Banks Seen at Risk Five Years After Lehman Collapse
Banks Seen at Risk Five Years After Lehman Collapse
Bailouts will cost the US Tax Payers 23 Trillion
- Thread starter Gunner
- Start date
Federal Reserve prolongs stimulus
Meanwhile in the rest of federal government land...
Meanwhile in the rest of federal government land...
Call it QE-Indefinitely
its not the military itself, but the assholes in charge of its
financial management should all be in jail...
the cia and nsa included..
so just get rid of the cia and nsa, ATF(alcohol and tobacco.. REALLY need to be enforced... trash em all) that right there alone is 50 trillion dollars.. instantly..
then go after corporations that got no bid contracts at the peoples expense, the fled the country for their own personal profits... we gots to shake em down.. fuck a haliburton and dick chaney...
they have no checks and balances and we wonder where our money is really going?
dick chaney got half the money using it to stay alive..
we need it back pronto tho..
How to Know When We’ve Ended the $83 Billion Bank Subsidy
How to Know When We’ve Ended the $83 Billion Bank Subsidy
By the Editors
Dec 1, 2013 5:00 PM CT
It’s been almost a year since we caused a stir by pointing out that the largest U.S. banks received a taxpayer subsidy worth an estimated $83 billion a year. What’s changed since then?
Better banking rules are coming into force, and if they work they’ll reduce the subsidy. It would be good to know exactly how much. Unfortunately, measuring the transfer in real time is something regulators aren’t well equipped to do.
Policy makers and legislators have largely come to accept that the subsidy is there. The biggest and most systemically important banks can borrow more cheaply than they otherwise would, because creditors expect the government to rescue them in an emergency. This is an unfair and unintended transfer of wealth to bank shareholders and executives, and it weakens market discipline by desensitizing banks to risk. In effect, banks are being rewarded for presenting a threat to the economy.
Federal Reserve Chairman Ben Bernanke and his likely successor, Janet Yellen, have both acknowledged the too-big-to-fail subsidy as an issue that needs to be addressed. Regulators are putting in place new capital requirements to ensure that the biggest banks are less likely to fail; the Federal Deposit Insurance Corp. is working on ways to handle those that do. The soon-to-be-published Volcker rule is explicitly intended to cut the subsidy for speculative trading.
Banks say these reforms are enough. Others think there’s a long way to go. Research and experience strongly suggest that the economy would benefit from capital levels much higher than what regulators have proposed. On the subsidy, the evidence is mixed: One recent study finds that the Dodd-Frank Act may have had some effect, another says it hasn’t. Settling this issue will require better measurement.
The subsidy has always been difficult to estimate. To know how much banks are benefiting from investors’ expectation of government bailouts, you need to know what their borrowing would cost without it. This cannot be observed, so researchers use different tricks to tease it out.
The economists whose work we cited in our $83 billion estimate -- Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz -- focused on the credit-rating “uplift” that banks receive due to the expectation of government support. By looking at long-term data on borrowing costs at different ratings, they could infer the typical annual value of the taxpayer subsidy.
The rating method, though, is less useful in monitoring the effect of reforms. Studies have shown that rating companies can succumb to pressure from banks, which are among their biggest customers. In the immediate post-crisis year of 2009, on which Ueda and Weder di Mauro focused, the raters were bound to recognize the value of government support. In calmer times, maybe not.
Moody’s Investors Service recently removed all uplift related to government support from its ratings of the largest U.S. banks. Its reasoning was that the FDIC’s new resolution mechanism means there’ll be no more bailouts -- even though the mechanism isn’t yet complete and the FDIC’s vice chairman, Thomas Hoenig, says it couldn’t handle a crisis like the one in 2008.
Researchers from New York University, Virginia Tech University and Syracuse University have adopted what seems a better way to measure progress. They use small banks, which don’t enjoy too-big-to-fail status, as the borrowing-cost benchmark (with statistical controls to strip out other features that make big and small banks different). This approach suggests that a multibillion-dollar subsidy persisted at least through 2011.
Economists are working on other methods, such as building a mathematical model of a subsidy-free big bank. No one approach is likely to be perfect. The best solution, suggested by Minneapolis Fed President Narayana Kocherlakota in a recent speech, is to develop several measures and use them all -- just as Fed officials do, for instance, when judging the state of the labor market.
Government can help move this along. At the behest of Congress, the Government Accountability Office is analyzing the too-big-to-fail subsidy, work that might be used to develop real-time indicators. The Office of Financial Research, set up by the Dodd-Frank Act to give regulators more information, could act as a clearinghouse, vetting the available research.
In the end, though, the estimated size of the subsidy, which can vary with market conditions and the general level of interest rates, is less important than its presence. As long as it exists, banks will want to take on too much risk. Under international accounting standards, the six largest U.S. banks have amassed more than $14 trillion in assets, equivalent to nearly a full year of economic output. Only about 4 percent of that is financed with loss-absorbing equity. A drop in asset value of only about 4 percent could be enough to make them insolvent.
