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US banks would lose $460bn if crisis struck again - (www.telegraph.co.uk) America's biggest banks would face losses of almost half a trillion
dollars should a deep financial crisis and recession hit the US again,
regulators said. The losses of $462bn (£308bn) for the country's biggest 18
banks were projected by the Federal Reserve's 'stress test', an annual exercise
the central bank now conducts to monitor the resilience of the financial
system. The losses would be racked up under the Fed's most extreme scenario in
which unemployment climbs to 12pc, house prices tumble 21pc and stock markets
halve in value over the next two years. Overall, the Fed said that just one of
the banks it tested, Ally Financial, failed to maintain a 5pc Tier 1 common
equity ratio - a key measure of a lender's health - under the most extreme scenario.
Rigging the IPO game - (www.nytimes.com)
ONCE upon a time, in a very different age, an Internet start-up called
eToys went public. The date was May 20, 1999. The offering price had been set at $20, but investors
in that frenzied era were so eager for eToys shares that the stock immediately
shot up to $78. It ended its first day of trading at $77 a share. The eToys
initial public offering raised $164 million, a nice
chunk of change for a two-year-old company. But it wasn’t even close to the
$600 million-plus the company could have raised if the offering price had more
realistically reflected the intense demand for eToys shares. The firm that underwrote
the I.P.O. — and effectively set the $20 price — was Goldman Sachs. After the
Internet bubble burst — and eToys, starved for cash, went out of business —
lawyers representing eToys’ creditors’ committee sued Goldman Sachs over that
I.P.O. That lawsuit, believe it or not, is still going on. Indeed, it has taken
on an importance that transcends the rise and fall of one small company during
the first Internet craze
Italy's credit rating downgraded - (money.cnn.com) Fitch
downgraded Italy's credit rating Friday, saying the lack of a stable government
in Rome puts the nation's already fragile economy at risk. The No. 3 ratings
agency cut Italy's credit rating to BBB+, which is still investment grade. The
outlook for Italy is negative, suggesting that further downgrades are possible.
Italy has been without clear leadership for weeks as politicians struggle to form
a coalition following last month's inconclusive election. Fitch
said it is unlikely that a stable government will be formed in the next few
weeks. "The increased political uncertainty and non-conducive backdrop for
further structural reform measures constitute a further adverse shock to the
real economy amidst the deep recession," the agency said.
Jobs numbers are far worse than they look - (www.marketwatch.com) Economists were surprised by the massive "beat" in Friday's reported
job numbers. The unemployment rate dropped 0.2 percentage points to 7.7% and
the economy allegedly added 236,000 jobs. But is that what really happened? Not
really. According to the household survey (on which the unemployment rate is
based), the economy added a healthy 170,000 jobs. The survey also shows a
tremendous increase of 446,000 part-time jobs. What this means is that the
economy actually shed 276,000 full-time jobs. The Bureau of Labor Statistics
labeled those 446,000 part-time jobs as "voluntary,” but I am not so sure.
Credit Boom Warning Sign? Buybacks Hit $1 Trillion - (www.cnbc.com) Corporate buybacks have surpassed the $1 trillion mark for the
first time since 2009, a sign the credit boom is reaching new heights,
according to Brian Reynolds, chief market strategist at Rosenblatt Securities. "Buyback
announcements for the S&P have now topped the trillion dollar mark for this
credit boom. And even though this boom is about to begin its fifth year, this
past month has seen the fastest growth for buyback announcements, as if CEOs
are making up for lost time," Reynolds said in a note on Wednesday. He
said buybacks, where a company repurchases its own outstanding shares to reduce
the number of shares in the market, have helped boost share prices.
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