Market Mover Monday: One bank needs more capital per stress tests..will the ‘Cheese’ stand alone?
Vodpod videos no longer available.
Airtime:
Fri. Apr. 24 2009 | 4:29 PM ET
Discussing the bank stress tests and more, with Robert McTeer, fmr. Dallas Fed Bank president; Bill Isaac, Secura Group of LECG; and CNBC’s Larry Kudlow
The cheese stands alone…but who is the cheese? DOW futures are down sharply, 141…
I say it’s CITI, any takers? The notion that our entire banking system is infected with TARP b/c Paulson and Geithner wanted to shield CITI by injecting capital into everyone, and now CITI is still a problem, if it is indeed CITI, well it sucks….
…if only the REGULATOR of CITI back then had KNOWN… who was that masked man? it was Geithner in NY as head of the NY FED…..
CITI CEO Vikram Pandit, who has been cooperating like crazy, even agreeing to cramdowns with Durbin…well WOTS is his head will roll as the sacrificial lamb…yet Dick Parsons somehow got promoted out of it, this after he presided over the TimeWarner stock tanking, go figure…
One of the 19 financial institutions that received a government stress test would require additional capital, based on the initial findings, according to an industry source…Though the source did not identify the company, the government in its report Friday said results were “conveyed” to the participating firms at the end of April, so the bank in question would be aware of the Federal Reserve’s assessment….
…Banks found to have inadequate capital, will have six months to raise the money, through a variety of means in the private sector. If unsuccessful, the government has said the institutions will be eligible for a capital infusion through its Capital Access Program….
“There are two things that are terribly wrong,” former FDIC Chairman Bill Isaac told CNBC.com. “First, that was publicly announced. I can’t imagine what Treasury was thinking when it made that move. It has been causing incredible angst in the markets … The second big problem is that the Treasury is directing the stress testing, apparently with direct involvement of the White House at the highest levels. Bank regulation by law is supposed to be carried out by the independent banking agencies without any political interference.”..
Update: Stress Test White Paper lacks detail…
Update: From WSJ:
Fed White Paper on Stress Testing Procedure pdf here: FED Press Release here; Market averages back to their trend line of the day, Dow up 130 to 8086, S&P up 14 to 86 NAS up 39 to 1691
For release at 2:00 p.m. EDT
A white paper describing the process and methodologies employed by the federal banking supervisory agencies in their forward-looking capital assessment of large U.S. bank holding companies was published on Friday.
The white paper is intended to assist analysts and other interested members of the public in understanding the results of the Supervisory Capital Assessment Program, expected to be released in early May. All U.S. bank holding companies with year-end 2008 assets exceeding $100 billion were required to participate in the assessment, which began February 25. These institutions collectively hold two-thirds of the assets and more than half the loans in the U.S. banking system.
More than 150 examiners, supervisors and economists from the Federal Reserve, Office of the Comptroller of the Currency, and Federal Deposit Insurance Corporation participated in this supervisory process. Starting from two economic scenarios–a consensus estimate of private-sector forecasters and an economic situation more severe than is generally anticipated–they developed a range of loss estimates and conducted an in-depth review of the banks’ lending portfolios, investment portfolios and trading-related exposures, and revenue opportunities. In doing so, they examined bank data and loss projections, compared loss projections across firms, and developed independent benchmarks against which to evaluate the banks’ estimates. From this analysis, supervisors determined the capital buffer needed to ensure that the firms would remain appropriately capitalized at the end of 2010 if the economy proves weaker than expected.
The Supervisory Capital Assessment Program: Design Summary (287 KB PDF)
Released now, the parameters were apparently already out there, they used Case Shiller Housing Value Futures in their projections…CITI already tested itself against that same metric…
they are not giving the Tangible Common Equity number they want from the banks is it 3%? 4%? and they are also not giving out the specific projected losses or the size of the capital buffer the regulators want…..meanwhile the NY Post is reporting Vikram Pandit is out as CITI CEO shortly….
They gave the categories of loans they looked at and the counterparty risk but not the other parameters, reporters asked on the conference call…..
Will get up the CNBC clip as soon as it’s available
It’s managing expectations they say..a whole lotta nothin’ just came out…they Put on the Ritz for us…they don’t want anyone running the numbers before the banks shore up capital..
Next words will be the results of the stress tests on May 4th, I think the banks will begin to leak their own inner results before that..
The markets are turning down now, were up over 100 now up 50 on the Dow….
Submitted by IrishC
Meredith Whitney- The “Great White Wash” of 1Q Bank Earnings – Bloomberg
Live! From New York, NY: Exclusive Interview with Meredith Whitney (Taking Stock)
Vodpod videos no longer available.
Moderate in the Middle 