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Violence erupts in Iceland

As this deepest of recessions takes hold, an increasing number of countries are seeing outbreaks of civil unrest. First it was Greece. Later, we saw unrest in the Baltics in Riga and Vilnius. Now, Iceland is experiencing the same. These countries are amongst the hardest hit economies. Therefore, we should see these episodes as a harbinger of what is to come unless government can prevent this downturn from deepening.

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TARP dividends are killing bank profits

When the Bush Administration gave banks money under the Troubled Asset Relief Program (TARP), it was not a complete freebie. The government has received preferred shares in many institutions. This shares pay dividends to the government as compensation for the investment. Well, apparently, those dividends are becoming a bit of a problem for banks because they are eating into banks’ much needed capital by siphoning off money to the government.

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Tips for small business owners struggling amidst the credit crisis

This article is from special guest contributor Steve Sildon, Senior Editor for CreditCardAssist.com, where he provides tips and advice for business owners on the strategic use of short-term debt and credit cards for small business financing.

The nation is waiting with bated breath for the proposed bailout assistance and economic stimulus package promised by the new incoming administration. Many small businesses simply cannot afford to wait. Not only are American families struggling to get by each day, small and large businesses alike are struggling mightily to stay afloat with a lingering recession and the most precipitous drop in consumer demand since the Great Depression. In the past, business owners have relied on their lines of credit to help bridge the occasional gap in their short term cash flows caused, for example, by seasonal fluctuations. But these days, small business owners who lack adequate credit histories or have not yet established any credit history at all simply cannot gain access to credit at all. In a more disturbing trend, many well-established, profitable companies with excellent, long-term credit histories have found their credit lines reduced considerably, and in some cases, cut off entirely.

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U.S. jobless claims: Claims rise 62,000 to 589,000

U.S. jobless claims: Claims rise 62,000 to 589,000

This past week, jobless claims settled in at a level near 600,000 after a few weeks of decline due largely to seasonal adjustments. Jobless claims were 589,000 while continuing claims were 4,607,000.

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EU: Banks ask for a bailout for poor lending in Eastern Europe

The need to bailout banks for their aggressive lending in central and eastern Europe is becoming ever more apparent. An Austrian bank has taken the lead in getting a consortium of banks together to lobby the European Union for bailout funds.

This should be seen for an undeserved handout for individual banks. I like the argument used to support this request (bolded in the snippet below) — it is self servingly cynical, but could be effective. However, it remains to be seen whether entire banking systems or individual banks will be successful in getting any funds outside of those provided by their national governments.

Stay tuned.

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Bailouts: catching a falling knife

This post from January 2009 explains why banks do not increase lending capacity when uncertainty about the level of existing loan losses already on their balance sheet makes them worry about future loan losses. Credit wariness will be the order of the day meaning new credit will be restricted amid doubt about the creditworthiness of potential borrowers. Given the still anemic growth in credit, this is something to keep in mind.

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Links: 2009-01-21

Yesterday was both an historic and eventful day. In the United States, we were celebrating the inauguration of a new President. I did my part over the past few days to bolster the economy by going to a number of parties and balls and consuming copious quantities of food and drink. Washington, D.C. was in a true bubble mentality because it was all Obama all the time here. I must confess to doing next to nothing yesterday except follow the activities on television.

However, as Washington was self-absorbed the global economy was reeling. The stock market collapsed, with financials taking a severe beating (I will have more to say about this in a later post). In Europe, the British Pound is in a disorderly unwind as unemployment approaches 2 million. Spain and Ireland are looking like they are in Depression already (Spain is headed for 19% unemployment while Ireland’s whole banking system is falling apart). Germany’s bailing out their banks and employers are cutting jobs across all industries. Not to be outdone, Singapore released truly dismal GDP numbers in what looks like Depression there.

All of this begs the question: what to do? Nationalization, further recapitalization, let them eat cake? I will have more to say about this shortly. In the meantime, here are the links for today.

Enjoy.

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Louise Yamada: Sell stocks; Dow could be headed for 6000

Louise Yamada is one of Wall Street’s foremost technical analyst. She is quite bearish and thinks the Dow Jones Industrial Average could go to 6000. Her advice: sell stocks.

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The worst M&A deals of all-time

As the financial industry further unraveled yesterday, Mathieu Robbins of the Irish Indendent asked a worthwhile question: Was RBS the idiot company of all-time in buying ABN Amro at the top of the market? Robbins says no and offers up nine other equally monstrous deals that all went seriously pear-shaped to prove it.

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Circuit City as canary in the coalmine for commercial real estate

Recently, I was discussing the economy with a lawyer expert in both commercial real estate and taxation, workouts, and bankruptcy. He made a few statements that I felt relevant enough to pass on here.

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Barack Obama’s Inaugural Address

Links: 2009-01-19 – banks and bloggers

Today’s links are dedicated to the banking crisis in the U.S. and Western Europe and to posts from my econblogging brethren. Below are my links for the day divided into three sections. Enjoy.

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