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| Thursday, March 18, 2010 |
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ANALYSIS
March 2, 2009
Sagging Index no longer reflects what’s going on in the market, some say, Replacements? Google it, to start.
March 2, 2009
Downward price spiral will actually boost the cost of capital for most companies. CFOS, take note.
March 2, 2009
The latest bailout at AIG could be a preview of how the president will deal with Wall Street.
March 2, 2009
No corporate defaults. Big debt offerings. Percolating CP issuance. Things may be looking up in the capital markets.
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January 21, 2009 3:09 PM ET
(Reuters) — The chief executive of one of the top performing U.S. banks said the government should take a more active role in bidding for troubled assets, to help extricate an industry facing its worst crisis since the Great Depression. Ronald Hermance, who runs Paramus, New Jersey’s Hudson City Bancorp, said the government should not nationalize lenders. That idea is being discussed more widely after hundreds of billions of dollars of capital infusions from the Troubled Asset Relief Program failed to restore investor confidence in banks, or arrest punishing share price declines. “I don’t think nationalization is the right answer,” Hermance said in an interview. “What you need, and you can see it out of TARP, is circling the assets that are problems, having the government bid on those assets, and then opening the bidding to others.” Shares of lenders are tumbling as credit losses mount, and as investors show little if any confidence in lenders’ ability to get through the credit crisis and a deep recession. Holders of many “toxic” assets are trying to guess at their worth because of an absence of buyers, adding to the uncertainty. Hudson City shareholders have been spared the trauma. Through Tuesday, the thrift’s shares were essentially unchanged since the end of June 2007, roughly when the credit crisis began. In contrast, the KBW Mortgage Finance Index, which includes Hudson City, was down 83%. Congress last week gave President Barack Obama authority to tap the second $350 billion available under TARP. Mr. Hermance said that by using TARP for its original purpose, to buy troubled assets, the government would create a market for those assets, and perhaps entice private equity firms and others to bid as well. “The real estate market has gotten to the same degree of difficulty it had during the S&L crisis, but we haven’t had the same resolution point,” he said, referring to the 1980s savings and loan crisis. “Investors are looking for TARP to buy out assets, and it hasn’t happened. Until we get some bids in the market for assets, we don’t know where the bottom is.” Such involvement would recall the approach that the government-created Resolution Trust Corp took in liquidating almost $400 billion of assets from more than 700 insolvent thrifts from 1989 to 1995. Some commentators have called for the creation of a “bad bank” to hold toxic assets for a while and allow market prices to recover, thus limiting potential losses to taxpayers. Treasury Secretary-designate Timothy Geithner told lawmakers on Wednesday that creating a government-controlled “bad bank” is extremely complicated, but may help address the credit crisis. He promised more details when Mr. Obama’s economic team delivers a comprehensive plan in the next few weeks. Hudson City is the second-largest U.S. savings and loan, and is expected to become the largest after Spain’s Banco Santander finishes buying the largest thrift, Sovereign Bancorp. In 2008, Hudson City profit rose 51% to $445.6 million, or 90 cents per share, largely through the thrift’s strategy of offering mortgages with high down payments to borrowers who want to live in their homes. “Analysts expect 2009 to be our 11th straight year of record profits, and I don’t see anything standing in the way of that,” Mr. Hermance said.
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