Comments on: WSJ Stress Test Graphics http://www.ritholtz.com/blog/2009/05/wsj-stress-test-graphics/ Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media Tue, 14 Feb 2012 17:33:06 +0000 hourly 1 http://wordpress.org/?v=3.0.5 By: FromLori http://www.ritholtz.com/blog/2009/05/wsj-stress-test-graphics/comment-page-1/#comment-170446 FromLori Mon, 11 May 2009 16:23:00 +0000 http://www.ritholtz.com/blog/?p=26117#comment-170446 Washington has indeed fixed the solvency problems of the large zombie banks -- not with additional capital or stress tests, as many of us seem to think. Rather, the banks have been stabilized by turning them into GSEs via FDIC guarantees on their debt. Those banks which can end their dependence on federal guarantees will be the visible winners in the post stress test market, and valuations and spreads will reflect this divergence between zombies and viable private banks. Seen from this perspective, Chrysler, General Motors (NYSE:GM) and the large banks are GSEs rather than private companies, parestatales as they know them in Mexico. To talk about a rally in the equity of large US financials seems truly ridiculous, at least to us, especially true when you look at how the public sector subsidies being applied to the banks have distorted their financial statements. Maybe by the end of next year, when we know which banks can or cannot shed the need for government subsidies, then we can talk about investible equity in these GSEs. To that point, turning Bank of America (NYES:BAC), Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) into GSEs was just the first battle, Vol. II of the Lord of the Rings, to use another cinematic metaphor. Next comes dealing with the dysfunction in the non-bank market for securitization and financing, the real battle to save the US economy from a truly dreadful year-end 2009 and beyond. Read the whole thing > And of course, that worked out so well the first time. What coul dgo wrong this time around? http://www.businessinsider.com/we-are-all-fannie-and-freddie-now-2009-5 Washington has indeed fixed the solvency problems of the large zombie banks — not with additional capital or stress tests, as many of us seem to think. Rather, the banks have been stabilized by turning them into GSEs via FDIC guarantees on their debt. Those banks which can end their dependence on federal guarantees will be the visible winners in the post stress test market, and valuations and spreads will reflect this divergence between zombies and viable private banks.

Seen from this perspective, Chrysler, General Motors (NYSE:GM) and the large banks are GSEs rather than private companies, parestatales as they know them in Mexico. To talk about a rally in the equity of large US financials seems truly ridiculous, at least to us, especially true when you look at how the public sector subsidies being applied to the banks have distorted their financial statements.

Maybe by the end of next year, when we know which banks can or cannot shed the need for government subsidies, then we can talk about investible equity in these GSEs. To that point, turning Bank of America (NYES:BAC), Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) into GSEs was just the first battle, Vol. II of the Lord of the Rings, to use another cinematic metaphor. Next comes dealing with the dysfunction in the non-bank market for securitization and financing, the real battle to save the US economy from a truly dreadful year-end 2009 and beyond.

Read the whole thing >

And of course, that worked out so well the first time. What coul dgo wrong this time around?

http://www.businessinsider.com/we-are-all-fannie-and-freddie-now-2009-5

]]> By: DeDude http://www.ritholtz.com/blog/2009/05/wsj-stress-test-graphics/comment-page-1/#comment-170398 DeDude Mon, 11 May 2009 14:39:58 +0000 http://www.ritholtz.com/blog/?p=26117#comment-170398 The stress in this test is absurdly low, but I guess they didn't feel ready to see any of them fall at this time. Particularly for the "to big to fail" size banks the requirements should be a lot more stringent. Smaller banks who presumably will not take down "the system" if they fail should be allowed a higher level of risk. But the bigger the bank the more capital and security should back it. The stress in this test is absurdly low, but I guess they didn’t feel ready to see any of them fall at this time. Particularly for the “to big to fail” size banks the requirements should be a lot more stringent. Smaller banks who presumably will not take down “the system” if they fail should be allowed a higher level of risk. But the bigger the bank the more capital and security should back it.

]]> By: jc http://www.ritholtz.com/blog/2009/05/wsj-stress-test-graphics/comment-page-1/#comment-170353 jc Mon, 11 May 2009 12:22:33 +0000 http://www.ritholtz.com/blog/?p=26117#comment-170353 The gift of eternal life for GMAC http://seekingalpha.com/article/136890-gmac-biggest-stress-test-loser-but-leads-a-charmed-life The US will cover the bulk of the GMAC 13B shortfall The gift of eternal life for GMAC

http://seekingalpha.com/article/136890-gmac-biggest-stress-test-loser-but-leads-a-charmed-life

The US will cover the bulk of the GMAC 13B shortfall

]]> By: jc http://www.ritholtz.com/blog/2009/05/wsj-stress-test-graphics/comment-page-1/#comment-170351 jc Mon, 11 May 2009 12:15:57 +0000 http://www.ritholtz.com/blog/?p=26117#comment-170351 The WSJ article that these charts were attached to points out that the banks got substantial reductions in their capital shortfalls, CITI and BAC alone would have needed about another $50B. Fed & Treasury as investors in these banks are inherently conflicted. This stress test was a confidence building exercise to bring in as much private investment as possible http://online.wsj.com/article/SB124182311010302297.html#articleTabs%3Darticle The WSJ article that these charts were attached to points out that the banks got substantial reductions in their capital shortfalls, CITI and BAC alone would have needed about another $50B. Fed & Treasury as investors in these banks are inherently conflicted. This stress test was a confidence building exercise to bring in as much private investment as possible
http://online.wsj.com/article/SB124182311010302297.html#articleTabs%3Darticle

]]> By: bman http://www.ritholtz.com/blog/2009/05/wsj-stress-test-graphics/comment-page-1/#comment-170331 bman Mon, 11 May 2009 04:47:26 +0000 http://www.ritholtz.com/blog/?p=26117#comment-170331 Well, I opened an account with TCF bank yesterday (a Saturday mind you,) and I am also pleased to notice TCF bank is not on the chart. Fifth Thirds bank is. I will soon be closing my accounts with them. That's about all I can do about that chart. There may be other customers acting likewise. I would like to think that some banks might still out-compete the zombie banks. Well, I opened an account with TCF bank yesterday (a Saturday mind you,) and I am also pleased to notice TCF bank is not on the chart. Fifth Thirds bank is. I will soon be closing my accounts with them.
That’s about all I can do about that chart. There may be other customers acting likewise. I would like to think that some banks might still out-compete the zombie banks.

