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Tag >> Banks
Mar 15

Lehman case another reason to revisit 2005 bankruptcy law

Posted by Ron F in RiskRegulationLehman BrothersFDICCongresscomplianceBanksbankruptcyBankingbank failures

Ron F

We're taken the bankruptcy reform law Congress passed five years ago to task for encouraging speculation in credit default swaps by creating a safe harbor for derivatives.

Until the law was enacted in 2005, that is, swaps were subject to the automatic stay from creditors' claims, so counterparties had to line up with other creditors to seek seek cash or collateral to make good on their contracts. That changed when the law created a process known as "close out netting," so counterparties to swaps could force a failed company to make good on its claims even in Chapter 11.

Mar 15

Did the New York Fed help Lehman mislead investors?

Posted by Ron F in Securities and Exchange CommissionRegulationNew York FedLehman BrothersGeithnerFederal ReservecomplianceChris DoddBanksBankingbank failures

Ron F

Back when the Federal Reserve started buying mortgage-backed securities from investment banks in the fall of 2008, there was some feverish speculation within the ranks of Financial Week, where I worked at the time, that the Fed's efforts were helping the banks make their balance sheets look better than they really were. But there was no way to prove that at the time.

Now the Lehman Brothers' examiners report is reviving such speculation, because Lehman's transactions with the New York Fed were similar to those it engaged in with other banks. And in the case of so-called Repo105 transactions involving $50 billion in Lehman assets that were temporarily shifted off of Lehman's balance sheet, the report says those transactions were "materially misleading" to investors because they were not properly disclosed.

Mar 12

Banks still gun shy when it comes to lending

Posted by MQuinn in RisklendingCreditCashBanksbailout


There have been many attempts to call a bottom to credit quality. Much time has been spent scouring through bank filings, combing over charge-off data. The thinking -- or hope, at least -- is that once credit quality stabilizes banks will fully get back into the business of banking.

But, as American Banker reports, executives at major banks are pretty comfortable with how their loan books are performing -- and they still don't plan to start doling out more money.

"All the ingredients are there for bankers to take a leap on lending....But banking executives sent a clear message Wednesday at a financial services conference hosted by Citigroup Inc. in New York: don't expect to see loan growth any time soon. The lenders said their customers are skittish - and so are they."

Mar 12

What's wrong with Chapter 11 for banks?

Posted by Ron F in RiskLehman BrothersGoldman Sachsderivativescredit-default swapBanksbankruptcybanking reformbank failuresbailoutsAIG

Ron F

I have never understood why exactly bank regulators need new, so-called resolution authority for banks when there is something called Chapter 11, unless of course they don't plan to use it, in which case there's no reason to provide it to them other than to engage in the complete pretense that they do.

And neither evidently does this panel of bankruptcy and restructuring experts.

Mar 11

Second-mortgage losses may require big banks to raise more capital

Posted by Ron F in Wells FargoTimothy GeithnerRegulationJP Morgan ChaseGeithnerFederal ReservecomplianceCitigroupBarney FrankBanksBank of Americabank failuresbailouts

Ron F

Bank of America claims it's comfortable with the amount of losses on second mortgages it would have to absorb if it complied with Barney Frank's request that it write them off so as reduce principal on first mortgages and thus help stem foreclosures.

But an analysis by financial blogger Mike Konzcal suggests such a view may be based rosy assumptions about the value of the second liens, and that the bank may have to raise more capital as a result. So might Citigroup and Wells Fargo, Konzcal finds.

Mar 10

Banks in no position to reward shareholders

Posted by mcole in RiskFDICCredit Ratingscommercial real estateBanks


A Financial Times report that US regulators are telling banks to hold onto their cash until the economy is further along on the path to recovery is hardly surprising.

How can banks instead spend it on stock buybacks or dividend payments when the sector is still getting hit by woes in commercial real estate, which could lead to significant write-offs and a need to raise more equity capital.

Mar 08

Public pensions look like bad homes for failed banks

Posted by MQuinn in Riskpension fundsinvestmentsFDICBanks


Bloomberg News reported on Monday that the Federal Deposit Insurance Corp. is encouraging public pension funds to inject capital directly into the banking system by buying failed banks.

On the surface, this feels like the act of one troubled, somewhat desperate government agency trying to take advantage of a troubled, somewhat desperate group of investors.

It's not at all clear how these investments would work. Pensions don't typically dabble in direct investments, though the success of the Ontario Teachers' Pension Fund could lead others to reexamine that strategy. And banking would be a somewhat strange place to start, especially in the current environment.

Mar 06

Mexican stand-off over bad JP Morgan loan is hardly a first

Posted by Ron F in RakoffloansJP Morgan Chasedue diligenceDealscomplianceBanksBanking

Ron F

As bad as this case involving JP Morgan and its Mexican client, Empresas Cablevision, sounded to me when I first read about it last month, I couldn't help but wonder just how unusual it was.

After all, it seemed clear from the coverage that there were some do's and don'ts in "assigning" loans, and that therefore the issue must have come up before.

Mar 05

Hank Greenberg: time to play shuffleboard

Posted by Stephen Taub in systemic riskRegulationPaul VolckerDealsCredit RatingsConsumer Financial Protection AgencycompliancecompensationCollapsebonusesBanksAIG

Stephen Taub

Maurice "Hank" Greenberg has never been a popular guy. He long had a reputation for being a bully, tough to work for. He would threaten lawsuits when he senses a publication was working on a story critical of him or his company. And in his 32 years running American International Group (AIG), he was routinely criticized for not have a viable successor in place in case he abruptly could no longer run the insurance giant.

In 2005, however, the 84 year-old resigned on the urging of then-New York attorney general Eliot Spitzer, who was investigating the questionable practices of a number of insurance companies, including AIG.

Mar 04

Why huge corporations are bad for the economy

Posted by Ron F in RegulationrecoveryrecessionNew York Fedjoblessnesshiringgrowthfinancial crisisemploymenteconomycompliancecapital expendituresBanksbanking reformbanking industryantitrust

Ron F

There are three pieces in the blogosphere today that touch on the fundamental problem with our economic system and why it will remain in a ditch, or just lurch onward to the next crisis, if it isn't addressed.

And that is monopoly. I'll leave aside the politics of that, which is addressed well enough by Thomas Franks over at the Wall Street Journal. In a nutshell, he warns of a return to feudalism, which I've done as well before.

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