It would be good to know that financial reforms have eliminated the subsidy. Without better evidence, that call would be a leap of faith.
http://www.bloomberg.com/news/2013-...d-the-83-billion-bank-subsidy.html?aid=203912
How to Know When We’ve Ended the $83 Billion Bank Subsidy
By the Editors
Dec 1, 2013 5:00 PM CT
It’s been almost a year since we caused a stir by pointing out that the largest U.S. banks received a taxpayer subsidy worth an estimated $83 billion a year. What’s changed since then?
Better banking rules are coming into force, and if they work they’ll reduce the subsidy. It would be good to know exactly how much. Unfortunately, measuring the transfer in real time is something regulators aren’t well equipped to do.
Policy makers and legislators have largely come to accept that the subsidy is there. The biggest and most systemically important banks can borrow more cheaply than they otherwise would, because creditors expect the government to rescue them in an emergency. This is an unfair and unintended transfer of wealth to bank shareholders and executives, and it weakens market discipline by desensitizing banks to risk. In effect, banks are being rewarded for presenting a threat to the economy.
Federal Reserve Chairman Ben Bernanke and his likely successor, Janet Yellen, have both acknowledged the too-big-to-fail subsidy as an issue that needs to be addressed. Regulators are putting in place new capital requirements to ensure that the biggest banks are less likely to fail; the Federal Deposit Insurance Corp. is working on ways to handle those that do. The soon-to-be-published Volcker rule is explicitly intended to cut the subsidy for speculative trading.
Banks say these reforms are enough. Others think there’s a long way to go. Research and experience strongly suggest that the economy would benefit from capital levels much higher than what regulators have proposed. On the subsidy, the evidence is mixed: One recent study finds that the Dodd-Frank Act may have had some effect, another says it hasn’t. Settling this issue will require better measurement.
The subsidy has always been difficult to estimate. To know how much banks are benefiting from investors’ expectation of government bailouts, you need to know what their borrowing would cost without it. This cannot be observed, so researchers use different tricks to tease it out.
The economists whose work we cited in our $83 billion estimate -- Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz -- focused on the credit-rating “uplift” that banks receive due to the expectation of government support. By looking at long-term data on borrowing costs at different ratings, they could infer the typical annual value of the taxpayer subsidy.
The rating method, though, is less useful in monitoring the effect of reforms. Studies have shown that rating companies can succumb to pressure from banks, which are among their biggest customers. In the immediate post-crisis year of 2009, on which Ueda and Weder di Mauro focused, the raters were bound to recognize the value of government support. In calmer times, maybe not.
Moody’s Investors Service recently removed all uplift related to government support from its ratings of the largest U.S. banks. Its reasoning was that the FDIC’s new resolution mechanism means there’ll be no more bailouts -- even though the mechanism isn’t yet complete and the FDIC’s vice chairman, Thomas Hoenig, says it couldn’t handle a crisis like the one in 2008.
Researchers from New York University, Virginia Tech University and Syracuse University have adopted what seems a better way to measure progress. They use small banks, which don’t enjoy too-big-to-fail status, as the borrowing-cost benchmark (with statistical controls to strip out other features that make big and small banks different). This approach suggests that a multibillion-dollar subsidy persisted at least through 2011.
Economists are working on other methods, such as building a mathematical model of a subsidy-free big bank. No one approach is likely to be perfect. The best solution, suggested by Minneapolis Fed President Narayana Kocherlakota in a recent speech, is to develop several measures and use them all -- just as Fed officials do, for instance, when judging the state of the labor market.
Government can help move this along. At the behest of Congress, the Government Accountability Office is analyzing the too-big-to-fail subsidy, work that might be used to develop real-time indicators. The Office of Financial Research, set up by the Dodd-Frank Act to give regulators more information, could act as a clearinghouse, vetting the available research.
In the end, though, the estimated size of the subsidy, which can vary with market conditions and the general level of interest rates, is less important than its presence. As long as it exists, banks will want to take on too much risk. Under international accounting standards, the six largest U.S. banks have amassed more than $14 trillion in assets, equivalent to nearly a full year of economic output. Only about 4 percent of that is financed with loss-absorbing equity. A drop in asset value of only about 4 percent could be enough to make them insolvent.
It would be good to know that financial reforms have eliminated the subsidy. Without better evidence, that call would be a leap of faith.
http://www.bloomberg.com/news/2013-...d-the-83-billion-bank-subsidy.html?aid=203912
QE: The greatest subsidy to the rich ever?
QE: The greatest subsidy to the rich ever?
By: Robert Frank | CNBC Reporter and Editor
Published: Wednesday, 18 Dec 2013 | 2:13 PM ET
Every Ferrari dealership in the country should have a framed picture of Ben Bernanke in their lobby. It should read: "Our #1 Salesman."
