Keynesians, Please Exit Stage Left

Back in February, amidst the neo-Keynesian rage to spend our way out of recession, I argued that stimulus wouldn’t stimulate.  Pointing to the graph of the 10-year Treasury vs. 30-year mortgage rates I said that the government wouldn’t be able to flood the market with Treasurys without driving up interest rates.  Higher rates on government […]

BankUnited’s Sordid History

No Option on Financial Pain Florida’s BankUnited Faces Tough Choices in an Even Tougher Mortgage Market September was a bad month for BankUnited Financial, Florida’s largest regional bank (Nasdaq: BKUNA). The company’s regulatory capital status was downgraded, it fired 12 percent of its employees, and it received a cease and desist order from the Office […]

Geithner Admits: Easy money did us in

In an interview with Charlie Rose on Tuesday, Tim Geithner admitted the bubble was caused by Greenspan’s easy money policy.  Unfortunately, Charlie didn’t ask the obvious follow-up: “why will this time be different?  Why will Bernanke’s easy money policy lead to different results?”  Here was the crucial exchange: Rose:  “Looking back, what are the mistakes […]

Stress Test Bargaining: Dealing with the Devil?

WSJ reports that after “intense bargaining,” the Fed “significantly scaled back” its estimates for banks’ capital shortfalls.  Indicative of this was the unexpected change in its methodology for measuring bank capital.  Instead of tangible common equity, the Fed used a less stringent measure it calls “Tier 1 Common Capital,” heretofore (virtually) unknown. As seen in […]

Chrysler to File Bankruptcy, Obama Unhappy with “Money People”

In an odd twist, enough of Chrysler’s creditors voted against the administration’s reorganization & recapitalization plan to force the automaker into bankruptcy.  The filing is expected today.  Credit default swaps may be playing a supporting role in this drama, as I’ll get to at the bottom… Yesterday, the reorganization plan seemed close to completion.  Four […]

Stress Test: Tangible Common Equity, 3/31/09

Ahead of official announcements regarding stress test results, OA thought we’d publish our latest update for banks’ tangible common equity, a metric that is likely to figure prominently. A recent Reuters report said “U.S. regulators want the top 19 banks being stress-tested to have at least 3% [TCE].”  In other words, regulators want leverage ratios […]