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Just One Day Left to Save the Euro…

On December 8, 2011, in Debt, Europe, by Tim

With just one day left to “save the euro” (as policymakers put it early last week), it appears that Lucy is about the pull the ball out from under Charlie Brown’s swinging foot one last time and, perhaps after this big miss, Charlie will wind up flat on his back and stay there.

Hopes were never very high for officials to accomplish much at tomorrow’s European Union summit (a meeting dubbed the most important gathering of this group in two years), but markets were instead placing their faith in the ECB (European Central Bank) to finally taking some sort of action to bolster credit markets.

But, after ECB President Mario Draghi spoke earlier today following the announcement that the bank had lowered short-term interest rates (a move that was widely expected) and offered banks long-term loans (a move that won’t make any difference over the near-term), markets appear to be quickly coming to the conclusion that Europe just doesn’t seem to care that they’re about to enter the abyss.

Word earlier today that the International Monetary Fund was riding to the rescue had raised the hopes of many and Bloomberg reports that European central banks are considering sending $200 billion to this group, which they’ll presumably “leverage up” somehow to a much higher amount before buying sovereign debt of spendthrift European governments.

We’ll see how that works out – it would appear to be the only hope at this point.

They’re starting to call tomorrow’s meeting the “No Second Chance Summit” after French President Nicolas Sarkozy warned that policymakers had better get it right this time, despite the fact that they’ve failed to get it right regularly over the last two years.

Something tells me that Lucy’s going to do what she always does…

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When Guarantees are Not Loans

On December 7, 2011, in Banks, by Tim

Since Bloomberg’s  Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress article appeared last week, apparently a lot of people (including The Daily Show’s Jon Stewart) have been going around saying that the nearly $8 trillion in loans and guarantees made by the Fed were actually loans, when anyone who’s seen a chart like the one below would know immediately that this was not the case – loans at the crisis peak were under $2 trillion.

Not that a little under $2 trillion in newly printed money to bail out the big banks is all that much better than just under $8 trillion, but, it’s important to get the facts straight. As you might conclude yourself by perusing the many items in the previous links post, the Fed did a good job by not naming Bloomberg in their letter to Congress and addressing criticism of Fed emergency lending in general so that they could lump Bloomberg’s report (which, was not in error) along with the rest of them, many of which were in error.

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Politicians and Lobbyists: “Ruh Roh”

On November 18, 2011, in Economy, Our Culture, by Tim

Well, it seems that the Tea Party and Occupy Wall Street movement might just have discovered some common ground in  Memphis, Tennessee, at least according to this Associated Press report from a few hours ago.

Occupy Memphis member Mallory Pope had just finished telling a group of about 75 tea party followers Thursday night that politicians should not allow themselves to be influenced by lobbyists and unions when she received an unexpected invitation.

“It sounds to me that y’all ought to be joining us,” said Jerry Rains, a 64-year-old computer programmer and tea party member. “You have a lot of the same goals we have, which is to take our country back.”

Pope and fellow Occupy Memphis protester Tristan Tran had a lively, sometimes strained and confrontational, but mostly civil discussion with members of the Mid-South Tea Party at a municipal meeting hall outside Memphis.

The factions saw eye-to-eye on some issues and clashed on others. And, while the young speakers didn’t change many minds, they did earn praise from the tea party members for their passion, honesty and courage.

The 21-year-old University of Memphis students had been invited by the tea party group to talk about the goals of the Occupy movement. The invitation was extended after a discussion between members of both groups on the tea party’s website, meeting organizer Jim Tomasik said.

At least they’re talking and, given the dim prospects for any substantive improvement in the U.S. economy, they’re likely to talk more and more in the years ahead, hopefully culminating in a third political party. No, that’s probably just wishful thinking.

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Thanks, Bank of America!

On November 16, 2011, in Banks, by Tim

From Funny or Die comes this look at how Bank of America has responded to recent customer complaints about raising fees. Aside from things like cutting brake lines and killing puppies, it’s probably not that far from the mark.


I don’t know about you, but, I’m almost starting to feel sorry for the big banks given their recent troubles and how everyone pokes fun at them now. But, the feeling quickly passes.

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Occupy Wall Street Regroups

On November 15, 2011, in Banks, Our Culture, by Tim

The local merchants (particularly those with restrooms) probably breathed a collective sigh of relief after a judge ruled that protesters would not be allowed to return to Zuccotti Park after a forced clearance in the wee hours this morning was followed by a scrub down.

What next? This Daily News report offers some thoughts about what the group might do next, noting that, in recent days, the protest site had only a small minority of individuals who identified with the original movement.

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The Future of Big Banking

On November 15, 2011, in Banks, by Tim

I’ve always wondered how big banks were going to make big money in the post-2008 era of finance where a consumer protection agency has made it more difficult to nickle and dime the masses. In this story at Bloomberg, Bank of America CEO Brian Moynihan explains.

Bank of America Corp. (BAC) Chief Executive Officer Brian T. Moynihan said that slow economic growth and new regulations mean that the “new normal” in retail banking won’t be as profitable as before.

The second-biggest U.S. lender by deposits is cutting costs and seeking to sell more services to existing clients to adjust, Moynihan said today at a conference in New York. The Charlotte, North Carolina-based company loses money doing business with many households at its consumer-banking operation, he said.

“It’s going to be a smaller platform, it won’t be quite the same as it was at Bank of America and around the industry,” Moynihan, 52, said at the conference. “We have 42 million retail customers, many of those don’t contribute or overcome their cost-to-serve.”
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The CEO’s strategy is to broaden relationships with its 8 million so-called preferred clients, who have about three- quarters of the unit’s deposits and are 1.5 times as profitable as the retail group.

Of course, extracting bigger fees from presumably smarter “preferred clients” in order to make up for all the little fees that were routinely collected from the millions and millions of customers who probably never balanced their checking account might be a tall order.

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