The largesse of the Federal Reserve over the past five years has amounted to one of the largest ever subsidies to the American wealthy—fueling record fortunes, record numbers of new millionaires and billionaires, and an unprecedented shopping spree for everything from Ferraris to Francis Bacon paintings. The prices of the assets owned by the wealthy, and the things they buy, have gone parabolic, bearing little relationship to the weak, broader economy.
On Wednesday, the Fed decided to start the long-awaited taper, dialing down its purchases of mortgage bonds and Treasury securities by a combined $10 billion. But the core of its program will remain through to 2014. And even if the Fed ends quantitative easing altogether next year, it's become increasingly clear that much of the gains from the program have flowed to the top 1 percent.
More millionaires have been created over the past five years than during the entire eight years of the Bush administration. According to Spectrem Group, there were 2.3 million new millionaires created between 2008 and 2012. This year, the number will likely grow by at least 200,000, which would bring the millionaire population past its previous record in 2007.
During the Bush administration, between 2000 and 2008, 400,000 new millionaires were created (the total number of millionaires increased from 6.3 million to 9.2 million between 2000 and 2007 but the number fell to 3.7 million in 2008 due to the financial crisis).
According to Wealth-X, the top 10 billionaires in America saw their fortunes grow by a combined $101.8 billion this year.
The reason is simple: Fed policy has fueled a surge in the value of financial assets. Since the wealthiest 5 percent of Americans own 60 percent of financial assets, and the top 10 percent own 80 percent of the stocks, those gains in financial assets have gone disproportionately to a small group at the top.
Or as James Grant, of Grant's Interest Rate Observer said Tuesday on CNBC's "Squawk Box," the money is all "going to Greenwich" Conn., the wealthy hedge-fund haven.
Stanley Druckenmiller, the billionaire founder of Duquesne Capital, called the Fed's policies "the biggest redistribution of wealth from the middle class and the poor to the rich ever."
It's not just asset wealth that's become more unequal. The income gap has also grown since 2008. According to Berkeley economics professor Emmanuel Saez, 95 percent of the income growth in the U.S. between 2009 and 2012 was captured by the top 1 percent. That's due largely to compensation that's tied to stocks—either through options or shares.
Some argue that the Fed has "punished savers" and helped the rich. That's only partly true. If you look at which segment holds most of the interest-bearing savings or CD deposits in the U.S., it's the wealthy that hold the most. The top 10 percent holds 70.5 percent of interest-earnings bank deposits, according to Edward Wolff, the economist and wealth expert at New York University.
All of that wealth and income piling up at the top has created huge cash hoards by companies and the rich. The savings rate of the wealthiest 1 percent soared to 37 percent this year—and more than three times their savings rate in 2007, according to a study from Harrison Group and American Express Publishing.
Americans with at least $100,000 in disposable income have at least $6 trillion in savings, and that number could double by 2014, according to the study.
The burgeoning plutonomy is also fueling a global shopping spree by the rich. The top two most expensive collector cars ever sold were sold in 2013—a $29.7 million Mercedes and a $27.5 million Ferrari. This fall saw the most expensive art work ever sold at auction—a Francis Bacon triptych for $142 million at Christie's.
And Ferrari is already sold out of its latest supercar—the $1.4 million LaFerrari. While the Federal Reserve policy hasn't shown signs of stoking everyday inflation, it has inflated the assets and consumables of the wealthy.
"You say, 'There's no inflation?'," Grant said on CNBC Tuesday. "How about Wall Street? Stocks and bonds and art and Ferraris and farmland, assets are up."
http://www.cnbc.com/id/101283037
QE: The greatest subsidy to the rich ever?
By: Robert Frank | CNBC Reporter and Editor
Published: Wednesday, 18 Dec 2013 | 2:13 PM ET
Every Ferrari dealership in the country should have a framed picture of Ben Bernanke in their lobby. It should read: "Our #1 Salesman."
The largesse of the Federal Reserve over the past five years has amounted to one of the largest ever subsidies to the American wealthy—fueling record fortunes, record numbers of new millionaires and billionaires, and an unprecedented shopping spree for everything from Ferraris to Francis Bacon paintings. The prices of the assets owned by the wealthy, and the things they buy, have gone parabolic, bearing little relationship to the weak, broader economy.
On Wednesday, the Fed decided to start the long-awaited taper, dialing down its purchases of mortgage bonds and Treasury securities by a combined $10 billion. But the core of its program will remain through to 2014. And even if the Fed ends quantitative easing altogether next year, it's become increasingly clear that much of the gains from the program have flowed to the top 1 percent.
More millionaires have been created over the past five years than during the entire eight years of the Bush administration. According to Spectrem Group, there were 2.3 million new millionaires created between 2008 and 2012. This year, the number will likely grow by at least 200,000, which would bring the millionaire population past its previous record in 2007.
