Posts filed under “Finance”
There is a long-but-worth it article (The End) in Portfolio by Michael Lewis, who traces the arc from Liar’s Poker to the End of Wall Street.
Before you turn in fear of yet another Magazine Cover Indicator, be aware of one thing: The prostrate bull on the cover of the magazine does not represent,a s you may have guessed, the stock market. What Lewis is declaring dead is the old way Wall Street used to do business.
When I published my book, the 1980s were supposed to be ending. I received a lot of undeserved credit for my timing. The social disruption caused by the collapse of the savings-and-loan industry and the rise of hostile takeovers and leveraged buyouts had given way to a brief period of recriminations. Just as most students at Ohio State read Liar’s Poker as a manual, most TV and radio interviewers regarded me as a whistleblower. (The big exception was Geraldo Rivera. He put me on a show called “People Who Succeed Too Early in Life” along with some child actors who’d gone on to become drug addicts.) Anti-Wall Street feeling ran high—high enough for Rudy Giuliani to float a political career on it—but the result felt more like a witch hunt than an honest reappraisal of the financial order. The public lynchings of Gutfreund and junk-bond king Michael Milken were excuses not to deal with the disturbing forces underpinning their rise. Ditto the cleaning up of Wall Street’s trading culture. The surface rippled, but down below, in the depths, the bonus pool remained undisturbed. Wall Street firms would soon be frowning upon profanity, firing traders for so much as glancing at a stripper, and forcing male employees to treat women almost as equals. Lehman Brothers circa 2008 more closely resembled a normal corporation with solid American values than did any Wall Street firm circa 1985.
Here’s the cover:
Portfolio, Nov 11 2008
Chris Whalen runs Institutional Risk Analytics.
The past several months have been a blur of activity. On the
eve of Veteran’s Day, when Americans remember those who have served and have
died to protect our freedom and our way of life, let’s take stock of where we
Following the takeover of Pasadena, CA-based IndyMac Bank in July, IRA launched our IRA Bank Cart (“How’s My Bank?”) product to help provide consumers with descriptive analytics on bank safety and soundness. We actually credit CBS’s Bill Whitaker for planting the seed. He interviewed us about four months ago and asked IRA CEO Dennis Santiago what to tell Mr. and Mrs. America about what’s actually happening inside their banks. We had to admit that around the time of that interview, the Do-It-Yourself solution was for individuals to learn to become better analysts at interpreting raw FDIC Call Reports, a skill even professionals on Wall Street were struggling with. With the failure of IndyMac, we got the message loud and clear that the non-analyst
world needed better.
So our team in Torrance set to work assembling an affordable online report, via The IRA Bank Cart, that provides all customers of banks as much if not better information on the fundamental stresses affecting U.S. banking institutions than most financial professionals possess. Because most people can and do deposit money in all types of banks, we chose not to limit our coverage to just the largest publicly traded banks that the media and Wall Street follow. Instead we created a comprehensive analytical product covering the entire federally-insured bank population.
As part of the IRA Bank Cart tool, IRA also introduced our Bank Stress Index that measures five life critical aspects of the business of banking-earnings, capital, efficiency, losses and lending commitments. To build this index, we created an explicit census of US banks by calculating actual measures for every FDIC-insured unit for every quarter going back every year to December 31, 1995. Americans deserve no lesser diligence.
We combine these individual measures into an overall measure of stress – a ratings system in effect — for the entire US banking industry. The Bank Stress Index represents yet another distillation of the FDIC data by IRA and let’s all bank customers compare the relative safety and soundness of every active FDIC Unit Certificate Holder
and the bank-only portions of all the Bank Holding Companies submitting periodic
reports to U.S. banking regulators.
Corporations Get into the Act
In the two months since the Bank Stress Index product was introduced, a new need emerged, namely serving the cash management activities of corporate CFO’s and Treasurers. It actually first began when the IRA Bank Cart product was launched. Worried representatives of church groups and 501(c3) non-profit organizations actually came to call our offices in CA. These risk-averse investors were looking to reduce the deposit risk exposures for their treasury funds in the $1MM to $2MM range and were of a mind to spread deposits from 100% in a single institution to typically 20% to 34% per institution.
Remember, we did not have any retail customers prior to May of this year. Now we have thousands.
Front page article in the Washington Post today, calling attention to a highly questionable aspect of the $750 billion bailout plan: A Quiet Windfall For U.S. Banks. We learn from WaPo that the Treasury Department slipped through a $140 billion tax windfall to US banks — in theory repealing 1986 legislation, passed by Congress and…Read More
Fascinating graph of the candidates money raising this campaign cycle. What is so astounding this election cycle is not that John McCain trails Barack Obama in fund raising, but that he also trails Hillary Clinton: Obama $659.7m, Clinton, $249m, McCain $238.1m. I posted a bunch-o-election related graphs, polls, charts, tables, etc. over in digital media….Read More