Writedowns past and present - FT

Published: May 13 2009

How severe is the state of Europe’s banks? The answer depends on the losses the banks have yet to recognise in their accounts and the amount of profit they can generate in coming years to absorb those losses. In the absence of other data, the most credible estimate of future losses so far has come from the IMF, which set out detailed forecasts in its global financial stability report, published last month.

Smaller US banks need an additional $24bln capital - FT‏

STILL STRESS TESTING the system, research done for the FT has revealed that smaller and mid sized US BANKS may require an additional Usd 24bln in capital, when applying the standards set by the govt in its recent stress tests of the US's 19 largest institutions. The deficits amt to Usd 16.2bln for the next 200 largest banks after the top 19 banks thatwere already examined and $7.8bln for the remaining 7,700 banks. The US Tsy has said that it does not intend to extend the stress tests beyond the19 top institutions. However news of the potential capital shortfall may well increase pressure on many of the 7,900 US banks that form the backbone of the US financial system; resulting in a wave of takeovers and consolidation in the industry.

Fed's Fisher: US Recovery Will Be a 'very Slow Slog'‏

FED'S FISHER SAYS U.S. RECOVERY LIKELY TO BE A `VERY SLOW SLOG' FED'S FISHER The Dallas Fed chief is speaking to a Texas bankers group, saying the Fed's action has brought the economy back from the"abyss", with signs now emerging that worst of decline is easing. But hecautious that economy apt to bounce along the bottom "for a while", with recovery to be a very slow slog, not a V-shaped snapback, nor even a U-shaped one. Moreover, he thinks price pressures will be "meek" with riskon the deflationary side.

Greenspan Sees ‘Seeds of a Bottoming’ in U.S. Housing - Bloomberg

By Vivien Lou Chen and Dawn KopeckiMay 12 (Bloomberg)

Former Federal Reserve Chairman AlanGreenspan said that the decline in the U.S. housing market maybe bottoming and it’s “very easy to see” financial marketscontinuing to improve.“We are finally beginning to see the seeds of abottoming” in the housing industry, Greenspan said today duringa conference of the National Association of Realtors inWashington. The U.S. is “at the edge of a major liquidation”in the stock of unsold properties, which may help to stabilizeprices, Greenspan said.Home-sales figures in recent weeks have shown a slower paceof decline, and the slide in property prices has eased,according to gauges including the S&P/Case-Shiller index.The former Fed chief, who was among the first prominenteconomists to warn about the risk of a recession in 2007, saidhousing prices could fall another 5 percent without putting toomuch strain on the economy.“We run into trouble if it’s very significantly more thanthat,” Greenspan said. Housing prices remain “the criticalAchilles’ heel” of the economy.While the housing bottom may not be obvious in prices, itis becoming clear in “significant regional differences,” wheresome of the hardest-hit areas are starting to show signs ofimprovement, he said.Greenspan said in congressional testimony in October that“a flaw” in his free-market ideology contributed to the“once-in-a-century” credit crisis.

Less Trouble

Today, Greenspan said companies are having less troubleraising money. U.S. firms have sold bonds at a record pace sofar this year, including a $3.75 billion offering today fromMicrosoft Corp., the world’s largest software maker.Wells Fargo & Co. and Morgan Stanley raised $16.6 billionin stock and bond sales on May 8, just a day after thegovernment ordered them to raise capital, becoming the firstbanks to respond to the government’s mandate.“Company after company has been raising capital and theyare getting far more than they expected,” said Greenspan, 83,who left the Fed in January 2006 after almost two decades at thehelm and has returned to his former role as a private economicforecaster. With the expansion in market liquidity, “you begin to see,as we are seeing today, a very significant rise in theavailability of money,” Greenspan said. As markets improve,“it’s very easy to see that it’s going to continue for anindefinite period,” he said.

Prices Fell

U.S. home prices fell the most on record during the firstquarter from the prior year as banks sold seized homes andforeclosures persisted at a high rate in California and Florida.The median U.S. housing price fell 14 percent during the quarterto $169,000 year-over-year, the National Association of Realtorssaid earlier today.U.S. banks held $26.6 billion of repossessed real estate atthe end of 2008, more than doubling from a year earlier,according to the Federal Deposit Insurance Corp. in Washington.Greenspan’s decisions as a central banker have come underscrutiny in recent years after the fall in home prices triggereda collapse in mortgage financing and other credit.Under Greenspan’s leadership, the Fed left the overnightlending rate between banks at 1 percent from June 2003 untilJune 2004. Regional Fed presidents such as Gary Stern ofMinneapolis and Janet Yellen of San Francisco have publiclyquestioned the Fed’s hands-off approach toward asset bubbleslike the one that emerged in house prices during Greenspan’stenure.

