Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Quick Hits: $1.2 Trillion More for Credit Markets?


Brief scrutiny of today's headlines.


The US banking industry may need as much as another $1.2 trillion to improve liquidity in the credit markets, an analyst believes.

In greatest need of capital are Citigroup (C), Goldman Sachs (GS), Wells Fargo (WFC), JP Morgan Chase (JPM), AIG (AIG), Bank of America (BAC) and GE Financial (GE), says Paul Miller, an analyst at Friedman Billings Ramsey.

"Debt or TARP capital is not true capital," Miller says in a research note. "Long-term debt financing is not the solution. Only injections of true tangible common equity will solve the current crisis."

These companies have combined assets of about $12.2 trillion, but only $406 billion in tangible common capital. The additional money is needed to strengthen the balance sheets and allow the institutions to again extend credit, Miller says.

Mortgage problems led to a pullback in the debt markets and soon triggered a credit crisis, slowing economic activity worldwide and pulling equity markets down.

Banks are scrambling for new deposits and have raised interest rates in an effort to attract new money. Many banks now offer about 4% on a 1-year CD - but the effort hasn't attracted enough new money.

Miller says at least $1 trillion more is needed; perhaps as much as $1.2 trillion. Most of the money would have to come from the government.

At stake is the credit needed to keep the economy moving. Miller says it's likely to take 3 to 5 years for the financial system to work through the current problem.

< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos