Wonder how the market's going to like this?

wow...its funny, I was watching (while doing two or three other things) but didn't really understand. how in the hell does a bank raise private equity if it did badly on the stupid stress test? who puts money into a bank where the gov't (or anyone else for that matter) is in the first position? this makes no sense.

Banks are insolvent. Why would anyone voluntarily provide capital?

Tomorrow, the day after, and the months following will all be "interesting"... and so so so painful.

i agree ... but

i don't think that summers or obama are idiots (as opposed to dick and george). wonder what they are thinking or meaning here that i am missing.

columbia, larry and barry may or may not be idiots (time will tell) but they certainly have an agenda that's not helpful to free markets.

oh come on...don't spout that crap...you are ridiculous.

this was the first stone thrown into to bullish pond LOL

And So It Begins? Biggest Florida Bank Given 20 Days To Find Buyer Or Risk Shut Down

The biggest financial institution in Florida, $14 billion BankUnited of Coral Gables, was told by its regulator, the Office of Thrift Supervision, to find a buyer who would raise its depleted capital to acceptable levels or risk a government takeover. In an ominously sounding "prompt corrective action directive", the OTS has essentially given the bank a 20 day ultimatum. If Florida's biggest bank is on the hook, at a potential maximum taxpayer cost of $14 billion, maybe the stress test will not be just the fluff everyone is now expecting it to be. Then again, Citi, with its $3 trillion in assets, being told to find a buyer in under three weeks, may not be the most amusing notion for Vikram Pandit and Sheila Bair.

PS. Now that Goldman is a "retail" bank, don't they need a depositor base? Anyone know the Stardust odds are on GS acquiring BankUnited in the next 2-3 weeks (with a loss sharing contract with the FDIC in place of course)?

http://zerohedge.blogspot.com/2009/04/and-so-it-begins-biggest-florida-bank.html

cc, i wonder myself. it seems as though its a series of reassured managed expectations. on one day they tell any and all that under no circumstances that nobody will be allowed to fail and everyone will be backstopped if necessary, and then this.

i think that this administration is more sensitive, by far, to public opinion. and by public, i include people like Stiglitz. they are trying to walk that high wire between giving the banks a free pass and avoiding the pitchforks. i don't envy them, and i'm even starting to (slowly, and i need to see more) come around to thinking that while they might not know what they're doing they're trying to do their best and not just help Goldman.

ht1, that will be a cluster. i doubt the fdic would throw something to gs with any sort of decent terms these days. i would imagine gs would like to revert to IB status asap. i also think there is some possibility of banks being split along those lines in the future so it may not behoove gs to acquire aggressively. but, i could be wrong, and that would be interesting too.

there's alot that's horribly wrong with my grammar, be kind.

come on...barry spent his life preparing to help out goldman? no way.

so, larry cashed in? so did a lot of us.

i still think these guys want to go down in history as the people who saved our ass. on the other hand, of course, so did george.

the horrible problem is that no one knows what to do. i certainly have no idea.

cc, barry spent a LOT of time hanging out with the guys at the U. Chicago business school. i know he's a decent person, but that doesn't preclude him from having so-so economic theories. i'd prefer to think it's a situation as Rahm has detailed, and which we need to consider when we think of Clinton signing NAFTA and welfare reform: you've got to go in and get the deal done, and it's not going EVER to be the deal you want.

I think they do have some idea, i just think that it will take an inordinate amount of time to get to the point where it can be (politically) done. Do the states deserve, need countercyclical monies? Absofuckinglutely. Will they get them? Maybe when Kansas needs them, or somebody realizes that California's default involves just as many counterparties as AIG's.

what do you think the idea is? the only thing i can see is to let the chips fall...etc. but i cannot imagine what that would involve including for me and mine.

i think the idea is that things have to become bad enough at each important injection point for congress to agree to help.

i'm afraid that might, at least in the short run, sink us. i think the USG was hoping beyond hope that this rally would allow pension fund managers to take profits and not tank. i don't think they got their wish.

what to do is very clear - let the assets trade at the levels they must trade at. ever since the mkt rolled over in '07 all efforts were spent on preventing that from happening. indeed bush panicked and f-d up by starting the bailouts but obama is taking it to a whole other level of government takeover.
and btw as much as i disliked paulson... he is a Man while geithner is a Boy.
back to RE: until assets are allowed to trade where they must there will be no bottom.

se10024, i found the following analysis very well articulated:

http://www.informationarbitrage.com/2009/04/us-government-overengineering-for-underperformance.html

very interesting...says it all. hard to have transparency without simplicity. impossible to have simplicity without taking our lumps. i don't envy the guys and gals in DC. very, very difficult to appear to keep changing course---makes it worse yet not changing?

