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J.P. Morgan: 'No' To PPIP Participation
Tweet Share on Facebook April 16, 2009 Comment (3)Jamie Dimon says "Thanks but no thanks" to buying toxic assets after beating Q1 earnings expectations.
From the WSJ:
He said J.P. Morgan would likely not participate in the Treasury's Public-Private Investment Program, which allows banks to sell illiquid securities and troubled loans. Mr. Dimon also said his bank likely won't buy or sell such assets through PPIP.
He says it's time to look beyond "toxic assets" (aren't they "legacy assets now anyway?):
"I don't think toxic assets [are] the problem. We hear this endless chatter about it, but the banks who are in business are lending," Mr. Dimon said.
"They are lending pretty much like they did in the past," he said, adding, "obviously there are banks not in business."
Mr. Dimon said banks have always had a portion of assets in nonperformance.
"Obviously those proportions will be going up, but I also remind people, banks are 25% of the system -- they are not 100% of the system," he said. "The rest of the system is hedge funds and money market funds and bond funds and pension plans and insurance companies and direct investors, investing consumers and that's where you have this enormous flow of funds taking place, which is very different than you had 50 years ago."
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Tax Day Reminder: Where The Money Goes
Tweet Share on Facebook April 15, 2009 Comment (1)WallStats has this great visualization of where your tax dollars are spent.
Death & Taxes 2009. Go buy a poster.
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Tea Party Video Round-Up
Tweet Share on Facebook April 15, 2009 Comment (2)Today's the day! Tax protesters are out in some sort of force. Before the moment passes, bask in some of its more memorable moments:
Here's Santelli's original Feb. 19 rant:
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Why Goldman Sachs Can't Go Free
Tweet Share on Facebook April 15, 2009 Comment (4)Goldman Sachs went into this crisis acting less like a bank and more like a hedge fund, and it seems they're going to dig themselves out the exact same way. The difference, of course, is that in the interim Goldman got involved with the bailout and became a bank holding company, which opens it up to new regulatory scrutiny. And, as a big component and provider of market liquidity, analysts say that even though the bank may pay back its TARP money in an attempt to return to greater independence, getting out won't be that simple.
Felix Salmon says:
..."Goldman has no business saying “thank you very much” for the financial-system bailout, but politely trying to decline participation in it by handing back the TARP funds. Like it or not, Goldman is a central part of the financial system, which means that it’s a central part of any bailout strategy. It can’t unilaterally say no to that, and I hope that it gets slapped down by Treasury as definitively as it was slapped down by the stock market yesterday.
So the government needs Goldman. But what does the bank's bubbly quarter say about its role as a stable partner? Even after Lloyd Blankfein's mea culpa last week, Goldman appears to be taking on significant new risks that will become the government's problem if they go bad. From Reuters:
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UBS Slashing 9000 Jobs
Tweet Share on Facebook April 15, 2009 Comment (2)Banks are scrambling to reassure the market they're in decent shape. Pressure began mounting Tuesday after Goldman Sachs sold $5 billion in stock and announced plans to pay back TARP money. It continued to increase after the federal government said it plans to release more information about bank "stress tests." All the banks may be passing, but the ones getting low marks could face another pummeling. So pre-announcements of bad news might just be getting started.
Here's the latest from UBS, which includes another round of job cuts.
From MarketWatch:
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The Problems Of The Average Investor
Tweet Share on Facebook April 14, 2009 Comment (3)Great piece in The Atlantic by Jeffrey Goldberg: Why I Fired My Broker.
Read the whole thing, as it includes standout bits on everything from hedge funds to survivalists, but take special note of his assessment of the kind of advice most of us get from our brokers in the real world:
It turns out that my crucial mistake was believing that the brokers and wealth managers and cable-television oracles who make up the financial-services industrial complex actually had my best interests at heart. Or so say the extremely smart—and wealthy—people I asked to help me figure a way out of my paralysis. One of these people was Robert Soros, the deputy chairman of the fund started by his father, George. I went to see him at his office, where he spent two hours performing an autopsy on my assumptions.
“You think a brokerage should be a place you go to pay commissions for fair and unbiased advice, right?” he asked.
“Yes,” I said.
“It’s not. It never has been.” He then cited another saying of Buffett’s: “‘Wall Street is a place where whatever can be sold will be sold.’ You are the consumer of their dreck. What they can sell to you, they will sell to you.”
“But they told us—”
“They lied.”
He went on: “You should be disheartened and disappointed. But don’t kid yourself. You’re a naive capitalist. They were never your advisers. Do not for a moment think that a brokerage firm is your friend.”
“So who’s my friend?”
“You don’t have one. This is the market.”
“Okay, that’s Merrill Lynch. What about the others?”
“They’re not your friends,” Soros said patiently.
“What about Chuck Schwab?”
“All brokers move products based on volume and commission,” he said.
And this from the head of bond giant PIMCO:
I asked Bill Gross what he thought I should do. He was somewhat dyspeptic. “The system is rigged,” he said. “It’s difficult for the average investor to even conceptualize what we’re talking about. For this reason, I think financial advisers are still worthwhile, but the average investor can no longer pay them what they felt they were worth. You should find someone who isn’t overpromising or overcharging.”
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How Will We Regulate Risk?
