US Finance World

Summary

1. EU Debt Crisis: Scheduled, Potential Events, Ramifications
   1. EU Finance Ministers Meetings May 17th-18th: Sovereignty Or The Euro?
   2. Needed EU Control Over National Budgets = End of National Sovereignty
   3. Indicators of PIIGS Bond Sentiment
   4. Major EU Stock Exchanges and Financial Stocks
   5. ECB Bond Sterilization Plans
   6. Ramifications Of EU Actions This Week
2. Growing Deflation Story EU, China, US, Japan And Ramifications
3. US Banking Investigations

Longer Term Technical Perspective

The EU’s crisis is primarily due to its unworkable combination of a unified currency with independent national spending. That has permitted the unaffordable spending of Greece and the other PIIGS to threaten the EU’s existence. Tha

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Ilove life! And I love it more when I take stock of the many blessings I enjoy every day as a wife, mother, and home-based business owner. That’s why I love the Gratitude Journal iPhone app, which I discovered through my friend Anne-Marie Faiola at Brambleberry. The Gratitude Journal makes it easy and fun to express gratitude quickly and in the moment. This video shares how it works. <

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Midwest Bank Holdings (MBHI) was the latest recipient of the Troubled Asset Relief Program (TARP)’s funds to be seized by the Federal Deposit Insurance Corporation (FDIC). Most of its assets and deposits were sold to Firstmerit (FMER), an Ohio based lender who escaped TARP early and has went on to a very profitable acquisition binge. The FDIC sales are largely made on attractive terms to the buyer to facilitate a quick transaction.

The taxpayers’ $84.8 million convertible preferred stock stake is all but certain to be wiped out. This is the fourth bank in the TARP’s Capital Purchase Program (CPP) for healthy banks that has been restructured in bankruptcy of FDIC receivership. It is the third largest bank to do so behind CIT Group and UCBH Holdings which received $2.33 billion and $298.7 million from taxpayers, respectively. MBHI received more taxpayer funds than Pacific Coast National which only received $4.12 million. MBHI was one of 82 banks that missed interest or dividend payments to the U.S. Treas

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Just weeks after going public, Solar Capital (ticker: SLRC), a newly minted Business Development Company (“BDC”), announced the sale of 5.89mn shares of existing stock held by many of the major shareholders. The stock market did not approve, trading the stock down 6% on the day to $22.07. That’s 9% down from the 52 week high.

We were curious and read the regulatory filings relating to the transaction, and came away feeling OK about the whole episode. Certainly the sophisticated investors who funded Solar Capital originally (the company is only 3 years old) appear to be making out well. If we read the filing right the selling shareholders bought in at a stock price of $15, so at $22 that ’s a nearly 50% gain.

However, the price is at or below Net Asset Value (“NAV”), which was pegged at $22.18 at the last quarter. Moreover, m

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There are numerous themes we’re seeing with regards to arbitration claims and lawsuits filed and submitted against the broker-dealer houses. One major theme is the possible misrepresentation, or material omission, of risks associated with investments in complex CDO products that subsequently went bad, or awful.

Certain CDOs are good: the run-of-the-mill CLOs, for example, turned out just fine (aside from some slight hiccups with certain Lehman LCDS CDOs that were hit by the torturous ipso facto clause decision in U.S. bankruptcy court). Several market participants, however, are trying to estimate comparative litigation risk by estimating the percentage market share of all CDOs, assuming that all CDOs are toxic. This is a mistake: it usually portrays banks like JP Morgan (JPM) as a comparatively high litigation risk (>10% market share) by this metric, whereas JPM was indeed rather a small player (<4% market share) in structuring the CDOs that subsequently underperformed. T

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On April 28th I published a piece on the FHLBs. Later I was contacted by the FHFA (the regulator for the FHLBs). They pointed to a factual error in my post and asked me to publish a correction.

I said the following:

Fannie (FNM) and Freddie (FRE) will cost us at least $400 billion. Add in another $100b for the FHLBs.

It is not correct that the FHLBs will suffer total losses of $100b. The FHFA provided a link to a balance sheet of the FHLB’s. The following is a slide of that report. As you can see (click to enlarge) there is a line item marked investments of $284B.

I relied on a the following sentence from an FHFA report to evaluate the investment portfolio:

FHLBanks’ investment portfolios consist primarily of MBS securities, chiefly Agency MBS or highly rated private-label MBS.

When I think of the term, “private label MBS” I immediately think losses. And i

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One of my favorite cartoons for the paranoid is a fitting companion for the graph that follows:

From the 5-Min. Forecast comes a recasting of a familiar graphic to those following the housing market:

This does indeed look like the eye of the storm for mortgage problems, but it may not be as bad as it might look. Here are two reasons:

1. The biggest part of the second wave is comprised of Option ARM mortgages, which are not necessarily of low quality.
2. Interest rates remain historically low and resets may occur with little increase in payment. I have received reports from individuals who have reset to lower rates during the past year.

However, there are reasons that Option ARMs could become a problem.

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State Street Corporation (STT) reported its first-quarter 2010 results on April 20. Operating earnings for the reported quarter were in line with the Zacks Consensus Estimate. However, results were substantially down from the year-ago quarter’s earnings. Investors were clearly not moved at all by these results. As a result, the share price significantly plummeted following the earnings release.

Also, analysts covering the stock now have responded negatively as they had sufficient time to absorb and consider the near-term fundamental downsides.

Let’s now cover the results of the recent earnings announcement, subsequent analyst estimate revisions and the Zacks ratings for both the short-term and long-term outlook for the stock.

Earnings Report Review

Achieving the estimates should be a positive for the stock price, and this inspires optimism for a stable future. But

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