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Chart of the Day: Bank credit card fees induce big antitrust lawsuit

Edward Harrison — Fri, 13 Jan 2012 01:30:30 +0000

So why are these big name retailers suing the big banks. It's this chart that appears to be the smoking gun. Credit card interchange fees are the highest by a large margin. Clearly those charges that go into the bank and credit card companies' coffers are either absorbed by retailers or passed on to consumers

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Who’s Fool?

Frederick Sheehan — Wed, 01 Jun 2011 01:16:19 +0000

Legislation to modify debit-card interchange fees cannot compete with celebrity gossip. It is not surprising that lobbying efforts have changed the minds of 19 senators who formerly aligned themselves with consumers and small banks (to which the lower fees do not apply.) The legislators have now hopped in bed with Too-Big-to-Fail Banks. That is politics as we know it

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Why is US revolving credit decreasing?

Edward Harrison — Tue, 08 Jun 2010 19:02:26 +0000

This morning David Rosenberg noted: We also received the U.S. consumer credit data for April yesterday afternoon and the $1.0bln rise in total outstanding should be viewed in the context of the sharp revision in March (to now show a $5.0bln decline versus the initially reading of a $2.0bln increase). What really caught our eye

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Links: 2010-02-26 – credit cards, reinflating the bubble and more

Edward Harrison — Fri, 26 Feb 2010 14:43:12 +0000

AIG posts $8.9 billion loss | Reuters CDS demonization watch, Greece edition | Felix Salmon Get a Credit Card Through Credit Unions and Small Banks to Save – Credit Cards – Lifehacker Welcome to the revolution Mr. Weidner – Abnormal Returns Reinflating the Bubble : Ryan Chittum – CJR Facebook Secures Patent for News Feed

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Links: 2010-02-19 – Canadian housing bubble, Brazilian bonds and more 19 Feb 2010
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Video: Jon Stewart on credit card reform

Edward Harrison — Thu, 25 Feb 2010 19:49:38 +0000

If you didn’t know, new credit card rules just came into effect. Jon Stewart has a pretty funny take on the industry. Make it rain, Bank of America, make it rain (credit card fees, that is)! Also see Learn How Canceling Credit Cards Affects Your Credit Score and Learn The Details of Your New Credit

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Why the FDIC’s Resources are Strong and Insured Deposits are “Absolutely Safe”

Edward Harrison — Tue, 17 Nov 2009 21:02:03 +0000

Is this propaganda? I just received this e-mail from the FDIC’s consumer news with the title above. Personally, I never doubted that unbrokered deposits under $250,000 are safe at U.S. depositary institutions. But, the natural sceptic in me doesn’t like to see someone reaffirm what I thought I already knew. As bank failures are in

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Consumer credit down, but does it show deleveraging?

Edward Harrison — Sun, 08 Nov 2009 02:47:16 +0000

I have just taken a look at the consumer credit figures for September, released just yesterday by the Federal Reserve. The data do show some modest deleveraging, especially when looking at the recent increase in nominal GDP. However, it is still not clear to me that the scale of deleveraging is great enough to induce

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Why is everyone saying consumer credit is falling? It’s not.

Edward Harrison — Thu, 08 Oct 2009 18:30:00 +0000

But, everywhere I look, everybody is saying it is. I would like to be true to the data and not just take the government’s seasonally-adjusted numbers at face value. Judge for yourself. Here’s the data: This is what everyone is focused on – the seasonally-adjusted data. The part in red shows consumer credit down $12

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Consumer credit falls 4.4% from year ago levels 7 Oct 2009
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Credit quality deteriorates in 2009

Edward Harrison — Thu, 24 Sep 2009 17:37:58 +0000

This is just in from the FDIC (emphasis added below). It should make clear that the banking system is still weak: Credit quality declined sharply for loan commitments of $20 million or more held by multiple federally supervised institutions, according to the 32nd annual review of Shared National Credits (SNC). The credit risk of these

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Steve Keen: On the Edge with Max Keiser

Edward Harrison — Mon, 21 Sep 2009 12:00:09 +0000

Last week, I highlighted some of the ideas of Australian economist Steve Keen in my post, “Steve Keen and the spectre of terminal debt.” Keen is of the Minsky camp and he believes that an unsustainable debt bubble has build up in the industrialized world which can only be brought to heel through a ‘debt

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Bank crisis for prostitutes

Edward Harrison — Sat, 04 Jul 2009 17:57:32 +0000

Credit is still tight despite the low Libor rates and other signs that market stress has died down. Case and point is an item I ran across on the Norwegian site E24. Apparently, Amsterdam is losing revenue as its prostitutes in the red light district cannot get credit. Here is my translation of the story:

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What’s in your wallet? Probably higher interest rates.

