banks will lead us out of this recession

"if the trend of good news from banks continues"

- what trend? Continuing to go to the Gov't for $$$ and ultimately being nationalized is not a positive trend

do you have any idea how banks make money? let me try and explain

the spread banks pay out for deposits and make on loans right now is very very healthy. do you understand how the tarp works and how the talf will work.

the us govt is now the largest shareholder in most tarp institutions, either directly with citi, or indirectly with b of a, goldman, etc. the govt won't nationalize as they will wipe themselves out first and then the rest of the common and preferred shareholders. they are aligned to help banks make profits. that is exactly what is happening.

enjoy the rally. prepare for a massive bank failure between the ides of march and independence day.

of course it's only my opinion, but if things suddenly seem "too good to be true"..they usually are.

UWS1313: Are you reading that 1960s encyclopedia brittanica on banking again? Borrow at 3, lend at 6 and on the links by 3? If that is the way major banks had been operating for the last 10 years we wouldn't be where we are and the government wouldn't be shareholders. Please read a newspaper.

And where do you think making a profit lies on the US government's list of priorities?

UWS1313 meet SteveF. SteveF meet UWS1313. Oh, it appears you're the same person! Imagine my embarrassment.

malthus you have no idea. traditional banking is making a bigger comeback than michael jackson. excessive risk taking will be regulated away by fed officials until such time they aren't running banks. have you met anyone who runs a bank? do you talk to bank officers?

massive bank failure - on what assumption?

oh i forgot, the chicken little bank failure model is more reliable than the federal reserve's.

GET REAL people.

b of a announces things are improving. jp morgan and now the mother load - citi has 2 good months.

why do people insist on seeing banks fail?

beatyerputz... you have a gifted mind! Carry on...

Himwhoknows... wait till Citi takes a massive "write-down" dump that will make their earnings look like one square piece of tissue paper holding back a bout of explosive diarrhea... and I'm not talking about the 2 ply stuff... it's gonna make today's rally seem like a speed bump compared to the downside :)

UWS1313.. .who the f r u... what was your handle b/f you changed it?

JP Morgan was just downgraded, wasn't it?

We are going back to traditional banking which is a very good thing but that alone won't save anyone. As for NY real estate, traditional bankers get paid a lot less than their naughty friends in IBanking. Also, it would be nice if these banks approved a mortgage or two to anyone other than buyers with perfect credit and loads of cash.

"have you met anyone who runs a bank? do you talk to bank officers?" Yes. And yes. Do you?

Traditional banking IS making a comeback but it doesn't drive anywhere near the revenue growth that more risky strategies did. THAT IS WHY THEY MOVED INTO RISKIER AREAS. I'm happy banks are now making money doing plain vanilla loans, but it will never, never bring back the revenues that the major banks experienced before the current situation. Banks are going to need to find something else for that and I expect with all the restrictions you mention, it will be a long time for that as well.

Why do you insist on propagating bs on this board? Everybody wants a quick recovery, but every time you throw out this crap in order to scare people into thinking there will be a quick recovery for NY real estate you are going to be called out on it because anyone who actually buys into your theories is going to crushed.

Citigroup Will Have To Sell More Assets: Whitney
Topics:Banking
Sectors:Financial Services | Banks
By: CNBC.com | 10 Mar 2009 | 04:31 PM ET
Text Size

Citigroup will have to sell more of its assets to stay in business, well-known banking analyst Meredith Whitney told CNBC Tuesday.

Whitney made her comment after being asked about Citi's Chief Executive Vikram Pandit saying he was confident about the troubled bank's survival prospects.

Meredith Whitney

"Citi's capital position is stronger relative to how it was," said Whitney. "But I wouldn’t call it strong."

Whitney, who is founder of Meredith Whitney Advisors, said that the bank has exposures across the board and said that "I'm not optimistic about them."

"Trillions of dollars of loans have been mispriced by Citi", said Whitney. "By my math, they don’t make money in any of their businesses."

Whitney says Citigroup [C 1.45 0.40 (+38.1%) ] will be forced to sell their "crown jewels" if they are going to get any more bailout money from the government. "They're going to have a 'yard sale.' They will be a smaller and less of an international business going forward," says Whitney.

Citi split off its prized Smith Barney brokerage on Janury 13th.

Since October of last year, Citigroup has received two federal bailouts, $45 billion of capital from the Treasury Department's Troubled Asset Relief Program, and a government agreement to cap losses on $300.8 billion of troubled assets.

On the topic of keeping mark-to-market rules, Whitney said that it's basically a non-factor and that the damage has already been done. Whitney says that the banks don't want to have it suspended because if for some reason, the market comes back "they don’t get the benefit of the newer market."

Whitney also said that the government is trying to sweeten deals for the private sector in order to get more cash infusions into U.S. banks. "The government cannot do it alone," said Whitney. "They need the private sector to come back."

Whitney also commented on the credit card crisis she's been predicting. She said that credit cards are the next credit crunch and said that banks' portfolios continue to shrink and when you shrink the portfolios for the banks, "credit losses eat into earnings and they have to peddle faster to collect on loans and they make less money and lose money."

RELATED LINKS

Current DateTime: 01:33:25 10 Mar 2009
LinksList Documentid: 29619436

* Whitney: Credit Cards Next Crunch

Whitney revised her estimate for credit card line cuts to more than $2 trillion inside of 2009 and $2.7 trillion by end of 2010.

