...I have to correct myself, but a loyal reader called to tell me that I should have said, "...it appears that Mr. Feinberg will refuse..." He is of course correct. The pay czar has made no final decision but I will lay 8-5 that what we will get in this case is a lot of, "Outrageous, Unconscionable, Undeserved," blah, blah and little else. I tend not to get too excited about this pay czar thing, stupid though it might be, because it will certainly whither and disappear as the financial sector emerges from this latest collapse which if the Fed continues to hand out free money will not be too long from today (mind the regionals, however). The signs are already emerging in the U.K. where the FSA blinked on the supposed mandated pay schedules, and are speaking only in terms of pay "guidelines" as the outlook for the sector improves. I suspect that good deal of this is to let bygones be bygones, after all boys will be boys and all of the stuff we love, what--but let us remember that the FSA has already been pronounced dead and buried by the Conservative Party if it is successful in the next election (less of a bet but still odds-on) and why get the City all riled up at this stage? The feeling on the Street here across the pond is that this too shall pass.
However, this tendency on the part of The Leader and Our Hero to control practically everything is not just a passing fancy. Has one noticed that not only are there discussions as to the need for the free flow of credit to resume but that in addition, there is a very clear undercurrent as to what locations it should be directed? The cash for clunkers program, while great for dealerships is about as dumb a use of money the country doesn't have as one can find. (Full disclosure: I checked on my clunker with messrs.Toyota and Honda: my old Acura was made with two different catalytic converters; one qualifies the other doesn't. Of course there is no way to tell which is which. You can't make this stuff up). I though we had seen this movie before when, in an attempt to eliminate "Redlining," mortgage lending was expanded by government fiat with, shall we say, somewhat uneven results. Or billions to the UA...ah, GM and Chrysler on the biggest come-line bet ever made. Oh, as an aside, GM announced its Chevy Volt yesterday with a milage rating of 240 per gallon if you have a 400 mile extension cord. I's supposed to have unlimited milage in city driving. Memo to The Leader: WE DON'T WANT BLOODY CARS IN THE BLOODY CITY!!! But of course, it's clean; it's a shame 2.5 billion Chinese and Indians aren't. In the good old days we used to say,"Hell, it's not our money it's the depositors." Wonder what these guys say?
As a final note to this week, jobless claims went up, retail sales were lousy and the Dow was up 36+ points. Go figure. I guess the continued uptick was based on the fact that France and Germany said the recession was over and it was onward and upward. Did someone, somewhere, care?
See you on Monday. It's too nice outside to write inside
Showing posts with label FSA. Show all posts
Showing posts with label FSA. Show all posts
Thursday, August 13, 2009
Tuesday, July 14, 2009
GOLDIE
As expected, Goldman Sachs blew the doors off with their earnings announcement of today. Despite what one might think of these guys they can turn on a dime and make a hell of a lot of money in any environment. Of curse when you are about the only guy left in the business life does get a bit easier and remember, GS is now a bank just like Citibank and is therefore eligible to borrow from the Fed and practically zero interest. With this kind of cost of funds, even I could make money but probably not as much as Goldie.
What is interesting is to note the absolute confidence they have in themselves as even with their low cost of funds you don't make $3.4 bil without taking risk, and obviously this is what they did. This strategy stands in marked contrast to their only real competitor left on the Street, Morgan Stanley, who had previously announced a meaningful reduction in their risk-taking well over a few weeks ago. I still believe that the earnings of financial institutions this quarter will be modest as little can be expected in stock appreciation at this stage whereas risk management and the building of reserves will take front stage. Again, I think earnings will be deliberately understated without comment from regulatory authorities. As to which approach is the wiser? Time will tell.
Meanwhile, the scuffling still continues over the proposed new world of regulators albeit at a more subdued pace, as official Washington is caught up in Supreme Hearings, Obamacare and Energy. It is encouraging to see, however, that the Brits are facing the very same politics now that there appears to be somewhat of a general agreement that the FSA didn't work worth a damn and that maybee the Old Lady should get another shot at it this time around. I've been thinking about my view that at least in regard to systemic risk (whatever the hell that is) The Fed should clearly be the entity that is in the forefront. The contrary view points to the fact that to mix the traditional role of the Fed as the setter of monetary policy with this new and perhaps conflicting role of systemic regulator might not be a good idea. There is merit in this, but as a practical matter, the nitty gritty of risk management, oversight or whatever one wishes to call it, was never the purview of the Federal Reserve in Washington but rather, of the Federal Reserve Bank of New York. So I said to myself, "Self, why don't they make de jurie what was always de facto?" The answer came back, "Beats the hell out of me." I'm going to think about this some more. I could continue to run on, but there aint that much happening. Later.
What is interesting is to note the absolute confidence they have in themselves as even with their low cost of funds you don't make $3.4 bil without taking risk, and obviously this is what they did. This strategy stands in marked contrast to their only real competitor left on the Street, Morgan Stanley, who had previously announced a meaningful reduction in their risk-taking well over a few weeks ago. I still believe that the earnings of financial institutions this quarter will be modest as little can be expected in stock appreciation at this stage whereas risk management and the building of reserves will take front stage. Again, I think earnings will be deliberately understated without comment from regulatory authorities. As to which approach is the wiser? Time will tell.
Meanwhile, the scuffling still continues over the proposed new world of regulators albeit at a more subdued pace, as official Washington is caught up in Supreme Hearings, Obamacare and Energy. It is encouraging to see, however, that the Brits are facing the very same politics now that there appears to be somewhat of a general agreement that the FSA didn't work worth a damn and that maybee the Old Lady should get another shot at it this time around. I've been thinking about my view that at least in regard to systemic risk (whatever the hell that is) The Fed should clearly be the entity that is in the forefront. The contrary view points to the fact that to mix the traditional role of the Fed as the setter of monetary policy with this new and perhaps conflicting role of systemic regulator might not be a good idea. There is merit in this, but as a practical matter, the nitty gritty of risk management, oversight or whatever one wishes to call it, was never the purview of the Federal Reserve in Washington but rather, of the Federal Reserve Bank of New York. So I said to myself, "Self, why don't they make de jurie what was always de facto?" The answer came back, "Beats the hell out of me." I'm going to think about this some more. I could continue to run on, but there aint that much happening. Later.
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