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Another political scandal is brewing in connection to the outrageous and controversial bailout of Chicago’s ShoreBank by Citigroup (NYSE:C), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Morgan Stanley (NYSE:MS) and GE Capital (NYSE:GE), where it’s thought so-called community bank with strong political connections, all the way up to Obama, is receiving bailout funds when they should have been forced to shutter like the hundreds of other banks taken over by the FDIC.
Even the banks offering the $140 million in new capital for ShoreBank say it won’t be nearly enough to deal with the issues it faces, and will need an additional $300 million to $400 million to survive over the long haul.
Federal Deposit Insurance Corp. chairman Sheila Bair is even backing this ridiculous circus of events, saying she’ll recommend to the Treasury that the application by ShoreBank to continue operations be accepted, even though it doesn’t meet the mandated guidelines to be allowed to continue operations. If I was a shareholder in any of these giant banks, I would start the lawsuits right away, as it’s definitely not in the interest of the shareholders to offer these loans, which are essentially illegal from the point of view of existing laws and banking requirements.
One media report asserts officials from the banks have been pressured to provide the loans, “officials at several of the banks that joined the consortium have complained that they received some political pressure to come up with the cash from people with ties to the Obama administration, including from Bair herself.”
The Chicago-raised Obama has given the bank high praise because they’ve loaned out money to low-income communities, as well as financing alleged environmentally friendly “green businesses.”
In other words, they’ve made terrible loans which are completely failing, but Obama and his cronies are going to completely disregard legal guidelines and save this bank in his city because they made loans they shouldn’t have.
To use the low-income argument is cynical and disingenuous. That also includes the environmental loans. All it reveals is that these types of loans shouldn’t be being made, as the results and failure of the bank reveal.
Why they use this terminology is to attempt to silence critics, as it makes them look like the bad guys to challenge what appears on the outside to be a supporter of the poor and defender of the environment. That can be manipulated by the administration and the mainstream media to make it look like those in opposition to bailing out this failed bank are against the poor and responsible environmental practices, when if fact what seems to be happening is the bank is making loans in a way a charity would give money to the poor.
Not only is something like this poor business practice, it is a misuse of deposits of those who have their money in the bank.
Thankfully, the ranking member of the House Financial Services Committee, Spencer Bachus, has launched an investigation into whether or not political pressure has resulted in this fiasco, and how far up the possible corruption goes.
This article (Citigroup (NYSE:C), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) Being Forced to Lend to Failing ShoreBank?) was originally developed by and is property of American Banking News. Checkout American Banking News for up-to-date banking news and peer to peer lending news.
Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) have been hired, along with Barclays Plc and Deutsche Bank AG, to manage the sale of $3 billion in bonds, which will be the largest corporate bond sale in about a month.
In a prospectus filed with the Securities and Exchange Commission, Abbot Laboratories said they’ll use the funds to pay down it commercial paper, which stands at $3.6 billion. General business purposes was the other reason cited for the issuance.
The bond offering includes $750 million of 5-year notes, with a potential yield of 70 basis points over similar Treasury offerings. There is also $1 billion in debt for 10 years, which could yield up to 90 basis points over their government competitors, and another $1.25 billion of 30-year bonds, which could pay a point spread of 122 basis points over Treasury bonds.
Those above figures aren’t confirmed yet, but an insider close to the situation said it’s close to what will be issued.
Corporate bond volume around the world has plunged in May, dropping from $183 billion in April to only $47 billion so far. Most of that is thought to be the result of the sovereign debt crisis in Europe.
Concerns of Moody’s are the debt load after the acquisition of Piramal Healthcare for $3.72 billion will cause the company to carry a “substantial” amount of debt in the short term.
Abbott was upgraded from “Hold” from “Sell” today by Citigroup (NYSE:C) analyst Mathew Dodds, basing it on the emerging markets strategy of the company.
Abbott is set to license a minimum of 24 products for sale in emerging markets in May.
Even so, Dodd did revise his target price on Abbott from $50 to $47 a share.
This article (Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) Hired by Abbott (NYSE:ABT) for $3 Billion Bond Issue) was originally developed by and is property of American Banking News. Checkout American Banking News for up-to-date banking news and peer to peer lending news.
Goldman Sachs (NYSE:GS) upgraded Citigroup (NYSEC) from “neutral” to “buy,” while maintaining buy ratings on J.P. Morgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC). In light of the current economic conditions, which are deteriorating in Europe and China, it does generate the question of whether the assessment of Goldman is far too optimistic.
Much of the positive mood of Goldman is related to the quality of credit at the banks, which could maintain their ratings, resulting in less expensive loans and operating costs. The winding down of debate on regulations, and the assumption lawmakers probably won’t ban derivative trading, which would be devastating to the large banks.
Speaking of that, volatile economic times are back, and in that scenario, the giant banks thrive, as the huge price swings brings them strong revenue and earnings. That has been the primary driver of revenue since the recession began, and it looks like it will be in the future as well, assuming they are able to continue to trade derivatives.
With business largely holding back from borrowing, and lenders not really wanting to lend, it shows that their faith in the sustainability of the recovery is very low, and until that changes from real changes in demand, we’ll continue to see that.
It seems Goldman’s assessment of the situation is primarily based on stronger defensive positions, and the belief derivatives will remain a part of the banking investment arsenal.
If that’s true, Goldman is probably right about the banks, although the question of Europe continues to weigh on those banks with heavy exposure there, and that could become as big as, if not larger than, the banking crisis in America.
To me, Goldman is a little too optimistic in their outlook, and it’s based on some assumptions, which while probably true, aren’t assured yet.
But to not include China and Europe in their outlook for the banking industry seems to leave out a huge, potential negative for the industry that will definitely have an impact, and that impact will have to be looked at from the perspective of individual banks.
This article (Is Goldman Sachs (NYSE:GS) Too Optimistic for Citigroup (NYSEC), J.P. Morgan (NYSE:JPM) and Bank of America (NYSE:BAC)?) was originally developed by and is property of American Banking News. Checkout American Banking News for up-to-date banking news and peer to peer lending news.