During the Bush administration, between 2000 and 2008, 400,000 new millionaires were created (the total number of millionaires increased from 6.3 million to 9.2 million between 2000 and 2007 but the number fell to 3.7 million in 2008 due to the financial crisis).
According to Wealth-X, the top 10 billionaires in America saw their fortunes grow by a combined $101.8 billion this year.
The reason is simple: Fed policy has fueled a surge in the value of financial assets. Since the wealthiest 5 percent of Americans own 60 percent of financial assets, and the top 10 percent own 80 percent of the stocks, those gains in financial assets have gone disproportionately to a small group at the top.
Or as James Grant, of Grant's Interest Rate Observer said Tuesday on CNBC's "Squawk Box," the money is all "going to Greenwich" Conn., the wealthy hedge-fund haven.
Stanley Druckenmiller, the billionaire founder of Duquesne Capital, called the Fed's policies "the biggest redistribution of wealth from the middle class and the poor to the rich ever."
It's not just asset wealth that's become more unequal. The income gap has also grown since 2008. According to Berkeley economics professor Emmanuel Saez, 95 percent of the income growth in the U.S. between 2009 and 2012 was captured by the top 1 percent. That's due largely to compensation that's tied to stocks—either through options or shares.
Some argue that the Fed has "punished savers" and helped the rich. That's only partly true. If you look at which segment holds most of the interest-bearing savings or CD deposits in the U.S., it's the wealthy that hold the most. The top 10 percent holds 70.5 percent of interest-earnings bank deposits, according to Edward Wolff, the economist and wealth expert at New York University.
All of that wealth and income piling up at the top has created huge cash hoards by companies and the rich. The savings rate of the wealthiest 1 percent soared to 37 percent this year—and more than three times their savings rate in 2007, according to a study from Harrison Group and American Express Publishing.
Americans with at least $100,000 in disposable income have at least $6 trillion in savings, and that number could double by 2014, according to the study.
The burgeoning plutonomy is also fueling a global shopping spree by the rich. The top two most expensive collector cars ever sold were sold in 2013—a $29.7 million Mercedes and a $27.5 million Ferrari. This fall saw the most expensive art work ever sold at auction—a Francis Bacon triptych for $142 million at Christie's.
And Ferrari is already sold out of its latest supercar—the $1.4 million LaFerrari. While the Federal Reserve policy hasn't shown signs of stoking everyday inflation, it has inflated the assets and consumables of the wealthy.
"You say, 'There's no inflation?'," Grant said on CNBC Tuesday. "How about Wall Street? Stocks and bonds and art and Ferraris and farmland, assets are up."
http://www.cnbc.com/id/101283037
Bailouts leave a legacy of cronyism: Opposing view
Bailouts leave a legacy of cronyism: Opposing view
Why is the 20% loss on GM considered a sign of success?
Mark Calabria
6:42 p.m. EST December 22, 2013
This month's sale by the Treasury of its remaining shares in General Motors should offer us all an opportunity to say "never again."
USA Today Editors - OUR VIEW: Auto rescue a triumph
Pay no attention to the the Obama and Bush administration cheerleaders. The federal rescue of GM, along with the TARP in general, serves as an example of everything wrong with Washington.
The TARP was little more than a transfer of losses from inept corporations to the taxpayer, mistaking the redistribution of losses with their avoidance.
Let's start with the easy part: The taxpayer is projected to take a loss of more than $20 billion on two of the TARP programs. About half of that loss is from the $50 billion GM bailout; the remainder is largely the result of various failed housing assistance programs.
It didn't have to be this way. When GM entered bankruptcy, the creditors should have taken their losses, and the company could have been reorganized at no cost to taxpayers. The same is true of the banks. A conversion of debt to equity would have recapitalized the banks at no cost to the taxpayer. Any upside would have been shared with the creditors.
We were repeatedly told, however, that the only choices were bailout or liquidate. GM, among others, proved that a false choice. Just as many of us have flown on bankrupt airlines, banks and automakers could have been operated in a reorganization.
Let's also not forget that there was no authority under the TARP to assist automakers. Congress had voted down an auto bailout. But the Bush administration blatantly ignored the law and provided assistance, punting the issue to President Obama. If that weren't bad enough, Obama bullied creditors and rearranged chains of priority to reward allies. Equality under the law took a beating.
As a Senate staffer in 2008, I took part in the efforts to oppose TARP. Its promoters promised untold profits and an economic turnaround. The TARP law itself sets out a number of objectives, such as promoting jobs, preserving homeownership and home values, along with protecting the taxpayer.
Five years later, it's impossible to objectively conclude that any of these stated purposes of the TARP were actually achieved. The current recovery is one of the weakest on record, and the very measures TARP promised to revive are all far below peak. Its legacy, however, is a different story: one of cronyism and lawlessness.
Mark Calabria is director of financial regulation studies at the Cato Institute.
http://www.usatoday.com/story/opini...ors-mark-calabria-editorials-debates/4168419/
Bailouts leave a legacy of cronyism: Opposing view
Why is the 20% loss on GM considered a sign of success?
