Treasury Department Is Already Saying "Volcker Rule" Won't Change Goldman Sachs
http://www.nytimes.com/2010/01/24/us/politics/24bernanke.html
The flow of money into bond funds has had many welcome knock-on effects. As bond prices rise and yields fall, borrowing costs have dropped, helping companies tap the flood of cash to pay off other more expensive debts. But market watchers at Citigroup are beginning to worry about bonds' newfound popularity.
In a note to clients this week, Citigroup strategists compared the current trend to the craze for technology stocks more than a decade ago. "Such conditions were evident for aggressive growth equity mutual funds during the late 1990s at the apex of the Internet bubble and a similar trend appears to be forming now," wrote Tobias Levkovich and Lorraine Schmitt. They liken the paltry yield on Treasury bills - 6-month bills currently pay 0.13% -- to the high valuations given technology stocks in late 1999.
http://www.forbes.com/2010/01/22/debt-banks-morgan-markets-bonds-investment.html
Desperate homeowners scrambling to get a loan modification through federal foreclosure relief programs are beginning to shun the offer, opting for a strictly business approach to the dilemma -- walking away.
Because the majority of modifications don't reduce the principal payment on loans made during the overpriced boom years, people with underwater mortgages could still be drowning 10 years out.
The better option for those borrowers, some say, is to take the hit now and attempt a short sale, deed in lieu, or even allow their home to go into foreclosure.
"The committee will be recommending abolishing Fannie Mae and Freddie Mac in their current form and coming up with a whole new system of housing finance," Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, said at a hearing in Washington today. "That's the approach, rather than a piecemeal one."
http://www.bloomberg.com/apps/news?pid=20601087&sid=aEmQPgp95F_g
The new accounting standard requiring banks to bring assets back on balance sheet had a negligible impact on Wells Fargo. Despite having over $2.0 trillion of off-balance sheet assets, Wells consolidated just $10 billion of risk-weighted assets when the new standard took effect January 1.
http://blogs.reuters.com/rolfe-winkler/2010/01/21/fas-1667-big-bark-but-no-bite-for-wells/
Voltron says: President Obama is calling this the "Volker Plan". This is significant because according to former bank regulator, Prof. William Black, limiting bank size will cause the ponzi schemes to collapse because all ponzi schemes must continuously grow. This marks the ascendency of former federal reserve bank chairman Paul Volker and the marginalization of President Obama's soon-to-be-former economic team: Treasury Secretary Tim Geithner and Larry Summers. Tim and Larry were responsible for the big bank bailouts that have backfired politically and, as we will soon see, have only delayed the crisis. Paul Volker raised interest rates aggressively in the early 80s to combat inflation, the this could pre-sage a change in interest rate policy. Also Federal Reserve Chairman Ben Bernanke's re-appointment is now in doubt.
http://finance.yahoo.com/tech-ticker/article/409143/Is-It-Just-Us%2C-Or-Did-Tim-Geithner-Get-Fired-Yesterday
http://www.businessinsider.com/look-whos-smiling-now-2010-1
http://www.reuters.com/article/idUSTRE60K6NV20100121
http://www.calculatedriskblog.com/2010/01/abc-news-senate-leadership-uncertain-if.html
Wells Fargo set aside $5.91 billion for loan losses during the quarter, a 30 percent decline from the same period a year earlier. Bank of America Corp., which also reported quarterly results Wednesday, actually increased its loan-loss reserves by 18 percent during the final three months of 2009.
Is Wells Fargo going to be dealing with bad-loan problems after its rivals are in the clear? Fourth-quarter results, reported Wednesday, point to such a scenario.
Wells's nonperforming assets—past-due loans and repossessed collateral—rose 18% from the third quarter. Meanwhile, J.P. Morgan Chase's fell 3.1%, Citigroup's were more or less flat, and Bank of America's rose 5.7%.
Investors watch this credit metric closely. As nonperformers start to fall, banks can slash bad-loan expenses, causing earnings to soar. Nearly all bank stocks have rallied as investors factor in such an earnings boost. But, after the rally, there could be upsets if credit metrics fail to improve in line with expectations. And that is why Wells is interesting. It trades at 1.4 times its book value, compared with J.P. Morgan's 1.08 times. If credit disappoints, the stock could fall to close that gap.
Wells's defenders might say the bank has adequate reserves for its loans. But Wells's nonperforming loans are now 3.12% of outstanding loans, compared with 2.77% at J.P. Morgan. Yet J.P. Morgan's reserve is 74% larger than its past-due loan total, whereas Wells's reserve is the same size.
