HEAD 'EM UP, MOOOOVE 'EM OUT!

Rowdy Yates was back in the saddle today snapping a rawhide whip at that steer of a CEO, John Stumpf.  Rowdy looked a lot like Crazy Lizzy but the result will be the same: Johnny Stagecoach will wind up in the slaughter house before all of this is over.  He belongs there if for no other reason that he was awful today in front of the Senate Banking Committee.  For the good of all of banking he deserves to be fired.  Nuff said.  The other bunch that deserves to be fired are the banking analysts who have been pushing this stock for years while not understanding--as usual--what the hell was really going on withing the company or, as Lizzy pointed out today, never really inquiring what kind of client it was of this kind of bank that needed 6.14 separate products.  I sware, these guys know less about banks than do the regulators, but enough of that.

Tomorrow wraps up the meetings of the Fed and more importantly, the Bank of Japan.  In anticipation of tomorrow's news nothing happened today.  So I have nothing to write about until tomorrow.  

Later.

STAGECOACH

I was going to start off with how clever I was in scooping the DeutscheBank story last week (OK, OK, it was $14 million not $15 million) but while that further little foray into the shakedown business by the Feds is a worthwhile subject, what starts tomorrow could even overshadow what is surely going to be a non-event Fed meeting later in the week.  John Stumpf, the CEO of Wells Fargo will be in D.C getting started on being questioned by what will probably add up to everybody in the Senate and the House of Representatives and then some. If an execution were to the be the result I would hope it be done in Public pour l'encouragement des autres as was suggested by Voltaire.  It would be well-deserved.

Now I admit to being sympathetic towards the banking community from time to time--or more than that to be honest--but what happened at Wells under Stumpf's watch has to be one of the most disgraceful episodes I have ever witnessed and the reaction to it by Stumpf and the bank to be far and away THE stupidest in recorded history.  Might I also add immediately that if he claims that he was unaware of the actions of his associates in my opinion he is a flat out liar and thrown into a Stagecoach headed directly to the hoosegow.  How the hell this could go on for FIVE years and he not know enough about it to stop it RIGHT NOW is impossible to believe.

In addition to the millions who were defrauded...I think that is the only explanation of the events that is fully descriptive...and the 5600 employees who have been fired, some of whom were earning $11 and hour, this fool and his organization have created an opportunity for the political hacks in Washing ton to impose even more crippling regulation upon the industry and lay waste to the good guys in the  who are trying, really trying to make it better and have made real strides in that direction like Mike and Mike at Citigroup and even Jamie the Greek who, to be honest, hasn't really made a wrong step in ten years despite what the Tarulos and Crazy Lizzys of this world would have you believe.  Saints, no, but guys trying to do the job in the right way, yes.

What I fail to understand is how Wells was allowed to escape with a fine of $176 million?  The only thing more inexplicable than that was the $900 million leveled against General Motors for killing 124 people while $15 billion is being talked about in the case of VW for faking emission numbers.  Is there an Obama Motors connection at work with Wells?  I hope someone asks that question.

Last week it was revealed that the person in charge of "community banking" for Wells had announced her resignation effective at the end of this year with a Bye-Bye of $127 million.  Today, it was revealed that the head of risk management was taking an indefinite leave of absence.  That is not good --not good at all.  If it were to be shown that there was collusion.....Both were women by the way; no glass ceiling at Wells I guess.  Equal opportunity for all crooks.

OK, I've had my say and will wait until more of the facts come out in whatever time is left after the moralistic speeches of the politicians.  I'm a touch would up about this as you can imagine.  I guess it's because I am of a different time when your word was your bond and you didn't kick the little people.  No more, I guess.  And we are not better for it.

TO THE MATTRESSES!

It appears that Mauricio Macri has beaten Daniel Scioli for the Presidency of Argentina thereby ending too many years of Kirchner rule culminating with Cristina, know as the Queen of Botox in various circles which is rather sexist but completely accurate and quite funny (I think).  She is of course a terrible person and a worse leader of a nation and whilst Scioli was not joined with her at the hip, the Peronista influence in Argentine politics may be reduced for a while which would not be a bad thing.  Further, Macri has promised to re-engage with the international financial community which would be a very good thing as at the rate Argentina is running through their reserves external help may well be needed as early as next year.  But this war between the families is hardly over; it is just beginning and may wind up making Chicago in the Thirties look like a kid's game.

