Monday, November 28, 2011

Monday, Monday

can't trust that day...
Oh Monday morning,
you gave me no warning
of what was to be.

--The Mamas and Papas

This morning investors in the Western world are hoping to recoup some of last week's losses. Stock futures are up big in the pre-market. But beware the pop and drop. The credit and currency markets are warning of what is to be:

Sovereign bond yields are rising, even in the Euro core.
Signs of depression and default.

The euro is losing value against the U.S. dollar.
Bad for stocks.

Inter-bank interest rates are rising--exponentially.
Howard Simons explains.

The question du jour is whether the Federal Reserve is going to prop up European banks the way it did the biggest U.S. banks three years ago. Remember TARP? Bloomberg reveals how the Congress-approved TARP investments in 2008-09 were just the tip of the iceberg. The Fed also provided under-the-table loans and guarantees totaling $7.77 trillion, or ten times the TARP support. The interest rate charged was as little as .01 percent, boosting net interest margins at recipient banks and allowing them to generate $13 billion in "free" income at a time when they were essentially insolvent. Find out what your favorite bank made in Bloomberg's interactive chart.

The enhanced liquidity also allowed these teetering institutions to merge, becoming Too Bigger To Fail. Total assets at the six biggest U.S. banks amounted to $9.5 trillion as of this past September 30, up 39% in five years. During the near-meltdown, the Big Six--JP Morgan Chase, Bank of America, Citigroup, Goldman Sachs, Wells Fargo, and Morgan Stanley--received $160 billion from the U.S. Treasury and $460 billion from the Fed in emergency relief.

Now, three years later, they're still staggering.

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