A Feral Pit Of Total War

“When I arrived in Amsterdam recently I took a taxi to my hotel. Over the radio came this uplifting and heartfelt lyric: ‘I’ve had a s**t day and I’ve had enough’ (having gone through airport security I knew exactly how the singer felt). The following day, in the taxi on the way back, [...]


Hang ‘em High

“Measures of central bank balance sheet expansion under-estimate the scale of liquidity support provided during the crisis … there has been a widening of the collateral taken by most central banks in their operations. The taking of imaginative forms of collateral has a history which predates central banking: in the 12th [...]


Eurozone Banks Exiting U.S.

[This research note is from Deutsche Bank's DB Reasearch group.]

Since the outbreak of the financial crisis in 2007, Europe’s banks have been gradually retreating from the US market, thereby making room for others to step in. At their peak in September 2007, euro-area banks held assets equivalent to 50% of all foreign bank assets. [...]


Broke Bank Mountain

Why, for example, do we need a central bank at all? A typical if feeble answer is that we need a lender of last resort. To which the answer is: why? Why do we need a government-appointed entity to support banks that get in over their heads? A typical answer is [...]


Operation Twist Will Fail — Again

A fall in interest rates cannot grow the economy. All that it can produce is a misallocation of real savings. As a rule, an artificial lowering of interest rates (which is accompanied by the central bank’s monetary pumping — increasing commercial banks’ reserves) boosts the demand for lending; and this, as a rule, causes banks to [...]


Moody’s: Too Much Risk

After the shock wore off from Moody’s announcement of its new ratings for the Big Banks, only two U.S. megabanks now have an “A” rating, and just barely.

As you can see from the above chart,  JPM went down two notches to A2 and Goldman was down two notches at A3 (lowest A rating). 



Living Off Immoral Earnings

“The reality… is that banks … support a thick layer of second tier executives, as well as legions of pen-pushing, meeting-loving, middle-and back-office workers who are paid multiples of their worth and contribution, especially compared with other industries.”

 -     Financial Times‟ Lex column, January 19th, 2012.

* [...]


Essay: The Loan — An Exchange Of Wealth For Income

As the title of this essay suggests, a loan is an exchange of wealth for income.  Like everything else in a free market (imagine happier days of yore), it is a voluntary trade.  Contrary to the endemic language of victimization, both parties regard themselves as gaining thereby, or else they would not enter into the [...]


One Way Toward Fixing the Banks: Learn From a Survivor

This is going to be my shortest post ever.  

In March of 2009, Bloomberg.com wrote up quite the interview with the descendant of a man who made a lot of money during the South Sea Bubble almost 400 years ago, and who now is the same family’s head of the bank founded in 1762.



Did S&P Downgrade Your Bank?

S&P issued new ratings for the world’s 37 largest banks. Was your bank upgraded or downgraded? As a public service, I have included the entire list.

Standard & Poor’s Applies Its Revised Bank Criteria To 37 Of The Largest Rated Banks And Certain Subsidiarie

NEW YORK  Nov. 29, 2011–Standard & Poor’s Ratings [...]


KeithGram: Broken Hedges

Peter Tchir wrote a piece yesterday describing yet another hole in the banks’ balance sheets:

I am not sure I fully understand it, but to me it looks something like this:

A bank has a duration mismatch.  Its funding is short-term, which means it must be rolled over frequently.  This subjects the bank to the [...]