Kept Rates Low

Former Fed Vice Chairman Alan Blinder, Stanford Universityprofessor John Taylor and other economists say Greenspan’sapproach of keeping rates low for an extended period helped tofoster the housing bubble.“I’ve always argued going back many decades that you donot capitalize a piece of real estate with overnight interestrates,” the former chairman said today in response to anaudience question.The housing market is instead fueled by a decline in long-term interest rates, which started a full year before the Fedbegan cutting the federal funds rate, Greenspan said.“I think there is a recalibration of financial historythat I find very puzzling,” he said.Referring to his critics, he said, “I can say that Irespectfully disagree. They’re wrong.”

La crise et Bâle II pèsent lourd sur les fonds propres en Europe - Les Echos

Elsa Conesa - 13 mai 2009

La dégradation de la qualité du crédit ainsi que l'accroissement des risques de marché constatés à la fin 2008 provoquent une surconsommation de fonds propres calculés selon les critères imposés par Bâle II à laquelle les banques américaines ne sont pas soumises.

Pour les banques européennes, la crise a un double effet ravageur. Elle affecte évidemment les revenus et la qualité des actifs mais, en plus, ses effets sont amplifiés par les règles de solvabilité liées à Bâle II qu'elles appliquent depuis début 2008.
Une double peine à laquelle les banques américaines, qui n'appliquent pas encore ces nouvelles normes, ne sont pas soumises. A l'origine, les règles prudentielles de Bâle II devaient permettre aux banques d'affiner leur mesure du risque en prenant en compte non seulement le risque de crédit mais aussi le risque de marché et le risque opérationnel dans le calcul des encours pondérés. Ces mesures devaient symétriquement permettre de mieux évaluer la consommation de fonds propres alloués et d'obtenir in fine des ratios de solvabilité Tier-1 plus fidèles à la réalité. Les banques françaises ayant en outre opté pour la méthode dite avancée, elles calculent elles-mêmes leurs risques de crédit.
Avec Bâle II, la dégradation de la situation financière des entreprises et l'accroissement de la volatilité sur les marchés coûtent très cher en fonds propres. L'abaissement de la note d'un client provoque, par exemple, si une provision est constatée, une surconsommation de fonds propres qui n'existait pas avec Bâle I. Certains l'évaluent entre 15 % et 50 % de plus par rapport à Bâle I. Les banques, qui gèrent leur capital au plus près, tendent alors à reporter les provisions.
« Elles préfèrent attendre la situation de défaut et traiter les dossiers au cas par cas », dit un banquier. Une attitude qui se ressent dans le traitement de la dette LBO. « Au cours du ecycle précédent, les banques anticipaient les défauts et passaient des provisions, ce qui leur permettait de lisser les résultats. Avec Bâle II, cela consomme trop de fonds propres, elles font tout pour différer le traitement des dossiers problématiques. La démarche s'est jusqu'à présent révélée payante car aucun gros dossier de LBO n'a fait défaut pour l'instant. »

Répercussions sur la VaR

Les effets cumulés de la crise et de Bâle II vont en outre se ressentir dans les risques de marché. La forte volatilité de la fin 2008 s'est répercutée sur la VaR (« value at risk »). Cet indicateur, qui mesure les risques de marché constatés au cours des 250 derniers jours, entre dans le calcul des risques de marché. Au dernier trimestre, la VaR des établissements qui ont des activités de marché a bondi, doublant même chez certains.
Cet accroissement brutal va perdurer dans le calcul des VaR moyennes jusqu'à la fin de l'année. « Entre janvier 2008 et janvier 2009, la même position de marché consommait 2,5 fois plus de VaR », constate un dirigeant de banque d'investissement. En d'autres termes, il faut 2,5 fois plus de fonds propres en ce début d'année pour la même position de marché qu'il y a un an.

Moody’s says spending threatens US rating

By Francesco Guerrera, Aline van Duyn and Daniel Pimlott in New York
Published: January 10 2008

The US is at risk of losing its top-notch triple-A credit rating within a decade unless it takes radical action to curb soaring healthcare and social security spending, Moody’s, the credit rating agency, said on Thursday.
The warning over the future of the triple-A rating – granted to US government debt since it was first assessed in 1917 – reflects growing concerns over the country’s ability to retain its financial and economic supremacy.

