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There seems to be a question as to whether
BofA had adequately reserved for bad loans, esp. home equity loans. See Today's Bloomberg Report http://www.bloomberg.com/apps/news?sid=a1QwuyKzLcro&pid=20601087
Also, can anyone comment on the huge growth in non-interest income? Is this the result of the unusual rise in the stock market this year? (See page 32 of the annual report)
For an interesting view of the Bear Sterns deal see Hussman's weekly commentary at
http://www.hussman.net/wmc/wmc080324.htm
Below is brief excerpt. For copyright reasons, I cannot reproduce the full text here.
In effect, the Federal Reserve decided last week to overstep its legal boundaries – going beyond providing liquidity to the banking system and attempting to ensure the solvency of a non-bank entity. Specifically, the Fed agreed to provide a $30 billion “non-recourse loan” to J.P. Morgan, secured only by the worst tranche of Bear Stearns' mortgage debt. But the bank – J.P. Morgan – was in no financial trouble. Instead, it was effectively offered a subsidy by the Fed at public expense. Rick Santelli of CNBC is exactly right. If this is how the U.S. government is going to operate in a democratic, free-market society, “we might as well put a hammer and sickle on the flag.”
Nouriel Roubini's Global EconoMonitor
A Generalized Run on the Shadow Financial System
Nouriel Roubini | Mar 17, 2008
Since the onset of the liquidity and credit crunch last summer this column has been arguing that monetary policy would be impotent to address such a crunch because, in part, of the existence of a non-bank “shadow financial system”. This system is composed of conduits, SIVs, investment banks/broker dealers, money market funds, hedge funds and other non bank financial institutions.
All these institutions look similar to banks because they are highly leveraged and borrow short and in liquid ways and invest or lend long and in illiquid ways. This shadow financial system is, like banks, subject not only to credit and market risk but also to rollover or liquidity risk, i.e. the risk deriving from having a large stock of short term liabilities (relative to liquid assets) that may not roll over if creditors decide to withdraw their credits to these institutions.
Unlike banks this shadow financial system does not have access to the lender of last resort support of the central bank as these are not depository institutions regulated by the central banks. What we are now observing – with the case of Bear Stearns and the recent disaster among SIVs, conduits, run on a number of hedge funds and money market funds is a generalized liquidity run on this shadow financial system.
The response of the Fed to this run has been radical and in the form of the extension of the lender of last resort support to non bank financial institutions. Specifically, the new $200 bn term facility allows primary dealers – many of which are non banks – to swap their toxic mortgage backed securities for US Treasuries; second, the Fed provided emergency support to Bear Stearns and following the purchase of Bear Stearns by JPMorgan, is now providing a $30 bn plus support to JPMorgan to help the rescue of Bear Stearns; finally, now the Fed is allowing primary dealers to access the Fed discount window at the same terms as banks.
This is the most radical change and expansions of Fed powers and functions since the Great Depression: essentially the Fed now can lend unlimited amounts to non bank highly leveraged institutions that it does not regulate. The Fed is treating this run on the shadow financial system as a liquidity run but the Fed has no idea of whether such institutions are insolvent. As JPMorgan paid only about $200 million for Bear Stearns – and only after the Fed promised a $30 billlion loan – this was a clear case where this non bank financial institution was insolvent.
The Fed has no idea of which other primary dealers may be insolvent as it does not supervise and regulate those primary dealers that are not banks. But it is treating this crisis – the most severe financial crisis in the US since the Great Depression – as if it was purely a liquidity crisis. By lending massive amounts to potentially insolvent institutions that it does not supervise or regulate and that may be insolvent the Fed is taking serious financial risks and seriously exacerbate moral hazard distortions. Here you have highly leveraged non bank financial institutions that made reckless investments and lending, had extremely poor risk management and altogether disregarded liquidity risks; some may be insolvent but now the Fed is providing them with a blank check for unlimited amounts. This is a most radical action and a signal of how severe the crisis of the banking system and non-bank shadow financial system is. This is the worst US financial crisis since the Great Depression and the Fed is treating it as if it was only a liquidity crisis. But this is not just a liquidity crisis; it is rather a credit and insolvency crisis. And it is not the job of the Fed to bail out insolvent non bank financial institutions. If a bail out should occur this is a fiscal policy action that should be decided by Congress after the relevant equity holders have been wiped out and senior management fired without golden parachutes and huge severance packages.
