Bank Stress Test Proof Positive

Some folks will look at a glass and say that it is half full and others will look at it as half empty. In the case of the banking industry you need to look at the glass and see that certain people will not be sipping from the glass anymore.

If I were one to have disposable income, and I do not, if I did, then I would be buying stocks in these troubled banks as fast and furious and as much as I could. Holding said stocks for five or more years and then taking a profit as investors will do. Over at MSNBC they have this little piece on the survivability of and stress test our largest and not so large banks in America went under the knife by the Federal Reserve…

Among the 10 banks that need to raise more capital, Bank of America Corp. needs by far the most — $33.9 billion. Wells Fargo & Co. needs $13.7 billion, GMAC LLC $11.5 billion, Citigroup Inc. $5.5 billion and Morgan Stanley $1.8 billion.

The five other firms found to need more of a capital cushion are all regional banks — Regions Financial Corp. of Birmingham, Ala.; SunTrust Banks Inc. of Atlanta; KeyCorp of Cleveland; Fifth Third Bancorp of Cincinnati; and PNC Financial Services Group Inc. of Pittsburgh.

The banks will have until June 8 to develop a plan and have it approved by their regulators. If they can’t raise the money on their own, the government said it’s prepared to dip further into its bailout fund.

The stress tests are a big part of the Obama administration’s plan to fortify the financial system. As home prices fell and foreclosures increased, banks took huge hits on mortgages and mortgage-related securities they were holding. - MSNBC

In my honest opinion the banking crisis is over and the only way all of this financial mess will be cleared up is by the banks themselves telling the American people that “We will be Okay!” When they tell the government and the rest of the financial industry that they no longer need assistance is when the crisis is officially over. It has to come from the CEO’s lips of each bank rather than a statement from the White House in a hurried press room briefing.

Citigroup will be fine, Bank of America will be fine. The true test isn’t in a hypothetical situation presented to the balance sheets of these banks by the Federal Reserve but by the actions of the people running the banks. The government has their backs respectively to ensure our economy is sound, now it is up to the big boys and girls running the big banks to scream at the top of their lungs that they will survive this crisis. Act accordingly to make sure that the institution they represent is around for another couple of decades if not more. Only then will the investment dollars start buying up cheap banking industry stocks that in less than a few years will make the oil industry profits look disgusting for investors today.

Now is the time to get back to the basics of what a bank should be doing, should have been doing, and should have not been doing. And for investors to make some long term stock picks in the banking industry that will not be allowed to fail.

Papamoka

Fannie and Freddie Paying Bonuses Too

Everyone pull your pants pockets inside out to show Fannie Mae and Freddie Mac that all we have left is pocket lint. Just when the bon fires over AIG are starting to roar, the good folks over at Fannie and Freddie are passing out “Retention” bonuses. Yahoo News and the AP have an interesting piece on it…

This makes no sense to me but you know how them pesky bankers are, they charge you a hefty overdraft fee when you already didn’t have enough money to have the check clear in the first place.

The good folks in the government need to clarify what the term “Retention Bonus” really means. Yesterday on the news they had one congressman drilling AIG CEO Liddy on this practice and he asked one very pertinent question that left Liddy sputtering like Porky Pig. Paraphrasing - “You mean to tell me that with all the layoffs on Wall Street, you can not find anyone qualified to do the same jobs as these people?” Good point Congressman, very good point. As for having to pay “Retention Bonuses” to the very people responsible for the business collapse is frankly idiotic and unethical. I’m pretty sure that anyone is replaceable in any job in America. President Obama or Timmy Geithner could walk down to Wall Street today and put up a help wanted sign for AIG, Fannie, and Freddie and I’m pretty sure a long line of applicants would begin to build. Even without the promise of bonuses!

A few years back I worked for a privately owned manufacturing company that for almost thirty years in a row paid a profit sharing bonus of fifteen percent of your annual gross pay. As long as the company was profitable, employees worked hard, watched out for waste and cost savings then the payments would continue. Long story short, the owner eventually retired and sold the company to a conglomerate where the stock price and quarterly profit were the live by standard. The new owners ran the company on stocks and leveraged the company down the drain. Profit sharing disappeared for the most part with all of the additional executive salaries that were piled on top of the companies bottom line. Ten years after they bought it, the doors to an 800,000 square foot plant were closed and what was once lifetime jobs for some four hundred people were gone.

My point to my little story is this, it wasn’t the people running the machines in the plant that caused its failure, it wasn’t the people in the offices answering the phones or buying the raw materials that caused the failure, it wasn’t even the plant manager or even the general managers fault that the plant failed. It was pure greed from the executives and junior executives that didn’t even have an office at the company that brought about its demise. They had no sense of pride or ownership in the company because all the company was to them was a number on the quarterly profit statement.

Papamoka

The Last Bush Rape of America

Make no doubt about it, George Bush and the policies he has followed have set the American economy up to be raped. He put a tube top on Wall Street, added some stiletto heals to the regulations and set America up to be raped! President Bush was not alone in this set up, he had help from the king of deregulation in the Senate from John McCain. McCain fought hard to deregulate the banking industry and he won. And because he won, $700 Billion dollars is about to head to Wall Street to save all the CEO’s and top executives with golden parachutes as they pack up and leave the mess on your doorstep. The rape is over, the baby is here now and orphaned by the people that created it and left for you to raise. The rape still happened!

Over at Brave New Films they have this speech from Obama on the blank check bailout…

Video Link



American’s need to wake up and face a wrong for what it is. If your child is abused by a stranger do you look the other way because the stranger was from your political party? Start looking at America as your child and you would be surprised how fast people start caring about the blatant abuse in our government. John McCain helped to create this beast and now that beast has plopped a huge bill on your door for more money out of your pockets.

America used to have a huge Conservative movement but they are silent during this crisis! Why? The truth is that the people that were supposed to be their champions just sold them all out. While the President and McCain were playing with our nations banking industry, the executives of those freed institutions ran wild and free till the money ran out. Now it is going to cost every man, woman and child in America $2300 bucks for the poor judgment that Senator McCain and President Bush showed over the past eight years. Having five children in my family, the wife and I own $16,100 dollars of the Bush/McCain error in judgment.

What Wall Street firm should I make the check out too. According to the terms of the Paulson bailout I should just sign the check and mail it to the U.S. Treasury. They’ll fill in the amount and the rest of the details later. By the way, the plan Paulson has proposed has a little feature that makes him, his entire department omnipotent and free from any oversight or court of law on how they spend the $700 Billion dollars. Are you okay with that?

Papamoka