Showing posts with label Tom Petruno. Show all posts
Showing posts with label Tom Petruno. Show all posts

Monday, September 16, 2013

The Crony Capitalist Banks: The Biggest Winners Since The Crash

And we, of course, are the biggest losers.

Tom Petruno for The LA Times:


In the second quarter of this year U.S. banks earned a total of $42.2 billion — the biggest industry profit in history, and double the earnings of the same period in 2010. It's no accident that the banks have prospered mightily since the crash, said Neil Barofsky, who was the watchdog over the U.S. bank bailout program launched in September 2008. "We turned the entire resources of the nation toward one goal: setting up a situation where the banks could earn their way out of this," said Barofsky, now an attorney at Jenner & Block in New York. The plan was not, he lamented, "about holding institutions accountable" for the debacle. ...

[I]n the longer run, TARP was less significant for many banks than the aid of the Federal Reserve under Chairman Ben S. Bernanke. By hacking short-term interest rates to near zero and holding them there since the end of 2008, the Fed has slashed bankers' cost of money — particularly deposits — to well below what they earn on loans and investments. Hence, record profits. ...

The Fed's decision to keep short-term interest rates near rock bottom for nearly five years has devastated the income of tens of millions of Americans. In the mid-2000s, savers in banks were routinely earning 4% or more on one-year bank certificates of deposit, or $2,000 in annual interest on a $50,000 nest egg. The average rate now: 0.23%, according to Bankrate.com. The same $50,000 nest egg earns just $115 a year in interest at that rate. "And after inflation they're actually losing ground," said Andrew Lo, a finance professor at MIT in Cambridge, Mass.

Read the rest from Tom Petruno, here.



Saturday, August 20, 2011

Gov. Rick Perry Would Fight Dollar Collapse, Maybe With A Little Tar and a Few Feathers

"Bernanke also is facing external dissent of a different type. This week, Texas Gov. Rick Perry, who's running for the GOP presidential nomination, made a controversial comment that appeared to encourage bodily harm to Bernanke if he continued to 'print money.'" -- Tom Petruno, LA Times, here.

"Gov. Rick Perry scorched the political pot on Tuesday with a red-hot rhetorical attack on Fed-head Ben Bernanke. When asked about the Fed reopening the monetary spigots, Perry said, 'If this guy prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we -- we would treat him pretty ugly down in Texas.'

"And that wasn’t all. In a more controversial slam, Perry said, 'Printing more money to play politics at this particular time in American history is almost treacherous -- or treasonous -- in my opinion.'" -- Larry Kudlow, here.

"There is no known case of a person dying from being tarred and feathered in [the Revolutionary] period. During the Whiskey Rebellion, local farmers inflicted the punishment on Federal tax agents." -- Wikipedia entry, here.


This dramatization shows the victim stripped naked from head to toe, whereas to the waist only was more customary. -- (source)

Saturday, August 13, 2011

Cash in Bank Savings Accounts Hits New Record of $5.86 Trillion

As reported by Tom Petruno for the LA Times, here.

Saturday, June 25, 2011

All Sums Held in Cash, $8.3 Trillion, Equivalent to 52 Percent of Wilshire 5000

An astonishing number, as Tom Petruno points out here, because most of that cash is making next to nothing, and everyone who holds it is losing money because of inflation:


[I]nvestors who want absolute safety for their money are sticking with cash. Lots of cash.

Since 2008, millions of individuals and corporate investors have sharply boosted what they hold in cash accounts at banks. The total in basic savings and money market deposit accounts has reached a record $5.58 trillion, up from $5.09 trillion a year ago and $4.03 trillion three years ago, according to Federal Reserve data.

There's an additional $2.7 trillion sitting in money market mutual funds.

Most of the combined $8.3 trillion in those cash accounts is earning close to zero interest. That's a massive chunk of capital producing almost no return for its owners. To put it in perspective, the sum in cash accounts is 52% of the value of the entire U.S. stock market as measured by the Wilshire 5,000 index.

Sunday, June 19, 2011

After QE2 Ends It Continues, But on a Far Less Grand Scale

At least for the time being.

Tom Petruno for the LA Times notes:

The Fed may be slow to consider more stimulus for another reason: It still will be reinvesting the proceeds from its total $2.6-trillion securities portfolio in more Treasuries. And the central bank seems certain to keep short-term interest rates near zero for the time being. So in Fed parlance, policymakers remain very "accommodative" for growth.

Readers are left to wonder just how much money is involved when the Fed reinvests "the proceeds from its total $2.6-trillion securities portfolio."

According to the Federal Reserve, here, the earnings of the Fed in 2010 break down as follows:

The Reserve Banks reported comprehensive income of $81.7 billion in the year ended December 31, 2010, up from the year prior.

Total comprehensive income included interest earnings of $44.8 billion on the federal agency and government-sponsored enterprise (GSE) mortgage-backed securities (MBS) holdings,

$26.4 billion on holdings of U.S. Treasury securities,

and $3.5 billion on holdings of government-sponsored enterprise debt securities.

In addition, total comprehensive income included interest income of $3.5 billion on loans to depository institutions and others.

The consolidated LLCs contributed to the Reserve Banks’ comprehensive income, with net earnings of $7.6 billion for the year ended December 31, 2010. ...

Net earnings from the [System Open Market Account] portfolio were approximately $76.2 billion; most of the earnings were attributable to interest income on Treasury securities and federal agency and GSE MBS.

So compared to the QE2 program of $600 billion in purchases, the Fed's intention to reinvest the proceeds of about $75 billion annually in like instruments represents a continuation of the program, but scaled back by roughly 85 percent.

Various scenarios for the unwinding of the Fed's massive balance sheet are discussed here.

Monday, November 29, 2010

Tom Petruno on the Zombie Bears

Not once in this more or less even-handed discussion does the massive rot infecting bank balance sheets because of declining housing and commercial real estate prices get mentioned.

You'd never know that half of the nearly 8000 banks in this country have serious problems, nor that the savings of millions of Americans have disappeared because of the bursting of the housing bubble.

But hey, we can live with rot, and maybe even recover, right? Cancer patients do it all the time. Except for the ones that die.

Against the sickening round of prolonged chemotherapy and radiation currently being applied through extend and pretend and stimulative liquidity, the bears instead advocate surgery:

The zombie bears are certain that the worst lies ahead, and that consumers and investors should prepare accordingly — although how exactly to prepare is a matter of debate.

"We need a deleveraging, deflationary depression, and in three to five years we're going to have a much better economy," said Michael Pento, senior economist at Euro Pacific Capital in New York.

"We just have to go through hell in the meantime."