By the By…
While we’re all discussing tea parties, the financial news out this week actually looks pretty good. Two major banks are recording big profits, and TARP advocates are, not unreasonably, claiming a little premature vindication. Granted, these are two strong banks that probably wouldn’t have failed even without the TARP money, but without the TARP money, the banks that will probably in the long run very likely would have pulled these guys down with them. With these banks rebounding, there’s the capacity for the financial industry as a whole to pull itself back up by the bootstraps, and be in a position where the sicker gazelles can fall behind without the herd as a whole getting eaten alive.
NEW YORK (MarketWatch) — Wells Fargo & Co. said Thursday that first-quarter earnings will surge to a record $3 billion, well ahead of analyst forecasts, as loan losses and provisions dropped from the previous difficult quarter and its mortgage business thrived.
Wells shares jumped 22% as the bank also noted its Wachovia acquisition is exceeding expectations and reported another quarter of double-digit revenue growth.
Wells said first-quarter net income will be roughly $3 billion, or 55 cents a share, after paying dividends on preferred securities, including $372 million to the Treasury Department. Analysts surveyed by FactSet Research expected profits of 31 cents a share on average.
Goldman Sachs Group Inc. said Monday it swung to a profit in the first-quarter compared to the prior period, and announced it has commenced a public offering of $5 billion of its common stock.
Goldman Sachs said net earnings for the period ended in March were $1.8 billion, or $3.39 a share, compared to $1.5 billion, [...] Analysts had been anticipating earnings of $1.64 a share, according to Thomson Reuters data. [...]
Goldman Sachs said in a statement that it intends to use proceeds of the $5 billion offering to help redeem “all of the TARP capital.”
Again, the debate is so complex that it’s hard to take that as evidence of anything too specific. But still, it’s better that they’re rebounding than not, eh?
I don’t know, have we eliminated the possibility of more CDO/CDS hijinks?
Comment by Mortexai — 4/14/2009 @ 12:02 am
No.
Comment by tessellated — 4/14/2009 @ 12:03 am
Seems kinda pointless then, don’t it?
Comment by Mortexai — 4/14/2009 @ 12:21 am
Potentially, yes. The most helpful resource on this stuff — the current crisis, explaining the various financial instruments AKA the alphabet soup jargon, along with expert opinion — has been over at Baseline Scenario. They have become slightly more optimistic in tone recently, but they have been calling for a breakup of what they essentially view as a banking oligarchy.
Comment by tessellated — 4/14/2009 @ 12:39 am
Actually, there is speculation that some of these happy-talk numbers from the banks are a response to fear of tough new rules about how banks can operate in the CDS market etc. So, I’d say your skpeticism is warranted.
Comment by tessellated — 4/14/2009 @ 12:58 am
That’s what I’m really getting at here, the first priority in my opinion should have been to plug the holes, and only then worry about bailing out the banks. This is my overriding concern in the whole mess, the real problem has been largely ignored in the wrangling over the disposition of the money, not that the money isn’t important, but if we stabilize the economy and then the banks go back to playing the same games, we get what, a decade at most before we’re screwed again?
Comment by Mortexai — 4/14/2009 @ 1:08 am
Well, I think your impulse has the right motivation behind it, but the general consensus is that the bailout couldn’t wait. Even Simon Johnson over at Baseline Scenario agrees with that much. When the shit hits the fan you MUST act and fast. So, I don’t fault the administration for putting up the money first (this one or the previous one, even).
I watched a really great Frontline piece that detailed the events last September which drove Paulson over the edge to supporting the original TARP plan. Paulson HATED it. He’s a Goldman Sachs alumn and a total free-marketeer. This is the guy who let Lehman go down in flames, but after seeing the total wreckage caused by the meltdown of one smallish investment house he was so frightened he did an about face.
It’s a very delicate dance this administration is having to do between balancing public opinion, Capitol Hill politics, and Wall Street influence. The most direct way of instituing preventative regulation would be to takeover the banks, break up the existing elite power structures, and then re-privatize them under reformed market rules. I don’t think I have to tell you why that’s a tough sell in America. Therefore Obama is trying to negotiate this sort of middle-path between a complete reset and just doing nothing at all.
I don’t know if it will work or not in the end, but I guess I do have to say it has seemed to help in the short-term. I suppose we’ll see what the next half year brings as far as reform. Hopefully we’ll see something more concrete soon.
Comment by tessellated — 4/14/2009 @ 1:36 am
Ok, so is it too much to ask for the processes to be simultaneous?
Comment by Mortexai — 4/14/2009 @ 2:46 am
It just goes to show you that it you give them 12 billion by way of AIG, they can make a 5 billion dollar profit. I suspect that they will continue to be able to profit as long as the Feds make good other losing investments that they made.
Comment by Coogan — 4/14/2009 @ 10:07 am