Tuesday, April 28, 2009

The Next Round

Citigroup and Bank of America 'must raise billions in extra capital'

Leaked preliminary results of US government stress tests on banks suggest the financial crisis is far from over. Citigroup and Bank of America have both been told that they must raise billions of dollars of extra capital, according to a report that suggests the financial crisis is far from over

Posted by alan @ 08:27 AM (898 views)
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6 thoughts on “The Next Round

  • Interesting the dispatches last night. I actually thought during it that the whole premise was that the governments had in effect saved the banks and that it was all sorted in that respect, so that now we are just left with the probs in the “real” economy. Wall Street / Main Street distinction..

    that aint necessarily so.

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  • What I find worrying is that the people responsible for this mess are still in charge and being cemented in place with taxpayers money. They can now borrow taxpayers money from the government at virtually zero interest rates then lend it back to us at 7%. If this isn’t political croneyism I don’t know what is.

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  • general congreve says:

    Techieman @1 – The US/UK banks are still in it up to their necks and are continuing to drag themselves, the taxpayer and their respective economies, not to mention the world economy, further down the toilet. They are continuing to make suspect loans and are not declaring the full extent of how insolvent they are, or will be, as defaults continue to rise.

    Round 2 of the the 2nd Depression, with truly mass unemployment, govt. insolvency, IMF bailouts for the west etc. is coming soon.

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  • GC – generally agree although “soon” is subjective and relative. In EW terms we have had the primary wave bottom in the DJIA and S&Ps with a sharpish rally, of the C wave capitulation. Whether the retacement so far is the complete wave 2 (of 5) of the C wave or just part of it is the question – so how “soon” will we get the next downleg?

    FTSE – slightly different story….

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  • Also the “Suspectability” of the loans will become more pronounced so that even when “good” loans are made then may turn out to be as suspect as originally “bad” loans. A loan is either performing or not – at some point one that is will not, that is more likely in a contracting economy when even the good loans turn bad. When that happens the lenders restrict lending further, and a downward spiral ensues.

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  • techieman

    Re: loans performing or not.

    In simple terms a performing loan of 100k at 5% interest rates borrowed at 1% interest rates still only produces £4k per year gross profit.
    Far better than the kind of money other Utilities extract from the average household but still a drop in the ocean compared to the amount that’s been lost in my opinion.

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