TPC has a good piece from Annaly Capital Management on the banks profit “mirage”:
If banks had held their coverage ratio steady at 63.6%, where it was in the previous quarter, this would have called for an additional provision of $12.9 billion, which more than wipes out the $2.8 billion in “profits” for this quarter. Instead, to produce those headline profits, the coverage ratio drifted further south, to stand at only 60.1%. It’s impossible for outside observers to say what level of reserves is adequate to cover future losses. After all, if a loan is collateralized, losses won’t total 100% of the loan. We can’t say what the “correct” amount of provisioning is, but it isn’t 60%. The average coverage ratio in the nearly 15 years before the crisis began is roughly 140%. The current coverage ratio won’t do, not when credit continues to deteriorate (and not if you want an active and lending banking system).
Clearly, the administration continues to allow the banks to “extend and pretend”. Can this be continued indefinitely?
Slope of Hope provides interesting perspective on the Dubai crisis…via Boston Wealth:
Dubai is a minor aftershock! The real big story to bring the markets down in 2010 is going to be something else.. I mean Dubai is chump change.. to wit from the sovereign GCC countries:
- Abu Dhabi lost 183 billion yes billion so far or 40% of its investments.
- Qatar lost 27 billion or 40%
- Kuwait lost 94 billion or 35%
- Saudi Arabia lost 162 billion or 12%…
Add them up! $466 billion and our bailout was $250 billion and up to $700 billion ..so that region is already down almost twice us much as we are!!!! Now how much was our bailout.. look how much they lost.. where is the outrage and market meltdown over that.. we are now worried about postponing of some 50 billion by Dubai!… small potatoes compared to what the region has also lost..
You really have to understand the politics of the region! Has anyone stopped for a minute to see that this is a smoke screen diversion to take away what a deposed ruler of one of the emirates has been doing in New York as recently as last month! http://www.nypost.com/p/news/local/sheik_takes_ny_bus_in_royal_war_hmrILwZhRFNG25uDW83TiI
And yes the UAE is very afraid of being attacked by Iran! http://www.sheikhkhalidrak.com/blog/
as Iran has already unilaterally taken over some of the UAE’s fresh strategic Straight of Hormuz islands
http://en.wikipedia.org/wiki/Greater_and_Lesser…