Power and money are at stake and for Macri to have any chance of being successful he will have to do a deal with the vulture funds (as they are known in B.A.) in order to get the country back in the good graces of the international community.  This will be fought tooth and nail by Kirchner and her under bosses.  There is no assurance that Macri will be successful and if he is not, the country could well be in crisis by this time next year.  In the minds of Argentine Politicians the state of the nation is never important unless the Party benefits from it.  This is going to get nasty and the Vultures might be well-advised to temper their position a bit in order to give Macri a fighting chance...and for a better chance for a smaller yet monumental payday.

Meanwhile, back in D.C. Big Danny Tarullo, self-appointed under boss for bank supervision in the Yellen Family, was talking tough again.  Subject:  Stress Tests.  Message: they are going to be tougher than ever and will undoubtedly create the need for even more capital on the part of the largest eight banks in the system.  This comes on top of the story of last week regarding new capital requirements which took on a different twist today as some of the finer details regarding the nature of the capital came to light.

Big Danny, who had always talked a good game about international cooperation seems to have decided that in regard to the banks from whom he collects the vig, they are going to play by his rules and bugger the international guys in a number of important aspects, to wit the the capital eligible bonds the banks will be forced to issue must be issued in the U.S. which means that if you have any of those financed outside of the U.S. and subject to non-U.S. law, they will probably have to be refinanced.  Major pain in the bum.   Seems Big Danny doesn't trust the Draghi Family Over There.   "Our Thing" in the world of Central Bankers ain't Danny's thing.

What also got dropped on the magical eight today was that the only thing that is eligible must have a maturity of more than two years.   Now that gets interesting because it means any repayment due on a bond of any maturity is no longer eligible within two years on that repayment date.  The effect of this piece of genius is to force financing into longer maturities, which in general will have higher costs, which eat into ROA, which affects stock prices, which affects asset mix, which creates more capital needs and in the end which means absolutely nothing in an attempt to avoid a repeat of 2008 which we have previously discussed.  Of course what it also does is to increase control over the allocation of assets in the economy through the back door which is exactly in what Big Danny is interested.  Danny likes to pick winners and losers.  Remember back a year or so ago when he ordered the hit on Citigroup in the stress test process?  Oh yeah, that was him.  No one to this day can figure out what going on with him and the Mike and Mike show and why he's so in love with Wells Fargo unless he likes Savings and Loans because they are so nice and safe (yeah, sure), but the funny thing about his new rules is that they hit Wells the hardest.  Estimates are that Wells will need about $40 billion in new capital and--amazingly--Citi will need but $10 billion.  Why?  I can't figure it out but in order to do so you need a complete breakdown of the assets of both institutions and their capital structure which I don't have..

To be safe in the neighborhood with a guy like this running around loose, what you have to do is what he and the family want you to do...no questions asked.  Fund the Government...buy bonds.  That keeps Janet's boss, the Capo di Tutti Capi in business...at least for a while.  But Big Danny had best keep in mind that the Capo's under boss may not make it to the top when he goes and if this happens, there are going to be contracts put out all over the place.  One of them is going to have Big Danny's name on it.   I hope he likes fish.

ALL ABOUT THE BANKS

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 banking...it'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.

THE KRUGMAN RAND

He did it, he really did it.  Today, Little Paulie came out in full support of the Trillion Dollar Platinum Coin or "other such innovative ideas" in a deliberately misleading, factually incorrect, packed with misunderstanding of markets (and one outright untruth) piece in the Times today.  But there we are; we now know that if pushed, the administration will challenge any concept, law or provision of the Constitution to shape their view of governance.  They won so I guess they think they can.  One thing I don't get, however, is why these guys insist on Platinum when freeze dried feces would work as well.  Same trillion dollar value and far lower production costs.  Why, they could use their own; they seem to have a lot of it.

