Archive for December 2nd, 2010

The Financial Crisis Is Over?

Guess I should close up shop. According to Rochdale Securities banking analyst Richard Bove, the financial crisis is over. From CNBC staff writer Jeff Cox this afternoon:

The Federal Reserve’s report this week on its $3.3 trillion bailout of the global banking system shows that the financial crisis is finally over, banking analyst Dick Bove said.

While the information on who borrowed from the US central bank contained surprises—such as the extent to which European banks had access to the money and that Goldman Sachs was “significantly weaker than anyone knew”—the overview is that the bailout helped save the system, said Bove, of Rochdale Securities.

“The biggest point that one should derive from this information, because what has been revealed now is ancient history, is that the only entity that needs this money any longer is the United States government,” he said in a research note to clients entitled “Financial Crisis Is Over.”

Last year, Bove also said that the U.S. housing crash is over. On October 21, 2009, He told CNBC’s “Squawk Box”:

I really believe that the industry has bottomed, that we’re not going to see further crashes in home prices or in home sales.

As much as I’d like to believe Mr. Bove regarding his assessments of housing and the financial system, I think I’ll continue writing a bit longer.

After all, Bove might be having another Wells Fargo moment.

Sources:

Cox, Jeff. “Fed’s Bailout Report Shows Financial Crisis Is Over: Bove.” CNBC.com. 2 Dec. 2010. (http://www.cnbc.com/id/40473315/). 2 Dec. 2010.

“Housing Market Has Bottomed, Banking Analyst Bove Says.” CNBC.com. 21 Oct. 2009. CNBC.com. (http://www.cnbc.com/id/33411724/Housing_Market_Has_Bottomed_Banking_Analyst_Bove_Says). 2 Dec. 2010.

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Thursday, December 2nd, 2010 Bailouts, Banking, Federal Reserve, Housing, Recovery No Comments

Best Financial Crisis Timelines

I remember the good ol’ days back in the summer of 2007 when my previous blog, Boom2Bust.com, was up and running, and there would be times it was real hard to find something to blog about. That didn’t last long. By the autumn of 2008, all hell had broken loose not just in the United States but in the global financial system as well. Even I was surprised at how fast the turmoil spread.

With this new project and its focus on protecting and growing self and wealth, I’ve found myself looking back over how the financial crisis began and what has transpired to date. To assist with that, I’ve been using three good crisis “timelines” out on the Internet, which I’d like to share with you today.

First, there’s the financial crisis timeline from the Federal Reserve Bank of St. Louis. Entitled “The Financial Crisis: A Timeline of Events and Policy Actions,” this timeline’s coverage begins with an entry from February 27, 2007:

The Federal Home Loan Mortgage Corporation (Freddie Mac) announces that it will no longer buy the most risky subprime mortgages and mortgage-related securities.’

And continues until the most recent entry on December 1, 2010:

The Congressional Budget Office releases a study describing the various actions by the Federal Reserve to stabilize financial markets since 2007 and how those actions are likely to affect the federal budget in coming years. The report also presents estimates of the risk-adjusted (or fair value) subsidies that the Federal Reserve provided to financial institutions through its emergency programs.

James Bullard, the St. Louis Fed President, talked about the timeline’s purpose:

The Federal Reserve and other agencies have taken many steps to contain the ongoing financial crisis and limit its impact on the broader economy. It is critically important that we clearly communicate our actions to better ensure their success. This web site was better created to provide the public with useful information about major financial events and policy actions, both over the past months and going forward.

Some nice features of this timeline include its navigation, links to sources, and the ability to convert the entire timeline into a .pdf document.

Of course, what you won’t find is the Fed taking any responsibility for helping create the financial mess. But that’s a given.

Another economic crisis timeline I’ve been looking at is the “Financial Crisis Timeline” produced by Sullivan & Worcester, a law firm with offices in Boston, New York City, and Washington D.C. Their timeline’s coverage begins on March 14, 2008:

Due to a grave liquidity crisis, the Federal Reserve authorizes the Federal Reserve Bank of New York to extend credit to JPMorgan Chase & Co. in order to provide financing on a nonrecourse basis to The Bear Stearns Companies Inc. and possibly to other primary securities dealers.

Given the likelihood of more bank failures and the current challenges facing the bank industry, the FDIC votes to keep the assessment rates charged to insured banks and savings associations for the Deposit Insurance Fund (DIF) unchanged for 2008.

Up until their latest entry on September 8, 2010:

The Federal Reserve announces that it has authorized ongoing small-value offerings of term deposits under the Term Deposit Facility (TDF) designed to ensure the operational readiness of the TDF and to provide eligible institutions with an opportunity to gain familiarity with term deposit procedures. The Board currently anticipates that TDF auctions will be held about every other month.

Navigation is basic yet nice, and the links to related material (like the Fed) is a big plus.

A comparison of the two reveals that that while some entries overlap, a number of crisis events are exclusive to each timeline.

The last timeline recommended for use tends to be a little bit different. “Timeline: Global Economy In Crisis” from the New York City-based Council on Foreign Relations is a timeline comprised of three areas. First, there’s “Capitalism in Theory and Practice (1776-Present).” Then, there’s “Regulation & Deregulation (1880-Present).” Finally, there’s Section 1, “Meltdown: 2007-Present.”

In “Meltdown,” events transpire in February 2007:

U.S. Housing Downturn

In 2006, a boom in U.S. housing prices abruptly reverses course; between the fourth quarter of 2005 and the first quarter of 2006, median U.S. housing prices fall 3.3 percent. These declines accelerate in 2007. The downturn prompts a collapse of the U.S. subprime mortgage industry, which offered loans to individuals with poor credit or no cash for a down payment. More than twenty-five subprime lending firms declare bankruptcy in February and March 2007. The collapse rattles the Dow Jones Industrial Average, which on February 27 loses 416 points, or 3.3 percent, its biggest one-day point loss since 9/11.

The last entry on CFR’s timeline is July 21, 2010:

U.S. Financial Overhaul

President Barack Obama signs into law a financial reform bill giving the federal government new powers to regulate Wall Street and prevent financial crises. The bill includes creation of a Consumer Financial Protection Bureau and a Financial Services Oversight Council of existing regulators to monitor market stability. The Federal Deposit Insurance Corporation gains power to seize and dismantle troubled financial firms deemed “too big to fail,” and proprietary trading (when banks invest for their own profit) is banned. The bill also limits the scope of banks’ investments in hedge funds and private equity funds and requires most derivatives to be traded through public clearinghouses or exchanges.

This crisis timeline is a little bit trickier navigationally-speaking, but still pretty easy to use. Related material is not available as with the other two. However, the CFR timeline incorporates more global events. Plus, even though it doesn’t have as many entries as the others, it offers a pretty good overview of what transpired.

So there you have it. If you’re looking for a historical record of events in the U.S. and global financial crisis, I recommend using all three of these timelines: the CFR timeline for a quick overview of what went down, then those from the St. Louis Fed and Sullivan & Worcester to fill in the blanks. By doing this one should have a more complete picture of the ongoing economic crisis in the United States and abroad.

(Editor’s note: Links added to “Resources” page; Sullivan & Worcester timeline is no longer available)

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Thursday, December 2nd, 2010 Federal Reserve, SP Resources No Comments
Survival And Prosperity
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Christopher E. Hill, Editor

Successor to Boom2Bust.com
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