Posted on 02/17/2009 7:52:17 AM PST by TigerLikesRooster
Bank Leverage Stats, 12/31/08
February 17, 2009 – 12:45 am
The table below is an update from this post published a couple months ago (the prior post also explains this leverage calculation in detail…and why it matters). Click on the image to enlarge.
As you can see, Morgan Stanley and Goldman have cut their leverage significantly. Citi is in worse shape. BofA and Chase are treading water.
GE is the scary one. I mean, is Timmy Geithner going to stress test them too? I’m pulling balance sheet data from their quarterly earnings release, which doesn’t offer any detail on shareholders’ equity. I’m assuming that the published equity figure of $104.7 billion includes the $3 billion preferred investment that Warren Buffett announced on October 1st. I’m deducting that amount from tangible common equity in order to get GE’s leverage ratio. If I have that incorrect, hopefully a better-informed reader will let me know.
December 30th’s was the first balance sheet the banks have published since they received TARP capital. Common shareholders are still in a first-loss position relative to the government, however, because TARP investments were in the form of preferred shares. So I have backed these out in order to arrive at the tangible leverage ratios above.
One BIG caveat with this calculation is that these companies carry “other assets” on the balance sheet, some of which might be intangible in nature. Also, each has significant risk exposure via off-balance sheet entities. The point is, even though these leverage calculations seem high, they actually understate the risks facing common shareholders…
Ping!
Looks like Sachs and Stanley are the only ones to have repositioned with a brain.
I just saved a bunch of money on my con-game by switching to Geithner.
Or / and lot’s of good inside goobermint info to time the pass?
FROM JAMES SINCLAIR WEBSITE-—>>>
Dear CIGAs,
Alf’s target on gold will be reached when the markets are stunned to find out that there is no safe haven in the US dollar.
Prior to that, gold in under the magnet may reach $1224 on the simple panic now building in markets as participants recognize there is NO practical solution to the enormous disruption that OTC derivatives manufacturers, distributors and Hedgies have caused.
The BIS (Bank for International Settlement) publicly altered the manner by which they determine the total nominal value of derivatives outstanding. This has actually backfired badly now that it is assumed every entity is lying. The BIS was all that was left for somewhat legitimate economic statistics.
You probably noticed the amount of outstanding OTC derivative nominal value dropped 80% from the BIS figure of one quadrillion one thousand and one hundred forty four trillion dollars as the BIS moved to the computer modeling of value to maturity, another foolishly glib cartoon.
Well, I mean, the graph that comes with it is pretty bracing. But on the other hand, the reality is proving to be even more bracing!
If there's one thing the business world has elevated to a 12th degree art in the past 20 years, it's the maximization of leverage. And lo....the loss event has come.
Geronimooooooooooooooooooooooooooooooooooo!
Paraphrase: Everybody has untold amount of skeletons in his closet. However, everybody is denying it. Still everybody is convinced that everybody else also has truck-load of skeletons in his closet and denying it with straight face.
No amount of bailout money would fix this mistrust. The financial world is as opaque as ever. Probably the most opaque in 100 years.
So nobody trusts nobody else’s financial health
This latest storm is in Eastern Europe. Austrian banks lent out billions there and so did German
I should stop blaming Wall St
It was a worldwide tulip mania
Citi is run by a bunch of idiots. Pandit is in way over his head.
The syphilis entry in Wikipedia is interesting-—>>>
http://en.wikipedia.org/wiki/Syphilis#History
Yes Lenin died of syphilis according to some. Idi Amin had it too
Our banks are insolvant. We might as well acknowledge that and get the restructuring over with. The sooner the better.
Anything less is only going to delay the inevitable, and our banking system isn't going to function properly until it is restructured.
But that means shareholders need to get wiped out, and bondholders and other non-depositor creditors are going to take a big hit. So be it. The markets need to learn that non-insured financial institution debt is not risk-free.
One of the causes of this crisis is that too many investors got that impression.
Bottom line:
Non-depositor bank creditors must take a haircut, even be wiped out if necessary! Any bailout is a wealth transfer from taxpayers to bank creditors.
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