Bank Repo Market Moves Into Focus
The Wall Street Journal has a nice little descriptive piece on the repurchase transaction market that bank participate in for short term funding. The Federal Reserve is testing this out to get back the cash they have injected into the banking system during the height of the Great Recession to purchase the “toxic assets” from the balance-sheets of all major financial institutions to give them the liquidity needed to operate.
I am still skeptical that they will do this in a timely manner if it would threaten the solvency of any banks. Many of these assets are non-performing and will require write-downs which have been coming very slowly as of late. This is more symbolic to show the Fed is doing something in my honest opinion. On the other hand, the FDIC has been talking about the lack of write-downs of the home equity lines and helocs that defaulted or will never be paid back, those are more likely to cause real harm in the banking system.
Wall Street Journal - The revelation that Lehman Brothers used repo shenanigans to hide its true weakness is bringing more attention to the repo market–and not a minute too soon. The repo market is huge, critically important to the banking system and, as indicated by last week’s bankruptcy-court examiner’s report, subject to abuse. Yet it’s little understood or scrutinized.
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SF Fed’s Janet Yellen contender for Federal Reserve’s vice chair
This is most likely the best choice available to the Fed. Janet Yellen is a known quantity and should do a good job at the Vice Chairmanship. Ms. Yellen will have a huge job ahead of her, we have a massive amount of liquidity in the U.S. banking sector that will need to be withdrawn or we will see inflation on the rise when all that cash goes into some asset class.
Reuters, Washington D.C. - San Francisco Federal Reserve Bank President Janet Yellen is a leading contender to be nominated by President Barack Obama as vice chair of the central bank, a senior administration official said on Friday.
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Bank of America to End Overdraft Fees on Debit Cards
This is great news and I applaud BofA for taking to the essence of the credit card reform bill and ended this predatory type of fee. Even myself, was under the impression that the reason we enter our pin number for debit purchases was to authorize a purchase and at that moment the terminal checked to make sure sufficient funds were in the account before running the transaction. I learned this was not the case and realized that a debt card holder could be charged thousands of percents of interest for the smallest transaction based on the fee that was charged on an annual basis. I hope to see more banks step up and do away with these fees and focus more on core banking tasks and true financial innovation to produce profits and value.
New York Times - In a move that could bring an end to the $40 cup of coffee, said on Tuesday that it was doing away with overdraft fees on purchases made with debit cards, a decision that could cost the bank tens of millions a year in revenue and put pressure on other to do the same.
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BofA modifies 12,700 mortgages under government HAMP program
Good to hear some homeowners are getting a reduction in their mortgage through the HAMP program. Problem is they need to really ramp it up because a total of 25,000 homeowners are a drop in the bucket. Still it is good to see some movement with BofA on trying to address these underwater mortgages to give the borrowers incentive to stay in the home.
Reuters - Bank of America has permanently amended home loan terms for more than 12,700 borrowers under the Obama administration’s main mortgage modification program, the bank said on Tuesday.
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Goldman Sachs Posts Nearly $5 Billion In Profit While Restrains Compensation In Q4
Quite a good quarter for the Goldman Sachs boys. With the amount of bailout they got through AIG via the treasury, you better be able to make money. We have a huge swing in the markets in 2009 and GS was flush with cash and was able to deploy it and ride the wave up. I do like they are trying compensation packages to stocks and not cash so the employees goals are aligned with long-term profitability of the firm.
I personally have no problem with a investment bank being profitably, but if we are going to have them unregulated, we need to let them fail when they get to greedy and lets them be rewarded by our markets when they are more clever than the rest, THAT is real capitalism.
New York - Dow Jones - Goldman Sachs Group Inc. (GS) on Thursday delivered its richest quarterly profit in the investment bank’s 140-year history, driven in part because it restrained compensation amid a public outcry about excessive pay.
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Bank of America Posts Loss of $5.2 Billion After Firm Repays Bailout
The market sold off strong today on 3 big banks (Wells, Morgan and BofA) all reporting losses and increasing of loan loss reserves. This throws a wrench in the whole recovery picture and brings uncertainty into the market which creates volatility. Goldman Sachs reports tomorrow and that will be very important, if they post huge losses then it will weigh on the markets and we could see the real correction everyone has been talking about coming true.
Bank of America Corp., the largest U.S. lender, posted a quarterly loss and its first full-year deficit in more than two decades, driven by the cost of repaying U.S. bailout money and defaults on consumer loans.
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BofA hires Brian T. Moynihan as new CEO
Looks like the board of directors went with an insider for the new top office job with Mr. Moynihan. I assumed they would go with a Bank of America company man over bringing in an outsider to be their new Chief Executive Officer. They really need someone who knows the culture inside and will have an overview of the operation so they can integrate their aquasitions into the larger brand and knows what units don’t work for their strategy so they can sell them off and reduce operational costs.
Wall Street Journal - Bank of America Corp. promoted Brian T. Moynihan to president and chief executive, ending an 11-week search with a unanimous boardroom vote in favor of a longtime insider.
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