Some thoughts about Banking on a Monday Morning
I don’t have the time to do it complete justice on a Monday morning, but I wanted to bring Yves article to your attention. She’s got a really good handle on what’s happening and what might happen….
Read it and I’ll have more later.
Tom Vanderwell
naked capitalism: More on Big Bank Endgames
Team Obama is still on Plan A, which is “we can patch this up with the duct tape and bailing wire we have on hand” and they really want to play that out if at all possible. I’m sure they believe that when, for instance, the trillion dollar consumer credit facility is out buying credit card, student loan, and auto receivables, that that will lead to more commercial bank lending (ie fee generation on their part) and we will see some halting progress towards normalcy.Now what could force their hand is a run on either bank, either depositors (replay of WaMu, on a bigger scale) or counterparties refusing to extend credit or moving accounts out (the Bear scenario). The possible perps of a deposit run would be those whose balances exceed FDIC guarantees (most likely businesses, since if you have payroll of any size, it is impractical operationally to divide your payroll processing among a lot of banks, and you need to have enough cash in the till to make the payments) and foreign depositors. As Felix Salmon noted earlier, Citi has a LOT of foreign deposits. as in….over half a trillion (this relative to a balance sheet of $1,9 trillion).