Whitney has previously said the credit line cuts would be $2 trillion by the end of 2010.

"... wait till Citi takes a massive "write-down" dump that will make their earnings look like one square piece of tissue paper holding back a bout of explosive diarrhea... and I'm not talking about the 2 ply stuff"

Dude - that might be the funniest thing I've read in months - bravo! I don't agree with you, but bravo.

UWS 1313 -- it is okay to be contrarian but unfortunately I think you have the wrong end of the stick here.

About 80 or so regional and community banks have failed in recent months, and hundreds more are expected to fail in 09. That is why the FDIC has been staffing up left and right (one of the few financial orgs that is now hiring!). They are going to need lots of people to help them assume all those assets when the banks that they insure fail.

You can read all about on this on many websites. Check out the mortgage bankers association, they have lots of news articles and research papers. You will see stuff about how hundreds more regional banks are expected to fail this year.

As for lending that is currently going on -- yes, some banks are lending, and yes, they are making those loans at rather higher rates than they were charging a year or two ago.

However, there are only two reasons they are making loans: 1) either they are rolling over debt that is already on their own books (because nobody else will), or 2) the loan is extremely loan risk and/or is being made to a borrower whom the bank knows well and with whom it hopes to do business in the future.

Now this is ok as far as it goes, but the problem is, it doesn't go very far. The only people who can loans noware the people who need them the least.

That is not a description of a healthy financial system.

Sorry, I meant that next to last sentence to say: The only people who can get loans now are the people who need them the least.

"Traditional banking IS making a comeback but it doesn't drive anywhere near the revenue growth that more risky strategies did. THAT IS WHY THEY MOVED INTO RISKIER AREAS. I'm happy banks are now making money doing plain vanilla loans, but it will never, never bring back the revenues that the major banks experienced before the current situation. Banks are going to need to find something else for that and I expect with all the restrictions you mention, it will be a long time for that as well."

Absolutely.

We'll get out of this eventually, for sure. There will be some pain, but we'll get back to a better place.

But how folks think that will be back to bubble levels is ridiculous. We'll get back to normal, yes. Eventually. But bubble prices and bubble incomes are NOT the norm.

We can have all the recovery in the world... but tulips never went back to peak prices.

what BS am i promulgating?

i never said real estate will approach peak prices - you *@#!s inferred from my comments that fallacious view.

i never said banks will approach peak earnings either - again you chicken littles only want to hear about the proximity of the sky you presume is falling.

when MAJOR money center banks and bulge bracket wall st firms return to any reasonable level of profitability, i assert that the fear and loathing which we find engulfing everything from these discussion boards to corporate boards will be replaced by a greater sense of confidence that we are NOT heading to the great depression II.

graffiti - a thousand little banks can fail and i won't worry. over 80% of deposits, loans, etc. are controlled by a few major banks. why do you think bernanke repeats too big to fail every time he testifies? focus on what really matters my friend.

22 years in banking and investment banking and i've seen the good the bad and the ugly. what i've NEVER seen is the federal reserve printing money at the rate we currently see. why doesn't anyone offer analyze money suppl;y and what it does to stimulate an economy?

i'll respect you in the morning if you have nay insightful comments re:

1) the rate of growth in M0, M1, M2
2) the implications of a steep yield curve for bank earnings
3) what will happen when the cds market regains its footing in april

UWS -- it seems many people on this board see the Fed printing money and assume that is going to lead to higher inflation -- I've heard that both as a reason to buy from uppereast and for a reason not to buy from HWK (who I think says he is holding swiss francs and gold).

I largely agree with your points, but to consider the following:

1) The FDIC is underfunded
http://www.boston.com/news/nation/washington/articles/2009/03/11/now_needy_fdic_collected_little_in_premiums/

2) While there have been numerous bank writedowns, where are the LTCM style hedge funds imploding?

3) Banks will not be able to have the same leverage ratio as they had in the past -- less leverage == less opportunity make money == less in bonus.

HWK, I"m still looking for an explanation for why you see expect inflation in this market.

UWS1313 - the issue is that it is clear the banks are still saddled with enormous obligations they can't cover. Making a profit as released by citi, one which does not calculate into it the debts, btw, considering the massive size of these obligations, makes this all a strange delusion game you're playing.

jmkeenan, ltcm was leveraged hundreds of times over. today hedge funds have largely delevered as the i-banks made massive margin calls. i would guess less than 3x leverage now in most hedge funds.

you are absolutely right that banks are delevering as well. think of it this way - some banks levered their balance sheets 40x. at that leverage ratio 2.5% credit losses on the loan book wipes you out! we will revert to historical avgs of leverage ratios, say 10-15x.

the key is the spread on deposits to loans. at 3% banks can make handsome profits even at lower leverage ratios. policy makers are aiming for just that in order to restore banks' profitability and healthier balance sheets. i'd argue that any measure of profits at leaner banks will bring back some hiring in 2010. bonuses are an entirely different issue as the govt has a problem with big bonuses and they are running the big banks. watch for goldman to pay down their tarp funding by the end of 2010 if not earlier.

why inlfation? read bill gross recent remarks, warren buffet's and marc faber's. the historical relationship between massive monetary stimulus and rising inflation is fairly clear. many like the 3 qualified individuals i just mentioned predict 2010. the market will react sooner.

re: citi, i'd argue that their ability to fudge the numbers is much more difficult as the fed examiners are so far up their a_s. furthermore, the govt is the largest shareholder and has all of the tarp powers. i'd take some time to review their writedowns in 2008.

