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Tempest in a health-care teapot
Ron F

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Opinions and views from expert CFOZone members.

Tag >> Banking
Apr 09
2010

Banks' balance sheet maneuvers aren't limited to Lehman-like moves

Posted by Ron F in RiskRepo 105Regulation, Lehman Brothers, Goldman SachsdebtcomplianceBanksbanking industryBankingAccounting

Ron F

This article on the balance sheet maneuvers of 18 banks obscures the difference between risk taking and accounting for it.

For starters, the findings don't show that banks are moving a lot of debt off their balance sheets a few days before quarter's end, and moving it back on afterward, the way Lehman Brothers did through short-term financing arrangements involving repurchase agreements treated as "sales."

Apr 08
2010

The partial re-education of Robert Rubin

Posted by Ron F in Volcker RuleTARPRegulationPaul VolckerGoldman SachsGlass Steagall Actfinancial crisisderivativesCongressCitigroupBanksbanking reformBankingbank failuresbailoutsAlan Greenspan

Ron F

Better late than never, I suppose. But Big Bob Rubin has apparently had a change of heart as to the virtues of financial deregulation.

Appearing before the Financial Crisis Inquiry Commission today with former Citigroup CEO Charles Prince in his capacity as former vice chairman of the bailed out bank, Rubin expressed much different sentiments about the need to prevent banks from becoming too big to fail and derivatives from adding untold amounts of undetectable leverage to the financial system than he did when he was President Clinton's deregulator in chief.

Apr 08
2010

We weren't dumb, we just blew it, ex-Citiguys claim

Posted by Ron F in RiskRegulationfinancial crisisFederal ReserveCitigroupBanksbanking reformBankingbank failuresbailouts

Ron F

Man, I just caught some of the last part of the financial crisis show this afternoon and I have to say it did very little to clarify who the hell was responsible for Citigroup's near-death experience during the mortgage meltdown, even though the panel had four former Citifolks on it.

Citi's ex co-CEO of markets and banking, Thomas Maheras, for example, testified that the bank was well aware that housing was heading south in late 2007 and was actively managing its balance sheet to deal with that.

Apr 01
2010

Financial reform going nowhere fast

Posted by Ron F in Senate Banking CommitteeRiskRegulationPaul VolckerFederal ReserveConsumer Financial Protection AgencyCongressoinal Oversight PanelCongresscomplianceChris Doddbanking reformBankingbank failuresbailouts

Ron F

I see that the slow boat to financial reform continues to drift sideways, as Senate Banking Committee member Bob Corker followed Paul Volcker's call for action yesterday with a sorry-no-can-do.

Unlike health-care reform, Democrats will need the support of a Republican like Corker to get a bill containing resolution authority for big banks, derivatives regulation, and consumer protection enacted this year. Only one piece of legislation can be passed through the budget reconciliation process in any one year, and now that the process was used for health-care reform, everything else will require a filibuster-proof majority that the Democrats no longer have.

Mar 30
2010

Don’t worry: SEC is all over this Repo 105 stuff

Posted by MQuinn in secRepo 105Regulation, Lehman Brothers, complianceCFOsBankingAccounting

MQuinn

The CFOs at 24 large financial institutions can expect a nice little treat in the mail sometime soon from the Securities and Exchange Commission: a letter asking them for detailed information about their use of repurchase agreements and their accounting and disclosure of these transactions, Reuters reported.

The inquiry, of course, is in response to the now infamous "Repo 105" transactions uncovered at Lehman Brothers by its bankruptcy examiner, which allowed the bank to move as much as $50 billion off its balance sheet just before reporting earnings and to move them back on later.

Mar 23
2010

Banks must be able to rip off customers, says Shelby

Posted by Ron F in RiskRegulationfinancial crisisConsumer Financial Protection AgencyCongresscomplianceBanksbanking reformBankingbank failures

Ron F

Does the banking industry need to be able to screw its consumers in order to be profitable? If so, it's in even worse shape than I thought.

Yet that's what Senator Richard Shelby suggested when he wowed the audience in a speech at an American Bankers Association conference last week. Saying the Republicans in Congress would do everything they could do prevent efforts to rein in banks, Shelby noted that "safety and soundness trumps everything," including "the consumer finance whatever."

Mar 20
2010

Another call to ban naked swaps

Posted by Ron F in RiskRegulation, Lehman Brothers, Federal ReserveEnronderivativesdebtcredit-default swapcomplianceBanksBankingbank failuresbalance sheets

Ron F

We've been harping on the need to curb the use of credit default swaps for speculative purposes for some time. And after Congress briefly entertained the idea of banning naked swaps, those, that is, where neither the buyer or seller owns the debt of the reference entity and thus has an insurable interest in it, the idea is enjoying something of a comeback.

Not that we had anything to do with that. Instead, that was Goldman Sachs' doing, since the interest rate swaps the firm sold Greece to hide much of it debt has led to a huge amount of speculation through naked credit default swaps against that debt, and made it more difficult for the country to raise fresh capital to stem its financial crisis, thereby endangering the European Union.

Mar 18
2010

House to hold new hearings over Lehman

Posted by Ron F in Securities and Exchange CommissionRiskRegulation, Lehman Brothers, Federal ReserveCongresscomplianceChristopher DoddBarney FrankBanksbanking reformBankingbank failuresbailouts

Ron F

I may be wrong about the apparent public indifference to the findings of the examiner's report on the Lehman Brothers bankruptcy that I detected from the relative dearth of on-going press coverage less than a week after it was released.

As Jack Ciesielski, an investment advisor who publishes the Analyst's Accounting Observer, put it in an email to me yesterday, "This is really opaque stuff, similar in that regard, at least, to Enron. It's hard to make it catch fire with the general public. All they know is that someone on Wall Street was crooked, and there you go again. But I think even the public is getting numb."

Mar 16
2010

What Dodd or others can’t mandate

Posted by Stephen Taub in sox 404Say on PaySarbanes-Oxleyratingsexecutive compensationdirectorscredit-rating agenciesCredit RatingsConsumer Financial Protection AgencyChristopher DoddChris Dodd, bankruptcy, Banking

Stephen Taub

You have to hand it to Senator Chris Dodd. For someone who has heavily depended on the generosity of the largest banks and investment firms for his fund-raising, he has proposed a pretty impressive bill for further regulating the financial firms....given the current environment in Washington, of course.

I am not confident it will prevent another AIG, Lehman or Bear Stearns. The current poisoned partisanship in Washington on both sides of the aisle wouldn't support that kind of onerous bill.

Mar 15
2010

Lehman case another reason to revisit 2005 bankruptcy law

Posted by Ron F in RiskRegulation, Lehman Brothers, FDICCongresscomplianceBanks, bankruptcy, Bankingbank 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.

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