Not a passing grade yet.
That's Andy Winton's view of the plan Treasury Secretary Henry Paulson has been pushing to get the credit markets functioning well again — at a cost to taxpayers of up to $700 billion. Winton chairs the Finance Department at the University of Minnesota's Carlson School of Management.
Winton, says the plan needs more congressional oversight. He also says taxpayers should be given a stake in the financial institutions that will be rescued by the plan. Such a provision would reflect the strategies legendary investor Warren Buffett employs in taking positions in companies.
Source
Wednesday, November 26, 2008
Wednesday, November 19, 2008
The end of an era – A year that changed Wall Street forever
2008 will go down as the year that Wall Street changed forever. Bear Stearns, Merrill Lynch, and Lehman Brothers have disappeared from the financial landscape as standalone entities. The U.S. government now owns Fannie Mae and Freddie Mac, and recently added American International Group to its burgeoning portfolio of financial basket cases.
The remaining large broker dealers Goldman Sachs and Morgan Stanley have applied for and received approval to become bank holding companies. This means they will now become commercial banks. In other words, they will be able to take in deposits and thus not be so vulnerable to the cost of borrowing in the wholesale money markets.
The credit crisis has changed the financial landscape on Wall Street forever, and these changes will continue as the surviving participants continue to maneuver (with the help of the Treasury and the Fed) to remain competitive.
Source
The remaining large broker dealers Goldman Sachs and Morgan Stanley have applied for and received approval to become bank holding companies. This means they will now become commercial banks. In other words, they will be able to take in deposits and thus not be so vulnerable to the cost of borrowing in the wholesale money markets.
The credit crisis has changed the financial landscape on Wall Street forever, and these changes will continue as the surviving participants continue to maneuver (with the help of the Treasury and the Fed) to remain competitive.
Source
Wednesday, November 12, 2008
ASF, SIFMA Oppose 'Q' Elimination
The ink is barely dry on the Financial Accounting Standards Board's proposal to eliminate the use of the qualified special purpose entity as a means of segregating assets off balance sheet, but industry critics are already appealing to Congress in an effort to avoid the measure.
FASB in April agreed as part of these rewrites to eliminate QSPEs, an accounting device that has come under much criticism over the past several years, with critics saying the practice has contributed to corporate scandals such as Enron by allowing losing or volatile positions to be obscured.
FASB Chairman Robert Herz himself has placed his full clout behind the proposed elimination of the ‘Q' as part of the board's rewrite of FAS 140 and FIN 46R, connecting QSPEs to the sub-prime mortgage crisis and stating pointedly that the vehicles into which riskier loans had been packaged were “ticking time bombs.”
Source
FASB in April agreed as part of these rewrites to eliminate QSPEs, an accounting device that has come under much criticism over the past several years, with critics saying the practice has contributed to corporate scandals such as Enron by allowing losing or volatile positions to be obscured.
FASB Chairman Robert Herz himself has placed his full clout behind the proposed elimination of the ‘Q' as part of the board's rewrite of FAS 140 and FIN 46R, connecting QSPEs to the sub-prime mortgage crisis and stating pointedly that the vehicles into which riskier loans had been packaged were “ticking time bombs.”
Source
Wednesday, November 5, 2008
Are we heading into a new Great Depression?
When the United States puts together the largest financial rescue plan since the Great Depression to bail out its investment banks, people get worried.
So it seems natural that after last week’s devastating blow to Wall Street, where the stock market plunged to the lowest it’s been in a decade, there are fears the Canadian economy might suffer too.
Some experts are saying that the world could be heading into the worst financial situation since the global market crash of 1929, and that’s leaving Ryerson students unnerved.
Source
So it seems natural that after last week’s devastating blow to Wall Street, where the stock market plunged to the lowest it’s been in a decade, there are fears the Canadian economy might suffer too.
Some experts are saying that the world could be heading into the worst financial situation since the global market crash of 1929, and that’s leaving Ryerson students unnerved.
Source
Wednesday, October 29, 2008
Never glad confident morning again?
