Credit Writedowns » crisis solutions

Big Bang or Endless Crisis?

Guest Author — Mon, 13 Dec 2010 14:30:23 +0000

Muddling through isn’t working. This column argues that troubled Eurozone nations should simultaneously open restructuring talks while continuing to service their debts normally. Germany, France, and other core Eurozone nations would have to stand ready to recapitalise the banks most exposed to the restructured debt. The ECB would then stabilise the banking system and the EFSF would stabilise sovereign debt. This big bang could be prepared in a weekend; the market already seems to be pricing it in

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The Swedish banking crisis response or the bailout hustle?

Edward Harrison — Mon, 22 Feb 2010 01:57:27 +0000

I referenced Matt Taibbi’s latest work at Rolling Stone “Wall Street’s Bailout Hustle” recently when talking about a movie on Ponzi schemes and fraud that aired on 60 Minutes. I liked the piece and recommend you read it – fully aware of the awaiting hyperbole Taibbi uses to hype his case. The interesting bit is

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The year in review at Credit Writedowns: Crisis Solutions

Edward Harrison — Mon, 28 Dec 2009 17:41:03 +0000

As we head into the New Year, I am trying to look back at the last one with some semblance of a coherent interpretation of events that leads to a strategic vision of the future. I have already touched on stimulus, kleptocracy and crony capitalism as dominant themes for the year 2009. These posts have

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The year in review at Credit Writedowns – Kleptocracy

Edward Harrison — Wed, 23 Dec 2009 17:30:31 +0000

Yesterday, I indicated I would write a few thematic posts as a look back at some of the more important economic topics that this credit crisis has uncovered. Tying posts together in a theme definitely gives a better holistic view of a the themes than the posts do in isolation. But I also enjoy writing

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The year in review at Credit Writedowns – Stimulus

Edward Harrison — Tue, 22 Dec 2009 15:43:24 +0000

As we approach the new year, I have decided to write a few thematic posts as a look back at some of the more important economic topics that this credit crisis has uncovered. The thinking is that tying posts together in a theme might give a better holistic view of a few themes than the

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Stop the madness now!

Edward Harrison — Fri, 20 Nov 2009 21:16:11 +0000

This is a post I just wrote over at Yves Smith’s site Naked Capitalism in response to a reader request. Marshall Auerback has already written a reply as well and I will post this later today. A reader at Naked Capitalism asked us to respond to a recent article from the Christian Science Monitor asking

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What would an alternative to bailouts have looked like?

Edward Harrison — Thu, 19 Nov 2009 20:33:39 +0000

I have written extensively about how I believe the bank bailouts were the worst of all possible solutions – fixes that perpetuate too big to fail, moral hazard and crony capitalism. That ship has sailed, but the questions still linger – in large part because the fix has not trickled down to common folk to

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The less optimistic view of Treasury’s handling of the crisis

Edward Harrison — Fri, 06 Nov 2009 19:01:05 +0000

The Obama Administration is captured. To understand why it has acted as it has, one doesn’t have to take the view that its efforts to save the banking industry were a deliberate attempt to line bankers’ pockets by transferring money from taxpayers to the banking industry. One need merely read the last post I wrote

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The wildly optimistic view of Treasury’s handling of the crisis

Edward Harrison — Thu, 05 Nov 2009 17:46:48 +0000

I was reading Kid Dynamite’s account of the recent Treasury – Finance Blogger meeting after having read a bunch of others (see them all in Abnormal Returns’ Nov 4th links). And I was struck by his characterization of the thinking at Treasuryregarding the financial crisis. I want to highlight two points and ask the question:

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The EU driving changes in European banking

Edward Harrison — Mon, 02 Nov 2009 22:24:02 +0000

At the weekend I wrote about Alistair Darling’s about-face on breaking up to big to fail financial institutions. Apparently, this was not a case of labour changing tack and finding regulatory religion, but rather of the European Union imposing its will on the British government. The EU is also dictating policy in Germany, the Netherlands

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More on greed, regulation, Lehman and the financial industry

Edward Harrison — Fri, 16 Oct 2009 03:08:05 +0000

In one of my latest posts I said “greed is not good.” Quite frankly, I looked at this statement as self-evident in the wake of an economic catastrophe where greed was a defining element. Yet, a remarkable number of people commented in defense of greed; they seem to believe greed is a good thing. So,

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What the stress tests reveal about Obama’s thinking on banks

Edward Harrison — Sat, 23 May 2009 11:39:19 +0000

Kyle, a long-time reader, recently asked why I think mark-to-market accounting actually matters. After alI, savvy investors know that accounting does not necessarily change cash flows. I think his question has a lot to do with not just accounting, but also with the stress tests. Kyle writes: My point is that it has really NOT

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Saturday Night Live Grades the Stress Tests