On the banking front, Wells Fargo came out with great fourth quarter numbers and prom ply fell like a stone bring the rest of the banking system down with it.  Now I don't know much about the stock market except for the fact that it is the place to which I head when I want to lose money but the reason given for the decline in bank stocks is demonstrative, I think, of what these guys don't know.  You see, the problem according to the street is that Wells has too many deposits and can't put them to use because rates are too low.  Boys and girls, you can NEVER, especially in times like these, have too many deposits...especially the retail based deposits akin to Wells.  If anyone tells you different, you are dealing with a fool.  Deposits are the real capital of a bank; one uses them to make loans, build relationships, sell additional services to he who is a customer rather than through cold calling.  They provide stability and most of all they provide liquidity.  Retail deposits hang around through thick and thin which is what the monstrously dumb Ms. Bair didn't understand when she intervened in the merger of Wachtovia and Citibank who, at the time, desperately needed a domestic deposit base.  Poor Wells. They are now paying for the stupidity of Poo Bair in being unable to put to work all those deposits.  Yeah, right.

Over there, The Italians had a hell of a 3 year auction with yields falling below 3%.  Good by any standard.  Massimo is still on holiday so the "insider's" view is still unknown to me but he should be back by next week  when things begin to pick up unless you consider L'Affair Cyprus to be of interest which it actually is as what has been floated that in return for the bail-out the Russian bond holders and depositors take a hit.  Look for a disruption of natural gas shipments to Europe if this discussion doesn't end which caused one of my more savvy friends down in the coffee shop in Galveston to ring me up with, "Damn boy, iffin we can git the OK to liquefy all the extra stuff we got and ship it to Europe, how much money you think we can make?"  Hadn't thought about that aspect but he may be on to something.  I'lltellyouwhat'sthetruth: things are gettin' complicated in this ol' world.  Fortunes from financial crises in natural gas.  Whew!  Oh, the Euro is at 1.33 today.  Guess the Euros really like that Krugman Rand idea.

See you next week

JUDICIAL NONSENSE

According to everybody, things are looking up all over.  U.S. GDP numbers are up (with a 45% rise in inventories), Italian and Spanish yields are down with the Spanish economy looking terrible), the Greeks and the Euros have almost found the can to kick (whilst the Greeks announced that their buy-back of debt will have to be financed...how's that again?) Japan looks better and everyone has talked themselves into believing that the fiscal cliff is overdone.  Don't look at me; who am I to question the wisdom of the ages.

On top of all of this, surely you remember the story surrounding the arrest of the good ship Liberdad as a result of the landmark decision against the Argies a couple of weeks ago?  To the surprise of many the 2nd U.S. Circut Court of Appeals has stayed the decision of the District Court which sought to inforce the parri passu clause in the original Argie loan documation which would have resulted in the Argies putting up some $3 billion in escrow for the holders of non-restructured debt should the restructured bond holders receive a payment next week.  The logic and reasoning of the Appelate Court seems to seems to be firmly planted in thin air not to mention the applicable law. To make matters worse the influential New York Times Bloggist Steven Davidoff has weighed in with an article that all at once demonstrates that he neither understand the business, doesn't understand the law, doesn't understand the Federal Court system and doesn't understand what goes on in the negotiation of sovereign loans.  No reason why he should of course:  He is a professor of law and finance at THE Ohio State University.  I urge you to read his piece in the Times of yesterday.

Just to help, the Foreign Sovereign Immunities Act of 1976 does not exempt foreign states from litigation; on the contrary, it states the BASIS upon which Sovereigns CAN be sued.  The general rule is that when a Sovereign commits sovereign acts it is generally cloked with immunity, BUT when the acts are inherintly commercial in nature, the cloke of immunity may well disappear.  Might I suggest that signing an agreement to borrow money and subjecting itself as a basis to so do to the laws and jurisdiction of another sovereign state is an act commercial in nature.  The Argies never raised the issue except as a throw-away line.

The Judge, Thomas Griesa, ruled that the Argies had to treat the holders of the unrestructured bonds in the same manner (but not as to amount) as the holders who restuctured, in accordance with the original contract terms, or to put it another way the full interest  due on the original but not the restructured amount.  The Argies screamed like pigs claiming

1.  The original holders were gone having sold the bonds to "Vultures"
2.  Parri passu only meant the holders were to be treated "legally" the same but not as to payment (?????)
3. Custom and practice in debt restructurings would be overturned and cited Greece as an example that never would have happened.