Mark Calabria
6:42 p.m. EST December 22, 2013
This month's sale by the Treasury of its remaining shares in General Motors should offer us all an opportunity to say "never again."
USA Today Editors - OUR VIEW: Auto rescue a triumph
Pay no attention to the the Obama and Bush administration cheerleaders. The federal rescue of GM, along with the TARP in general, serves as an example of everything wrong with Washington.
The TARP was little more than a transfer of losses from inept corporations to the taxpayer, mistaking the redistribution of losses with their avoidance.
Let's start with the easy part: The taxpayer is projected to take a loss of more than $20 billion on two of the TARP programs. About half of that loss is from the $50 billion GM bailout; the remainder is largely the result of various failed housing assistance programs.
It didn't have to be this way. When GM entered bankruptcy, the creditors should have taken their losses, and the company could have been reorganized at no cost to taxpayers. The same is true of the banks. A conversion of debt to equity would have recapitalized the banks at no cost to the taxpayer. Any upside would have been shared with the creditors.
We were repeatedly told, however, that the only choices were bailout or liquidate. GM, among others, proved that a false choice. Just as many of us have flown on bankrupt airlines, banks and automakers could have been operated in a reorganization.
Let's also not forget that there was no authority under the TARP to assist automakers. Congress had voted down an auto bailout. But the Bush administration blatantly ignored the law and provided assistance, punting the issue to President Obama. If that weren't bad enough, Obama bullied creditors and rearranged chains of priority to reward allies. Equality under the law took a beating.
As a Senate staffer in 2008, I took part in the efforts to oppose TARP. Its promoters promised untold profits and an economic turnaround. The TARP law itself sets out a number of objectives, such as promoting jobs, preserving homeownership and home values, along with protecting the taxpayer.
Five years later, it's impossible to objectively conclude that any of these stated purposes of the TARP were actually achieved. The current recovery is one of the weakest on record, and the very measures TARP promised to revive are all far below peak. Its legacy, however, is a different story: one of cronyism and lawlessness.
Mark Calabria is director of financial regulation studies at the Cato Institute.
http://www.usatoday.com/story/opini...ors-mark-calabria-editorials-debates/4168419/
Bond Dealers Clamor to Sell as Fed Prepares to Shut QE Window
Bond Dealers Clamor to Sell as Fed Prepares to Shut QE Window
By Cordell Eddings
Oct 27, 2014 1:11 PM CT
The line for dealers to sell Treasuries to the Federal Reserve got longer right up until the central bank was poised to shut its purchase window.
Central bank policy makers have been winding down their unprecedented monetary stimulus program, known as quantitative easing, as they saw improvements in economic growth. The Fed, which announced buying of $45 billion in Treasuries per month in December 2012 and tapered to $10 billion this month, said it is likely to end the buying at its two-day policy meeting starting tomorrow.
Goldman Sachs Group Inc., JPMorgan Chase & Co. and the other 20 primary dealers obligated to bid at debt auctions offered $5.94 for every dollar the central bank purchased from the firms since mid-September, the most since 2011, data compiled by Bloomberg show. The average offering amount this year has been $4.77 as dealer positions in Treasuries have declined to $63.8 billion after climbing to a record $146 billion a year ago.
“Since tapering was announced, there has been a steady stream of people wanting to sell to the Fed,” said George Goncalves, the head of interest-rate strategy at Nomura Holdings Inc., one of the primary dealers that trade directly with the Fed. “Even though there has been time to prepare for the Fed stepping away, the market will be different without the biggest buyer there.”
Closing Time
The central bank conducted its final scheduled bond purchase today, acquiring $931 million of Treasuries maturing from February 2036 to February 2044. The Fed said in September it will end its buying as long as the U.S. economy keeps improving.
The Fed has expanded its balance sheet assets to $4.5 trillion, buying Treasuries and mortgage-backed securities, from less than $1 trillion in 2008 in an effort to stimulate growth after the global financial crisis.
Fed Chair Janet Yellen opened the door to keeping a multi-trillion-dollar portfolio for years, saying a decision on when to stop reinvesting maturing bonds depends on financial conditions and the economic outlook. Shrinking the balance sheet to normal historical levels “could take to the end of the decade,” Yellen said at her press conference last month.
The Fed’s balance sheet includes bonds bought in all three rounds of QE. The first two totaled $2.3 trillion through June 2011. The third round differed from its predecessors in that it was open-ended.
Fed Purchases
The FOMC began tapering purchases of Treasuries and mortgage in December 2013, when it slowed monthly buying by $10 billion. It made six more cuts of the same size at each of the following meetings, saying with each that it would respond to incoming data.
The end of QE may bring more volatility in the bond market and wider spreads between the prices of buyers and sellers, Nomura’s Gonclaves said.