Investment bankers are not generally lost for words. But as they surveyed the battered landscape of their industry this week, many were struggling to sum up the damage the latest financial storm has inflicted. In less than a fortnight, a business that emerged from the wreckage of the Great Depression to become the dominant force in financial markets has changed beyond recognition.
Two weekends ago, huddled inside the New York Federal Reserve headquarters in lower Manhattan, top bankers witnessed the disappearance of two of Wall Street's most famous names. Lehman Brothers, whose history stretched back 158 years, slid into bankruptcy after the US government refused to support a rescue, while the once mighty Merrill Lynch rushed into the arms of Bank of America.
The upending of the established order left many aghast. At Morgan Stanley, as its share price plummeted and the cost to insure its debt shot up, staff in the bank's US offices sneaked out of their cubicles to catch a glimpse of the news about their employer on television or newswires. Others stayed at their desks clicking the "refresh" button on news websites to find out what was happening. "We were staring into the abyss last week and it was tough not to know our fate," says one.
Source
Two weekends ago, huddled inside the New York Federal Reserve headquarters in lower Manhattan, top bankers witnessed the disappearance of two of Wall Street's most famous names. Lehman Brothers, whose history stretched back 158 years, slid into bankruptcy after the US government refused to support a rescue, while the once mighty Merrill Lynch rushed into the arms of Bank of America.
The upending of the established order left many aghast. At Morgan Stanley, as its share price plummeted and the cost to insure its debt shot up, staff in the bank's US offices sneaked out of their cubicles to catch a glimpse of the news about their employer on television or newswires. Others stayed at their desks clicking the "refresh" button on news websites to find out what was happening. "We were staring into the abyss last week and it was tough not to know our fate," says one.
Source
Wednesday, October 22, 2008
Area may lose hundreds of jobs as result of Chase-WaMu deal
JPMorgan Chase & Co.’s acquisition of the failed Washington Mutual thrift will give the combined company a clear lead as Tarrant County’s biggest bank but also threatens hundreds of jobs in overlapping operations.
Chase was already the county’s leader in deposits and branches as of last year, according to the FDIC. It also has more than 4,000 local employees, including about 1,800 at a document-processing center just south of Dallas/Fort Worth Airport and 450 at a south Arlington call center that handles consumer accounts.
"There isn’t any question there will be consolidation," said Scott Macdonald, head of the Southwest Graduate School of Banking at Southern Methodist University in Dallas. "I’d say they want good coverage in areas of growth, but you definitely don’t need to be within a few blocks of another branch."
Source
Chase was already the county’s leader in deposits and branches as of last year, according to the FDIC. It also has more than 4,000 local employees, including about 1,800 at a document-processing center just south of Dallas/Fort Worth Airport and 450 at a south Arlington call center that handles consumer accounts.
"There isn’t any question there will be consolidation," said Scott Macdonald, head of the Southwest Graduate School of Banking at Southern Methodist University in Dallas. "I’d say they want good coverage in areas of growth, but you definitely don’t need to be within a few blocks of another branch."
Source
Wednesday, October 15, 2008
State loan agency MOHELA suffers first operating loss
For the first time in its nearly 30-year history, the Missouri Higher Education Loan Authority (MOHELA) has suffered an annual operating loss.
The state-chartered student loan agency lost $2.2 million in fiscal 2008, according to a preliminary financial report Ray Bayer, MOHELA’s executive director, presented to the agency’s board Friday.
The authority is feeling the squeeze of the credit crunch and the fallout from the auction-rate securities meltdown in February.
MOHELA also transferred $233.8 million to the controversial Lewis and Clark Discovery Initiative, a fund Gov. Matt Blunt created to devote some of the money that had been slated for loans toward the construction of campus buildings instead.
The payment was part of an agreement that calls for the authority to transfer $350 million over the next six years to the state college construction program. In June, the authority had to delay payment to the fund due to concerns the payment would strain the authority's weakened financial position.
Source
The state-chartered student loan agency lost $2.2 million in fiscal 2008, according to a preliminary financial report Ray Bayer, MOHELA’s executive director, presented to the agency’s board Friday.