It could also put further pressure on candidates from both the Republican and Democratic parties to sharpen their focus on healthcare and pensions in the run-up to November’s presidential elections.
Most analysts expect future governments to deal with the costs of healthcare and social security and there is no reflection of any long-term concern about the US financial health in the value of its debt.
But Moody’s warning comes at a time when US confidence in its economic prowess has been challenged by the rising threat of a recession, a weak dollar and the credit crunch.
In its annual report on the US, Moody’s signalled increased concern that rapid rises in Medicare and Medicaid – the government-funded healthcare programmes for the old and the poor – would “cause major fiscal pressures” in years to come.
Unlike Moody’s previous assessment of US government debt in 2005, Thursday’s report specifically links rises in healthcare and social security spending to the credit rating.
“The combination of the medical programmes and social security is the most important threat to the triple-A rating over the long term,” it said.
Steven Hess, Moody’s lead analyst for the US, told the Financial Times that in order to protect the country’s top rating, future administrations would have to rein in healthcare and social security costs.
“If no policy changes are made, in 10 years from now we would have to look very seriously at whether the US is still a triple-A credit,” he said.
Mr Hess said any downgrade in the US rating would have serious consequences on the global economy. “The US rating is the anchor of the world’s financial system. If you have a downgrade, you have a problem,” he said.
Moody’s did once threaten to cut the rating of some of the US Treasury’s debt when Congress refused to pass the president’s budget in the mid-1990s.

America’s triple A rating is at risk - FT

By David Walker - Published: May 12 2009 20:06

Long before the current financial crisis, nearly two years ago, a little-noticed cloud darkened the horizon for the US government. It was ignored. But now that shadow, in the form of a warning from a top credit rating agency that the nation risked losing its triple A rating if it did not start putting its finances in order, is coming back to haunt us.
That warning from Moody’s focused on the exploding healthcare and Social Security costs that threaten to engulf the federal government in debt over coming decades. The facts show we’re in even worse shape now, and there are signs that confidence in America’s ability to control its finances is eroding.
Prices have risen on credit default insurance on US government bonds, meaning it costs investors more to protect their investment in Treasury bonds against default than before the crisis hit. It even, briefly, cost more to buy protection on US government debt than on debt issued by McDonald’s. Another warning sign has come from across the Pacific, where the Chinese premier and the head of the People’s Bank of China have expressed concern about America’s longer-term credit worthiness and the value of the dollar.
The US, despite the downturn, has the resources, expertise and resilience to restore its economy and meet its obligations. Moreover, many of the trillions of dollars recently funnelled into the financial system will hopefully rescue it and stimulate our economy.
The US government has had a triple A credit rating since 1917, but it is unclear how long this will continue to be the case. In my view, either one of two developments could be enough to cause us to lose our top rating.
First, while comprehensive healthcare reform is needed, it must not further harm our nation’s financial condition. Doing so would send a signal that fiscal prudence is being ignored in the drive to meet societal wants, further mortgaging the country’s future.
Second, failure by the federal government to create a process that would enable tough spending, tax and budget control choices to be made after we turn the corner on the economy would send a signal that our political system is not up to the task of addressing the large, known and growing structural imbalances confronting us.
For too long, the US has delayed making the tough but necessary choices needed to reverse its deteriorating financial condition. One could even argue that our government does not deserve a triple A credit rating based on our current financial condition, structural fiscal imbalances and political stalemate. The credit rating agencies have been wildly wrong before, not least with mortgage-backed securities.
How can one justify bestowing a triple A rating on an entity with an accumulated negative net worth of more than $11,000bn (€8,000bn, £7,000bn) and additional off-balance sheet obligations of $45,000bn? An entity that is set to run a $1,800bn-plus deficit for the current year and trillion dollar-plus deficits for years to come?
I have fought on the front lines of the war for fiscal responsibility for almost six years. We should have been more wary of tax cuts in 2001 without matching spending cuts that would have prevented the budget going deeply into deficit. That mistake was compounded in 2003, when President George W. Bush proposed expanding Medicare to include a prescription drug benefit. We must learn from past mistakes.
Fiscal irresponsibility comes in two primary forms – acts of commission and of omission. Both are in danger of undermining our future.
First, Washington is about to embark on another major healthcare reform debate, this time over the need for comprehensive healthcare reform. The debate is driven, in large part, by the recognition that healthcare costs are the single largest contributor to our nation’s fiscal imbalance. It also recognises that the US is the only large industrialised nation without some level of guaranteed health coverage.
There is no question that this nation needs to pursue comprehensive healthcare reform that should address the important dimensions of coverage, cost, quality and personal responsibility. But while comprehensive reform is called for and some basic level of universal coverage is appropriate, it is critically important that we not shoot ourselves again. Comprehensive healthcare reform should significantly reduce the huge unfunded healthcare promises we already have (over $36,000bn for Medicare alone as of last September), as well as the large and growing structural deficits that threaten our future.
One way out of these problems is for the president and Congress to create a “fiscal future commission” where everything is on the table, including budget controls, entitlement programme reforms and tax increases. This commission should venture beyond Washington’s Beltway to engage the American people, using digital technologies in an unparalleled manner. If it can achieve a predetermined super-majority vote on a package of recommendations, they should be guaranteed a vote in Congress.
Recent research conducted for the Peterson Foundation shows that 90 per cent of Americans want the federal government to put its own financial house in order. It also shows that the public supports the creation of a fiscal commission by a two-to-one margin. Yet Washington still sleeps, and it is clear that we cannot count on politicians to make tough transformational changes on multiple fronts using the regular legislative process. We have to act before we face a much larger economic crisis. Let’s not wait until a credit rating downgrade. The time for Washington to wake up is now.

