February 8, 2012

Devil in the Details: Do Banks Really Need $221 Billion of New Capital?

February 17, 2010 By Jason Paez 3 Comments

Today’s NYT Dealbook headline reads (underlines added for emphasis):

Top banks will need an extra $221 billion of capital and see annual profits slump by $110 billion if all proposed regulations to reform the industry are brought in, leading analysts said on Wednesday, Reuters reported.

If all the initiatives from regulators are implemented it would cut the average return on equity to 5.4 percent from 13.3 percent next year, hurt economic growth and raise costs for bank services, JPMorgan analysts warned, according to the news service.

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The Retro-Reacta-Tax: Lamenting Poor Term Sheets

January 15, 2010 By Jason Paez Leave a Comment

When $23.7 trillion in government programs were variously created to provide direct (and indirect) support to the financial system it seems everyone involved either conveniently forgot or didn’t know that firms lay aside 50%+ of revenue for compensation as standard operating procedure. If the goal was to allow banks to “earn” their way out of cataclysmic loss rather than to forcibly unwind them, the synthetic creation of bank revenue would lead to only one possibility with regards industry bonuses.

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Too Much Spitzer, Not Enough AIG

December 19, 2009 By Jason Paez Leave a Comment

As a New Yorker I still cringe at details of Gov. Spitzer’s fall from grace, tidbits I wish I could forget. This doesn’t take away from his fundamental arguments with William Black though.

We know too much about Spitzer, not nearly enough about what really happened at AIG.

Show Us the E-Mail

By ELIOT SPITZER, FRANK PARTNOY and WILLIAM BLACK || NYTimes.com

WE end this extraordinary financial year with news that the Treasury is in discussions with American International Group about selling the taxpayers’ 80 percent ownership stake in that company. The government recently permitted several banks to break free of its potential oversight by repaying loans made during the rescue. But with respect to A.I.G., the Treasury should not move so fast. There is one job left to do.

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“It’s Certainly Not For A Lack Of Effort”

December 19, 2009 By Jason Paez Leave a Comment

The hubris case against bank CEOs has been made before in several flavors but the gist is always straightforward — essentially, proponents argue that bank CEOs haven’t shown nearly sufficient respect for responding to the President given circumstances. It’s hard to imagine there’s not at least some truth, and this is POTUS we’re talking about.

That said, circumstantial evidence doesn’t necessarily prove ill intent, it only implies it. I agree with Simon this was impolite to the maximum but I’m not as certain it will be anyone’s undoing (at least in the short term).

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FDIC Playing a Dangerous Game

December 14, 2009 By Jason Paez Leave a Comment

Government may need to think outside the box to get the kind of lending they want going again, hopefully without leaving the punch-bowl out too long. Fiscal stimulus can at least be more focused than a monetary one — quantitative easing can’t last forever.

Where does politics end and prudence begin?

Sheila Bair Begs For More Bank Failures

One might think that 159 bank failures in the last two years would be the primary concern to Sheila Bair.

Unfortunately, that is not the case as noted by Bloomberg in FDIC’s Bair Concerned Banks Making Only ‘Safest Loans,’ Urges More Lending

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Thoughts on Fed Exit Strategy

December 14, 2009 By Jason Paez Leave a Comment

The case against fractional reserve banking is an interesting one, though almost certainly fruitless (and unnecessary). However, the concern from Stephen Roach is something I share — there is a lot of risk in the upcoming unwind of Fed positions.

Relatedly, the Murray Rothbard suggestions are fascinating to read.

Thoughts on Fed’s Exit Strategy: Stephen Roach vs. Mish

Former Fed economist and current Morgan Stanley Asia Chairman Stephen Roach Sees ‘Great Risk’ in Fed Exit Strategy.

The Federal Reserve may cause another crisis by botching the withdrawal of liquidity from the U.S. economy, Morgan Stanley Asia Chairman Stephen Roach said.

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Game Theory in Polifinance

November 29, 2009 By Jason Paez Leave a Comment

Is the financial services industry a zero-sum game?

“Can’t Get Enough: Goldman’s Profit is Citi’s Pain?”

By Thomas Adams, at Paykin Krieg and Adams, LLP, and a former managing director at Ambac and FGIC.

Many thanks for the thoughtful comments on my earlier post. If you can take a little more on the subject, I thought I would add some clarification to some of the issues raised.

First, on the merits of a monoline vs. AIG bailout, consider a case of counterparty compare and contrast, using Goldman Sachs and Citigroup as examples.

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Simon Johnson: The Quiet Coup

March 31, 2009 By Jason Paez Leave a Comment

The seminal work that launched Simon Johnson, James Kwok and Baseline Scenario into eco-blogger stardom, and for good reason.

The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.

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