The authority is feeling the squeeze of the credit crunch and the fallout from the auction-rate securities meltdown in February.
MOHELA also transferred $233.8 million to the controversial Lewis and Clark Discovery Initiative, a fund Gov. Matt Blunt created to devote some of the money that had been slated for loans toward the construction of campus buildings instead.
The payment was part of an agreement that calls for the authority to transfer $350 million over the next six years to the state college construction program. In June, the authority had to delay payment to the fund due to concerns the payment would strain the authority's weakened financial position.
Source
Wednesday, October 8, 2008
New York Plans to Sue Student Loan Company
The attorney general of New York is preparing a lawsuit against a student loan company, Goal Financial, charging that the lender broke state and federal laws by luring borrowers with iPods, cash and other gifts and that it misled consumers about loan terms and benefits, said a senior official in the office.
The attorney general, Andrew M. Cuomo, has been investigating the student loan industry since early last year and has uncovered an array of troubling practices. Separate from the Goal lawsuit, the office is close to agreements with about a dozen loan companies on what marketing tactics are appropriate, according to the official, who cited the investigation and the pending lawsuit as reasons he could not be identified.
“The hope is that those settlements will set a new industry standard when it comes to how direct-to-consumer lenders are operating,” the official said. Goal is being sued because it has failed to demonstrate a willingness to change its practices, he added.
Source
The attorney general, Andrew M. Cuomo, has been investigating the student loan industry since early last year and has uncovered an array of troubling practices. Separate from the Goal lawsuit, the office is close to agreements with about a dozen loan companies on what marketing tactics are appropriate, according to the official, who cited the investigation and the pending lawsuit as reasons he could not be identified.
“The hope is that those settlements will set a new industry standard when it comes to how direct-to-consumer lenders are operating,” the official said. Goal is being sued because it has failed to demonstrate a willingness to change its practices, he added.
Source
Wednesday, October 1, 2008
Banks in state report stability
Ken Cyree had plenty to do, but couldn't peel himself from watching the mayhem on Wall Street.
Cyree, the interim dean of the University of Mississippi School of Business and holder of the Mississippi Bankers Association Chair of Banking, was surprised at the financial meltdown he was witnessing.
"I'm in shock," he said Monday morning. He wasn't the only one.
By the end of the day, the Dow had dropped more than 500 points as investors reacted negatively to the bankruptcy filing of Lehman Brothers Holdings Inc. and the forced sale of Merrill Lynch to Bank of America.
"What can you say?" he said. "Look at what's happened to the Big Five on Wall Street. You had Bear Stearns a few months back, Lehman Brothers files for bankruptcy, Merrill Lynch is bought by Bank of America, J.P. Morgan was already bought by Chase ... Goldman Sachs is the only one who hasn't been affected as much.
"The point is, you don't make great returns for free, not with the amount of risk that's involved."
Financial companies made huge bets during the housing bubble, which burst a little more than a year ago. The subprime market yielded good returns -until reality hit. Since then, falling real estate values, rising foreclosures and a tightening credit market have squeezed those financial institutions to the point where we are today: Billions of dollars lost and thousands of people without jobs and homes.
But bank customers in Mississippi need not worry about the liquidity and financial strength of their banks, Cyree said.
"In general, banks in Mississippi are in good shape," he said.
One reason is that the real estate market in the state is stable. Another reason is that banks haven't participated in the subprime debacle that has claimed other banks and other financial firms across the country.
Aubrey Patterson, chairman and CEO of Tupelo-based BancorpSouth, said larger regional banks and community banks in the area have refrained from those risky investments.
"All the problems have roots in the subprime and real estate bubble," he said. "The presumption was that people would continue to make money; it was a contagion. By contrast, BancorpSouth, for example, has assets of $13.4 billion, and we only had $300,000 in subprime debt, which essentially is none."
Regional banks and community banks don't take the big risks that larger banks take and are more regulated, Patterson added.
"There is a distinction between Wall Street and Main Street," he said.
