Consider that one year ago Royal Bank of Scotland paid US$100 billion for ABN Amro. That seemingly impossible amount would now buy:

Citibank $22,5 billion (74% down)
Morgan Stanley $10,5 billion (-72%)
Goldman Sachs $21 billion (-67%)
Merril Lynch $12,3 billion (-77%)
Deutsche Bank $13 billion (-71%)
Barclays $12,7 billion (-71%)
And still leave $8 billion change – with which you would be able to pick up General Motors, Ford, Chrysler and the Honda F1 team.

Not too shabby!

Hat tip: Prieur, Investment Postcards

Category: Bailouts, Credit, M&A, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

32 Responses to “Cost of Banks”

  1. rww says:

    I beat myself relentlessly every time I do something stupid in the market. This will help.

  2. karen says:

    laughing uncontrollably, or hysterically, can’t tell which…

  3. JustinTheSkeptic says:

    yea, and it made, makes so much sense, to be bailing all this crap out at these levels. Should have let it crashed and then picked up the pieces. Sorry folks, I know that I have been a broken record for the last two and a half years.

  4. wally says:

    Pulled the trigger too soon. Much like Bernanke.

  5. gabrielbp says:

    i wrote that post for my job at ….. PRIVATE BANKING …. I WANT MY CREDIT… JAJAJJA.. CHECK THE POST OF ” Q3 FLOW OF FUNDS”

    86 Responses to “Q3 Flow of Funds”

    1. gabrielbp Says:

    December 11th, 2008 at 2:34 pm

    ANECTDOTE
    Find below a little anecdote that sounds very interesting:
    1 year ago RBS paid $100bn for ABN Amro.
    For this amount it could now buy:
    Citibank $22.5bn
    Morgan Stanley $10.5bn
    Goldman Sachs $21bn
    Merrill Lynch $12.3bn
    Deutsche Bank $13bn
    Barclays $12.7bn
    And still have $8bn change……which you would be able to pick up GM, Ford, Chrysler and the Honda F1 Team.

    PERIOD….

  6. Andy Tabbo says:

    I try not to be too much of conspiracy theorist, but Matt Nesto just came on for “Breaking News”….The Fed widens the scope of the TALF. Surprise. They’re going to take in a wider range of assets…

    Um. It’s 3.25….35 minutes before option expirations….can we please cease these Breaking News items on expiration day.

    - AT

  7. debtkid says:

    Wow. It’s amazing what one can buy with a 100 billion these days!

  8. Mannwich says:

    @AT: In today’s climate, you/we have every reason to be a conspiracy theorist.

  9. VennData says:

    It’s obviously caused by a huge bubble in cash following a consumption surplus.

    Also note Niall Ferguson’s article in the FT today.

    “…Looking back, we now see just how big a proportion of US growth since 2001 was financed by mortgage equity withdrawals. Without that as a means of financing consumption, the economy would barely have grown at 1 per cent a year under President George W. Bush…”

    http://www.ft.com/cms/s/0/85432b32-cd32-11dd-9905-000077b07658.html?nclick_check=1

  10. Chief Tomahawk says:

    *** DAMN !!!!!! ***

    Howard Davidowitz, the Meredith Whitney of Retail, just came on CNBC and BURNED DOWN THE MALL!!!!!! “Depression” in commercial real estate reiterated several times. Some commercial real estate “can’t be sold at ANY price.” “Huge new writedowns by banks to be taken on commercial real estate” and “that’s where all of the TARP money is going to”.

  11. Mannwich says:

    SRS down again today. It’s clear they will be bailing out commercial estate too. This “market” is a waste of time. Guessing what the feds will or won’t do. Complete bullshit.

  12. Winston Munn says:

    @AT and Mannwich,

    There is certainly valid reasons to wonder about certain types of conspiracies:

    “Milton Friedman suggested that a monetary authority can escape a liquidity trap by bypassing financial intermediaries to give money directly to consumers or businesses…. The monetary authority must act covertly to give gift money to specific individuals or firms without appearing to give money away. ”

    Now it makes sense why the administration wanted no oversights and why the Fed refused Bloomberg’s FOIA request….

  13. BG says:

    Having said all of that….Should I put this jar of crunchy peanut butter currently selling for $4.99 ( 1 jar – 40 oz.) back on the shelf or should I buy all that they have? Now, I’m really confused!!

    (It’s Friday, lightened-up a little bit, OK?)

  14. Mannwich says:

    @WM: Exactly. If they’re not doing something conspiratorial/illegal, then why not release the details of the bailouts to Bloomberg or even FOX News, who is also requesting information?

    I have a sneaking suspicion the only reason why many more haven’t simply given up on this market is that they don’t want to miss out on a fake rally and free money in case the government propped market goes up, hoping to recoup some of their losses from the government gaming the system. Nobody wants to completely jump off of the gravy train for that very reason and that’s sad. There’s no doubt we’re a banana republic now.

  15. Chief Tomahawk says:

    Joseph A. Bank Clothiers advertising here in Chicago, a “Buy one, get two free” sale on EVERYTHING this weekend. See http://www.josbank.com for store locations.

  16. R. Timm says:

    Uh, you can’t just buy the good parts of a company you have to buy the stinking pile of liabilities that goes with it.

    Unless of course the deal is arranged by the Feds and you give them part of the stinking pile.