Edward Harrison — Wed, 01 Jul 2009 18:22:06 +0000

FT Alphaville is reporting that the credit rating agency Fitch puts credit card losses at 10.4% of outstanding loans. This is a record. Bad news if you are a credit card company. So, what does one do in that situation? You raise rates on customers that are paying, silly. Citi’s rate increases emerged on the

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CNBC gives primer on counterparty credit default swap risk

Edward Harrison — Thu, 14 May 2009 17:09:45 +0000

This is a very good explanatory piece from CNBC on how counterparty credit risk makes the credit default swap market a financial weapon of mass destruction. Note they are not talking about eliminating the CDS market, but merely regulating and standardizing it to prevent a potentially catastrophic domino effect. Related Posts Lehman Brothers: a primer

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More credit card writedowns are coming

Edward Harrison — Wed, 01 Apr 2009 19:53:20 +0000

Of course you know I think credit cards are going to produce a tsunami of writedowns, right? Things are looking more and more like that tsunami is right around the corner: Credit card writedowns soared to record levels in February, representing an all-time high in the 20-year history of the Moody’s Credit Card Index, as

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Community banks getting no love in this crisis

Edward Harrison — Fri, 27 Mar 2009 16:47:14 +0000

Recently, I posted a Wall Street Journal article that suggested smaller banks and new banking enterprise can supply the lion’s share of additional credit needed for the U.S. banking system. While President Obama is off meeting the heads of the big banks, we should keep in mind that there are other institutions out there that

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Moody’s anticipates huge increase in leveraged loan defaults

Edward Harrison — Wed, 25 Mar 2009 15:31:31 +0000

This comes via Angus Robertson at Research Recap. Just as the RMBS post yesterday confirmed, moe writedowns are coming in other credit classes: In a trend likely to accelerate in 2009, the default rate on bank loans to speculative-grade corporations rose sharply in 2008 and recovery rates on leveraged loans dropped over the same period,

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It’s a great time to start a bank

Edward Harrison — Tue, 17 Mar 2009 16:18:46 +0000

With the shadow banking system of hedge funds and non-bank financial institutions in shambles and the banking system's credit shrinking, U.S. government officials are desperate to get credit into the system any way they can. A key part of that is the TALF, which is a back-door recapitalization of the shadow banking system, albeit not yet with the necessary regulatory oversight to prevent future excess leverage. One often overlooked piece to this puzzle is fresh capital injecting into brand new lending institutions. The Wall Street Journal has a good article today demonstrating banks are still opening. (Hat tip Judith) And depositors are rushing in

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Cramdowns are coming your way

Edward Harrison — Wed, 04 Mar 2009 13:10:53 +0000

Below is an interview with an expert on the issue of mortgage cramdowns. Basically, this issue is all about debt forgiveness for borrowers and writedowns for lenders. Lenders do not like cramdowns for that reason. See below for a view on cramdowns from Paul Van Valkenburg of the Mortgage Industry Advisory Corp. Warning: you should expect him to have a negative bias given who he works for. I actually like cramdowns. Van Valkenburg is looking at this from an investor's perspective and wants senior creditors not to be negatively impacted by the coming cramdown legislation. Nevertheless, I am posting this video because it is informative as to the impacts on mortgage-backed securities, mortgage servicing and housing

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Europe on the ropes

Niels Jensen — Tue, 03 Mar 2009 00:00:55 +0000

The Absolute Return Letter March 2009 “Many of today’s policy proposals start from the view that “greed” and “incompetence” and “poor risk assessment” are the ultimate source of what went wrong. In fact, they were not the true cause at all. Moreover, even if they had been, it is fatuous to think that we will

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BofA carrying loans on books for $44 billion above fair value

Edward Harrison — Sat, 28 Feb 2009 02:01:51 +0000

This news comes via Reuters: Bank of America Corp is carrying loans on its balance sheet marked at more than $44 billion above their fair value, the company said in its annual report filed with U.S. regulators on Friday. The bank said it ended 2008 with $886.2 billion in loans, but estimated the fair value

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Amex: paying cardholders to close accounts

Edward Harrison — Mon, 23 Feb 2009 23:50:34 +0000

From the National Post: American Express Co., the largest U.S. credit-card company by purchases, is paying some cardholders US$300 each to close accounts so the lender can reduce the risk of defaults as the recession deepens. People who got the offer to “simplify” their finances must pay off their entire credit-card balance by April 30,

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Citibank has cut all lending in Denmark

Edward Harrison — Fri, 20 Feb 2009 02:56:48 +0000

This comes from the Danish daily Berlingske Tidene. It suggests that Citibank is cutting back all international lending. Citigroup has sold its German operations to a French bank and I understand they are cutting credit lines in the UK as well. In seeing all these stories together, one gets a full view of the kind

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Video: The Wall Street Journal talks about Eastern Europe

Edward Harrison — Thu, 19 Feb 2009 21:27:26 +0000

Related Posts Bloomberg talks about the meltdown in Eastern Europe 17 Feb 2009 UBS does not see the need for panic over Eastern Europe 18 Feb 2009 On Wall Street, ignorance is not bliss 9 Aug 2008 More About: banks, credit, credit cards, Eastern Europe, Economy, Europe, journalism, media, video

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UBS is sitting on billions in bad student loans