“If the Fed means business, the market will have to learn to trade in this new environment,” Goncalves said. “Treasuries will have to compete in the bond market without the Fed’s help, and there will still be plenty of bonds to buy.”
http://www.bloomberg.com/news/2014-...o-sell-as-fed-prepares-to-shut-qe-window.html
Bond Dealers Clamor to Sell as Fed Prepares to Shut QE Window
By Cordell Eddings
Oct 27, 2014 1:11 PM CT
The line for dealers to sell Treasuries to the Federal Reserve got longer right up until the central bank was poised to shut its purchase window.
Central bank policy makers have been winding down their unprecedented monetary stimulus program, known as quantitative easing, as they saw improvements in economic growth. The Fed, which announced buying of $45 billion in Treasuries per month in December 2012 and tapered to $10 billion this month, said it is likely to end the buying at its two-day policy meeting starting tomorrow.
Goldman Sachs Group Inc., JPMorgan Chase & Co. and the other 20 primary dealers obligated to bid at debt auctions offered $5.94 for every dollar the central bank purchased from the firms since mid-September, the most since 2011, data compiled by Bloomberg show. The average offering amount this year has been $4.77 as dealer positions in Treasuries have declined to $63.8 billion after climbing to a record $146 billion a year ago.
“Since tapering was announced, there has been a steady stream of people wanting to sell to the Fed,” said George Goncalves, the head of interest-rate strategy at Nomura Holdings Inc., one of the primary dealers that trade directly with the Fed. “Even though there has been time to prepare for the Fed stepping away, the market will be different without the biggest buyer there.”
Closing Time
The central bank conducted its final scheduled bond purchase today, acquiring $931 million of Treasuries maturing from February 2036 to February 2044. The Fed said in September it will end its buying as long as the U.S. economy keeps improving.
The Fed has expanded its balance sheet assets to $4.5 trillion, buying Treasuries and mortgage-backed securities, from less than $1 trillion in 2008 in an effort to stimulate growth after the global financial crisis.
Fed Chair Janet Yellen opened the door to keeping a multi-trillion-dollar portfolio for years, saying a decision on when to stop reinvesting maturing bonds depends on financial conditions and the economic outlook. Shrinking the balance sheet to normal historical levels “could take to the end of the decade,” Yellen said at her press conference last month.
The Fed’s balance sheet includes bonds bought in all three rounds of QE. The first two totaled $2.3 trillion through June 2011. The third round differed from its predecessors in that it was open-ended.
Fed Purchases
The FOMC began tapering purchases of Treasuries and mortgage in December 2013, when it slowed monthly buying by $10 billion. It made six more cuts of the same size at each of the following meetings, saying with each that it would respond to incoming data.
The end of QE may bring more volatility in the bond market and wider spreads between the prices of buyers and sellers, Nomura’s Gonclaves said.
“If the Fed means business, the market will have to learn to trade in this new environment,” Goncalves said. “Treasuries will have to compete in the bond market without the Fed’s help, and there will still be plenty of bonds to buy.”
http://www.bloomberg.com/news/2014-...o-sell-as-fed-prepares-to-shut-qe-window.html
Didn't Illinois republican gubernatorial candidate Bruce Rauner Donor's Hedge Fund Group Received $200 Million in Government Bailout Funds from AIG?
If you want to ask if any random rich person benefited from the bailout, then my answer is extremely likely.Didn't Illinois republican gubernatorial candidate Bruce Rauner Donor's Hedge Fund Group Received $200 Million in Government Bailout Funds from AIG?
Now, when was the last time you cared about a person, you voted for, benefiting from the bailout you're supposed to be against?
Who are you supporting for the Illinois gubernatorial race?
I don't vote remember.
That means my vote will count twice as much!
Doesn't matter since you've already won.
Remember, it's ok to not vote as long as it's surrendering.
OK, you have last word with that gibberish.
You're a bad winner. What happened to giving me the last word?
Wells Fargo Rides Retail Deposits to Become Most Valuable Bank
Wells Fargo Rides Retail Deposits to Become Most Valuable Bank
By Yalman Onaran
Dec 18, 2014 7:27 AM CT
Behind Wells Fargo & Co. (WFC)’s ascent to the world’s most valuable bank lies a cheap and reliable source of funds favored by regulators and less popular with its largest rivals: retail bank deposits.
Wells Fargo gets 78 percent of its funding from deposits, and 90 percent are so-called core deposits -- small amounts from individuals and other account-holders that are viewed as slower to yank their money than big institutions, data compiled by Bloomberg show. The bank has more than tripled deposits in seven years, adding the equivalent of Atlanta-based SunTrust Banks Inc. in the last two.
Under Chief Executive Officer John Stumpf, Wells Fargo has focused on the consumer, corporate and real estate lending common among regional banks instead of adopting the sprawling universal bank models typical of the biggest banks. This month the company surpassed the record set by Sandy Weill’s Citigroup Inc. in 2001 for most valuable bank in U.S. history.