correct... we need clean house on all levels: feds, congress, bank ceo's. until clowns are out and credible folks (yes, they do exist) brought in there will be no 'recovery'. and incidentally, it'll happen when everyone stops trying to engineer it.
government doesn't 'fix' things it breaks them, e.g. stock market over last 18 months, and i don't mean simply that it's down, but that the mechanism by which buyers and sellers are matched was destroyed. it's just much more liquid than RE hence not as evident yet but it will be when liquidity dries up

take a look at this.... Through April 1, the government has made commitments of about $12.1 trillion and spent $2.5 trillion

http://www.nytimes.com/interactive/2009/02/04/business/20090205-bailout-totals-graphic.html

kind of knew this but seeing it this way is an eye opener.

and yet, there's more to come:

http://www.reuters.com/article/governmentFilingsNews/idUSWEQ00089320090421

Meredith Whitney has been pounding the point home about the banks upcoming reduction in unused credit card lines (supposedly well over $2T, more than half of the current total). What she and everyone else fails to mention is what that reduction will do to credit ratings. As your credit rating is strongly affected by your ratio of used to available credit, many people will discover that their credit ratings have been slashed as a result of American Express becoming more risk averse. That will really promote spending!!!

Agree wtih comments above re letting assets get to true values. The governments policies are basically designed to reflate (prevent from deflating) asset prices that are out of whack, but it may well not work (probably won't), and introduces uncertainty into the market. If prices are allowed to go to real levels, we admit banks are bankrupt,then amidst the rubble people will start investing again, in search of real return on real asset investment prices. And there is kind of analogy to NYC where 3/4 of the market seems paralyzed, hoping that somehow the trillions of reflation money will somehow, magically save this market, and all these projects, but it won't, so we have walking dead projects, sellers in denial, and buyers who will not buy until real asset values are arrived at.....Well, that wasn't exactly eloquent, but it is my humble view.

i'm sick and tired of the media showing homeowners as the victims of the crash. for me the real victims of artificially inflated prices (through subsidies and credit) are those in the sidelines and those that are going to be buying soon. it's time for those groups to DEMAND to the gov not only to stop billing them for the bail out of homeowners in trouble (many of them contributed to inflate home prices) but also to stop trying to re inflate prices. it's not only money wasted but it's not respectful of those that did the right thing (waiting for prices to come down).

Admin ---100% agreed.

RANT: I don't have an SUV, a McMansion, or a yard full of kids in Ralph Lauren Kids clothes with ipods,etc...and I don't have any credit card debt...and now I have to bail these people out.

Acting like homeowners underwater are the only interest group that matters is ludicrous. It's like Lemon Socialism -- bailing out the losers (bad decision makers) by taxing the winners (financially prudent).

i read that up to two-thirds of foreclosed homes are being withheld from the market by lenders as shadow inventory as they don't want to "depress prices." and those properties remain on the banks books at gloriously inflated values.

admin, this administration's economic policies make me want to vomit.

Last week's issue of Barron's included an interview with William Black, who served as deputy director of the Federal Savings and Loan Insurance Corp. during the thrift crisis of the 1980s. That article included these clear-sighted comments on reality of the situation:

“We already know from the real costs -- through the cleanups of IndyMac, Bear Stearns, and Lehman -- that the losses will be roughly 50 to 80 cents on the dollar. The last thing we need is a further drain on our resources and subsidies by promoting this toxic-asset market. By promoting this notion of too-big-to-fail, we are allowing a pernicious influence to remain in Washington. The truth has a resonance to it. The folks know they are being lied to.

“With most of America's biggest banks insolvent, you have, in essence, a multitrillion dollar cover-up by publicly traded entities, which amounts to felony securities fraud on a massive scale. These firms will ultimately have to be forced into receivership, the management and boards stripped of office, title, and compensation. Right now, things don't look good. The government is reluctant to admit the depth of the problem, because to do so would force it to put some of America's biggest financial institutions into receivership. The people running these banks are some of the most well-connected in Washington, with easy access to legislators. Prompt corrective action is what is needed, and mandated in the law. And that is precisely what isn't happening. The savings-and-loan crisis showed that, too often, the regulators became too close to the industry, and run interference for friends by hiding the problems.