Edward Harrison — Mon, 11 May 2009 15:47:59 +0000

I forgot to add this to my links. Very funny Saturday Night Live clip spoofing Timothy Geithner. Related Posts Sarah Palin on “Saturday Night Live” 20 Oct 2008 Black: Stress tests and the Big Lie 9 May 2009 At least six banks need more capital under stress tests 29 Apr 2009 More About: banks, capital,

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Black: Stress tests and the Big Lie

Edward Harrison — Sat, 09 May 2009 22:36:23 +0000

I found this story and video of Bill Black on Tech Ticker (hat tip Larry Doyle). Basically, Black thinks the stress tests were a joke, a common theme heard from those in the know. Listen to what he says about a really difficult stress test we gave Fannie Mac ten years ago. Results of the

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Timothy Geithner on Charlie Rose

Edward Harrison — Sat, 09 May 2009 00:21:56 +0000

In case you missed it, this is Tim Geithner talking stress tests this past Wednesday on Charlie Rose. Related Posts Tim Geithner on Charlie Rose 11 Mar 2009 Ackman and Stigliz talk Stress Tests with Charlie Rose 27 Apr 2009 A conversation about AIG on Charlie Rose 18 Mar 2009 More About: bailouts, capital, Charlie

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Ken Lewis defends Bank of America’s stress test results

Edward Harrison — Fri, 08 May 2009 14:53:13 +0000

In the CNBC video below, Ken Lewis defends his company’s performance on the stress test and answers some pointed questions in the John Thain – Ben Bernanke – Ken Lewis – Hank Paulson he said she said match. He also details how Bank of America plans to raise the $34 billion in capital to deal

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FDIC Statement on the Stress Tests

Edward Harrison — Thu, 07 May 2009 22:07:28 +0000

This came to me in my inbox seconds ago: Federal Deposit Insurance Corporation (FDIC) Chairman Sheila C. Bair today commented on the release of the results of the Capital Assessment Program. Chairman Bair said: "I want to commend the Federal Reserve for leading the stress assessment exercise and believe that this effort will serve to

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BofA, Citi, Wells and GMAC biggest losers in stress test leaks

Edward Harrison — Wed, 06 May 2009 21:28:02 +0000

If you haven’t noticed, the Treasury department seems to be leaking the results of the stress tests to reporters at the Wall Street Journal. Richard Bove, a well-known bank analyst was on Bloomberg Radio this morning talking to Tom Keene and said he knows they have been leaking. Yves Smith was on top of this

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The Germans get tough with the state banks

Edward Harrison — Mon, 04 May 2009 04:19:38 +0000

Last week I wrote a post suggesting that the Germans were getting tired of bailing out their banks and had moved to more draconian solutions to ‘fix’ the banking sector. Nationalizing Hypo Real Estate this week will be the first move in that direction. But the Germans are not nearly finished in their effort to

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Warren Buffett: Wells passes my own stress test

Edward Harrison — Sat, 02 May 2009 18:36:32 +0000

Warren Buffet speaks with CNBC in the lead up to the Berkshire Hathaway Annual Meeting. He talks a bit about stress tests and Citigroup. When asked about Wells Fargo, he says he administers his own stress tests and that Wells passes “with flying colors.” He also uses an analogy of a commodities producer selling copper

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At least six banks need more capital under stress tests

Edward Harrison — Wed, 29 Apr 2009 07:10:54 +0000

This comes via Bloomberg: At least six of the 19 largest U.S. banks require additional capital, according to preliminary results of government stress tests, people briefed on the matter said. While some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares

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Channeling my inner Larry Summers

Edward Harrison — Tue, 28 Apr 2009 17:19:08 +0000

This is a thought experiment, so bear with me. I have written repeatedly how I felt that the U.S. Government’s plans to save the banking system were not adequate in the face of a severe capital shortfall in banking. On one level, I cannot understand the seemingly blinkered view now being taken in Washington by

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Stress tests reveal Citi and BofA need more capital, but you knew that already

Edward Harrison — Tue, 28 Apr 2009 10:00:19 +0000

The leaks about who failed the stress tests are already starting. Who got a big fat ‘F’? Apparently, Citi and BofA for starters. But is that any surprise? Regulators have told Bank of America Corp. and Citigroup Inc. that the banks may need to raise more capital based on early results of the government’s so-called

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Ackman and Stigliz talk Stress Tests with Charlie Rose

Edward Harrison — Mon, 27 Apr 2009 18:46:34 +0000

In this much-talked about Charlie Rose roundtable with Nobel Laureate Joseph Stiglitz joined by Bill Ackman of Pershing Square, Andrew Ross Sorkin of the New York Times and Kate Kelly of the Wall Street Journal, these experts discuss the government-administered stress tests. Joseph Stiglitz has been particularly negative about the Obama Administration’s banking crisis plan.