]]> By: popo99 http://www.ritholtz.com/blog/2009/05/wsj-stress-test-graphics/comment-page-1/#comment-170220 popo99 Sun, 10 May 2009 21:00:35 +0000 http://www.ritholtz.com/blog/?p=26117#comment-170220 Marcus, I'm an intellectual property lawyer, and you're clueless. Have a nice day. Popo99 Marcus,

I’m an intellectual property lawyer, and you’re clueless.

Have a nice day.

Popo99

]]> By: ZackAttack http://www.ritholtz.com/blog/2009/05/wsj-stress-test-graphics/comment-page-1/#comment-170162 ZackAttack Sun, 10 May 2009 15:18:35 +0000 http://www.ritholtz.com/blog/?p=26117#comment-170162 I can't find anyone on the planet (excepting a certain cadre of long-side cheerleaders) who think the stress tests were anything but a joke. So, if they were nothing but sound and fury, how come Mr. Market liked them so well? Being an Occam's Razor guy, I can't give a lot of credibility to the theory it's a jam-job perpetuated by Government Sachs. I can’t find anyone on the planet (excepting a certain cadre of long-side cheerleaders) who think the stress tests were anything but a joke.

So, if they were nothing but sound and fury, how come Mr. Market liked them so well?

Being an Occam’s Razor guy, I can’t give a lot of credibility to the theory it’s a jam-job perpetuated by Government Sachs.

]]> By: florida bear http://www.ritholtz.com/blog/2009/05/wsj-stress-test-graphics/comment-page-1/#comment-170127 florida bear Sun, 10 May 2009 12:20:54 +0000 http://www.ritholtz.com/blog/?p=26117#comment-170127 Regarding the "stress" test, look @ Table 2: 1) Memo: Purchase Accounting Adjustments $64.3 billion and, 2) Resources other Than Capital to Absorb Losses $362.9 billion. Is the implicit assumption for the Fed to maintain a 0% fed funds rate & maintain the $trillions in lending programs? Are the SIVs & Toxic assets all good?????? Regarding the “stress” test, look @ Table 2: 1) Memo: Purchase Accounting Adjustments $64.3 billion and, 2) Resources other Than Capital to Absorb Losses $362.9 billion.

Is the implicit assumption for the Fed to maintain a 0% fed funds rate & maintain the $trillions in lending programs? Are the SIVs & Toxic assets all good??????

]]> By: thetanman http://www.ritholtz.com/blog/2009/05/wsj-stress-test-graphics/comment-page-1/#comment-170117 thetanman Sun, 10 May 2009 08:19:17 +0000 http://www.ritholtz.com/blog/?p=26117#comment-170117 You guys are perplexed by the market rally and all this talk of a turnaround. Its all about the short squeeze in credit. Bearish bets are being unwound which is throwing off waves of liquidity. Doug Noland calls it the government finance bubble. Its basically the dynamics of the crash running in reverse as many financial charts are the ones from the crash turned upside down. You will soon see the numbers improve dramatically as this liquidity floods the economy. The bump in the economy is a given, the only question is it sustainable? Most likely not, as the economy will need ever greater amounts of credit, and one day the short squeeze in credit will end. Then things will get complicated. The Japanese had numerous false dawns and we have a doozy in progress. You guys are perplexed by the market rally and all this talk of a turnaround. Its all about the short squeeze in credit. Bearish bets are being unwound which is throwing off waves of liquidity. Doug Noland calls it the government finance bubble. Its basically the dynamics of the crash running in reverse as many financial charts are the ones from the crash turned upside down. You will soon see the numbers improve dramatically as this liquidity floods the economy. The bump in the economy is a given, the only question is it sustainable? Most likely not, as the economy will need ever greater amounts of credit, and one day the short squeeze in credit will end. Then things will get complicated. The Japanese had numerous false dawns and we have a doozy in progress.

]]> By: Marcus Aurelius http://www.ritholtz.com/blog/2009/05/wsj-stress-test-graphics/comment-page-1/#comment-170111 Marcus Aurelius Sun, 10 May 2009 04:33:13 +0000 http://www.ritholtz.com/blog/?p=26117#comment-170111 Hey popo: Do you own the copyright to these charts? Are you aware that there is, in fact, a copyright infringement? Do you know, for a fact, that the charts are stolen? Are you aware of any arrangements BR might have with the WSJ, or did you just come in here and start libeling him? BR did provide criticism - he said the charts were good. He said where he got them. Why don't you just shut the fuck up and mind your own goddamned business? Does that answer your question? Ya' freekin' dickweed. Hey popo:

Do you own the copyright to these charts? Are you aware that there is, in fact, a copyright infringement? Do you know, for a fact, that the charts are stolen? Are you aware of any arrangements BR might have with the WSJ, or did you just come in here and start libeling him? BR did provide criticism – he said the charts were good. He said where he got them. Why don’t you just shut the fuck up and mind your own goddamned business?

Does that answer your question?

Ya’ freekin’ dickweed.

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