Friday, July 12, 2013


Such was today.  Wells Fargo and J.P. Morgan opened trading with news of far better results than expected with Wells up over 20% per cent on it's net and the Morg a whopping 31% primarily because of investment banking and trading results.  Morg appears to have gotten it just right and suffered little in the last month in the whip-saw environment caused by the babbling from the Fed whilst the success at Wells--after a cursory review--appears to be the result of a dramatic improvement in credit quality resulting in a 50% drop in additions to the loan loss reserve.  As I've often said, I love's so subjective.  I like Morgan's numbers better; trading results are not subjective, loan loss reserves can be.  But good for the industry all around.

Meanwhile, on another planet, Lizzy Warren was explaining her Back to the Future idea of reestablishing Glass Steagall for the 21st Century.  Enormous brain in this lady's head; no room for any common sense or auditory function.  Keeps saying separate all investment banking type activities from commercial banking and especially from FDIC guaranteed deposits so if the investment banking functions goes toes up taxpayer funds will not be at risk.

Memo to Lizzy:

1.  They are separated as we speak.  Investment banking activities are conducted out of what is known in the trade as Sec. 20 corporations, located in the same holding company but separate from the deposit taking function.

2.  FDIC funds are contributions from banks not the Treasury.  TARP was a political decision.

3.  Investment banking might have been said to have caused the crisis.  Remember Bear, Lehman?

4.  Lizzy you claimed on CNBC today that we had no bank failures between 1933 and 1999 because of Glass Steagall.  Hum.  How 'bout 1974 when half the system was down and out because of REITs.  Bankers Trust stayed alive because of the "subjectivity" of its senior loan guys allowed by the Fed and NY State.  I suspect there were others.  How 'bout 1983 when the world was done because of the Latin American debt crisis?  Subjectivity saved the day there too.  1987? Ditto.  LTCM?  Hardly a Glass Steagall candidate.  2008...well, if you would listen we could talk.  Fact is Liz ol' girl, banks fail because of the riskiest line of business which they practice:  the lending of money...and of course the loss of liquidity which happens when their depositors figure out they stink at pricing credit.

Lizzy is going to be a problem.

Meanwhile, Over There, in a very much bank-related scenario, Portugal's government is about to fall which means the banks will probably run out of cash, which means the Big Guys in Europe will probably lose a bundle as a result of the bail out fund in which they participated, which means Angela is going to have big time problems with the Volk, which means the odds for a default just got very short.  Bye, bye Euroland...maybe.  But are the Brits concerned? Not about that.  The impending birth of HRH whatever is center fold but also occupying everyone's time was the refusal to walk by Stuart Broad after a very thick edge to first slip inexplicable missed by a first class referee in the first test for The Ashes.  All of Oz was furious.

Have a great weekend.

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