  17. NiNM says:

    @Mannwich

    I have had my fingers scorched by SRS so many times that I finally swore it off no matter what. Now all I do is kind of look at it out of the corner of my eye and wonder — is there something about CRE I’m completely missing? Is there some kind of super-duper-special bailout that will miraculously fill the massive numbers of vacant office buildings and strip malls valued at ridiculous prices? I remember looking at small apartment complexes in 2003 and people were buying them at prices where the monthly income with 0% vacancy could not possibly cover the interest. Sight unseen, no less, in a crappy part of town.

  18. Winston Munn says:

    What is really weird to me is that even if all these machinations work and halt the downward spiral, all that really has been accomplished is a reconfiguration of the Matrix – we will live in a world of over-valued assets propped by undervalued debt backed by an underserving government.

    I beginning to think that I should have swallowed the blue pill…

  19. Mannwich says:

    @WM: Pretty sickening, isn’t it? The thing is, I actually don’t think it will work. They’re simply throwing dough down a big black hole in an attempt to save themselves and their friends.

    Glad I booked a trip today in early January. Need to get out of here for a while and just sit on the beach. Just wasting my time. Might as well get out and enjoy life a little and burn a little of my cash. It seems that’s what they want us to do anyway……

    I give up.

  20. Chief Tomahawk ,

    n/k, it’s Nation-wide, 67% Off..if BK attorneys haven’t lined-up that account yet, they’re sleeping–or, already over-booked..

    from the SPX— 1500×1/3=~500 ~900×1/3=~300, there’s your Range..300-500
    DOW 8579.11 -25.88
    S&P 500 887.88 +2.60
    NASDAQ 1,564.32 +11.95
    Russell 2000 486.26 +7.09
    S&P/TSX Comp 8,552.00 +126.65
    Mexico Bolsa 22,221.64 -125.53
    Brazil Bovespa 39,131.23 -405.04

  21. Bob A says:

    That’s why I say again:

    What’s all this fuss about the Madoff “Ponzi Scheme”

    All of freakin Wall Street has been one big Ponzi Scheme for chrissakes!!

  22. Chief Tomahawk says:

    Thanks, Mark. I’m going to check a nearby store tomorrow morning. Snowed in here today … more time to post on BR’s blog….. ;-)

  23. Mike in Nola says:

    I suppose that is an example of the deflation they keep talking about.

    Question: Would anyone want to buy these banks at these prices? I haven’t seen anything about Warren or Bill sniffing around.

    Winston: The problem with the secret gifts of money is that it didn’t increase liquidity because the recipients are just sitting on it. Would have been better suited to their purpose (which I don’t agree with) if the government had just written mortgages and car loans directly. The money they have given away is like the carbon dioxide that people theorize can be trapped on the bottom of the ocean.

  24. @Winnie, and Jeff,

    I hear ya, though, that’s part of the program..the IMF refers to it as ‘Shock Therapy’–meant to destabilize, disorganize, and destructure the ‘old’ system.

    We forget, too convienently, there are, but, two choices: Liberty or Tyranny. It will be, as it always has been, a tough slog..
    ~~

    Chief Tomahawk,

    no prob, saw their ad during WWEx, this morning, and previously..

    ~~

    Bob A,

    you answered your own Q, IOW: to make it seem unique, there’s, still, too much fruit in the Orchard..

  25. Moss says:

    The plan is to re-capitalize the whole country with the Fed’s balance sheet and ZIRP. Who needs China or anyone else to buy the paper?
    I don’t think we will see inflation for a while.. at least that is what the fed is hoping. If the banks did think we would see much inflation they would not be making loans at 4.5%.

  26. Winston Munn says:

    Mike in Nola,

    Milton’s Billions have not worked the magic Uncle Milt thought they would – but then I never expected it to work as I believe the Austrians and their psychologically-based ideas have it closer to correct than monetarists and their equations.

    The Y in Y=MV isn’t valid when it stands for Y spend it now?

  27. KJ Foehr says:

    SRS is a screaming buy, IMO. The CRE depression will lag the recession as it takes time for retailers to throw in the towel, leases to expire, etc. But it is coming, of that I feel almost certain.

    I’ve got a big chunk in two different accounts and I’m holding on for dear life, rally or no. The risk reward is highly favorable at $59.

    I feel the same about EEV at this price level.

    Now, having spouted of about it, it will probably fall another 30% or more, but I would not give up on it. I gave up on SKF after the shorting ban, but it went on to peak at $303 in November after trading as low as $87 in September!

  28. rww says:

    KJ, you have many silent brethen here.

  29. Mike in Nola says:

    KJ: I hear ya. Bought SRS in the 80′s and was stupid enough to sell calls at 105. Didn’t think it could go up that fast. Someone else got a bargains.

  30. Andy Tabbo says:

    I’ve seen several BP posters talking about the SRS…..

    So, I checked it out tonight. I can see the allure. Um. It “looks” like a buy, buy I must say these “ultra” anything ETFs are sort of a scam, so I’d be real careful on longer term plays. However….the Dollar looks bullish, gold looks bearish, oil is terrible, and the S&P is struggling…so I sort of like this SRS action next several days.

    That being said, I still don’t like these “ultra” anything etfs….

    - AT

  31. DOW_1500 says:

    Wait 2 more years and you can buy all this stuff above, and get a 50 B. change, not only 8 B.

  32. d4winds says:

    Many of these banks have received taxpayer cash. The really interesting comparison is their market cap net of that cash. The implication of the comparison would be insolvency or near to it, re Citi, GS, MS.