David Walker is chief executive of the Peter G. Peterson Foundation and former comptroller general of the US

US belatedly learns to listen to the lesson from Japan - FT

By Gillian Tett - Published: May 9 2009

In recent months, Japan's sorry banking history has provided the world with plenty of reasons to worry about America. Now, however, it might offer a crumb of comfort, too.
The reason? In part, it lies with those stress tests which Washington has just conducted on its largest 19 banks.
During most of the past two years, the American leadership has been in a state of procrastination and denial in relation to its banking woes: first it tried to pretend that the financial woes were not too serious, since they were "contained". Then it insisted that free market pressures would be enough to force the banks to come clean about their mess - without the need for the government to act.
In reality, the Americans were not at all unusual in taking that stance: when Japan's banks first became plagued with bad loans in the early 1990s, the government in Tokyo took an identical stance - and continued denying the scale of woes for almost a decade.
But precisely because the Japanese were such past masters of procrastination - and learnt the hard way what that can do - they have been quietly dubious about much of what Washington has said about the banking woes in the past two years.
As long ago as the autumn of 2007, for example, Daisuke Kotegawa, a canny former financial bureaucrat who was central to Japan's own banking clean up, pointed out to me that what was missing from the American debate was any effort to conduct an audit of Western banks.
For Kotegawa is convinced that it was only when the Japanese government finally went into its banks and did a thorough, independent review of their operations - and then published the collective bad loan estimate and forced the banks to plug any capital gaps - that the Tokyo financial dramas started to heal.
The point is: if you let banks themselves count their bad loans, not only are they apt to lie - but investors will disbelieve anything they say, even if they do tell the truth. "What is needed [to solve the credit crisis] is not [just] cash but wiping out widespread mistrust," Kotegawa observed back then.
Now, at last, it would seem that men such as Tim Geithner are finally - belatedly - learning that lesson too (and Mr Geithner is a man who knows this Japanese tale only too well since he worked there himself in the 1990s).
You can argue at length about whether the stress tests are completely "correct" or not. But what is undisputable is that they have taken place in a fairly thorough manner. In a world that has been marked by cognitive fog, in other words, investors now have something tangible to cling to. At last, there is a sense that someone is in charge - and a bottomless pit might not be so bottomless after all.
That is potentially very important for sentiment. Back in the 1990s, when Japan's government was procrastinating and fudging, there seemed to be no limit to just how big the estimates of bad loan numbers could become: they started the decade at around $50bn, but then rose to over $1,000bn (and Goldman Sachs even slated in a $2,000bn, which back then seemed unimaginably large).
But when the Japanese finally performed their own versions of a stress test, those ever-rising projections suddenly stopped growing, not least because confidence started to return - and the wider economy picked up. These days, economists now guess that Japanese credit losses were actually around $800bn - which is very large, but less frightening than $2,000bn.
There is, of course, no guarantee that America can repeat exactly that trick. One crucial difference is that men such as Kotegawa only had the Japanese banks to worry about. Mr Geithner does not share that luxury: irrespective of whether he has measured bad loans at American banks correctly, who knows what is sitting in European banks now?
Nor does America have the luxury of sitting in a world where there are other export markets that are booming - a sharp contrast to Japan, which started to enjoy an economic uplift when Chinese demand boomed soon after it reformed its banks.
Moreover, another reason for feeling cautious is that the slant of American policy still appears to be more focused on avoiding damaging bank collapses rather than trying to build truly vibrant institutions that could lend money again. Simply removing the patient from the critical list, in other words, does not make him truly healthy again - let alone ensure that the economy will properly heal. Recapitalisation is a necessary not sufficient condition for recovery, as the history of Japan shows.
Yet, even with those caveats, the fact that the stress tests have now taken place is certainly reason to cheer. The only crying shame is that it took such a ridiculously long time for the American administration to listen to that lesson from Japan - while many of Mr Geithner's counterparts in Europe continue to ignore it, even today.

