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« James Grant On The Fed's Im-Balance Sheet: Insolvency Rules | Main | Elizabeth Warren On Bank Stress Tests: Deja Vu All Over Again (Clip) »

Whalen: Regulators Banking A Deal With The Devil (Truth Bomb Clip)

This short clip courtesy of Aaron Task and TechTicker is an absolute must see.  For more color on Chris Whalen's comments about TARP payback being a fraud amid the FDIC debt crutch, see this story.

Briefly, Whalen expects most of the large banks to need help again by the 4th quarter of '09 as loss rates begin to accelerate again in most categories.  Moreover, he makes our point that as long as hundreds of billions of FDIC-backed bonds are still floating through the sytem, then any talk of being done with TARP is illusory and disingenuous.

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Reader Comments (4)

EXCLUSIVE: The New York Fed Has Been Captured By Citigroup, Top Obama Official Complains

Jun 10, 2009 at 9:28 AM | Registered CommenterDailyBail
News that 10 of the nation's largest banks have repaid $68 billion in TARP funds has been largely cheered by Wall Street, regulators and the press.

But the payback news is "evidence bankers are running the show," counters Chris Whalen, managing director of Institutional Risk Analytics, which provides bank stress ratings and advisory services. The banks and Treasury have created a "fantasy-land version of reality" that the industry is healthy again, he says.

Banks and regulators have "done a deal with the devil" by believing they can "pump up confidence" to bring credit spreads down and the Fed can keep rates down by buying Treasuries, the analyst says. The Fed is "fighting a losing battle," Whalen says, arguing the currently favorable rate environment that allows banks to essentially print money by borrowing for next-to-nothing and lending at substantially higher rates will not persist for much longer.

Jun 10, 2009 at 9:30 AM | Registered CommenterDailyBail
Jun 10, 2009 at 9:33 AM | Registered CommenterDailyBail
The FDIC has been agitating for changes to Citi's top management, but we think there's a case for going further. We're told that regulators differ on whether they have the authority to roll up a financial supermarket such as Citigroup, but former regulators with impeccable credentials argue that they do. And given everything that the Fed and Treasury have done over the past year and a half, now seems a strange time to argue that they lack the legal authority to act to resolve a bank that has $300 billion in insured deposits, some $63 billion in FDIC-guaranteed debt, and another $300 billion or so in taxpayer guarantees of its toxic assets.

Jun 10, 2009 at 9:35 AM | Registered CommenterDailyBail

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