Shockingly, the stress tests seem to indicate that Citibank and Bank of America need to raise capital; perhaps that's why I got a notice in the mail yesterday that my Bank of America credit card fees were going up. I know, I know . . . you didn't see this coming. None of us did. You may be feeling that if Citibank and Bank of America can't pass the stress tests without more capital, there's no hope for any financial institution. You may be pricing canned beans and ammunition. You may be wondering if there's any point in going on. This is what valium is for.
What I'm not clear on is how this helped. I think Bank of America and Citibank were well aware that they really needed some capital to steady their balance sheet. Certainly, the rest of us weren't in any doubt. But capital's sort of scarce right now--you may have read something about it in the papers. Announcing to the world that Bank of America and Citibank are kinda teetering doesn't seem likely to help them tap the capital markets. It's yet another roundabout way of saying, "Hey, you know, I think we have to give you some more money."
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Got the same letter in the mail yesterday. At least all the fees are for things I never use a credit card for, and probably never will. I didn't even know you could do an EFT with a credit card.
BoA owns 50% of Blackrock, 17% of China Constuction Bank, and assorted pieces of Banco Itau and Banco Santander. Adding up those pieces comes to about #35 billion. Plus they own Columbia asset management and First Republic Bank.
They should be able to sell some combination of those assets to raise any capital they may need.
As a side point, this recent emphasis on TCE is beyond silly.
I've never paid a fee to BOA, but I throw out all their junk mail so I'll just have to cross my fingers I guess.
I used to have one personal BOA card, but then they bought MBNA which had my business card, which I think is really symptomatic of the whole mess we're in now.
If interest rates rise, and I don't see how they don't sometime in the next 2 to 3 years with all the governments borrowing, the real holes in the balance sheets will be truly gargantuan.
This is what valium is for.
No! No! No! This is what bourbon is for.
I think that holding off until now to announce, "officially", the problem, and delaying the bankruptcy for half a year, allows the markets time to get used to the idea. Whereas if it had all been done, at once, in January, the markets might've had a conniption.
So the slow way reduces the damage. To a point. We want to avoid the Zombie Bank problem.
I know a few in finance who prefer their vaporizers to both tranqs or booze.
Interesting. The gummint owns a large chunk of BoA and Citibank. The banks need to raise capital so among other measures they are raising fees and the interest rates of credit cards. But the O just came down from the podium railing against the raising of fees and interest rates. What to do?