Just when we were told that the governments and central banks of the world had put the financial crisis behind us, the governments of Europe found it necessary to commit more than a trillion dollars to support of the financial system – a $962 billion facility to support the weak periphery of the Eurozone, plus an unspecified volume of outright purchases of government bonds by the European Central Bank as well as Germany’s Bundesbank, not to mention an emergency swap facility by which the Federal Reserve will lend Europe all the dollars it requires.
The banking system really was about to come down. The reason is that sovereign debt is a bigger problem than subprime mortgages ever were. We know from available data that two-thirds of the US deficit, according to available numbers, has been financed by domestic as well as foreign banks during the last quarter of 2009 and the first quarter of 2010. Thi
Panic: The Betrayal of Capitalism by Wall Street and Washington (Richard Vigilante Books, 2010) co-authored by Redleaf and Richard Vigilante, the communications director of Redleaf’s hedge fund, is a compelling work. It is for the most part an intellectual history of the financial meltdown, demonstrating how Wall Street became the victim of its own faulty paradigms. Unfortunately, the book could not be written in the past tense because most of these paradigms are still secure atop their pedestals. Unt
2. On a related subject, the non-accrual portfolio picture looks encouraging. Yes, 3 companies were added to the non-accruing club this quarter (and one removed).
Subtitle: Ending the World’s Ongoing financial plague with Limited Purpose Banking. Laurence Kotlikoff has revived Fisher’s 100% Money proposal (which I also reviewed) under the name of Limited Purpose Banking, which is setting the reserve ratio at 100%. The idea is that you have only two types of banks. Cash mutual funds hold your cash and give you access to money as a means of payment, while all other mutual funds take your money and invest it in one asset class only. Therefore, if a financial institution goes down, it does so without side effects. Financial plague solved. Or so Kotlikoff claims.
Fund manager of the decade Bruce Berkowitz and his Fairholme Fund recently increased their stake in American International Group (AIG). We had previously revealed his new AIG stake and then posted up when SEC filings confirmed his position size. Fairholme recently filed an amended 13G with the SEC disclosing that they now have an 18.9% ownership stake in AIG representing 25,467,800 shares due to activity on April 30th, 2010. This is quite a sizable increase as Berkowitz previously had an 11.1% stake in the company. This means that over the past month and a half, Fairholme has added 10,429,700 more shares, a 69.4% increase in their position size.