Wednesday, February 24, 2010

Fallout From Financial Crisis Widespread

This morning's WSJ is a veritable cornucopia of articles detailing the lingering effects of the financial crisis. First, the reader is hit in the face with the headline story "Lending Falls at Epic Pace" and the accompanying graph that depicts, well, lending falling at an epic pace. Aside from the top-tier banks, most of which are making money from trading rather than lending, the rest of the banking industry is suffering, according to the FDIC's quarterly report. Banks registered their biggest full-year decline in total loans outstanding in 67 years. Also, the FDIC's problem bank (those at risk of failing) list grew to 702. Furthermore, more than 5% of all loans were at least three months past due, the highest level recorded in the 26 years the data have been collected.

Moving right along to some dismal local news for those of us in California, there is the story entitled "Lehman's Ghost Haunts California," which tells the sad tale of the aftermath of San Mateo County's failed investment in Lehman Brothers. That $155 million the county punted on Lehman bonds (commercial paper? whatever it was, the risk premium was definitely not justified) is looking pretty foolish now that the public schools are laying off teachers, community colleges are scrapping new facilities and the commuter rail is trimming service.

Speaking of California and really bad investment decisions, you can read all about Calpers latest woes in "Backlash Hits Calpers Property Deals." The story details the controversy surrounding some of Calpers' real estate deals which, in addition to losing buckets of money for California retirees, also had the socially conscious benefit of evicting low income residents from their housing units. Calpers response? "These historical investments were made under previous investment leaders" and outside managers who handle Calpers real-estate investments. Translation? If you're looking for someone to nail to the stake, you might want to go after, um, the other guys who were here. Back in early 2008 when most of Calpers' senior investment managers left for "personal reasons," it turns out those reasons weren't so personal after all. Who could've guessed? Oh yeah, me.

Moving right along, there is the article on yesterday's unexpected plunge in consumer confidence entitled "Jittery Shoppers Dim Stores' Hopes." It turns out that unemployed people don't shop so much. Shocking.

Even Casket Makers are hitting tough times, according to the cleverly titled "Casket Makers Dig In as Sales Take Hit." In addition to discussing how the economic slump is hurting the casket making industry, the article also sports the Pulitzer-worthy opening line of: "As their sales slow, some casket makers worry their business is hitting a dead end."

Looking for some good news amid the gloom? Look no further than "Bon Appetit: Toxic Bonus Yields 72% at Credit Suisse," which tells the tale of the 2000 investment bankers forced to take some of their bonuses in 2009 in the form of toxic assets. The assets have since rallied 72%, although employees can't withdraw from the plan until 2014. According to the story, the bankers groused about the plan when it was first introduced and they are probably still grousing that they only get to collect interest payments until the plan's expiration in four years.

You can read all about Wall Street bonuses rebounding in 2009 in "Wall Street Bonuses Get 17% Bounce." Then again, unless you work on Wall Street, maybe you'd better not.

1 comment:

g said...

great summary of the days news.