you all are missing the point. the fact that operations at banks are coming out of the doldrums is an incredibly important economic indicator. it's significance is not primarily for the banks themselves, which could still go under from the pressure of the toxic assets (although i tend to think they won't) bur rather for the broader economy. credit is starting to flow again. people want loans. the economy went off a cliff, but maybe it is starting, ever so slowly, to pick itself up and get it together. we'll see.

unemployment is, as i hope everyone knows, a lagging indicator, and no doubt will continue to go up. that's quite painful. but a lot of what a recession actually is is inventory liquidation and that's happening. i am neither particularly optimistic nor particularly pessimistic, but when most people start saying that things will never get better and anyone who points to any bright spot or optimism gets pilloried, it might be the turning point.

HR - I mostly agree with you, with the exception of credit. It is not flowing and that is one of the main problems right now. People are not getting loans and businesses are being choked. The situation cannot improve significantly until the credit markets are loosened.

Actually, there are indications that credit is tightening again.

but the credit markets are starting to loosen. at least, that's my first-hand experience.

For companies the credit market is as tight as ever. The small businesses can only stay afloat for so long. If they don't improve soon we will likely see a rash of small and medium-sized companies fail or have large layoffs.

www.calculatedriskblog.com/2009/03/more-credit-tightening.html

Well, sorry for pillorying but I didn't read this simply as a "isn't that good news" story. Especially not since it is a REAL ESTATE BOARD and the conclusion was that asset prices and real estate might be recovering and that banks would lead the way back by lending. I also don't enjoy the straw man so much -- I mean, really, with all of our tax dollars sunk into them, who doesn't want the banks to recover. But the point still holds that we are undergoing structural change and the profits aren't coming back in the volume they previously rolled in. It follows that other bubbles directly inflated by those profits won't be coming back soon either. So if the idea was simply "Yay banks are doing better!", then I second the yay.

By the way, the basic idea of the thread -- that banks are out there lending again would be great news. But based on today's WSJ, calculated risk and other posts on the board, I'm not sure that is even true.

aboutready - thanks for the link.

FWIW, I think this can be fixed and that it would have an immediate positive effect on the economy. It will require somebody going in with a big stick and smacking some skulls around, but isn't that what politicians are supposed to do in a recession?

malthus i never suggested that banks are lending the way that we need them to lend. i am pointing out that we need banks to not only be solvent, but ultimately profitable in order for them to regain the confidence they need to lend in a way that is stimulative to the economy once again.

put another way, you can inject infinite capital into the banks and it will not do sh_t for the credit markets. profitability will fundamentally change bank mgmt's outlook and their desire and willingness to lend.

uws1313, banks need to feel that they have enough capital to cover potential losses going forward. making money currently provides some of that, but not enough.

waverly, my only concern is that a big stick will no longer suffice, and we don't seem to have anyone capable of wielding a tree trunk.

aboutready - haha...I think that is funny (and could be true). I will remain optimistic on this happening, though, out of choice if not due to any credible evidence.

aboutready, they need to lend the money out to re-inflate the assets that back the loans. the toxic, bloated balance sheets need to be wiped clean. at 30-40x leverage i'm afraid there isn't enough capital to cover another 3-4% of credit losses.

OTNYC... glad you enjoyed it :)

Yo waverly et. al. UWS1313.. I take it back.. you r not the other anonymous poster that I thought you were... carry on.

jmkeenan... as to your question as to inflation vs. deflation... you will have pockets of both in this economy... yes the printing presses are on 24/7 and if you can pass on inflation (i.e you have pricing power) then you will.... but it will be very limited to food, medicine, i.e. other necessities (righting of the ship).... but all the other crap (boats, planes, $1MM plus homes, banker's wages, soft assets (bonds, stocks etc.) will keep deflating. Bringing it full circle to NYC RE, I see nothing but doom and gloom... although you may not believe this... I am bullish on America (no better gov't in the history on mankind) and NYC (I love this city)... but not NYC RE prices... :(

Did agentrachel just lose her job?

w67, what's your profession?

I'm one of you.... did the I-banking, commercial banking, work-out group.... auditor prior to that for a major I-bank. MBA form Ivy, wife a doc, 2 kids in private school. 1 Boat, 4 cars (997 T, RR HSE, Honda Odyssey, Cayenne Turbo)... $1MM in cash and 4 years of shit from wife for not buying in 2003-2007.... now... Assuming you are new to Board, been on 4 months.... its good for shitz and giggles....

I come on to vent about all the bloated crap that were trading for $2,000psf (FYI, my commercial and RE LT investment that were made in mid 90's were done at (drum roll pls) $300psf...). F! I tried to tell everyone and their dogs that you shouldn't leverage yourself in 2004-2008... to a point I stopped saying it b/c people were looking at me funny... But I'm on this Board to say "I TOLD YOU SO." But can't do that in REAL life to my wife's friends who bought and are struggling and mutual acquaintances that r RE brokers etc.... so here I AM.. like the Air Supply song... last I heard they were living on the Big Island :)

one other thing... inflation/pricing power is how society allocates resources... for the last 10 years me thinkz we've just been trading homes back and forth to each other and with each trade we'd go out and buy a salad shooter made in China, a new Hummer and that glorious trip on Carnival Cruise line... hope you still got that tan.... :)

w67, i have a friend who bought into that building x the street from wfc at $1600 psf pre-closing costs in 2007. ouch! i wouldn't dare to tell him itys. it may put him over the edge as he worked at lehman until recently. the wealth destruction in his life is so f'ing painful.

nyc is definitely being repriced as you suggest. i just cannot stand every chicken little calling for the worst ever kind of sh_t. with that cash position you must be low ball bidding?