“Banks following the simple bread-and-butter banking model are providing better returns and have an easier time with regulatory compliance,” Sheila Bair, a former chairman of the Federal Deposit Insurance Corp., said in a phone interview. “Core deposits representing customer relations are very stable, and markets are appreciating that as well as regulators now.”
Wells Fargo has climbed 18 percent in the year through Dec. 17, making it the best-performing stock in the 24-member KBW Bank Index. (BKX)
Last week, the Federal Reserve proposed an extra capital requirement for the eight biggest U.S. banks, including Wells Fargo. The rule was especially demanding for those lenders that rely most on short-term market financing -- the type that can vanish in a crisis -- instead of deposits.
New Challenges
That benefited San Francisco-based Wells Fargo, which has grown to become the nation’s biggest mortgage lender since the 2007-2008 financial crisis. Now the bank is opposing a different rule under Fed consideration that would require the largest banks to issue long-term debt to absorb losses. That proposal, made by global regulators, is off the mark because it doesn’t recognize that individual depositors provide more reliable funds than bondholders, said Stumpf, who turned 61 in September.
“Those companies that fund most of their operations with debt are less impacted,” he said. “We fund substantially all of our balance sheet with retail funds. Wouldn’t it be an oddity to have the most conservative funding and yet be asked to go raise more debt?”
Bank deposits have surged since the financial crisis as interest rates near zero made alternatives like money market funds less appealing. Wells Fargo’s have grown by $783 billion, or 225 percent, to $1.13 trillion. The bank’s 2008 acquisition of Wachovia Corp. contributed.
Rising Rates
Rivals, even those that made big acquisitions of their own, didn’t increase deposits as fast. New York-based JPMorgan Chase & Co. (JPM), which swallowed Washington Mutual Inc., added $594 billion, while Bank of America Corp., which bought Countrywide Financial Corp. and Merrill Lynch & Co., boosted deposits by $306 billion.
Pittsburgh-based PNC Financial Services Group Inc. (PNC), with one-fifth the assets of Wells Fargo, saw its deposits jump 173 percent for the second-fastest growth among the 11 biggest U.S. banks.
Whenever the Fed starts raising interest rates, which many economists expect to happen next year, companies and institutional investors are likely to move their deposits to higher-yielding alternatives faster than individuals, according to Standard & Poor’s credit-rating firm.
“If the rate increase happens gradually, banks will adjust to the deposit outflows,” said Stuart Plesser, a senior director at S&P. “But if the rate increases are sudden and sharp, some banks can struggle to cope.”
Different DNA
In a Dec. 2 report, S&P listed 25 banks that could suffer large outflows of deposits if rates jump. Wells Fargo wasn’t among them.
Lately banks including JPMorgan have been trying to reduce large blocks of deposits from corporations or financial institutions. Not Wells Fargo, where time deposits larger than $100,000 -- such as certificates of deposit -- account for only 10 percent of the total compared with 26 percent at JPMorgan and 20 percent at Citigroup.
“Most of our deposits are part of long-term relationships for us,” Stumpf said last week in an interview in New York. “We’re in a category of one when you consider the size and how different we are from what you’d consider as large money-center banks. Our DNA is much more regional, community bank in structure.”
Vicious Cycle
While Bank of America’s core deposits are also about 90 percent of the total, it funds more operations in the bond market than Wells Fargo. That brings the Charlotte, North Carolina-based lender’s ratio of core deposits to total liabilities down to 54 percent.
History has shown that institutions doing traditional banking are more successful, according to Thomas Hoenig, vice chairman of the FDIC. While the sheer size of a bank can increase the risk it poses to an economy, the potential dangers are multiplied by complexity and activities such as trading that fall outside the traditional model, he said.
“Wholesale funding secured by assets on the bank’s balance sheet creates a vicious cycle during a financial downturn as creditors grab the collateral and sell in panic, bringing prices down even further,” said Hoenig, who has been an advocate for higher capital requirements for the biggest banks. “That’s where the vulnerability for the banking system comes from.”
Warren Buffett, whose Berkshire Hathaway Inc. is Wells Fargo’s biggest shareholder, has expressed a similar view.
“The biggest single asset that Wells has is its deposit base,” Buffett said in a television interview aired last year. “They have a consumer-based, small-business-type bank that’s just huge.”
http://www.bloomberg.com/news/2014-...il-deposits-to-become-most-valuable-bank.html
Wells Fargo Rides Retail Deposits to Become Most Valuable Bank
By Yalman Onaran
Dec 18, 2014 7:27 AM CT
Behind Wells Fargo & Co. (WFC)’s ascent to the world’s most valuable bank lies a cheap and reliable source of funds favored by regulators and less popular with its largest rivals: retail bank deposits.