This is all pointed out in Prof. Davidoff's article.  The arguments are all rubbish.

Under law, the "Vultures" are what we call holders in due course.  As such, they have all the rights and privilages of the original holders.

As to the Argie argument, I have no idea what that is supposed to mean and I suspect that no one who spent 2 weeks in a class on contract law knows either.  Speak to a banker and he will tell you the only thing legally important in a loan document or debenture is how he gets paid.

The "custom and practice" argument is a complete fabrication.  It has never been part of any practice and to refer to Greece as did the Argies ( Prof. Davidoff does as well) is to ignore the fact that the debt restructured by Greece was subject to Greek law.  As to the Greek obligations subject to (primarily) the Laws of England and subject to English jurisdiction, they were paid to the last penny with neither argument nor deduction.  To not state this fact is either egregiously poor research or a deliberate attempt to decieve.

For the 2nd Circuit to fall for this crap and grant a stay is even worse.  I am reminded of a battle royal that occurred many years ago between Wells Fargo and Citibank over the terms of the restructuring of the Philippines, being overseen by Citibank much to the dislike of the plaintiff.
Eventually, it reached the Supreme Court which sent it back for a rehearing but before that occured, the parties settled (with I am told, a suggestion from the Federal Reserve).  Weeks later I was speaking to one of the Justices who was an acquaintance at the time.

"Remember the Wells/Citi case over the Philippines?  You gentlemen realized of course that everything requested of the banks by the Philippines was drafted by Sherman & Sterling at the request of Citibank?" (Because that's the way it was done)

"WHAT!  WHY DIDN'T WE KNOW THAT?!"

"Nobody told you I guess."

Prof Davidoff suggests that there is a danger in the Courts of the United States interfering in international affairs.  Nonsense.  When a sovereign willingly subjects itself to the oversight of this nation's judicial establishment in order to obtain the benefit of borrowing from the international community including American institutions, I would argue it is the DUTY and OBLIGATION of the courts to involve themselves.  But Prof. Davidoff is correct when the courts are unaware as to either the true facts or the true nature of the transactions involved as too often is the case.

Oh yeah, Professor, one other thing.  The Liberdad might have been a frigate 200 years ago; that's not what is is today.  It's a training vessel.  It moves by wind.  It has sails.   Not even sure it's a frigate as the classafication of frigate refers to a lightly armed ship of war.  It may be a three-masted bark.  We could research it together if you like?


Full disclosure:  I avoided doing ANY business with Argentina, but that's another story

MORE OF THE SAME

Oh my.

China's economy grew at an annualized rate of only 8.1% in the last quarter , well below estimates.  The sky didn't fall but the equity markets did.  Italy's 10 year auction didn't help a bit with bids of nearly 6.00% and of all things, J.P Morgan, led by the World's Greatest Banker, beat estimates by just a smidge, along with the World's Greatest Bank, Wells Fargo, who beat by just  2 cents.  Gloom was the highlight emotion on the Street this morning.  It got worse.  The Dow closed down 125 points.

I'm not surprised about China.  China, in the space of just a few years has become a middle-income country and as such you simply can't expect double digit growth from such a higher base.  Italy--well, we've spoken enough about Europe and the box in which they've put themseves  with unrealisticly false assumptions of the overall economic future of the region and a single-minded focus on saving the banks.  But frankly, the less than exciting performance of the two banks considered to be the pick of the litter troubles me.  Given the economic and job numers we saw from the end of 2010 I would have thought that the claimed pick-up in economic activity would have resulted in a stronger performance but that was not to be.  Either the numbers were false or the economy had but a spurt...a false start so to speak...that did not result in increased financing opportunities.  Admittedly, I have not gone through the detail of the numbers but with conditions as favorable as they appeared, I expected better.  As a result, I am now eagerly awaiting Citigroup's release next week.

