There is no timestamp on this: must be from this morning.
"A strong, resilient financial system is necessary to facilitate a broad and sustainable economic recovery. The U.S. government stands firmly behind the banking system during this period of financial strain
Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments.
Under this program, which will be initiated on February 25, the capital needs of the major U.S. banking institutions will be evaluated under a more challenging economic environment. Should that assessment indicate that an additional capital buffer is warranted, institutions will have an opportunity to turn first to private sources of capital. Otherwise, the temporary capital buffer will be made available from the government.
This additional capital does not imply a new capital standard and it is not expected to be maintained on an ongoing basis.
Any government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory. (you know what that means, is that if it goes to Common equity, it can then go back to Preferred)
"Currently, the major U.S. banking institutions have capital in excess of the amounts required to be considered well capitalized. This program is designed to ensure that these major banking institutions have sufficient capital to perform their critical role in our financial system on an ongoing basis.
What is obvious is that this is a solid plan, and geitner is too scared to come out and sell it.... and the worst part is that we could lose a good secretary, because he is a bad speaker.
Monday, February 23, 2009
Joint Statement by the Treasury, FDIC, OCC, OTS and the Federal Reserve
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11 comments:
This is the stress test that is talked about, right?
If Obama came out on day one and said BAC and Citi are zombies, we're going to take them into conservatorship for 6 months...
you know we would have heard all the cries about "socialism" and "see, we told you Obama just wanted to nationalize the banks like Castro did", yada, yada, yada.
So Obama gets Geithner, a veteran of paulson's Treasury Dep't. and then does all this due diligence to at least go through the paces and now his detractors say he's not doing it fast enough.
Jeebus. If anyone thinks Citi or BAC are going to survive at this point, good lord there's no hope for them.
Nobody is going to buy banks until this is settled, but then the surviving banks will be okay. You can catch WFC from 20 to 40, but trying to bottom-tick these things is ruinous.
You're right, they shoot the generals last, and the generals should be the first to be resurrected. If you must be long, probably healthcare and tech are reasonable options. GOOG is not going away; it'll hit 400 at some point in our lifetimes just maybe not this year.
Do you think we won't need bandaids after mad-Max takes over thunderdome? JNJ is in the low 50's baby with a 3.4% divvy, paying better than T-bills or gold.
BTW, MYL has a short interest ratio of 10!!! If/when this thing recovers you should see a major squeeze. Same with PRGO.
If stress test Negative, and moving money from Tier 1 to TCE doesn't work... they get more money.
The other part is... I THINK, they are going to use the TALF to move assets into this new "fund" the new "Aggregator Bank", and it picks up the assets at PAR, if they don't perform, the aggregator moves the assets back to the bank, or Talf Sells them, then returns the par value to the aggregator.
all of this is too complicated...
the market wants to hear "Citi is dead" or "we are buying all the crap assets."
You also may want to thing about the possibility that the idea of "nationalizing the banks" is just another Bargaining tactic...
Another "plan to save us" that won't work that we are using to try and convince ourselves that we are in control of what is going on, and not a sign of acceptance.
same with "letting Citi fail"
"fire Geitner"
"elect Neut"
None of this is is going to make people buy coke and make the stock go up.
With all due respect, I have thought about that and you might be correct, this is all bargaining. Maybe behind the scenes Obama has already moved beyond that and maybe has even accepted the fact that this is hopeless, but what is he supposed to do?
Mad-max. This with the skills and the resources will survive, those that don't won't. Some people will not survive. Somewhere Thomas Malthus is smiling.
I'm not sure that this means that they need to "do nothing"... it would be nice if they could manage to do things that don't make it worse.
I guess what I'm saying.. and realize... I'm just guessing... Most of this is NOISE, it's market panic and 2000 typing monkeys.
I think if they also could come on and just have ONE clear plan.