UWS1313, let's put things in perspective... we came from a poor country with very little prospects for "prosperity" and my parents were amazed at the ENTIRE F-'n aisle of dog/cat food (in our country, it was left-over and if times got tuff... the dog (belch) had to go)... so I feel no sorrow for any NYer that can't do the $15K/month carrying costs... especially when you can rent same unit for $5K... so they should stop smoking the same joint with Agentrachel and sell the damn thing!

Right now any seller is asking me to catch a falling knife... if I'm gonna take that risk, I want to be well compensated... that means CHOP your prices.... and one final note, I'm not a buyer until I see significant short sales/bankruptcy sales in NYC (proper).... at which point I'll use that as the comp from which to under-bid. I just re-upped my rental for 16 months... no need to rush this :)

UWS -- here's the link re: inflation speculated by Buffett, Gross, etc.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aQ1ft2HEw6r8&refer=us

I'm not saying that they are wrong or that there will not be inflation -- it's a very real and scary thought. However, the argument that "the fed is printing more money therefore there will be inflation" is somewhat simplistic. In the case of Japan of the 1990s, there were 0% interest rates and yet there was deflation, b/c of bankrupt companies and falling asset prices -- if asset prices fall, that contracts the money supply as well.

We clearly have serious asset price contraction outside of NYC. I think there is an argument that deflation is still the bigger danger than inflation.

Of course, if there is inflation nationally, that would have a major impact on NYC real estate prices as the obligation of mortgage holders would be greatly reduced. W67th, I'm not sure I understand the mechanics of how you can have both deflation in one area and inflation in another at the same time. If there is inflation, then those assets we see as overpriced today will no longer be (as) overpriced, no?

http://en.wikipedia.org/wiki/Deflation#Deflation_in_Japan

And, the FDIC is asking for more money for its reserve fund, which I believe would also create deflationary pressure.

One more thing -- I think there were three speculative bubbles that burst in the last 10 years -- one was the equities correction of 2000-2001, which prompted Greenspan to lower interest rates and thus empower the second bubble, the property bubble as people sought the same returns they were accustomed to in the equity markets (in fairness to Greenspan, housing bubbles also existed in many other countries including Ireland, England and Spain). The third bubble -- and I think ignored -- was the commodity bubble of 2006-2008. Look at many of the commodity charts - not just oil - and you will see all the marks of a speculative bubble. the rise in the price of copper in 2006 was just insane.

All it takes is for banks/companies to start reporting earnings in March (Q1) and June (Q2) for people to realize that the returns are high with stocks at these price levels. Meanwhile, all the doom and gloom advocates can spread fear to achieve their agenda.

Can Citibank with all its prime real estate offices all over the world and all its human resources really evaporate?? Especially if the gov't is compelled to back it up because it is too big to fail?? One day we will all grin and shake our heads "I didn't buy Citi when it was a buck".

"Can Citibank with all its prime real estate offices all over the world and all its human resources really evaporate?? Especially if the gov't is compelled to back it up because it is too big to fail?? One day we will all grin and shake our heads "I didn't buy Citi when it was a buck"."

There was a lot of commentary about Bear never failing, about Lehman, at the time. Politicians have been voicing growing sentiment (on the republican side) that Citi and other banks should be allowed to fail. What happens if AIG returns yet again, hat in hand, for their next fix of US taxpayer money, and Congress ties it to revealing counterparties?

Not saying this will come to pass, but confidence in anything given what has happened, I believe is misplaced. There WILL be a turn around, of course, and at the point those who bought surviving banks low will cluck years later as they reap the profits. In the interim, with other failures possible, a lot still could be lost, and it will be a lucky (or genius) timing, IMO, that finds those profits by investing heavily now in these stocks.

UWS1313: My apologies. I thought you were making a different point. I guess I'm not the only one since someone else thought you were SteveF in disguise but it is clear you are not and I certainly agree with your point about needing solvent and profitable banks. The current situation is hurting a lot of businesses, not just the banks themselves. I may even need a mortgage myself ... some day.

okay. B of A says they can earn $50 billion pre-tax this year. how about them apples?!?!

well i looked at the bank/financials iyg etf now and it may just may be telling us something.

time to revisit this thread - any of the perma-bears willing to admit they are wrong????

BTW - I didn't buy Citi at a buck, $1.30, and in size....

> time to revisit this thread - any of the perma-bears willing to admit they are wrong????

Crain's just came out with the report... banks across the country are hurting. It got posted here like a week ago.

You said we'd have asset price recovery... and prices have only gone down since you made the statement (and are still falling).

housing prices are falling around the country stimulating buying activity, see the 4 month trend. if you cannot see the next trend given liquidity, low inventories, low rates and the return of homebuilders....banks failing?? yup and that's a good thing. bad banks need to go away. however, the money center banks who control over 80% of the country's deposit base are not going to fail. do they still have HUGE problems, of course. if you still think they may fail i suggest you start taking those meds again.

the problem with being so negative and so bearish is you miss the opportunities right before your very eyes.

re: manhattan real state - look at closings across manhattan. despite the lack of bank jumbo lending cash buyers are returning at rising prices (from 1Q). hard to argue with that.

finally, have you heard wall st is hiring again? many of you must hate that as well.