The conventional opinion is that in the face of the ongoing work-out of the retail housing sector, it has been difficult for the industry to attain personnel reductions and as a consequence, overall cost reductions.  No doubt this is true but I suspect that the projected revenue numbers, even at considerably reduced levels, have been impossible to obtain as well.  Coupled with the still almost complete uncertainty in the implementation of Dodd/Frank, the industry does not find itself in a good place.  Unfortunately, in my opinion, there is nothing on the horizon to make one become optomistic.  This is shaping up as a verry, very tough year.

Anyway, I'm having an early dinner, a bit of wine and off to bed.  Everton/Liverpool tomorrow bright and early in the first semi-final of the FA Cup  followed on Sunday by Tottenham/Chelsea.  Classic cross-town rivalries at Wembly.  For some happy few there are things more important than the financial state of the planet.  Let's go you Whites!

Have a great weekend.

BEWILDERED

I have no idea what happened. Thursday's edition was written, posted--I thought--and disappeared. I don't even have a copy of it. It's just...GONE. Unfortunately, I didn't notice it's absence until yesterday which is really inexcusable. It was all about the IMF meeting and what didn't happen as well as the total capitulation of The Suit in line with The Leader's view that the whole world is one. We are now to allow the IMF the privilege of explaining to us when we have a bubble at what we are to do about it, so silly us do not repeat the mistakes of the past. I wont try to repeat the post but simply raise the question that if the good folks on Cn Avenue miss the timing a tad bit, who's there to clean up the mess? The Suit hadn't figured that one out yet at the time of (mis) posting, but I guess one is to assume that with the IMF standing guard, that issue will never arise. Oh, our girl Shelia Bair was blabbering all over Europe which we pointed out. More on her today.

I also mentioned that Mr. Bernanke a week or so ago had rolled over and exposed his throat to Barnie Frank and Frank's committee. Seemingly, Mr. Bernanke has agreed to a mismash of central regulation containing all of the present regulatory bodies that would clearly fall under the control of Congress and by definition, become a politically responsive body. Now it is in the area of monetary policy in which the Fed is supposedly independent but from this point on can anyone say with any conviction that that independence has a prayer for survival? I think not. In attempt to save his organization (and himself?) from Congressional wrath, Mr. Bernanke has delivered himself and his organizations into the hands of the Philistines. Ok, say you, what's the big deal? Let's take a look at Citigroup for a clearer understanding of the tragedy of this move.

Now those of you who have been with me for a while no I do not have a lot of time for the afor-mentioned Ms. Bair. Ms Bair sits astride the FDIC which really has one role in life and that is to guard depositors in commercial banks and close down institutions which are deemed to have failed. The FDIC does this quite well and has for years, but quite frankly it has no ability to monitor the well-being of the banking system as a whole due to a lack of funds and personnel. Indeed, the FDIC uses contract help in performing the two primary tasks to which it has been assigned. Nevertheless, deep into the negotiations between Citi and Wachovia in which it was agreed that Wachovia would merge with Citi it was our girl, under the guise of protecting the depositors, who APPROACHED WELLS FARGO AND ADVISED WELLS HOW TO SCUTTLE THE CITI DEAL IN A MANNER THAT PROVED TO BE SUCCESSFUL. Why? Quite frankly no one really knows except that it IS known that Ms. Bair has a...ah, the term cannot be used in a family blog...for Citi's management. Except for the critical circumstances of the time, she should have been fired for her actions. She was not. Now of course the lawyering for Citi in this deal was appalling but when one has the Fed and the Treasury brokering the transaction a small excuse can be made for not believing that the very junior partner in the triumvirate would go off the reservation. Consider this: at the time Citi's major weakness was funding. Despite it's size Citi buys its deposits, it does not have a large domestic deposit base. Wachaovia does (or did) and therefore it was an excellent fit. Ms. Bair's claim that she was protecting the depositors is utter nonsense as if there was ever a situation "too big to fail," this was it. Remember my friend Jimmy? Where it comes to the evaluation of the health of our financial system and the maintenance of the same, you want ONE S.O.B running the show not a grab-bag of individual operatives with individual agendas. It is a catastrophe in the making particularly when they do not all have the capacity to accomplish the mission. Ms. Bair played her political cards well and laid the groundwork for all sorts of meddling in the future. Unfortunately, Mr. Bernanke has thrown in the towel. It's open season for every windbag with a microphone.