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All your bank are belong to us

Edward Harrison — Sat, 25 Apr 2009 03:02:13 +0000

It looks pretty clear that the U.S. regulators are going to clean house this year — at least with small banks. Hundreds of small banks and credit union will go into receivership in 2009. However, big banks are getting a free ride. First there was the juxtaposition of the kid gloves treatment of too big

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Reinhart: Not everybody can be above-average in stress tests

Edward Harrison — Wed, 22 Apr 2009 19:28:40 +0000

Irrespective of whether one thinks the stress tests used to test the U.S. banking system is a sham (10% unemployment is not a worst-case scenario), the fact of the matter is these tests MUST show some differentiation in order to be credible. Vincent Reinhart, a former Fed official now at the AEI, makes this case

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McCulley: We need the political will to socialize the losses

Edward Harrison — Wed, 22 Apr 2009 17:23:20 +0000

Paul McCulley of PIMCO made a few comments back in March which caught my attention. Given how well banks are doing this earnings season, I thought it relevant to quote him here. The essence of his remarks was this: Deleveraging is a self-reinforcing vicious cycle brought upon by the Paradox of Thrift. In order to

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Meredith Whitney: Regardless of stress tests, banks will still need more capital

Edward Harrison — Tue, 21 Apr 2009 13:11:02 +0000

The Bloomberg video below makes it seem that Whitney believes the stress tests are a sham. She says the tests are a theoretical exercise whereby banks ask: “what will our earnings power be in two years after we sell off these ‘toxic’ assets?” She goes on to suggest that the answer to this question will

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Video: Geithner calls for single agency to oversee systemic risks

Edward Harrison — Thu, 26 Mar 2009 18:16:31 +0000

Story from Investor’s Business Daily: Treasury Secretary Timothy Geithner called for “new rules of the game” on Thursday, including a systemic-risk regulator, stronger capital cushions for banks, and more disclosure from hedge funds. The broad-brush vision also would have derivatives such as credit default swaps trade via a central clearinghouse. Higher standards for money-market mutual

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Krugman: Geithner Plan “won’t work”

Edward Harrison — Wed, 25 Mar 2009 12:00:54 +0000

I have the same misgivings about the Public Private Partnership Investment Program that Paul Krugman does. However, I still think it could work in conjunction with all of the other stimulus being applied (at least in inducing a cyclical rebound, which seems to be the goal). Krugman does not. Watch the video to see his

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Roubini: Nationalization “fully on the table” in Geithner’s Plan

Edward Harrison — Wed, 25 Mar 2009 11:00:49 +0000

This is yet another semi-positive post about the Geithner plan. To reiterate, I think the plan is inadequate because it assumes illiquidity instead of insolvency and is a huge gift to the financial sector. But, that does not mean it will definitely not work in conjunction with other moves by Obama. In fact, to the

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2003

Edward Harrison — Wed, 25 Mar 2009 09:30:07 +0000

Yesterday, I posted an item on Naked Capitalism about the bankruptcy of Yamaichi Securities in 1996 as testament to lingering weakness in a country’s financial sector if sick financial institutions are not dealt with swiftly. In essence, the entire Japanese banking sector remained weak for years despite multiple cyclical upturns after the Bubble Economy burst.

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Goldman: Quote of the day – “Leopards change spots”

Edward Harrison — Tue, 24 Mar 2009 22:00:41 +0000

If you haven’t noticed, I think the Geithner Plan, while far from perfect, has a reasonable chance of success. Marshall, too, believes the plan could work as he has suggested in his last post. The optics of it are another matter. “Goldman has already said they will repay their TARP money within a month (obviously

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Bernstein: America is turning Japanese

Edward Harrison — Tue, 24 Mar 2009 19:56:50 +0000

I do believe the U.S. policy response to this financial crisis is very much like the Japanese response to their crisis in the 1990s. I have a post up at “naked capitalism” making this point. I would add, however, that America is in a worse position due to its lack of exports and manufacturing and

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Bernstein: America is turning Japanese originally appeared on Credit Writedowns

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Geithner’s Plan: one of the most regressive wealth transfers of all time

Marshall Auerback — Tue, 24 Mar 2009 18:38:46 +0000

Marshall Auerback here. I do not like the Geithner Plan because it is needlessly expensive. Nevertheless, it could well work. My main objection is that it constitutes the most regressive transfer of wealth in history and it’s being done BY A DEMOCRAT ADMINISTRATION!!!! Unbelievable. It has to be done this way in terms of securing

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Geithner’s Plan: one of the most regressive wealth transfers of all time originally appeared on Credit Writedowns

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Credit Writedowns Feed # abf0d081857b85fe6be494728740a4f1

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