Tweet Share on Facebook April 14, 2009 Comment (3)Remember the word: "Macroprudential"
It's not the nebulous name of the latest bank to go bust. Macroprudential describes one of the suggested paths for getting us out the mess the banks caused. Broadly, it's a system-wide, holistic approach to monitoring the financial sector, and a plan that would undoubtedly mean aggressive new international regulation of the entire global finance system.
For a good summation, read BIS research head Claudio Borio at VoxEU who defines macroprudential thusly:
The macroprudential approach has two distinguishing features. It focuses on the financial system as a whole, with the objective of limiting the macroeconomic costs of episodes of financial distress. And it treats aggregate risk as dependent on the collective behaviour of financial institutions (in economic jargon, as partly “endogenous”). This contrasts sharply with how individual agents treat it. They regard asset prices, market/credit conditions and economic activity as independent of their decisions, since, taken individually, they are typically too small to affect them.
That top-down view is a seedling for what could become new tools used to manage systemic risk at a global level, and the idea is gaining traction among more policymakers and pundits (see, for example, hedge funder Andrew Lo with some similar thoughts here). The FT outlines why such radical changes are even being considered: Banking and national regulation are out of synch:
Bankruptcy is capitalism: it makes you bear the costs of the risks you choose to take on. But the incapacity of national governments to manage international markets has sheltered the largest financial institutions from this capitalism.
As finance grew global, national rules could not prevent some companies from becoming too large for bankruptcy. We have discovered that to close down financial giants we must bail out their creditors or risk a global recession. At the same time, those too large to fail may also be too large for national governments to save, for fiscal and political reasons. Few countries can even afford to rescue truly global institutions. Taxpayers may in any case refuse to meet failed institutions’ liabilities to foreigners.
The biggest question raised by the crisis is how to resolve this contradiction. The current mismatch of globalised finance and national governance is unsustainable. Either governance becomes more globalised or finance less globalised.
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Is Your Company Ethical? See Ethisphere's 2009 Rankings
Tweet Share on Facebook April 13, 2009 Comment (2)Is your company ethical?
The Ethisphere Institute lists the world's 99 most ethical companies that stand out thanks to forthright business practices. Companies are scored based on criteria including corporate citizenship, governance, innovation that contributes to public well being, industry and executive leadership, reputation and internal ethics programs.
Winners include the likes of Honeywell International, Nike, Patagonia, and HSBC Holdings. See the full list here.
As with all lists, this one is a bit subjective. Reuters notes "diversity, layoffs, executive compensation and outsourcing are not part of the criteria" and that some of the winners (like Nike) get points for righting past wrongs.
Related: Not everyone is happy with the list.
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Oh Noes! Creeping Socialism!
Tweet Share on Facebook April 9, 2009 Comment (11)Look out America! Socialism is winning!
New Rasmussen poll says Just 53% Say Capitalism Better Than Socialism:
Only 53% of American adults believe capitalism is better than socialism.
The latest Rasmussen Reports national telephone survey found that 20% disagree and say socialism is better. Twenty-seven percent (27%) are not sure which is better.
Plus, this red-ish menace is rampant among Gen-Y . . .
Adults under 30 are essentially evenly divided: 37% prefer capitalism, 33% socialism, and 30% are undecided. Thirty-somethings are a bit more supportive of the free-enterprise approach with 49% for capitalism and 26% for socialism. Adults over 40 strongly favor capitalism, and just 13% of those older Americans believe socialism is better.
. . . but not among investors or Republicans . . .
Investors by a 5-to-1 margin choose capitalism. As for those who do not invest, 40% say capitalism is better while 25% prefer socialism.
There is a partisan gap as well. Republicans - by an 11-to-1 margin - favor capitalism. Democrats are much more closely divided: Just 39% say capitalism is better while 30% prefer socialism. As for those not affiliated with either major political party, 48% say capitalism is best, and 21% opt for socialism.
. . . or anyone who likes free markets . . .
The question posed by Rasmussen Reports did not define either capitalism or socialism.
It is interesting to compare the new results to an earlier survey in which 70% of Americans prefer a free-market economy. The fact that a “free-market economy” attracts substantially more support than “capitalism” may suggest some skepticism about whether capitalism in the United States today relies on free markets.
Other survey data supports that notion. Rather than seeing large corporations as committed to free markets, two-out-of-three Americans believe that big government and big business often work together in ways that hurt consumers and investors.
But we're still all for state ownership of American industry right? Right?
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Buffett's Bank Buys Beat Back Downgrade
Tweet Share on Facebook April 9, 2009 Comment (1)Warren Buffett's Berkshire Hathaway saw its long-term credit rating cut to Aa2 from top-rated Aaa by Moody's, which cited the troubled economy and the "severe decline in equity markets" for the move as Berkshire's investments in the likes of Wells Fargo and American Express fell hard, the WSJ reports.
Bad news right? Not really, for a couple of reasons. Berkshire lost about a third of its value in the last year, and it's obvious even Buffett didn't escape the worst of the credit crisis. The latest rating change was expected after Fitch and S&P revised their ratings, and this downgrade actually makes the legendary investor look more like his usual honest self after questions were raised over Moody's hesitance to cut Berkshire given Buffett's 20 percent sake in the ratings firm. As Felix Salmon notes, the open conflict of interest actually makes the news less meaningful.
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