By the way, dear reader, keep in mind you have a pretty big stake in Citi as a taxpayer. Guess what also happened last week? Remember Citi's commodity trader who was owed $100 million? Well, that problem got solved. The administration's pay czar obviously couldn't allow that payment to be made from a political standpoint but it became more and more apparent that legally, the government hadn't a leg to stand on. The money was contractually due. So what did The Leader & Co. do? They pressured Citi into selling the entire unit to Phibro, a private trading house. Well, that's not quite correct; they pressured Citi into giving it away. The most profitable unit was reportedly sold for the value of it's assets--a ridiculous price--to solve a political problem. And screw the shareholder and taxpayers in the process. Be happy with your government as your regulator. From the gang that brought you Fanny and Freddy (and are about to bring you the FHA) they now have it all. What a country.

I NEED SOMEBODY TO HELP!

This is becoming very difficult. There is very little going on and it appears that the entire world is awaiting the results of the "stress test" scheduled for Thursday. Well, that is inaccurate. Not the entire world. It appears that the International Monetary Fund has found a mission that of predicting with unerring accuracy the condition of the U.S. Banking system an the requirements facing the same for new capital. Excuse me if I am underwhelmed, then again, one must keep in mind that the Fund has friends in high places as it was no other than Our Hero was once an employee. It was there that he became confused as for the need to pay payroll taxes for you see, you salary from the Fund is essentially tax free (they pay it) and it's easy to become confused...oh, why bother. Suffice to say, it has been a dull day in a fairly dull week.

But, we labor on to report that rumor has it the Wells Fargo, Citibank, B of A and apparently a few others are a bit short of the ready according to the Regulator mob. Oh that ominous note, the bank index has traded up big time. Go figure. Or maybe it's not so hard. Part of the report is supposed to set guidelines for "tangible common equity" for each individual bank and it may well be that the stock boys have no more idea than yours truly what the hell "tangible common equity" is supposed to do to make anyone of us sleep better at night. Oh I know the definition;this is the stuff that is supposed to be there at the end of the day after a bankruptcy. The percentage being floated about is 4--4 1/2% of total footings. Last time I looked the Incredible Shrinking Citicorp had about $2 TRILLION in total footings. If any among you feel that 4% of that number is just about right, would you contact me with your reasoning and the best reasonoer will win a prize. I case of ties, duplicate prizes will be awarded. Employees or any member of the family of a Citicorp employee are not eligible. This offer is available to only members of this planet. Advanced life forms from other galaxies are not eligible. All entries must be postmarked by tomorrow at midnight, eastern daylight time. We are going to get to the bottom of this thing.

Once there is agreement, the short-fall institutions will scurry out into the market to raise the necessary capital from private sources or failing that, Our Hero will make up the difference after about six months...assuming that anyone is left after six months. Actually, I was in favor of this approach a few months back but the major difference in my thinking was that there are some things that are best done in private. Announcing to the world that the First National Bank of Boothill (apologies, Chris Fides) is in extremis is not exactly the best way to prepare the market for a fund raising operation on behalf of FNBB or at least in my experience it never has been. But, I have been wrong before (two or three time to be exact) and there is a price for everything so this could become really interesting. Then again, if people believe that the fund raisers are in the nature of a Government Sponsored Organization ala Fanny and Freddie...well, we shall see. Only thing is those two didn't come out well in the end did they? Neither did Mr. & Mrs. Tax Payer. Then again, the Treasury could provide the funds directly as suggested, but that might result in more howls and shouts for ownership on the part of the government rising to a fever pitch. You pay peanuts, you get monkeys. $2 TRILLION in assets run by monkeys? Hummmmm.

You can see my problem. I'm just sitting out here in fly-over country waiting for a bit of inspiration. Worse yet, of the 10,000 Peonies in the world the wife just bought at least 500 of the 1500 she doesn't already own. She buys, she doesn't plant. They are pretty, however. I've left a pass and not at the gate house for John Lennon in case he comes by to visit. HELP!

