Your Bailout Dollars At Work
(Business • Economy)
More ribald hijinx from those lovable financiers down the block:
“It’s like buying fire insurance on your neighbor’s house — you create an incentive to burn down the house,” said Philip Gisdakis, head of credit strategy at UniCredit in Munich.As Greece’s financial condition has worsened, undermining the euro, the role of Goldman Sachs and other major banks in masking the true extent of the country’s problems has drawn criticism from European leaders. But even before that issue became apparent, a little-known company backed by Goldman, JP Morgan Chase and about a dozen other banks had created an index that enabled market players to bet on whether Greece and other European nations would go bust.
This pretty much leaves me speechless this morning.
→ B.Dunn, Feb 25, 2010, 04 26 am
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Too Bubba Not To Fail
(Be Afraid • Economy)
Bank Bailout III – Thanks to your local commercial-real-estate top-heavy regional or community financial institution, this movie is coming fast to a wallet near you.
It was so easy to make those Skyscraper Erection loans, wasn’t it, especially when the developers were big-time pals with your board directors? Who knew the economy wouldn’t continue growing forever?
Not the nitwit bankers, obviously. Thus, sayeth the Congressional Oversight Panel:
The commercial real estate market is currently experiencing considerable difficulty for two distinct reasons. First, the current economic downturn has resulted in a dramatic deterioration of commercial real estate fundamentals. Increasing vacancy rates and falling rental prices present problems for all commercial real estate loans. Decreased cash flows will affect the ability of borrowers to make required loan payments. Falling commercial property values result in higher LTV ratios, making it harder for borrowers to refinance under current terms regardless of the soundness of the original financing, the quality of the property, and whether the loan is performing.Second, the development of the commercial real estate bubble, as discussed above, resulted in the origination of a significant amount of commercial real estate loans based on dramatically weakened underwriting standards. These loans were based on overly aggressive rental or cash flow projections (or projections that were only sustainable under bubble conditions), had higher levels of allowable leverage, and were not soundly underwritten. Loans of this sort will encounter far greater difficulty as projections fail to materialize on already excessively leveraged commercial properties.
The really swell thing about this latest looming multitrillion-dollar economic hurricane is that small and mid-sized banks have generally, percentage-wise, much greater exposure to bad commercial real estate loans than the bigger banks. This is bad if you happen to operate a small business or were thinking of doing so because your job went away forever over the past two years of recession.
That’s because the smaller banks are just about the only institutions making loans to small business owners. They are not by any means too big to fail, and so when they go away, one of the last sources of small-business loans goes with them.
The big banks? Oh they still will be expecting your tax money to bail them out the next time they get caught investing in something really stupid, but until then, they aren’t willing to give you the time of day let alone a business loan, ‘cause they need it for executive bonuses.
Meanwhile, think Timothy Geithner or Ben Bernanke will stop this latest train wreck? Neither does the Congressional Oversight Committee.
The Panel is concerned that until Treasury and bank supervisors take coordinated action to address forthrightly and transparently the state of the commercial real estate markets – and the potential impact that a breakdown in those markets could have on local communities, small businesses, and individuals – the financial crisis will not end.
Which is why, in 2010, the fashionable American peasant is serving gruel for lunch.
→ B.Dunn, Feb 11, 2010, 09 50 am
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Your Cash Ain't Nothin' But Trash Part II
(Family Math • Economy)
Back in March when the Federal Reserve decided the best way to end an economic crisis was to print more money, I lamented the fact somewhat bitterly, and we moved our micro-cash hoardings into a mutual fund invested in Treasury Inflation-Protected Securities.
Not being rocket scientists but still possessed with rudimentary math skills, we simply figured if the government was going to double the monetary supply, the value of the dollars we held in our mayonnaise-jar bank account would drop by half if we just allowed them to continue to sit there.
Several of hallowed economist Paul Krugman’s acolytes apparently found our inflation concerns quaint back then, and the assurance seemed to be that, basically, printing play money was a pretty good idea, the details of which should be left to people with at least several academic degrees apiece.
That was then. This is now:
The dollar index, which tracks the currency’s value against six others, dropped to a 14-month low this week. The slide has caused some leaders to raise concerns about the dollar’s reserve-currency status.Asian central banks on Thursday intervened in the currency markets to check the appreciation of their currencies against the dollar, fearing their countries’ exports could be losing ground as a result.
The slide of the diluted dollar prompted Federal Reserve Chairman Ben Bernanke, a guy with several academic degrees, to promise that interest rates will be jacked up as a counter-balance, at approximately the exact moment you decide it’s time to refinance your home mortgage.
(Cross-posted at Splattastic!)
→ B.Dunn, Oct 09, 2009, 04 57 am
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The Texas Tin Man
(Texas • Economy)
Texas Gov. Rick Perry could put 650 unemployed people to work and avert the crisis facing tens of thousands of hungry Texans who can’t get the food stamps for which they qualify, all in one bold political stroke. Instead, he seems intent to help prove that Texas has the most heartless state government in the country. Why is that?
→ B.Dunn, Sep 29, 2009, 04 33 am