Wells Fargo gets 78 percent of its funding from deposits, and 90 percent are so-called core deposits -- small amounts from individuals and other account-holders that are viewed as slower to yank their money than big institutions, data compiled by Bloomberg show. The bank has more than tripled deposits in seven years, adding the equivalent of Atlanta-based SunTrust Banks Inc. in the last two.
Under Chief Executive Officer John Stumpf, Wells Fargo has focused on the consumer, corporate and real estate lending common among regional banks instead of adopting the sprawling universal bank models typical of the biggest banks. This month the company surpassed the record set by Sandy Weill’s Citigroup Inc. in 2001 for most valuable bank in U.S. history.
“Banks following the simple bread-and-butter banking model are providing better returns and have an easier time with regulatory compliance,” Sheila Bair, a former chairman of the Federal Deposit Insurance Corp., said in a phone interview. “Core deposits representing customer relations are very stable, and markets are appreciating that as well as regulators now.”
Wells Fargo has climbed 18 percent in the year through Dec. 17, making it the best-performing stock in the 24-member KBW Bank Index. (BKX)
Last week, the Federal Reserve proposed an extra capital requirement for the eight biggest U.S. banks, including Wells Fargo. The rule was especially demanding for those lenders that rely most on short-term market financing -- the type that can vanish in a crisis -- instead of deposits.
New Challenges
That benefited San Francisco-based Wells Fargo, which has grown to become the nation’s biggest mortgage lender since the 2007-2008 financial crisis. Now the bank is opposing a different rule under Fed consideration that would require the largest banks to issue long-term debt to absorb losses. That proposal, made by global regulators, is off the mark because it doesn’t recognize that individual depositors provide more reliable funds than bondholders, said Stumpf, who turned 61 in September.
“Those companies that fund most of their operations with debt are less impacted,” he said. “We fund substantially all of our balance sheet with retail funds. Wouldn’t it be an oddity to have the most conservative funding and yet be asked to go raise more debt?”
Bank deposits have surged since the financial crisis as interest rates near zero made alternatives like money market funds less appealing. Wells Fargo’s have grown by $783 billion, or 225 percent, to $1.13 trillion. The bank’s 2008 acquisition of Wachovia Corp. contributed.
Rising Rates
Rivals, even those that made big acquisitions of their own, didn’t increase deposits as fast. New York-based JPMorgan Chase & Co. (JPM), which swallowed Washington Mutual Inc., added $594 billion, while Bank of America Corp., which bought Countrywide Financial Corp. and Merrill Lynch & Co., boosted deposits by $306 billion.
Pittsburgh-based PNC Financial Services Group Inc. (PNC), with one-fifth the assets of Wells Fargo, saw its deposits jump 173 percent for the second-fastest growth among the 11 biggest U.S. banks.
Whenever the Fed starts raising interest rates, which many economists expect to happen next year, companies and institutional investors are likely to move their deposits to higher-yielding alternatives faster than individuals, according to Standard & Poor’s credit-rating firm.
“If the rate increase happens gradually, banks will adjust to the deposit outflows,” said Stuart Plesser, a senior director at S&P. “But if the rate increases are sudden and sharp, some banks can struggle to cope.”
Different DNA
In a Dec. 2 report, S&P listed 25 banks that could suffer large outflows of deposits if rates jump. Wells Fargo wasn’t among them.
Lately banks including JPMorgan have been trying to reduce large blocks of deposits from corporations or financial institutions. Not Wells Fargo, where time deposits larger than $100,000 -- such as certificates of deposit -- account for only 10 percent of the total compared with 26 percent at JPMorgan and 20 percent at Citigroup.
“Most of our deposits are part of long-term relationships for us,” Stumpf said last week in an interview in New York. “We’re in a category of one when you consider the size and how different we are from what you’d consider as large money-center banks. Our DNA is much more regional, community bank in structure.”
Vicious Cycle
While Bank of America’s core deposits are also about 90 percent of the total, it funds more operations in the bond market than Wells Fargo. That brings the Charlotte, North Carolina-based lender’s ratio of core deposits to total liabilities down to 54 percent.
History has shown that institutions doing traditional banking are more successful, according to Thomas Hoenig, vice chairman of the FDIC. While the sheer size of a bank can increase the risk it poses to an economy, the potential dangers are multiplied by complexity and activities such as trading that fall outside the traditional model, he said.
“Wholesale funding secured by assets on the bank’s balance sheet creates a vicious cycle during a financial downturn as creditors grab the collateral and sell in panic, bringing prices down even further,” said Hoenig, who has been an advocate for higher capital requirements for the biggest banks. “That’s where the vulnerability for the banking system comes from.”
Warren Buffett, whose Berkshire Hathaway Inc. is Wells Fargo’s biggest shareholder, has expressed a similar view.
“The biggest single asset that Wells has is its deposit base,” Buffett said in a television interview aired last year. “They have a consumer-based, small-business-type bank that’s just huge.”
http://www.bloomberg.com/news/2014-...il-deposits-to-become-most-valuable-bank.html
Similar threads