I admit i've been quiet impressed by the stock market rally lately and became pretty bullish about it but i'm still bearish on the RE market. The RE market is still a declining market. I prefer to use my 20% downpayment money to buy stocks, my short term rewards have been quiet amazing so far. If i had listened to any RE bulls 6 month ago, i would not have made so much money and the value of my property would be down.
I'll be renting and day trading stocks for another year or two and see where the RE market is at by the end of 2010. No chance prices will go up so no rush buying.

> housing prices are falling
> banks failing?? yup and that's a good thing.

And yet you want to take a victory lap. Hillarious!

"the problem with being so negative and so bearish is you miss the opportunities right before your very eyes."

Don't project your losses onto others. While some of us were avoiding getting crush in RE, we also bet stocks and were rewarded hansomely. I told everyone about SSOs in the 7s and 8s multiple times...

"If i had listened to any RE bulls 6 month ago, i would not have made so much money and the value of my property would be down. "

Of course. Yet there hasn't been ONE to admit they were wrong, despite all the black and white evidence. Amazing. Even more amazing that some have tried to claim they were right!

I bought Citi at 1.10 and sold at 3. And not looking back :)

If the stock market can weather September and October, I may change my mind and feel a tempered bullish attitude towards NYC real estate.
Right now, I still feel the stock market is in for a big dip this fall, followed by more pre christmas bonus layoffs, and further followed by retailers cashing in on what they can during christmas season ending in many chapter 11's in january and february.

so AIG is up 20% because new $7 million CEO says they are going to be able to pay the government back $180 billion. neglects to say when or how and market goes up. brilliant.

Anyone here believe as well that the next crash will be happening if CIT group goes bankrupt?

nyc10022 - why do bad banks need to fail? have you thought this one out? bad banks sit on bad assets and stifle lending activity as a result. by letting them fail, the bad bank's balance sheet is cleaned up, bad assets are priced properly and the new owners of a bad bank (anyone but the govt please) can do what banks are supposed to do - lend prudently and make profits. at present any bank with a clean balance sheet can make huge profits given the shape of the curve. Got that one?

falling prices - why is that good?? you establish a clearing price for assets. you can argue that increased sales and BUILDING activity as prices fall are both bad. i argue that those who are taking risk, and sizeable ones at that, are not predicting continued declines in home prices. put another way, home builders risk billions of dollars rather than opine, as we are doing, that home prices will recover. i love that. i know that your immediate knee-jerk response will be - well they did that in the past... to which I say, God bless the entrepreneur's spirit.

no victory lap - just a continued contradiction of the perma-bear view that the sky is falling and will continue to fall. oh and i thought your silence re: the last 60 days of closings in the $1 million+ condo/co-op market was deafening.

btw-no projection of loses on my part here. quite content with gains. maybe a tiny bit of gloating - oh i'll just come out and say it - "i told you so."

I love your circular logic.

You actually just tried to rationalize that falling prices are evidence that the people who predicted falling prices are wrong.

You get the rediculous part of that, right?

"i thought your silence re: the last 60 days of closings in the $1 million+ condo/co-op market was deafening. "

I wasn't silent, I pointed out that the sales numbers that came show prices BELOW last quarter. I'l translate.... prices still falling (but you knew that).

> maybe a tiny bit of gloating - oh i'll just come out and say it - "i told you so."

You either have some awfully bad logic, or an interesting sense of humor.

Person who says prices will rise saying "I told you so" to folks who said prices will decline... as prices are declining!

Crack is wack....

Don't really know what affects and effects a CIT bankruptcy would have.
It would most obviously affect the garment industry, but on the supplier(importer to retailer) level.
The trickle down would be suppliers tightening up shipments and maybe causing shortages in retail store inventory? Maybe retailers can then buy direct overseas or from those willing to take the credit risk.

Someone could also buy CIT and be instantly be in the garment industry.

But who wants more risk today. And especially with the upcoming chapter 11 season (Jan/Feb).

I think the govt. will probably either have to bail them out or make sure they are taken over by someone that can continue the service.

nyc10022 how do i use circular logic?? read all of my posts again. your argument that i use circular logic is simply a way to obfuscate your absurdly wrong view of the world what i like to call the chronic bear syndrome. that's ok. i repeat time and time again that we need healthy banks in order to have asset prices and by extension real estate prices recover.

read the title of this thread, banks will lead us out of this recession, read my earlier forecasts and projections, thanks goodness they are dated by streeteasy. where did i ever say RE prices are about to rise?? i suggested several times that as banks recover, hard to argue that BofA, Goldman, Morgan Stanley, CrediSuisse, even Citi (profit up yoy, stock prices up over 100% off the lows in many cases), asset prices will recover as well. that includes financial assets, real assets and commodities. the good news is we can revisit this forecast again in 6 months.

read my posts and then come back. i do appreciate your juvenile attacks and amateurish attempts at high school debate judging. love the democratic nature of bulletin boards.

truthskr10, the Gvt made clear he won't bail them out. Also, the Gvt needs whatever money it can get to finance the Health care reform.

S-hammer

Fuunny huh? The democrat party's selective bailouts looking a lot like the "selectivity" they accuse the republican party of.
Different package, same crappy product.