“We have lost the ability to be blunt. Now we have a situation where Treasury Secretary Geithner can speak of a $2 trillion hole in the banking system, at the same time all the major banks report they are well-capitalized. And you have seen no regulatory action against what amounts to a $2 trillion accounting fraud. The reason we don't see it -- aren't told about it -- is that if they were honest, prompt corrective action would kick in, and they would have to deal with the problem banks.”

A friend who tries to buy bank owned and fix up and resell tells me horror stories of how banks simply will not deal in the realm of reality, you have to have lots of meetings, etc...they just sit on crap that goes further down in value.

jim, did you see Black on Moyers? it was awesome.

Is there a link to it?

the beginnings a little slow, as he is laying out the basics for the people. but he really gets going a bit later.

http://www.pbs.org/moyers/journal/04032009/watch.html

i just watched the entire clip and my mouth is hanging open. who is william black? is he for real? if so, (and he certainly seems credibile, so maybe i'm just in the same denial i accuse everyone else of) we are royally screwed. either way, this is must viewing.

All you morons bashing Obama have seem to forgot that this happened because of your party, George Bush, and "free market" non regulation.

petrfitz, i am and always have been a democrat.

looks like plenty of blame to go around for everyone....getting rid of glass steagal during clinton years seems to have backfired nicely. bush and his buddies took us to new, unthinkable heights of stupidity but the real rub from this guy Bill Black is what's going on today. If he's right. Geithner should be ridden out of town on a rail and obama should have his head examined.

It was the Republicans who got rid of Glass Steigal. Clinton was presented with a veto proof republican lead legislation.

at this point we don't have much wiggle room. we've got to start hitting some home runs, or this game is going into extra innings with a zero-zero score.

cc, i just don't get it. i had such high hopes. dashed, once again, by my own damned party. Geithner was Bush's boy. bring in Stiglitz, Volcker, Yellen, somebody, PLEASE.

yeah---neither do i. i still think obama is the right guy at the right time but that moyers/black piece really rocked me. i keep wanting to think that black is a wacko but he certainly didn't come off that way. starting to think what i said to you above re GS was way offbase---very disappointing.

Wow!

sometimes i think i've morphed into a conspiracy freak. more often than not i feel rather sane, which is disappointing to me as well.

petrfitz: YOU are a moron.
back to the discussion: bush/obama/paulson/geithner are not to blame, people expecting them to perform some kind of 'magic' act to 'fix' everything is the problem. there's a fundamental lack of understanding of how a credit cycle works and where we are within that cycle. when assets get to the point where buyers come out to purchase them that will be the 'fix'.
the best example i believe is not US in the '30s but japan in the 80's: 20 years and counting of government not letting the banks fail.

i would recommend watching the interview and then seeing what you think.

i'm not looking for a magic fix in the slightest. i think the contrary is necessary, let them fail. i think the government is pandering to the interests of certain members of the financial world. i'm not alone.

http://www.housingwire.com/2009/04/21/feds-hoenig-too-big-to-fail-a-farce/from the KC Fed chief:

That's really wierd. Link pulls up wrong (although also interesting) aricle. anyway, i'll try to fix it but essentially the Fed chief Hoenig said this is all a load of crap, and we are aiding the big bad boys which isn't warranted and puts the others at a disadvantage.

http://www.housingwire.com/2009/04/21/feds-hoenig-too-big-to-fail-a-farce/

I think this should do it. I inserted the link in the wrong spot. Still don't know why it pulled up the Moody's article.

Ok, another sign of nepotiz.. (can you name that reference?)

http://www.nakedcapitalism.com/2009/04/stress-tests-favor-big-trading-firms.html

To Jimstreeteasy and aboutready - thanks for clueing me in to the Bill Black reads. This is a man I can believe in - he seems a no-nonsense straight shooter.

That being said, the pervasive fraud in our upper crust is quite disheartening...

Lecker, it looks like Black's views are gaining some momentum:

http://blogs.ft.com/economistsforum/2009/04/the-crisis-holding-the-professionals-to-account/

another one, from the inside, commenting on the lack of ethics.

http://online.wsj.com/article/SB124027114694536997.html

Also, I strongly recommend the Moyers video posted above. Moyers is one of the best investigative reporters alive. This is highly credible, not crazy ranting. And it's scary.

http://blogs.ft.com/economistsforum/2009/04/the-crisis-holding-the-professionals-to-account/

"In the US, we are told that there are no culprits in the crisis. The attitude of the policy makers, regulators, bankers and traders involved in the crisis is virtually fatalistic, treating the crisis as an inevitable “force majeure”. All of them were observers and “no one saw it coming”. In short, the crisis is a Lemony Snicket’s “Series of Unfortunate Events”."

Reminds me of 9-11.