May Day MayDay
What do you mean “we’re broke”?
The first encouraging sign in a long time from the Fed and the Treasury is in the link above. After it became common knowledge that the “stress tests” were only going to be window dressing, the question on everyone’s mind became only “How much more is it going to cost the American taxpayer to keep subsidizing the guys who got us into this?” (Brad DeLong’s mileage varies, though I note that Mark Thoma may be coming around, after his initial assumption that his money would be Used for Good and the System would be Fixed—a venial sin at the most.)
The fact that Geithner/Summers and PBandit/Lewis are “haggling over the price” means there is still some reality reaching over the seawall that is the Obama Treasury Department.
Speculation below the fold
Or maybe this is the reality going deeper. Wells Fargo, which got Suckered by Charlotte with WalkAllOverYa? Or a Major Regional, say, SunTrust?
The last time I raised the spectre of SunTrust, Sammy questioned me and someone named Jessica suggested (in no uncertain terms: “SunTrust is one of the leading banks in the industry and is in NO NEED of bail out money. The FDIC Corp has trusted in SunTrust enough to reach out and ask for some help bailing out the smaller banks that are on the FDIC Watch List.”) that I must be mistaken.
At the time (29 Oct 2008), SunTrust had received $3.5 Billion, “more than BoNY/Mellon. More than BB&T or Fifth Third or Zions Bancorp.” They took another $1.4 Billion at year-end, so they’re up to $4.9 Billion, more that $1 Billion more than Capital One, which is one of the banks that is always spoken of as being endangered.
It doesn’t appear to have helped. SunTrust has been downgraded twice by S&P this year.
As for that help they’ve been giving the FDIC? Dr. Black notes that an 11th bank in Georgia has gone under since March of last year. No other state—not even California—is in double-digits yet.
So I won’t be surprised if SunTrust needs “additional capital.”
Another possible contender from the regionals? PNC Financial Services, which came out of nowhere to borrow $7.6 Billion at the end of last year. And, unlike SunTrust, there haven’t been any bank failures in the Greater Pittsburgh area (which surprises me more than it probably does Rusty).*
Going back to what Hank Paulson said, “these things are never over until you have a couple of institutions go that surprise everyone.” No bank on the Endangered Species list so far has been a Surprise in that sense; the delay of the “stress test” announcement until next Thursday, May 7th, may well mean that we will see one of those surprises getting capital.
It doesn’t make it good, right, or sensible, but it does at least hint at the possibility that things might, eventually, start getting better.
*In fact, today’s in upstate New Jersey is the first on the East Coast since at least January of 2008.