gillian.tett@ft.com

Beware the seductive appeal of the sucker's rally - FT

By Spencer Jakab Published: May 9 2009

The market is a cruel mistress indeed. Compounding the pain of big swoons, it kicks investors when they are down by luring them into sucker's rallies - typically sharp but fleeting bounces in the middle of a bear market.
The current recovery has propelled the S&P 500 a third above its March low in just 60 days, convincing many sceptics that a new bull market has begun. Noted bear Doug Kass of Seabreeze Partners said the recent nadir may be a "generational low" and strategist Tobias Levkovich of Citigroup claimed many large investors who had feared another bear market rally may soon capitulate, pushing markets higher.
The Bull Market Express may really be pulling out of the station, but Wall Street's trains have a nasty tendency to derail just as passengers jostle for seats. Most recently, the S&P 500 soared 24 per cent over seven weeks ending in early January, only to plunge to a new low. It was a fairly typical sucker's rally and bear markets often need more than one to create sufficient disillusionment for a definitive bottom.
The 2000-2002 bear market had three, with average gains of 21 per cent in the Dow Jones Industrials over 45 days.
The granddaddy of all bear markets, 1929 -1932, had six false alarms with an average gain of 47 per cent. And Japan's ongoing bear saw the Nikkei rise by at least a third four times in its first four years with 10 more false dawns since then.
Bear markets typically end with a whimper rather than a bang, casting doubt on the latest recovery according to Hussman Econometrics, which analysed numerous US market bottoms and bear market rallies. With the exception of the 1987 crash, the month before the lowest point of a downturn saw a gradual descent. By contrast, bear market rallies were preceded by steeper declines and had sharper rebounds.
Another characteristic of bear market rallies has been modest volume on the rebound compared to the decline. The current recovery fits the pattern of bear market rallies in terms of volume and the "V" shape of the trough. Analysts at Bespoke Investment Group noted that there have been only seven other periods in the past 110 years with rallies of similar magnitude for the Dow. Three preceded the Great Depression, three came during the Depression and one in 1982.
That last example is a hopeful one as it kicked off the greatest bull market of all time. Expectations of a sustainable rebound have been helped by the fact that US stocks touched a 13-year low in March. But this was also the case in 1974, the start of a long rally - technically a bull market - that lost steam after a 73 per cent gain in two years. It would take four more years to reach the 1973 high and two more, the start of the 1982 bull market, to break decisively higher.
An authority on bear market bottoms, Russell Napier of CLSA sees a 1974-1976 scenario unfolding followed by an even worse slump. In Anatomy of the Bear , he scanned media coverage around the bottoms of 1921, 1932, 1949 and 1982 and does not see the apathy that characterised those turning points.
"For the great bear market bottoms, you need a society-wide revulsion with equities," he said. "It just doesn't smell like the big one yet."
Stocks also become incredibly cheap before major bull markets begin. Yale University Professor Robert Shiller notes that all four big bubbles of the 20th century saw stocks exceed 25 times cyclically-adjusted earnings and trough between 5 and 8 times. On this measure, the 2000 bubble never fully deflated and even the recent low did not breach 11 times.
For what it is worth, the US market's best-informed participants do not find valuations compelling. April saw the lowest level of insider buying (by people associated with the company) ever recorded by research group TrimTabs, with insider selling 14 times as high. Likewise, companies sold 64 per cent more shares than they bought in April.
This last point though may be a contrarian indicator of a true bull market. Corporate America hardly displayed prescience prior to the bust, after all.