If they won't bail out CIT there is a good reason for it. They probably foresee the wave of retailer chapter 11's coming and no amount of bailout will keep CIT solvent then.

how big is CIT's balance sheet? what systemic effect will it have on the financial system??

i agree the bailouts are sometimes political and selective, but i cannot argue with the results - we averted a total meltdown.

sledgehammer...

Looks like a a little dutch boy's finger may temporarily do the trick.
http://www.thestreet.com/story/10585120/1/cit-future-looks-bright-for-bondholders.html?cm_ven=GOOGLEN

Still, just like in the movie backdraft "You go, we go." (you = retailers we = CIT)

Well, the Gvt manoeuver was pretty wit. The pressured Goldman sacks to lend them 2 Billions. I believe Goldman sacks should have been investigated long ago. May be part of the deal was to delay the investigation if they lent CIT the money... You know, those kind of deals...

I remember reading that CIT was something like a quarter the size of Lehman's. Still pretty big!

UWS1313
"how big is CIT's balance sheet? what systemic effect will it have on the financial system??"

I am not in the garment industry but I can tell you CIT is of same importance to the garment industry as medicare is to the over 65 crowd.

"nyc10022 how do i use circular logic?? read all of my posts again. your argument that i use circular logic is simply a way to obfuscate your absurdly wrong view of the world what i like to call the chronic bear syndrome. that's ok"

Except you have that wrong, too. Again, I called buy with dow crossing 8 and 7....

You can call me whatever names you want, but I've been right on two fronts now, no matter what you make up about me.

Uws13141516171819. Citi also does a bunch of franchise stuff to the likes of dunkin (one of my tenants has a working capital line from citi). Banks have ton of re on the balance sheet still so your logic is indeed circular. Banks stock rises bc their bad stuff is undisclosed, they lend to people to buy re so their 're assets' gets floor so their stock goes up. All I'm saying is what is the floor of these assets including commercial loans, personal credit and residential re loans. Me thinkz the market for re has further to fall till it resets and job losses will continue for awhile so come back in 6 months and get more popcorn.

Now, the prevailing wisdom is that the economy has bottomed, but, as Mr. Bernanke said today, “The economic recovery is likely to be relatively slow at first.”

I tend to think he is right. But I wonder whether one part or the other of that forecast — whether the economy has bottomed, or the recovery will be slow — will seem similarly foolish a few years from now.

I bought citi at 1.02 and sold at 4 --- i bought b of a at 2.58 and sold at 8.75. left some money on the table -- but no regrets

I picked up SSOs for $1200 to $2k a pop. I think they're over $3k now. I've been taking the "earnings" out and keeping the principal in (but I think I've not earned back the entire principal).

w67st everyone knows how much re and bad mortgages are on bank balance sheets. the big question is how do you price those assets. i won't bore you with TALF, PPIP and the fact that both the Treasury, FDIC and FED are back stopping banks and securing their debt. without it the big banks would definitely be up sh"t's creek, as would we all. however, is it circular reasoning to suggest that banks earnings are improving and as a consequence they MAY be in a position to improve their capital ratios, their balance sheets and ultimately their lending? it will take a while for sure but what i assert is that the trend is moving in the right direction.

i want to ask one important fundamental question - why is it that so many people who post here seem to be fixed on the notion that re prices are in a prolonged free fall? there is hope and then there is reality. I think re prices may fall a bit further but a modest recovery is closer than you all think.

and again, remind me of what you've forecast nyc10022?? right on two counts?? buy the djia at 7000 and 8000??

read my comments again - i never suggest that you are wrong about the fact that asset prices fell. i forecast what those falling prices and the effect on sales and home building portend for home prices in the future.

"and again, remind me of what you've forecast nyc10022?? right on two counts?? buy the djia at 7000 and 8000??"

No, thats just 1. Other was to get out of RE in 2007, which was an even bigger right.

"why is it that so many people who post here seem to be fixed on the notion that re prices are in a prolonged free fall?"

Well, because its what the data has shown. This is no longer a prediction, this is what has happened. Prices still haven't stopped declining.

Now, you seem to be inferring that people have claimed that they will fall forever.

But thats really just not the case, thats a strawman.

let's see:

1) when you repeat what i say and put it in quotes, then i know i must be wrong.

2) let's see, prolonged = forever ??

3) when you repeat an OBVIOUS fact over and over that everyone knows, like RE prices have fallen, that makes your other opinions more valid, qualified and justified

4) i'm glad you refer incorrectly to the strawman argument just as you misrepresented my alleged circular logic. aren't these really just cover-ups for your inability to offer a valid counter opinion. answer my simple questions:

- are money center banks' profitability improving, if that trend continues what does that portend for mortgage lending?
- is the increase in building and re sales, not re prices, a positive, neutral or contrarian indicator?

now stop repeating me in quotes and simply offer a well informed counter opinion.

btw, i told everyone to buy real estate in 1999 a bigger ?? right ?? (strange wording isn't that?) and i also predicted that obama would be elected president in 2007, and i told all my friends to buy google on the ipo. those are my big rights so everything i say must be more right because i'm telling you i made very good predictions in the past that you cannot invalidate, can you?

