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Tests Are Over But American Banks Are Still Stressed

Reenita Malhotra — Sat, 09 May 2009 08:35:12 +0000

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Economist, James Galbraith, on bank stress tests

The results of bank stress tests released this week, do not bear good news. The bottom line is that at total of $75 billion needs to be raised from 10 major banks to prop them up for losses that could come from a deepening recession.

Here is a Top 4 summary of who needs what in the next six months:

Bank of America (BAC) will have to raise $33.9 billion;
Wells Fargo (WFC), $13.7 billion;
GMAC (GJM), $11.5 billion; and
Citigroup (C), $5.5 billion

The question people are asking is whether this is the worst news yet? Or whether it is news that the worst is over?

There is no easy answer. The truth is that if unemployment continues to rise, housing prices continue to fall and the economy continues to shrink, then much more money might be needed as problem bank loans could be on the rise.

Citibank - Can It Avert Nationalization?

Reenita Malhotra — Mon, 23 Feb 2009 13:11:54 +0000

As ‘nationalization‘ appears to be the U.S. government’s answer to saving the banking industry, the banks themselves are doing all that they can to boost shareholder confidence.

The latest news from Citibank is that they have approached the US government to agree on a new capital injection that would increase their stake in the troubled bank to about 40 per cent but prevent an outright nationalization.

According to this morning’s FT the U.S. government has a strong preference for supporting banks in private markets wherever possible because of the potential international disruption that could ensue if a large global bank fails. But Treasury did not rule out nationalization in all circumstances. The situation is obviously unlike that of Lehman Brothers which the authorities were quite willing to let falter despite international implications.

The move would allow Citigroup to write off some of its existing debt and raise the amount of common stock. While this could translate to happier investors on one hand (because of a larger portion of common stock requirement when details of the new stress test are announced this week), it would also dilute existing Citigroup stockholders significantly.

Credit Card Companies Find More Ways to Squeeze Cash Out Of Their Customers

Reenita Malhotra — Tue, 17 Feb 2009 15:56:45 +0000

The world of credit might not be dead just yet but it has certainly become less appealing.

Credit card companies like Citibank, Bank of America Corp., Wells Fargo & Co. and American Express Co. have recently sent letters to their customers, notifying them that interest rates are going up, in some cases to 30% if a single payment is missed. (LA Times).

It’s one way for banks to try and deal with their insolvency issues given the current economic conditions.

The recession might be a great time to redesign your purchasing habits and buy only what you can with cold hard cash. Old school discipline tells you that if you don’t have the cash in the bank, that you don’t have the money to spend. It is perhaps a difficult notion to accept given a culture that swears by credit. But looking at it positively, changing your behavior now might mean that when paychecks fatten up again post the recession, you might just find that you have developed a propensity to save your new earnings rather than to spend them!

Image Credit: www.thetaoofmakingmoney.com

Today: National Day of Action Against Coal-Funding Banks

Alex Felsinger — Sat, 15 Nov 2008 07:20:26 +0000

Rainforest Action Network has declared yesterday and today, November 15th, as national days of protest against Citibank and Bank of America for their consistent support of the coal industry and its impact on global warming.