A TRIFECTA

Finally, something important happened today--well, yesterday and today.  As a matter of fact, three things happened.  Remember the agreement among heads of state Over There of a few months ago? You know, the one on the austerity budget where Angie backed David and Frankie went nuts?  Yesterday, the Euro Parliament rejected it by a wide margin and reaffirmed that austerity is a four letter word in so far as the parliamentarians are concerned (when you are making 200,000 Euros for 6 weeks of work one can see why).  The gang is gathering as we speak and will have the the decision of the Parliament presented to them at this, another two day conference of Heads of State and ministers.  The fireworks should be heard tomorrow.  Reminder: the ECB's umbrella is based on an austerity scenario for Euroland.  While the market watch is on, it is too soon for any firm conclusions as to how this difference of opinion is going to play out.

Important things # 2 & 3 occurred Over Here.  J.P. Morgan got absolutely hammered by a joint committee of the Senate looking into the "London Whale" disaster.  This was an afternoon announcement around the same time as the final Fed report on the latest stress test (couldn't be deliberate, could it?), causing folks like me all kind of problems as there is no time to review it before "going to press."  In that Fed report came the conclusion that the capital structure of both Morgan and Goldman Sachs was inadequate and would have to be corrected before the end of the year.  Mind you, the operative word is "structure." Capital adequacy for both institutions is, well, adequate, but this is a huge double whammy on what everyone was touting as the "best run bank" with the world's greatest banker at the helm and a "fortress balance sheet." Which reminds me of one of the great truism in the financial world told to me by my dear departed friend, Joe Dilworth.  "Charlie," said he, "you have to realize that all banks are screwed up; they're just screwed up differently."  What will be the reaction?  I don't know but I do have some advice.  Hubris, Jamie, hubris.  Find some.

Important thing #3 is the Phoenix-like return of Citibank.  This is a welcome event as it spells out a clear road map as to how these things can be accomplished.  It also provides--hopefully-- much needed confidence in the system and in some of those who manage it.  One thing it should do is point out to our Euro pals how far behind they are in coming to grips with their own problems but of course it will not.  We'll try to have much more on this tomorrow.