[PEN-L:30684] Re: banks

[Charles Jannuzi <b_rieux@xxxxxxxxx>]

--- "Devine, James" <jdevine@xxxxxxx> wrote:
>  The banks may be in trouble, but one thing
> that's saving their collective
> ass (at least in the U.S.) is that the "yield
> curve" is pretty steep, as
> steep as it was in the early 1990s. That means
> that the banks can pay us
> depositors low rates while charging high rates
> on loans. The spread allows
> high profit margins and recovery. Of course,
> the steep yield curve also
> means that Alan Greenspan's efforts to lower
> short-term interest rates
> (along with other imbalances) is having a weak
> effect in terms of promoting
> the health of the real economy that we
> non-bankers live in. Of course, the
> steep yield curve is itself a symptom of the
> trouble that the banks
> currently have.

This has helped the big Japanese banks limp
through ten years of profits. Many a bank has
shown profits even as it was forced into
bankruptcy over capital adequacy ratios (which
have to be at 8% if the bank is global).

On the other hand, yield spreads cripple big
insurance, and many bad loans go back to
insurance companies in Japan. The Nikkei flat
lines while gov't bonds yield very little.

Finally, about Greenspan. As I predicted on the
Leftover Bored Observer Squawk list, Greenspan
won't cut rates til some sort of outcome on the
Baathist removal campaign becomes clearer. Sure,
the little Randian shit sits in on all sorts of
national security meetings, but no doubt keeps
his own council.

C. Jannuzi




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