"delay and pray"

http://blogs.reuters.com/commentaries/2009/08/21/delaying-the-moment-of-truth/?p=2950?tempedition=debatehub

1) this was and is still a re bubble of epic squared porportions squared. Ain't gonna get cleaned up in 20 months especially given the kick back of mark to market.
2) consumption is based on income which is based on productivity. Right now we still have 20% of population that are still related to jobs and income that will never come back ( all related to re and overconsumption based oN inflated re 'income', borkers, mortgage bankers, dog walkers, carpenters, flippers (not burgers, they're actually helpful to so society), $500 haircuts, enormous boat/Porsche/ferarris sales).
3) crazy income distribution that cannot be sustained on any real level any longer.

I agree there was more re activity in NYC than I would have thought but the trend continues to be south with no let up after fall Xmas and into spring. It's only so long that a couple can look away from a bank account that is being depleted by $10k a month while a rental for 1/2 that is down the hall. Note, we've only been in this for less than a full year in NYC re, I can't imagineit taking much longer than another12 months for the 2nd wave of capitulators to come around to accepting the 'market'. We may disagree about the number of waves, but let's not kid ourselves, the waves are coming that's gonna make this summer buying look like the people who walked out into the beaches in thailand when the water receded. The 'smart' animals instinctively ran for the hills. Run to the hills, run to the hills. Damn who sang that song? I gotta kazaam that.

http://blogs.reuters.com/rolfe-winkler/2009/08/17/americas-japanese-banks/

"So what do we do? We can start by eliminating government guarantees that allow banks to avoid dealing with the problem. As things stand, the biggest banks have no incentive to write down loans because the Federal Reserve, Federal Deposit Insurance Corporation and Treasury Department have, in effect, promised them unlimited financing to hold loans to maturity.

As the Japanese can tell you, this is just a recipe for stagnation. Thanks to a debt bubble that authorities refused to deal with decisively, that country is now entering its third consecutive lost decade."

www.calculatedriskblog.com

"First-time home buyer activity has boosted existing home sales, and will continue to boost existing home sales (reported at close of escrow) through November.

This level of first-time buyers is completely unsustainable - even if another tax credit is enacted. There was significant pent up demand from potential first-time buyers who were priced out of the market in 2004-2006, and then were afraid to buy as prices fell. But demand from these buyers will wane. (Like "cash-for-clunkers" demand waned).

This doesn't help the mid-to-high priced market because a large percentage of sales are distressed (REOs or short sales), and there is no seller to move up.

Expect a surge in existing home sales (and some new home sales) over the next few months. Expect all kinds of reports that the bottom has been reached. (Like the ING report via CNBC)

Expect the frenzy to end ..."

"enjoy the rally. prepare for a massive bank failure between the ides of march and independence day."

Where is HimWhoKnows? Doesn't know sh*t

getting any sleep these days, JM?

Hey shouldn't you be manbreastfeeding your son? Get some sleep the little bugger has no sympathy. That develops at the age of 5.

Ha! Beat me to it ar. You know what they say, sick people think alike. Yep I remember those days, it was like a dream that I thought I would not wake from, just the constant bottles, diapers and worry.

Whatever you do, get them potty trained early. Wake him up and put him on the can and start 'shhhhhhhhhh' 'shhhhhhhh' sound. Never too early! oh, never ever wake a sleeping baby. They are cranky on a different dimension

Sleep? I work 70 hours a week and do night feedings to give my wife a break. JuiceMan = Zombie

are the bears going to admit defeat??

credit spreads narrowing, debt issuance picking up, housing improving, stock market up 50% from the lows in March, Bernanke upbeat, consumer activity improving, industrial activity picking up, inflation in check with the fed holding short term rates at near zero....

I am more confident with each passing day that a full economic recovery is under way. mark my words, by mar 2010 new jobs will be created as well. then the real fun starts.

could we see a 5-10% increase in manhattan re prices as well?

housing improving? relative to what? and at what price level?

consumer activity improving? wasn't august '09 6% less than august '08?

happy days are here again.

columbiacounty you must have a Phd in BS. trite cynical questions are merely a means for you to cover up your intellectual inadequacies. put forth an argument with data substantiating your bearish views. even roubini will tell you this uptick has some legs. he will at least argue that the toxic assets are still there, blah blah blah. they are for sure but that doesn't mean that other areas of the us and global economy aren't improving.

the fed and the fdic are definitely continuing to "bail out" the too big to fail banks. and thank goodness for that! meanwhile, the federal government and the fed and the fdic continue to run the printing presses at full capacity. guess what? they won't stop until this recovery really takes off.

that's what i don't understand about you bears. what about this major policy decision the whole world has adopted don't you see?

as for real estate, ny is not the rest of the usa and doesn't suffer from the same overbuild as say florida or las vegas, etc. look at some of the new construction that is now selling again. sure there are examples of bulidings that won't re-price and are sitting on huge unsold listings. but for everyone of those there is a 535 west end ave, 200 riverside. why are people paying top prices for those properties?? i think you know why. nyc is still a very desirable place to live and work and get paid huge bonuses!! sure sh_tty locations and bad apts are being priced down to levels not seen for 6 or 7 years. they should be.

again - audit this page in 6 months. columbia county, nyc10022, and even w67 read what you wrote and admit once and for all tht you myopically focused on the toxic assets and not the massive power policy makers have to print money and set interest rates so low (zero?) that even those financial institutions that brought us to the brink of armageddon will survive as profitable banks once again.

my husband still hasn't been given the go-ahead to tell the summer associates that they have a start date. and hasn't been given authority to make any offers for next year's summer class.

