Tuesday, April 28, 2009

U.S. tells Citi, Bank of America to boost capital - report - Apr. 28, 2009

From the NY Times:
"...the new worry is that this latest effort to instill confidence may undermine it instead.When the stress test was first conceived, it was never clear whether the results would be made public. But within days of the government’s announcing the test, lawyers inside the banks started to point out that, ahem, this may be material information, which means by law they have to disclose it to shareholders."

So I guess it is a good thing FERPA does not hold for banks! Which brings us to this piece from CNN:

U.S. tells Citi, Bank of America to boost capital - report - Apr. 28, 2009:
"Government regulators have told Bank of America Corp. and Citigroup Inc. that the banks need to increase their capital reserves based on preliminary 'stress test' results, according to a report published Tuesday.

The capital shortfall at Bank of America could amount to billions of dollars, the Wall Street Journal said, citing people familiar with the situation."
That said there already seem to be some questions and concerns about the test itself.

Let's hope they really stress-tested things.

TARP Cop Sees Unstressful Bank Tests - NYTimes.com:
"The adverse scenario used to test the health of the 19 largest U.S. banks is 'disturbingly close' to current economic conditions, sparking a concern that there might need to be a second 'stress test,' a U.S. financial bailout fund watchdog said on Monday.
Given that things seem to rebounding the "disturbingly close" is troubling even if based purely on speculations since in the same article,
"Elizabeth Warren, who chairs the Congressional Oversight Panel for the Troubled Asset Relief Program, said the test may in actuality be rigorous, but the government's recent document describing the test's methodology lacked critical details.
As a teaching point: when running simulations, scenario analysis, or sensitivity analysis, always be sure to test the limits. Remember, "Bad" is "Bad", not just "not good".

1 comment:

Anonymous said...

Ken Lewis may have committed blunders, but the real crooks are
sitting in Merrill Lynch. They don't work at all, they fly all over
the world, still spend lavishly while we suffer in the economic
recession. They spend 90% of their work day politicking internally to
protect their turfs and create their own groups. These arethe true
viruses of the BoFA-ML system.

We need to clean up Merrill Lynch where greed and power has been
perversed. We need to fire the following people at our shareholder

Thomas Montag, the head of global sales and trading at Merrill, made
$39.4m in 2008.

David Sobotka, now in charge of global proprietary trading, was paid
about $13m in 2008

David Gu, head of Merrill's global-rates division, made $18.7m in
2008, according to the figures.

Merrill's co-head of commodities, David Goodman, was paid $16.5m last
year, the figures show.

Fares Noujaim, who joined Merrill in 2008 and now heads Bank of
America's Middle East and Africa operations, made more than $15m in
2008, the figures show.

Peter Kraus, had an employment contract valued at $29.4m, the figures

Andrea Orcel, the firm's top investment banker. Although Merrill's
net loss ballooned to $27.6bn (€22bn) last year, Orcel, 45 years
old, was paid $33.8m in cash and stock.

None of these guys have made money forthe firm, but only lost

They should be fired at our shareholder meet and under the Patriot
Act put behind bars.