Why Central Bankers Struggle to Stimulate Growth

In order to stimulate lending and get the economy going, the European Central Bank (ECB) recently said it could take more drastic action. Among the tools considered are negative interest rates. Meaning, the ECB would charge banks on reserves held at the central bank.

It’s a strange stimulus plan, built on a faulty assumption about how banks lend. And it won’t work.

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U.S. Bank Profits: A Beautiful Piece of Fiction

Global stock prices have rallied significantly since 2009. Financial stocks have increased albeit off a low base, with US banks up by over 200%.

But improvements in the fortune of banks may be misleading. To paraphrase George Bernard Shaw, financial markets have substituted the ‘obsolete fictitious for the contemporary real’.

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The BCBS Influences Credit Markets for Years to Come

Over the weekend exactly two years ago, a few smartly dressed gentlemen gathered in an otherwise unremarkable boardroom in New York’s Wall Street district. They spoke in hushed tones. They sipped coffee from white porcelain teacups.

While their manner was indistinguishable from any other meeting held before or after in that oak-paneled office, by the end of the day, they’d arranged to rescue Merrill Lynch, allowed Lehman Bros. – one of Wall Street’s most venerable firms – to declare bankruptcy and kicked off a series of events that would lead to the $180 billion taxpayer bailout of insurance megalith AIG.

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More on this topic (What's this?)
As Go the Credit Markets, So Go Stocks!
EuroMoney: There is No Credit Bubble in Brazil
Read more on 2007 Credit Crunch at Wikinvest

Sell Bank Stocks: The “Truth” Behind Non-Performing Loans

Whoever said, “Opposites attract,” didn’t know what they were talking about…or maybe they did know and just didn’t provide all the details.

The world around us provides ample evidence that opposites do, in fact, attract…but not always toward a favorable outcome. Sometimes opposites attract like gravity attracts a crippled airliner…or like a field mouse attracts a rattlesnake…or a bare foot attracts a rusty nail…or a Rusty Nail attracts an alcoholic…or accounting chicanery attracts a gullible investor.

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Crisis-Related Bank Failures Racing Toward 1,000

A new projection is now showing that roughly 1,000 US banks may fail because of the financial crisis that uncovered the toxic assets hidden on bank balance sheets.

According to Reuters:

“James Dunne, senior managing principal of Sandler O’Neill, said 300 to 400 banks could be seized this year, especially as institutions start to deal with deteriorating commercial real estate loans.

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FDIC’s Problem Banks List: Where Will It End?

The FDIC is even more broke than it was three months ago. The fund the FDIC uses to “insure” your bank account went $20.9 billion in the red during the fourth quarter of 2009. That’s more than twice the deficit reported when the fund first entered negative territory in the previous quarter.

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