1313, i agree with much of what you write in your last paragraph. but i think the long-term consequences are horrible. another bubble is clearly exciting you. but bubbles aren't something to celebrate, they're something to fear.

Wasn't it Jim Rogers who recently asked in a piece (I may be taking this out of context or misremembering the source) "how is the answer to too much debt and too much consumption, more debt and more consumption as the solution?"

Can't deny the govt has worked hard to keep the status quo, but I have to think interest rates need to go up at some point. What happens when they do?

"look at some of the new construction that is now selling again. sure there are examples of bulidings that won't re-price and are sitting on huge unsold listings. but for everyone of those there is a 535 west end ave, 200 riverside. why are people paying top prices for those properties??"

what are you talking about? there is no evidence of closing at 535 wea and i have no idea what 200 riverside means? new construction is selling? where? in your fantasy land?

UWS1313: You are quick to label conflicting opinion as BS. I remember our debate over the prices at 905 WEA, where the first sales eventually closed at levels you had declared unthinkable.

Now your best evidence of a buoyant market comprises 535 WEA - where nothing has closed and contract activity has been at a standstill for a year - and something called "200 Riverside". If you mean 200 RSB, it's Ground Zero (along with 220 RSB) for the Trumpville price collapse. If you mean 200 WEA, then you haven't been watching Columbia's inventory dump in that building.

You have to love real estate agents. I can't believe the "New York is different" argument is back. It seems like UWS 1313 is interested in only one thing - reflating the housing bubble as soon as possible. How can any logical person believe that the RE market will ratchet up as quickly as the equities market has? I mean has nothing been learned? Where the hell are the jobs and higher incomes needed to support higher prices in NYC real estate? Why do people insist on complicating simple economics with drawn out thesis on why real estate is going up. We are still in the midst of massive deleveraging on the side of consumers and people seem to think that translates to rising prices in real estate. Let's just stick to fundamentals.

finished the james stewart piece in the New Yorker last nite. he paints a vivid picture of people (paulson, geithner, bernanke and others) trying to cope with an unprecedented situation as best they could. problem is that nothing has really changed since then. not saying that i have a better idea but it is clear that the economy is on government life support with no end in sight. as noted above, interest rates cannot stay at zero forever, can they?

lecker we can argue that too much debt doesn't call for more debt, but it think the fact that a good deal of the TARP money has been/is about to be paid back is testament to the fact that the US financial system can recover from a nearly fatal blow with a little (tongue in cheek) help from Uncle Sam. We can argue philosophically and politically whether taxpayers should bail out greedy bankers...but,the fact that taxpayers made money on the trade and that the US economy is back on its feet is all i care about. btw, if mr. jim rogers was running the fed or our govt we'd be in the midst of the new great depression right now. he continues to take the extreme view that we should've let all of the bad money center banks fail. think that one through for a minute and imagine the consequences of the destruction of the us financial system...after you've gone through that exercise you realize he is a billionaire with a bullhorn that is irrelevant to policy decisions.

now let's set the record straight once and for all - i am not calling for a new bubble in re prices, equity prices or bank lending. i'm calling for a recovery and a modest one in that.

the s&p is still well below its peak (-35%) last summer, housing and NYC RE prices are still well below their recent highs and will remain so for some time, and bank/mortgage lending is still ridiculously low, and the govt is the only lender in town. the key observation is that we are recovering and the recovery will be muted as compared to the past 5 recessions. but we fell so low so fast that this bounce was inevitably going to be quite steep initially. ALL markets were discounting a depression as they should've. now that we are recovering market participants have reason to celebrate, at least for now.

so, i call out the bears once again. your arguments don't hold water. and the data that we see coming out each day prove me more right.

toxic assets will remain a problem for some time, but the US govt, the ECB, China and any other govt that matters is allowing the banks the time to heal, and in china's case GROW. when you can essentially borrow funds from the govt for next to nothing and lend it out, to only the best/most credit worthy borrowers, at ridiculously high spreads you make money and you begin the healing process of these horribly toxic balance sheets. by 2010, or early 2011 banks will being to do what they are supposed to do and that is provide credit on a more normalized basis.

MODEST RECOVERY....

W81 it's been too long, and no i'm not a broker for those of you who think i am. i am a trader of assets.

nice...you certainly answered the question about new construction selling. and also, what about your reference to 200 riverside?

"a good deal of the TARP money has been/is about to be paid back" really? 10-15% represents a good deal? what about the money from AIG, BAC and Citi? think we'll be seeing any of that soon? or ever?

and you claim that I'm full of shit?

columbia - not full of anything based on your inaccuracies and tirades, most especially gray matter. you amuse me if you haven't figured that out by now.

UWS1313: If you won't answer a simple, direct question - like "what's 200 Riverside?" - it's hard to converse constructively. You make stuff up and then, when called on it, you just move on to the next topic where you might find support for your general thesis that the market is firming.

You may or may not be a broker; and you may or may not be right that the market is starting to turn. But if you're looking for the BS artist in the room, I suggest you look in the mirror.

Other than the re bubble you can make a strong case that we've been in a deflationary period for many years that was rapidly escalating when the gov started flooding the banks et al with cash, so no inflation for now but how long can this go on before it all blows up. This can't be very positive for re. I think that this has been said by many including a recent article by UD.

But what going to happen to my Citi AAvantage card?

This is good. I usually avoid all the economic-progostication threads, but it's a rare treat to see West81st both (a) get ticked off and (b) write.