Robin McGraw, chairman and CEO of Tupelo-based Renasant Bank also added assurance, saying, "Although no one is immune to the credit crisis and what is happening within the national financial markets, banking consumers should know that, through the FDIC, their deposits are protected up to certain amounts ... Renasant, as with all FDIC-insured banks, is regularly and thoroughly examined by state and/or federal regulators who focus on institutional performance, soundness and risk management."
Too much debt
Taking on massive debt is not an ideal situation, because it is impossible to maintain the capital structure, and that's where companies like Lehman ran into problems - liquidity.
Said Cyree, "Lehman's was overleveraged - 30, 40, 50 to 1."
In fact, Lehman had $60 billion of bad real estate. It wasn't alone, however, as global banks have written off more than $300 billion in asset value since last year, according to The Associated Press.
And that's why banks doing business in Mississippi are doing just fine.
"Larger regional banks and community banks, too, also have something that those other banks don't, and that's stable deposits," Patterson said. "The bottom line is that Mississippi banks are stable, well-regulated and our deposits are safe."
Source
Cyree, the interim dean of the University of Mississippi School of Business and holder of the Mississippi Bankers Association Chair of Banking, was surprised at the financial meltdown he was witnessing.
"I'm in shock," he said Monday morning. He wasn't the only one.
By the end of the day, the Dow had dropped more than 500 points as investors reacted negatively to the bankruptcy filing of Lehman Brothers Holdings Inc. and the forced sale of Merrill Lynch to Bank of America.
"What can you say?" he said. "Look at what's happened to the Big Five on Wall Street. You had Bear Stearns a few months back, Lehman Brothers files for bankruptcy, Merrill Lynch is bought by Bank of America, J.P. Morgan was already bought by Chase ... Goldman Sachs is the only one who hasn't been affected as much.
"The point is, you don't make great returns for free, not with the amount of risk that's involved."
Financial companies made huge bets during the housing bubble, which burst a little more than a year ago. The subprime market yielded good returns -until reality hit. Since then, falling real estate values, rising foreclosures and a tightening credit market have squeezed those financial institutions to the point where we are today: Billions of dollars lost and thousands of people without jobs and homes.
But bank customers in Mississippi need not worry about the liquidity and financial strength of their banks, Cyree said.
"In general, banks in Mississippi are in good shape," he said.
One reason is that the real estate market in the state is stable. Another reason is that banks haven't participated in the subprime debacle that has claimed other banks and other financial firms across the country.
Aubrey Patterson, chairman and CEO of Tupelo-based BancorpSouth, said larger regional banks and community banks in the area have refrained from those risky investments.
"All the problems have roots in the subprime and real estate bubble," he said. "The presumption was that people would continue to make money; it was a contagion. By contrast, BancorpSouth, for example, has assets of $13.4 billion, and we only had $300,000 in subprime debt, which essentially is none."
Regional banks and community banks don't take the big risks that larger banks take and are more regulated, Patterson added.
"There is a distinction between Wall Street and Main Street," he said.
Robin McGraw, chairman and CEO of Tupelo-based Renasant Bank also added assurance, saying, "Although no one is immune to the credit crisis and what is happening within the national financial markets, banking consumers should know that, through the FDIC, their deposits are protected up to certain amounts ... Renasant, as with all FDIC-insured banks, is regularly and thoroughly examined by state and/or federal regulators who focus on institutional performance, soundness and risk management."
Too much debt
Taking on massive debt is not an ideal situation, because it is impossible to maintain the capital structure, and that's where companies like Lehman ran into problems - liquidity.
Said Cyree, "Lehman's was overleveraged - 30, 40, 50 to 1."
In fact, Lehman had $60 billion of bad real estate. It wasn't alone, however, as global banks have written off more than $300 billion in asset value since last year, according to The Associated Press.
And that's why banks doing business in Mississippi are doing just fine.
"Larger regional banks and community banks, too, also have something that those other banks don't, and that's stable deposits," Patterson said. "The bottom line is that Mississippi banks are stable, well-regulated and our deposits are safe."
