Comments on: Here We Go Again . . .

By: Fed/Treasury bailout for Bank of America « Mostly Economics

Fed/Treasury bailout for Bank of America « Mostly Economics — Fri, 16 Jan 2009 06:15:07 +0000

[...] bailout for Bank of America By Amol Agrawal Baseline Scenario pointed that BoA is in dire straits and would get Fed/Treasury support after Obama swearing on 20 Jan [...]

By: efw

efw — Fri, 16 Jan 2009 02:53:27 +0000

There was an news story on Bloomberg today that JPMorgan is planning to emulate Citi by leasing a supertanker, as they both continue, via subsidiaries, to speculate on oil prices. Regulators must breakup these super “banks” that continue in their ways knowing that they are to big to fail.
To get any aid BoA should be requires to eliminate their dividend. Actually, these banks should be nationalized and their management fired and all opportunites looked at that could lead to jail time.

By: Dan

Dan — Thu, 15 Jan 2009 15:42:22 +0000

This is why I’m changing all of my money over to Yuan and using to stuff my matress.

By: self-evident » What we need is a (Merrill) lynching

self-evident » What we need is a (Merrill) lynching — Thu, 15 Jan 2009 05:36:27 +0000

[...] Here We Go Again… (Baseline Scenario) [...]

By: Tom K

Tom K — Thu, 15 Jan 2009 05:12:35 +0000

We can complain all we want about the terms of these deals, but I think there is a great deal of pressure being placed on Citi, for one, to use as little of the $306 billion federal guarantee as possible.

Pandit stated earlier this year that Smith Barney was definitely not on the auction block, but lo and behold, Morgan Stanley now owns 51% and probably 100% in the next few years. Reports are that Citi will eventually be trimmed by one third of its size. Considering the size of Citi, that is a lot of trimming.

I’ve seen headlines stating that Citi now has a new CEO, the federal government. I think when companies like Citi, AIG, and BofA accept second bailout lines, they are effectively being nationalized. They are being watched very closely by federal regulators and the Treasury and are taking orders from these sources.

I believe it was also a goal of the original capital injections that supposedly healthy banks would buy up banks which were in dire straits. This happened with PNC Financial buying National City Corporation, BofA buying Merrill/Lynch and Countrywide, JP Morgan Chase taking over WAMU, and Wells Fargo buying Wachovia. Apparently the hope was that these supposedly healthy banks would be able to handle the lousy balance sheets of the companies they took on. The depth of the recession and its corrosive effects were probably not foreseen when these deals were made.

It would not surprise me after all is said and done that these large financial institutions now being formed with government money will be forced to break apart when financial health is restored. That is likely the quid pro quo. Nobody wants “too big to fail” banks anymore.

As for the release of the second round of TARP, it is a done deal. Congress will approve it this week or next. If it does not, there is a veto looming.

By: James Kwak

James Kwak — Thu, 15 Jan 2009 04:30:44 +0000

You may very well be right – I was working from memory, and this would be a hard thing to look up, since it was all off the record. But I think it’s definitely true that at that time, of the big three, Bank of America and JPMorgan were considered the healthier ones, and Citi was already considered the sicker one.

By: MLee

MLee — Thu, 15 Jan 2009 04:22:21 +0000

Wasn’t B of A supposed to be a healthy bank? Isn’t Ken Lewis (CEO) the person who told Henry Paulson he didn’t need the first round of TARP money, but he would take it to show solidarity and for the public good?

-I thought it was Jamie Dimon who said such thing during the meeting. But then, I wouldn’t be surprised if all CEOs present in the meeting tell us that they said the same thing during the meeting.