GTI Earnings February 28
GTI (first noted by Dr. Stoxx) has been rising strongly into earnings which are scheduled to be announced Feb. 28.
SORL seems to be recovering; has been on a gradual ascent and now appears to be breaking out.
I think you jinxed it. ONT also "got flushed" last night, but may be worth watching. (I got out half way down.)
Tuna
On October 30, Jim Quince mentioned ONT which was 0.78; it is now over 3.5 and shows no signs of slowing down.
Second thoughts on CPNE?
ONT is up about 17% on the day at 2.54 (Jim Quince mentioned in October when it was 0.87. Moving very fast today.)
Jim
Since you flagged ONT in October it has moved from 0.87 to today's 1.19 (it's been higher). Seems to have strong support at 1.16.
Is the NYSE listing the time for longtime Health South holders (like me) to unload.
Check message 443473 posted a while ago when ORCT was a bit lower and there were even earlier messages providing this gift.
For a steady, slow climber: TLK, Indonesian mobile operator.
Are you still in IMOS
Has the switch to digital photography significantly affected silver demand?
pxp seems to be doing well now, any thoughts?
I own,recommended by my conservative LTH broker ages ago.
Anyone watching one of Dale Baker's (SI Thread) favorites, GLNG. Something's up.
LLGM
Re: HRLY.
Looks like a good report, as you said.
Do you have a target for selling.
llgm
I could not take it any more and got in at 2.85. Thanks
Any comment on the latest GERN patent?
delete duplicate
Is MRK now ready for a short term play.
Productivity Rate Soars in Second Quarter
Thu August 7, 2003 08:33 AM ET
WASHINGTON (Reuters) - U.S. businesses boosted their productivity sharply during the second quarter, squeezing out more output while ratcheting down labor costs, a Labor Department report showed on Thursday.
U.S. non-farm productivity climbed at a robust 5.7 percent rate, more than twice the revised 2.1 percent pace posted during the first three months of the year. That handily exceeded Wall Street economists' forecasts for a 4.1 percent increase in second-quarter productivity and implied companies were becoming leaner and more efficient at boosting their output while keeping costs under control.
Unit labor costs, which economists monitor as a sign of potential wage pressure, declined 2.1 percent during the second quarter after rising 2 percent in the first quarter this year.
The Labor Department report reflected an annual benchmark revision of data that showed national productivity, or output per hour of all workers, grew last year at the most vigorous rate in more than half a century.
The revised 5.4 percent increase in productivity during 2002 -- up from a previously reported 4.8 percent rise -- was the strongest for any year since a 6.7 percent jump in 1950 during the Korean War era.
In again (JCOM) at 32.18
Sticking with JCOM? I bailed out.
LLGM
Sticking with JCOM? I bailed out.
LLGM
Anyone know why SEPR is exploding. I bought it a while ago as LTBH (an anathema on this thread)
Jim
Can we get off this Martha thing. Start another thread if you want.
LLGM
Thanks for JDEC
LLGM
I know nothing about the referenced analysis on Ford, but I suspect the phrase means having difficulty with debt service.
Colin Powell is now speaking on CNN. There does not seem to be any uncertainty in his speech.
Followed you into NEM, thanks.
Are you holding, stop loss, or will you sell today?
What happened to ATK
llgm
dish not moving
llgm
See his post earlier today on Silicon Investor
llgm
See his post earlier today on Silicon Investor
llgm
It's an unusual story. Actually they were trying to play it safe. See the explanation by Dale Baker on the silicon investor thread. In edit, I think its worth considering buying now.
llgm
From the little I know of banking, another factor leading to lending abuse may be the fact that a banker's compensation is based on the deals he/she closes, while there appears to be no penalty if a loan later goes sour. A second aspect is that on large financings (hundreds of millions - billions of dollars) the loans are syndicated and usually the exposure of the lead bank is relatively small compared to the fees that it earns.
llgm
Yahoo's "real time" quotes for AH prices are highly inaccurate. I have an account at Fidelity and use them. If you use Yahoo, then to go the Combined, Island or Archipelago site indicated in the far right hand corner of the "Real time" quote screen to get a better picture. You often will see from the spread that no real trading is going on.
llgm
Yahoo's "real time" quotes for AH prices are highly inaccurate. I have an account at Fidelity and use them. If you use Yahoo, then to go the Combined, Island or Archipelago site indicated in the far right hand corner of the "Real time" quote screen to get a better picture. You often will see from the spread that no real trading is going on.
llgm