Source
Thursday, September 25, 2008
Board member eyes charter school expansion
An accusation lobbed at Arthur Ravenel during his school board run in 2006 was that he planned on selling the "Taj Mahal," a nickname for the district's three-story headquarters on Calhoun Street. It turns out that he's not all that concerned about selling the district's property; in fact Ravenel would apparently prefer to give away half-used or unused district buildings to charter school programs straining for space.
When the district's budget came up short this year, Superintendent Nancy McGinley said the district would sell excess property as a one-time fix, while taking a broad look at school closings and consolidations to provide more efficiency and to put a few more properties on the market. But this effort toward frugality — once thought to be a staunch conservative principle — is now at odds with another Ravenel mantra: supporting parent-led charter schools.
He didn't get the majority he'd hoped for when elected in '06, but Ravenel has been able to find enough support for a few issues closest to his heart. Earlier this year, Ravenel won free lodging for the new Charleston Charter School for Math and Science in the largely unusued Rivers Middle School. While the district spends years on structural improvements to the building, Ravenel also got the board to provide trailers to the charter school until the work is complete.
Earlier this year, Ravenel allegedly called McGinley a "bitch" during a rant over the Math and Science charter request, either indicating his frustration with the school district or his commitment to charters.
Ravenel says the consolidation of half-filled schools should free up space for growing charters — buildings like the Archer campus on the peninsula, currently housing students from Sanders-Clyde Elementary while a new school is being built.
"I know several campuses are looking at that school," Ravenel says of charters eyeing the building.
And those charter schools have more than just Ravenel's thumbs up — with the district's support of the Math and Science charter, they have precedent.
There is also a state law instructing the Charleston school district, exclusively, to provide any resources to a charter school that it would provide to public schools. Though it has not been challenged in court, Republican state Attorney General Henry McMaster said last year that the district couldn't charge rent for the use of existing buildings.
Finding a facility is a major stumbling block for charter schools, says Joel Medley, with the state Department of Education's Charter School Office.
"Some of the charter schools receive all the necessary approvals. They just can't find a facility, so they never open," he says.
Charter schools often have to go out into the market and find private bank loans to pay for their buildings. The money for those loans likely would come out of the state-mandated stipend a charter receives based on its student population and a percentage of the district's operating budget.
Source
When the district's budget came up short this year, Superintendent Nancy McGinley said the district would sell excess property as a one-time fix, while taking a broad look at school closings and consolidations to provide more efficiency and to put a few more properties on the market. But this effort toward frugality — once thought to be a staunch conservative principle — is now at odds with another Ravenel mantra: supporting parent-led charter schools.
He didn't get the majority he'd hoped for when elected in '06, but Ravenel has been able to find enough support for a few issues closest to his heart. Earlier this year, Ravenel won free lodging for the new Charleston Charter School for Math and Science in the largely unusued Rivers Middle School. While the district spends years on structural improvements to the building, Ravenel also got the board to provide trailers to the charter school until the work is complete.
Earlier this year, Ravenel allegedly called McGinley a "bitch" during a rant over the Math and Science charter request, either indicating his frustration with the school district or his commitment to charters.
Ravenel says the consolidation of half-filled schools should free up space for growing charters — buildings like the Archer campus on the peninsula, currently housing students from Sanders-Clyde Elementary while a new school is being built.
"I know several campuses are looking at that school," Ravenel says of charters eyeing the building.
And those charter schools have more than just Ravenel's thumbs up — with the district's support of the Math and Science charter, they have precedent.
There is also a state law instructing the Charleston school district, exclusively, to provide any resources to a charter school that it would provide to public schools. Though it has not been challenged in court, Republican state Attorney General Henry McMaster said last year that the district couldn't charge rent for the use of existing buildings.
Finding a facility is a major stumbling block for charter schools, says Joel Medley, with the state Department of Education's Charter School Office.
"Some of the charter schools receive all the necessary approvals. They just can't find a facility, so they never open," he says.
Charter schools often have to go out into the market and find private bank loans to pay for their buildings. The money for those loans likely would come out of the state-mandated stipend a charter receives based on its student population and a percentage of the district's operating budget.
Source
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