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Posted on 01/20/2009 9:45:36 AM PST by rabscuttle385
Large financial institutions are expected to need more capital later this year. But after TARP money from the government runs out, where will the cash come from?
BY DAVID ELLIS
NEW YORK (CNNMoney.com) — Can anything satisfy banks' appetite for capital?
Judging by the way things are going in the sector lately, the answer seems to be a resounding 'No.'
Last week, the government allocated an additional $20 billion for the seemingly steady Bank of America (NYSE:BAC) to help the company close its acquisition of Merrill Lynch. BofA has now received $45 billion in government funds as part of the government Troubled Asset Relief Program, or TARP.
And in late November, the government effectively had to double down on its bet in Citigroup (NYSE:C) by investing an additional $25 billion in the company to stave off its collapse and prevent broader fallout across the financial system. Citi has also received $45 billion in TARP capital.
So far, $192 billion in government money has been invested in more than 200 financial institutions. But that may not be enough to fix the many problems in the banking sector.
(Excerpt) Read more at money.cnn.com ...
Many large banks are continuing to face massive writedowns tied to the mortgage-related assets on their books that have tumbled in value alongside the broader U.S. housing market.
In other words, the U.S. will now pay for all the banks' losses due to extremely-leveraged derivative securities!
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The UK is starting to realize that there’s not enough money available to cover the bank’s bad debts.
Many of our banks are already bankrupt. It’s just being papered over as they are counting on more government bailouts.
I’m fully expecting bank runs and government imposed bank holidays in 2009.
So essentially we have a “reset” on the entire bailout question. As long as Obama was able to coast along with Bush having the big beggar’s moment (October Bailout Speech), he and the dems could exist in a perceived world where the Bailout was Bush’s, or at least, everyone.
Now it may shift to a new flashpoint a few months down the road, where what is left of the conservative base will have to craft their response and poltical ground.
If done correctly, this could put the spotlight back where it belongs, on congress and by association, Obama.
Of course, I am sure we are in for another round of “WTH is McCain doing NOW” I wish he’d just retire so we can at least have a new script. This one is getting old.
Believe I said that about a year ago, had some wall street clown tell me I was stupid and did not even know what a derivative was. Wonder were he is polishing shoes today.
There was about 550 trillion in derivatives.
Let’s see.... we give massive amounts of money to banks with massive losses. We don’t require a change in management, nor in accounting practices, nor in business practices, nor the forced sale of assets.
And no one other than congress is surprised that the same managers at the same companies with the same worthless derivatives manages to lose more money.
Something big must have happened today. Bank stocks are down MASSIVELY.
DOW close to 8,000.
There's not enough money in the world to bail out the reckless derivative traders. It's time to cut losses and quit blaming the duped foreclosed homeowners.
Banks can go under. Derivative holders can do a madoff routine - lose it all...
This author takes the fact that Citi and Bank of America went to TARP for a second round and assumes other big banks will need to follow, but fails to give any indication which “Large financial institutions are expected to need more capital later this year.” or cite any sources for that claim.
Despite what gets reported in the news or on CNN, there are a number of large banks that were profitable last year and are expected to be profitable this year. Among them: JP Morgan, Wells Fargo, PNC, BBT, Goldman Sachs, Morgan Stanley and US Bancorp.
It’s entirely possible one or more of these institutions will run into more trouble and need to raise capital or go to TARP hat in hand. But, the author fails to present his case for which one and what will drive the losses that isn’t already in analysts’ estimates.
IMHO, this author has made a ‘sky is falling’ claim (which very well happen) and failed to provide information, assumptions and facts that support his prediction. His argument boils down to “C and BAC needed TARP money twice; all the banks will need to go that route.”
CNN should have labeled this opinion or an editorial rather than part of a Special Report.
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