THE BUNNY TRAIL

Back from a wonderful Easter weekend with all of the grandkids. If you think dealing with the financial crisis is hard, try dealing with 2 year old triplets produced by son #2 and bride. It's like herding cats. How those two do it I have no idea but The Leader and Our Hero should give them a call for some advice. It will undoubtedly be better than some they have been receiving.

When we last visited the state of play, Wells Fargo had just released spectacular earnings as predicted by your humble scribe (see: "He sprang to his saddle..." March 11) Today, Goldman Sachs "beat the street" with a reported net of $1.8 billion. That's a lot of money for a firm reportedly in dire straits just a few short months ago. I'm willing to admit Goldman is good...better that most probably...but I still find it difficult to figure out how they manage to pull off coups such as that today where they successfully issued 5 million shares of common at $123 a share which and then watch it crash to $113 at the close. The $1.8 billion came almost exclusively from trading, and fixed income trading if one believes the release (there is no reason not to) but that is a hell of a lot of profit from a business with razor thin margins. Before September last, Goldie was an investment bank with gearing applicable to their position in the business.; read HIGH. Today, they are a commercial bank with gearing supposedly governed by the Basel Rules and monitored by the Fed. Forgive me, I love the number, but $1.8 Bil out of one facet of the business leads me to believe that the balance sheet mid-month was a Tad bit larger than one might expect it to be for a good, commercial bank leverage-wise. But it is what it is and there is $6.5 Billion more in tier one capital and a real headache for Our Hero.

Goldman has wasted no time in letting it be known that Plan A is repay the TARP money as soon as possible so that they can get beck to paying themselves obscene amounts of money unhampered by the silly thoughts of The Leader and and those of the dimmest of legislators. With a new injection of capital and bright prospects for the future (at least in their minds) they seem to have a strong argument. Although one might think that the return of taxpayer's dollars, the evidence of the ability to attract permanent capital at remarkable levels and the hope of a bright tomorrow fulfills all that the Administration has been asking for, there seems to be more than a bit of hesitation of its part. Mind you, there is still the sticky question of how does one price the warrants that the Government holds and would be forced to cash if the TARP funds are to be repaid (raising the specter of how does one price Our Hero's plan in general), but surely this can be worked out? Could it be, one asks, that the Administration has a bit more on its mind than a mere "tiding over" of the financial sector until a better day, and that the implied control that TARP and Our Hero's plan is at least as important? The implications of this position, long whispered in the press and on the Street, are perhaps being focused far too quickly for the Administration's liking as a result of the surprising strength of a portion, at least, of the financial sector. A plethora of good results over the next few weeks in, once again, a wonderful banking environment may well focus this issue and none too soon.

A bit of a sad note. last week, the Wall Street Journal carried a story about the absence of Paul Volcker from the public view despite his highly publicized joining of the Administration's financial team, his appointment as Chair of an advisory commission and the very public promise by The Leader that Mr. Volcker would have an important role to play going forward. Now some of you might have gotten the impression that I am not entirely happy with some of the positions taken by this Administration but this was not one of them. Paul Volcker is one of the giants (no pun intended this time) in the financial sector and his presence and learned counsel is needed and would be most welcome. Unfortunately, he did nothing to dispel the implications in the article that he is being...ah, underutilized. This is more than unfortunate and one would hope would be reversed. If not, one can only come to the view that in the twilight of a distinguished career of public service, a very fine man was used quite shamelessly to lend credibility to an otherwise less than ready group. I hope I am wrong, but I fear that I am not.

STAGECOACH A'COMIN'

I didn't expect to post anything today but when one gets a chance to say, "i told you so," one should take it. Now one Robin does not a summer make, but back a bit I wrote that this is one of the greatest moments in time for banks and the prospects for bank earnings. Comes today blow-out numbers for Wells Fargo. Had to happen and there is going to be more of the same. This might suggest that all involved take a deep breath and step back a moment to survey the landscape. Time and earnings cure a lot of things. But of course we are surrounded by geniuses and geniuses must act, must they not? "To do nothing is not an option." "Never waste a crisis." I wish I were a genius. Life is so easy.