Category Archives: banking

Another Reason for Banks to be Small

Mike at Rortybomb finds some empirical research on what happens to loan rates when banks get bigger and more consolidated. The results make intuitive sense: as competition falls, loan rates go up. The exception is loans which can be securitized, … Continue reading

Posted in banking | 68 Comments

Why Healthy Banks Shouldn’t Repay TARP Funds

I got an interesting response from one reader to my post on whether healthy banks should be able to give back TARP funds. Here it is, with permission; the short version is basically "no". The TARP preferred shares were extended … Continue reading

Posted in bailouts, banking | 7 Comments

Why Big Banks Should be Smaller

James Kwak wants to make US financial institutions smaller: There are a few main things that made companies like AIG and Citigroup systematically important. One was interconnectedness: they did business with lots of counterparties. One was complexity: when push came … Continue reading

Posted in banking, regulation | 5 Comments

What they Used to Teach You at Stanford Business School

Chris Wyser-Pratte, who got his MBA from Stanford in 1972 and then spent the next 23 years as an investment banker, sent me the following note last night. I’m reprinting it here with his permission: I learned exactly seven things … Continue reading

Posted in banking, education, investing | 3 Comments

Millennium: A Stanford Copy-Cat

Adrienne Carter has found what looks very much to be the first — but surely not the last — of banks which won’t withstand much if any scrutiny in the wake of the Stanford collapse. Does any of this sound … Continue reading

Posted in banking, fraud | 2 Comments

Stanford vs Citi

Comment of the day comes from John Slater: You’ve had some interesting posts on Stanford. It appears that they have taken deposits to acquire trading/speculative assets. Not sure that what the big trading banks have done is all that different … Continue reading

Posted in banking | 3 Comments

America’s Insolvent Banks

John Hempton has 5,155 words on bank insolvency today, and makes the good point that "insolvency" is not well-defined. So what do I mean when I say that some big banks are insolvent? I mean that when you look at … Continue reading

Posted in bailouts, banking | 2 Comments

Are Uninsured Bank Depositors in Danger?

One of Dan Colarusso’s favorite bloggers, Hugo Lindgren, picks up on the latest weekly newsletter from Christopher Wood: It is even more amazing that Obama does not understand the political appeal of the nationalization option. Maybe the so-called liberal Democrats … Continue reading

Posted in banking | 51 Comments

Stanford Update

The Stanford Group story is finally, slowly, making its way into the mainstream media, with BusinessWeek and Bloomberg both reporting that the group is undergoing a new SEC investigation. BusinessWeek’s Matthew Goldstein also has the news that Charlesworth A.S. Hewlett, … Continue reading

Posted in banking, fraud | 1 Comment

Barack Obama for Treasury Secretary!

After Tim Geithner’s uninspired and uninspiring performance today, Barack Obama stepped up to show him how questions about nationalization should be answered: TERRY MORAN: There are a lot of economists who look at these banks and they say all that … Continue reading

Posted in bailouts, banking | 1 Comment

What’s Going On at Stanford International Bank?

Ray Pellecchia and I think that if Harry Markopolos had put his theories about Bernie Madoff online, Madoff would not have been able to continue his scam much longer. Against that, a lot of people are saying that no matter … Continue reading

Posted in banking, fraud | 2 Comments

Sorkin’s Questions Answered

Andrew Ross Sorkin has a great list of questions this morning for Congress to ask the big banks’ CEOs when they appear in Washington tomorrow. He’s too polite to provide the real answers, so let me try. 1. Try to … Continue reading

Posted in banking | 2 Comments

Against New Good Banks

Paul Romer’s op-ed on starting up new good banks rather than trying to rescue existing institutions has gotten quite a lot of play in the blogosphere, maybe because of his famous last name; he shouldn’t be confused, however, with David … Continue reading

Posted in banking | 1 Comment

Lobbying Datapoint of the Day

The Center for Responsive Politics does some adding up, and concludes that the 300 TARP recipients between them spent a total of $77 million last year on lobbying, on top of $37 million in federal campaign contributions, for a total … Continue reading

Posted in banking, Politics | 1 Comment

Sachs’s Nationalization Idea

Jeff Sachs has a slightly peculiar idea for nationalizing banks, which he calls "contingent nationalisation". As best I can work out, it involves the government buying up toxic assets at par, and then selling them off over the course of … Continue reading

Posted in bailouts, banking | 2 Comments

When Bonuses Aren’t Discretionary

It’s becoming increasingly clear that if there’s a problem in the general economy with sticky wages — employers being unable to cut costs by cutting wages, and thereby going bust — then on Wall Street the problem is the other … Continue reading

Posted in banking, pay | 2 Comments

Nationalizing Bank Losses

Tyler Cowen has a new argument against nationalization: Say that banks are in the red by $2 trillion for ever and all eternity. Taking over the banks simply means that the government picks up these losses as owner. Government ownership … Continue reading

Posted in bailouts, banking | 1 Comment

Where’s the Nationalization Debate?

There’s a lot of words but less actual news in the NYT’s big report today on Tim Geithner and his plan for the US banking system. But one thing does interest me, given the extent to which Warren has been … Continue reading

Posted in bailouts, banking | 1 Comment

Bonus Scandals Begin to Emerge

The issue of Wall Street bonuses in general, and Merrill Lynch’s bonuses in particular, is only just beginning to heat up. The NYT is scandalized today that bonuses in New York are going to total $18.4 billion — the sixth-largest … Continue reading

Posted in banking, pay | 1 Comment

Black Mail

I think it’s safe to say that the USA is the only major country in the world where people still regularly send checks in the mail. Which is one reason this is so shocking: Saying the U.S. Postal Service "is … Continue reading

Posted in banking | 1 Comment

John Thain’s PR Expenditures

When Maria Bartiromo asked John Thain about his notorious office, he replied: Well, first of all, it– it is true. This was a year ago or actually a little bit more than a year ago in a very differ– different– … Continue reading

Posted in banking, defenestrations, Media | 1 Comment

Bank Loss Datapoint of the Day

Wells Fargo released both its and Wachovia’s fourth-quarter earnings this morning: The fourth-quarter net loss of $2.55 billion, or 79 cents a share, compares with profit of $1.36 billion, or 41 cents, a year earlier, the San Francisco-based company said … Continue reading

Posted in banking | 1 Comment

What Makes a Bank Too Big to Fail?

David, one of my readers, writes in with a question: I’m curious about what actually makes a bank too big to fail. My guess is that it is because they are counter-parties to many deals, but would something like a … Continue reading

Posted in banking | 1 Comment

Wall Street Monoculture

There were many causes of the financial crisis, but Anil Dash brings up a new one: There’s a related question here which no one is asking, which is whether the economic catastrophe facing the global marketplace is a result of … Continue reading

Posted in banking, race | 1 Comment

Sorkin Exonerates Fuld

Andrew Ross Sorkin today has the most astonishing parenthetical I’ve seen in a long while: (By the way, doesn’t it seem increasingly hard to vilify Richard S. Fuld Jr., the former chief executive of Lehman Brothers, given what’s happened since … Continue reading

Posted in banking, Media | 1 Comment