Edward Harrison — Mon, 16 Feb 2009 01:01:31 +0000

Below is my translation from an excerpt in the Swiss newspaper NZZ:

In 2008, the lucrative business with loans to U.S. students came to an abrupt end. Today, UBS sits on paper that could still be worth $8.4 billion - or less. The collapse of the market for student loanshas increased the barrier to a good education for young Americans.
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Cramdowns and refis won’t need appraisals

Edward Harrison — Wed, 28 Jan 2009 20:10:15 +0000

In November, the U.S. federal agencies which oversee the banking system proposed new guidelines for real estate appraisals. One would imagine that these guidelines would be in keeping with the new more stringent regulatory frame of mind the financial services sector. This is not the case. In fact, the new proposal appears to entirely eliminate mandated written appraisals in connection with cramdowns and refis
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Citi agrees to do cramdowns 8 Jan 2009

Citi agrees to do cramdowns

Edward Harrison — Thu, 08 Jan 2009 21:32:39 +0000

After meetings with lawmakers, Citigroup has agreed to back legislation that would allow bankruptcy judges to alter the amount due on mortgage principal, so called cram downs. As it stands today, all other debtors including corporations have the cram down option available in bankruptcy court. However, changes to bankruptcy law have eliminated this option for mortgages, creating an impasse as house prices have dropped
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Connecting Fed cuts with credit writedowns and quantitative easing

Edward Harrison — Tue, 16 Dec 2008 21:10:03 +0000

To my mind, lowering interest rates in the aftermath of an enormous credit bubble where institutions have just destroyed $1 trillion in capital is wrong. It distorts lending decisions such that yet more money will eventually be lent out imprudently. The only way to increase credit availability is by getting reserves into the system. And normally you do that by making a profit. However, profits are hard to come by for financial institutions right now
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Chart of the day: Excess Reserves

Edward Harrison — Thu, 04 Dec 2008 01:39:06 +0000

One feature that is peculiar to the present downturn is the accumulation of reserves at the U.S. Federal Reserve. I imagine it is no different at other central banks, though I have not seen the data. Let me tell you what this reserve accumulation means and show you a chart of excess reserves compiled by the St. Louis Fed
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JPMorgan Chase: Large exposure to real economy downturn

Edward Harrison — Mon, 01 Dec 2008 01:55:57 +0000

The financial services sector has been the hardest hit sector in the credit crisis so far. Banks with large exposures to mortgage-backed securities like Citigroup, UBS and Merrill Lynch have suffered the most. This is largely because the crisis has been in asset prices -- chiefly home prices. However, as credit has become severely restricted, the credit crisis has become a global recession and that means the real economy will be impacted. This spells trouble for JPMorgan Chase
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Quote of the day: Willem Buiter – Tits on a bull

Edward Harrison — Wed, 26 Nov 2008 16:00:32 +0000

Willem Buiter has a very useful and provocative blog at the Financial Times website called Mavercon. The Dutch-born former Bank of England MPC member is not afraid to take policy makers to task or call a spade a spade. In his latest post on why banks are refusing to lend to creditworthy customers, he has
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Peter Schiff: they laughed at him, now he’s laughing back

Edward Harrison — Sat, 15 Nov 2008 03:33:00 +0000

I have been tied up with other activities all day today. But, I just had to send this post on Peter Schiff. My brother-in-law sent me this video a second ago of Schiff predicting doom and gloom on YouTube. And it's actually kind of funny to look back and see what he was saying in 2006 and 2007 and how he was pilloried. His calls were uncannily right on the money
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The emerging markets crisis

Edward Harrison — Tue, 11 Nov 2008 17:08:00 +0000

Last night an article by Niels Jensen of Absolute Return Partners caught my eye. In it, he made a very strong case for worrying about European bank exposure to emerging markets and its potential for creating systemic risk. I would like to share some highlights from this well-written piece and add a few thoughts of
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Reverse carry trade borrowing is deadly

Edward Harrison — Fri, 31 Oct 2008 15:40:00 +0000

By now, you are familiar with the carry trade, where one borrows in one’s own currency in order to invest in higher yielding foreign assets, often times with significant leverage. The Japanese were famous for making this trade in Australian Dollars, U.S. Dollars, you name it. What a lot of people don’t realize that everyone
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Reverse carry trade borrowing is deadly originally appeared on Credit Writedowns

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Massive short covering at VW and massive losses for hedgies

Edward Harrison — Tue, 28 Oct 2008 13:00:00 +0000

I ran across a very disturbing news item today that is getting a lot of press in Germany. Apparently, the leveraged finance community is getting routed at the German Automaker VW. The crux of the situation is that Porsche, which controls VW, upped its stake in the company causing shares to rise. For whatever reason,
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Forced liquidation

Edward Harrison — Mon, 27 Oct 2008 14:00:00 +0000

The recent movement in global markets has me scratching my head a bit. You have people dumping gold and the Swiss Franc in order to invest in the U.S. dollar and Treasury securities. Everyone says it is a flight to quality. I do not agree. Logic has it that the U.S., as a debtor nation
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