spencer.jakab@ft.com

Stress test wasn’t that comforting

By Gretchen Morgenson - May 10 2009
The beginning of the end of the banking crisis or merely the end of the beginning? That is what inquiring people want to know after the pronouncement last week that 10 of the biggest U.S. banks must raise $75 billion by November if regulators are going to give them a clean bill of health.Bank of America, Wells Fargo, GMAC and Citigroup are the neediest institutions, said government stress testers. Nine others, including Bank of New York Mellon, American Express and U.S. Bancorp, were deemed healthy.‘‘The results released today should provide considerable comfort to investors and the public,’’ Ben S.Bernanke, chairman of the Federal Reserve Board, said Thursday in a statement when his office released the Supervisory Capital Assessment Program.He added that nearly all the tested banks had enough capital to absorb the higher losses the Fed expected under its ‘‘hypothetical adverse scenario.’’ With almost 40 pages of charts, graphs and scenarios, the program was a ‘‘deliberately stringent test,’’ its authors said. Clearly, the message they want to send is that the banking mess we have endured for the last two years is finally becoming manageable.All is under control. Nothing to see here, folks. Move along.Much as it would be a relief to move on, anyone in search of reality cannot yet conclude that the big banks are out of the woods. The government tests were, in truth, not exceedingly tough.And some of the program’s ‘‘adverse’’ scenarios look more like a day at the beach.reserve bill will have ended. Then, you’ll know you are done.’’ In the meantime, U.S. taxpayer subsidies to banks will help offset some of the losses, he said. But keeping interest rates in the cellar to revive banks has significant costs, Mr. Whalen said. For example, institutions that have agreed to pay out interest on investments that are higher than prevailing rates— think insurance companies and pension plans—are getting killed. ‘‘The Fed can’t do this for much longer,’’ he said.What’s more, banks’ costs for working out bad loans—whether mortgages or credit card debt—are rising, Mr. Whalen said. In previous downturns, for example, investors would step up and buy bad credit card debt from banks. Yes, the prices they paid were discounted, but at least the banks could write off the loans and move on.Now, though, buyers for these ‘‘Let’s not call it a stress test,’’ said Janet Tavakoli, founder of Tavakoli Structured Finance, a consulting firm in Chicago. ‘‘This was a test to try to get a measure of capital adequacy, using broad-brush percentages. I think what they are hoping is that the banks are going to be able to earn their way out of this.’’ Some might be able to do that, given the immense taxpayer subsidies they are receiving. Cheap money from government programs translates to delightfully low expenses and the potential for profits where there might otherwise be only losses.But not all banks will be able to earn enough to see them through. And while no one knows how long our economy will remain under pressure, Ms.Tavakoli said she was certain that the stress tests’ assumptions on worstcase losses at banks were too rosy.Under the government’s so-called adverse scenario, for instance, banks may experience losses of 8.8 percent over the next two years on the first mortgages they hold. A more likely figure, Ms. Tavakoli says, is 10 percent.‘‘Given what has happened with the economy and unemployment, they are in massive denial,’’ she said. Losses recently seen in Fannie Mae’s portfolio support this view. In the first quarter, its subprime loans had average losses of about 68 percent; the Fed expects twoyear losses in subprime to be, at worst, 28 percent.For investors interested in a stress test that is free of government spin, Institutional Risk Analytics, a bank analysis and risk management firm, published its own assessment of financial institution soundness last week.Using first-quarter 2009 reports on 7,600 institutions from the Federal Deposit Insurance Corp., the analysis showed that banks were under increasing pressure.Christopher Whalen, the editor of Institutional Risk Analyst, said that the data told him that bank losses would not peak until the end of the year; before he combed through the figures, he had thought losses would hit their highs in the second quarter.Mr. Whalen said he pushed back his estimate for peak losses because banks continued to provision more for loan losses — the reserves bankers set aside for future damage — than they were actually writing off. ‘‘We don’t see charge-offs yet,’’ he said. ‘‘When you see banks charging things off, the hobbled portfolios are so rare, and the prices they will pay so low, that banks are hiring their own workout specialists to recover what they can from troubled borrowers. That costs.It is good that the stress test circus is over. But two lessons remain. First, the effects of a debt binge like the one we have just experienced cannot be worked off either quickly or painlessly.Second, there is the matter of the government’s credibility deficit. Maybe $75 billion will be enough to pull the big banks through this woeful period. But weren’t some of the folks providing these estimates also those who assured us subprime would not be a problem? That, in fact, it would be ‘‘contained’’? Yes, indeed.

Hello everybody, the blog will soon be full of content ... wait and see !