Assorted links


It seems like you occasionally test on the means of conveying these links. Here's a qualitative response, +1 is difficult hypertext to click on.

Bad for all the cited reasons. Plus two additional factors.

1. from the article: ". . . it will have to sell common shares to raise capital."

Probably so, and this misdeal will make capital restoration more difficult b/c the Buffet cumulative preferred "screwed" current and future common shareholders who will see no return until Buffet "gets out of the way." Why would anyone buy additional needed common equity, now?

2. The Buffet money doesn't qualify asTier 1 capital and (see 1) hurts future capital raising efforts. To those concerned with "safety and soundness" (the Fed and FDIC) is concerned, the Buffet deal would be unsafe and unsound.

3. (I lied) It proves BAC is worse than it discloses and BAC management stinks.

Disclaimer: I am not a BAC shareholder. I advise shorting both BAC and C.

As a holder of BAC's debt and stock, I can say that BAC and indeed all of the large banks have balance sheets that are black boxes. I chuckle when I read articles that say things like J.P. Morgan has a solid sheet or WFC has a shakier balance sheet than BAC. Is there a single person in the world that is in a good position to make these comparisons?

More than anything else, this crisis has been an accounting crisis. Through rotten accounting standards and even more rotten interpretations of those standards, companies, particularly in finance, have worked hard and successfully to completely blind markets and even themselves to their true state. What's worse, very few people seem to understand that it is uncertainty over the current state of things, rather than the future, that is the dark cloud hangining over the economy and driving such mad volatilty in the markets. Efficient markets thrive on information. We don't have efficient markets, because companies have become very good at preventing the collection and dissemination of information about them.

I think you are corrcet, KLO.

The external auditors, FRB, and SEC should be on this. They are not.

Case in point: old FAS 15 GAAP (the ASC Subtopic numbers give me brain freeze) for troubled debt retsrutures was updated recently. I bet none of the banks is doing that correctly.

I also bet, banks have not appropriately provided valuation allowances for incurred credit losses in distressed and subprime 1 to 4 family residential mortgage loans. One example: they modify a 30 year mortgage for one year. There is no evidence that at the end of the year the borrower will be able to return to making contractual payments (or who is paying taxes and insurance). Dollars to donuts the PV of "expected" cash flow calculation assumes the return to contract payments and minimal impairment is calculated and recognized.

2. Fantastic.

Re: number 6--Yes, it's a good piece, but this snippet is too dumb to be there:

“What they hadn’t imagined,” says Newhouse, picking his words carefully, “was an intentional act of human causative agency.”

Hmmm ... April 1995, Oklahoma City, 168 deaths, over 600 additional injuries, over 300 buildings destroyed or damaged, estimated $2/3 billion in damages.

And those disaster insurance experts hadn't imagined a terrorist attack?

One wonders, with billions of people, some crazy and hateful, shouldn't human agency be the #1 expected cause?

Ahh, but those losses were in fly-over country. They didn't matter.

Seriously, while the reinsurers don't have any external reasons for bias, they have plenty of internal ones. I cannot imagine entering that business given what I know of human nature.

Number 6. It would be interesting to know if any catastrophes have moved back on to the "insurable" list -- the article makes it seems like once in the uninsurable category they never go back.

Tyler, courtesy of your fraudulent-clown-in-chief a new SNL episode

The writer of the insurance article should be ashamed of themselves for failing to discuss the terrorism risk insurance act of 2002 (still law). The Federal Government pays the losses accruing to reinsurers that exceed $50m...and reinsurance only covers $50m...strange.

Regarding the reinsurance piece, perhaps the message should be "why do governments choose to self-insure risks they could reinsure" rather than "the risk business can tell us a lot about catastrophes".

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