Also... I think that Bush just about ordered Paulson to "do nothing" until the last minute. His thinking; "the market will sort it out", and then when paulson was backed into the corner, he had to be Reactive and not proactive. This added to Instability... "the rules keep changing" meme.
The market is acting like this is the old system of the right hand doesn't know what the left is doing. when they are trying to be more deliberative. I keep loving this idea that Geitner needs to come out and say something, and yet But this time he needs to have a good Clear Detailed Plan. and he needs to come out NOW!!! Its like they don't realize that the reason the hasn't shared the detailed plan is because the are still working on the details.
I tend toward optimism, and might hint(or just like to think) that the reason for collapsing share price is that there is no confidence that there is anything but the inherent insolvency in every bank. If you assume bank insolvency and a move toward nationalization why touch them?
But if they set a standard of nationalizing the banks, what happens next recession? They will go from $30 to $1 in a month.
Also... I saw Charlie rose last night, and 'what's his name' from MS pointed out what I've been trying to point out. We have 2000 banks in this country, as opposed to japan or Sweden that had 3 or 4.
Up open, gap fade, maybe more ... then we see...
Funny as a good example of how we lack lucidity that it's fairly clear from this statement that they are not going to let anyone fail, and all the "Stress tests" are, are to decide if they need more money or not.
and that the market doesn't get that, and still thinks "if they fail the stress test, they will 'let them go'.
and that treasury is trying to provide the mandatory convertible preferred and that the market is jumping to the conclusion that citi-is the one asking for it.
one could think that What they need to do is just keep the status Quo for a while... and that would stabilize things... Keep stuff from blowing up...
I don't know what they are going to do about AIG.. the market seems to ignore it, because the equity is already zero. economically it's more important than that, but "The talking heads" don't care cause it doesnt have a ticker to watch go to zero... like watching a patient flat line.
karen is on, talking about giving out Clear unchanging signals to the market... but is it that the market is hearing confusing signals... or that the administration is giving mixed signals. Seems obvious that the market is just Hearing confusion, because the market is confused.
I still stick with my Way original thesis that the market wants a "fixed" game, and when they let Lehman go... suddenly the "fixed game" was no longer the game they had been playing for so long.
When they talk about Rules changing that is what they are talking about... suddenly we are in a "real free market", and they don't like that.
It's nationalism they fear, as opposed to the Lemon Socialism(privatize gains, nationalize losses(isn't that what the reserve is all about)), we have had for so long.
"what the rules changed! the market will be a market and not just a shell game"
We all want a "fixed" game as long as we are the ones without moral hazard.
Jack Perugian was in favor of the bank bailout in Sept but now he wants the "free" market to come down hard on homeowners.
I think the president knows what needs to be done-- heck if I can figure it out I know he has-- and Citi and BAC are toast. he just has to figure out a way to mitigate the damage to their creditors, which was not done with Lehman.
The reason Lehman's failure was so damaging is the way it was done. I still say that anyone who thinks BAC is worth $4 is crazy. I'm not shorting it because I'm not sure what the govt will do and I guess there is a small chance they do something nuts like buy all the BAC stock for $5 or something.
Wall street is not necessarily a unified blob that "decides" things,, but I do see that there is an element of groupthink, and the meme that has developed is that this is all Obama's fault. If only, if only, if only...
"All we need is optimism", "all we need is a Clear Plan", "all we need is MY plan".
There are no easy solutions. We are at 1932 and the market will slide more. Last Sept 24 we were at 1929, so we are making some progress, but these things always go too far one way then too far the other.
my prediction... there will be a small rally to say 76.. then we are range bound all day
Like +50 on the dow, then we float +/- 25 all day as we watch tv
Sounds like a reasonable thesis for the day. I'm out most of the day anyway with work, but I may be back for the final hour.
the moral hazard thing is impressive...
THIS IS THE MORAL HAZARD... we don't need to worry about new moral hazard.
this "what worries traders is that washington is the financial center and not new york"
I guess we should have thought about that before we ran the train off the tracks.
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