that dominate the United States were rarely on the losing end in the Geithner years." Continue reading →

Continue ReadingBanks, at Least, Had a Friend in Geithner

Central Bankers’ Nightmare: Goldman Sachs Might Go Bust

"The central bankers of the world literally cannot conceive of what they would do if Goldman Sachs ever did go belly-up. This would threaten the entire world economy. This is why governments and central banks are not about to allow Goldman Sachs to go belly-up, which is why Goldman Sachs indulges in high-risk, high-return speculation: managers know that the firm will be bailed out. This is called moral hazard, and it is basic to the modern economy." Continue reading →

Continue ReadingCentral Bankers’ Nightmare: Goldman Sachs Might Go Bust

Italy risks political crisis as MPS bank scandal turns ‘explosive’

"Monte dei Paschi (MPS), the world’s oldest bank dating back to 1472, is under investigation for covering up losses on derivatives and paying over the odds for its €9bn (£7.8bn) purchase of Banca AntonVeneta in 2007. Italy’s press alleges that the inquiry has unearthed a network of bribes and kickbacks, a claim denied by the bank. The lender has lost €6.4bn since early 2011 and the damage is mounting. What makes the case so delicate are the bank’s close ties to the Italian political Left. MPS is 35pc-owned by a foundation that answers to the PD-controlled Tuscan province of Siena and was run by ex-Communist Giuseppe Mussari until his abrupt exit this month." Continue reading →

Continue ReadingItaly risks political crisis as MPS bank scandal turns ‘explosive’