Tuesday, May 05, 2009

The Chuzpah Is Staggering.......

But not unexpected and somehow admirable.....As predicted earlier the Fed & Treasury have "decided" that converting preferred to common equity is equal to "adding" capital.... Read "Redefinition Accomplished" Spin Continues....."Preferred To Common Equity Edition" with straight talk from Barry, Kasriel & Winkler why this is "bogus"...... Let´s hope that the banks that have passed the test are able to attract as much "smart money" as fast ( window of opportunity probably short lived ) as possible...The taxpayer needs a break..... Update: Wells Fargo, Morgan Stanley Boost Capital After Stress Test

Die Dreistigkeit der Fed und des Finanzministeriums ist schon fast wieder bewundernswert..... Wie bereits früher prognostiziert wird ein Großteil der Mrdlücken die der eh schon realtiv stressfreie Stresstest zu Tage führen wird lediglich durch eine Form der Bilanzakrobatik "bereinigt"..... Empfehle den nachfolgenden Link "Redefinition Accomplished" Spin Continues....."Preferred To Common Equity Edition" der für jedem mit gesundem Menschenverstand aufzeigt das diese Art der Rekapitalisierung nicht gerade "vertrauenserweckend" ist.....Bleibt zu hoffen das zumindest die Banken die den Test bestanden haben in der Lage sind genügend "Smart Money" schnell genug ( befürchte das die Bedingungen nicht dauerhaft so gut sein werden ) einszusammeln.... Der Steuerzahler kann dringend etwas Hilfe gebrauchen..... Update: Wells Fargo, Morgan Stanley Boost Capital After Stress Test


Bank of America Said to Need About $34 Billion in New Capital
May 6 (Bloomberg) -- Regulators have determined that Bank of America Corp. requires about $34 billion in new capital, the largest need among the 19 biggest U.S. banks subjected to stress tests, according to a person familiar with the matter.

Citigroup Inc.’s shortfall is more limited because the company already plans to convert government preferred shares to common stock
, people familiar with the results said. JPMorgan Chase & Co. doesn’t need a deeper reserve against losses, according to people familiar with that company’s result.

The banks may outline their strategies to add capital, or in other cases buy out government stakes, after the Federal Reserve publishes the stress tests results tomorrow.
Firms requiring more capital could raise all the funds through conversions of preferred shares
if they choose, according to people familiar with the matter.

“To the extent that there are banks that need capital, our hope is that many of them will be able to raise that capital through either private equity offers or through conversions and exchanges of existing liabilities,” Federal Reserve Chairman Ben S. Bernanke
told lawmakers at a hearing in Washington yesterday. “The data we have are accurate reflections of the financial conditions of those banks.”

Banks that want to return money injected by the Treasury since October must show they can borrow from private investors without a Federal Deposit Insurance Corp. guarantee,according to people familiar with the matter.
> This will be the real stress test for Goldman ( Goldman Sachs has sold $18.6 billion of debt under the TLGP program, the sixth-highest amount among banks ) & Co ...... This would be a real sign of confidence when they are able to fund themselves completely without FDIC backed funding..... The latest bond yielded 410 basis point higher than Treasuries ( Goldman Sachs Sells $2 Billion of Notes Without FDIC Guarantee .... No wonder when you take a closer look at the "quality" of earnings ( see A Few Goldman Highlights........)

> Denke das wird der echte Stresstest aus Sicht der Banken und insbesondere Goldman Sachs ( haben momentan 18,6 Mrd an besicherter Anleihen ausstehen ).... Sollte Goldman in der Lage sein zukünftig darauf zu verzichtn wäre dies in der Tat auch ein von mir anerkanntes Signal der Stärke. Die letzte Anleihe ohne Garantie würde mit einem Spread von 410 Basispunkten gegenüber Staatsanleihen gepreist. Keine wirkliche Überraschung wenn man sich die Zusammensetzung der letzten Ergebnisse mal etwas genauer ansieht ( siehe A Few Goldman Highlights........)

> I´ll close with this comment......

> Verasbschiede mich mit dieser Bemerkung......

U.S. Banks' Not-So-Stressful Test WSJ
Finally, the government has effectively said it wants banks to have Tier 1 common stock equivalent to 4% of risk-weighted assets. First, investors have to decide whether they have confidence in the risk weightings.

Then they must decide whether 4% -- which still translates into 25-to-1 leverage -- is safe for the unpredictable environment we are in.

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2 Comments:

Anonymous eh said...

Yeah, I was wondering about that -- tbh I'm still not sure I understand the concept...

I understand this though.

5:40 AM  
Blogger jmf said...

Moin Eh,

the only concept i can see is that the "cover up team" is still working overtime.... :-)

But an old rule comes to mind....

It´s not the news but the reaction to the news that matters....

The same kind of "honesty" in the banking sector and we would have had already riots..... :-)

6:09 AM  

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