Daily Stuff

RBS
Royal bank of Scotland did stock offering today to existing shareholders and 0.7% of the offered shares were bought.
The UK Treasury currently owns 70.3% of RBS and will buy the remaining 99.3% of the shares of this offering.
RBS rallied over 30% last week when it declared that it passed the UK version of the “stress test”. If anybody believed RBS were solvent, then they probably would have bought some shares here. But they voted with their wallets and chose to buy no more stock.
I think the UK “stress test” is a bunch of bs and so is ours.

KIMCO
This week Kimco Realty did a stock offering for $700 million thorough Merrill Lynch.
The day before the offering, the analyst at Merrill raised his rating on Kimco.
All of the proceeds from the offering were used to pay Merrill Fees and to repay Kimco’s line of credit to Merrill.

That has to be illegal, but if the FDIC can break the law, then why can’t a company like Merrill?

TALF is not working as planned
TALF was supposed to jump start securitization lending, by allowing lenders a place to sell new loans. So far, it has only had to buy a few Billion in new loans.

So maybe the real crisis right now is that people aren’t borrowing. That would make this a crisis of Demand and not a crisis of Credit. The problem is that most of the efforts of the Government have been designed to increase the availability of Credit (Supply), when the facts are starting to show that the efforts should be focused on increasing Demand.

This tells me that you can try and bail out the automakers, but it won’t help. The reality is that there is too much capacity and until you mothball a lot of factories and a lot of workers, Supply will be too big for Demand and they will lose money.

http://www.businessinsider.com/talf-program-is-just-limping-along-2009-4

PPIP an Epic Failure
http://blogs.wsj.com/marketbeat/2009/04/06/ppip-weighs-on-financials/

With the end of Marked to Market, banks know they can lie about the price of the bonds they hold, so they don’t need to sell them to the Government. Moreover, they won’t want to sell them for fear of raising eyebrows about how high they are pricing these assets.

So removing Marked to Market rules saved the taxpayer a $1 trillion (thanks FASB), but has done nothing to change the real problem of banks not being solvent enough to make new loans.

Barron’s has its doubts
http://online.barrons.com/article/SB123879893288588249.html

FDIC
The FDIC is funding the TALF so that they Obama Administration doesn’t have to go back to Congress and beg for more money.
The NY Times shows how this is beyond the mandate of the FDIC – it is illegal.

http://dealbook.blogs.nytimes.com/2009/04/07/the-taxpayer-takes-the-risk-in-fdics-no-risk-insurance/#statute

Special Drawing Rights
Thanks to last week’s G20 Meeting, we now have a de facto Global Currency – Special Drawing Rights (SDR).

The G20 promised to print $250 Billion of this new currency. Expect this to be the first of many rounds of printing.

It is actually a brilliant move, because it allows the G20 countries to cause inflation without getting into a situation of competitive devaluation – where countries are forced to print money because other countries are printing money.

It is actually not a bright move because it is worthless paper, not directly backed by a specific country. It also has the potential to be overused and will be hard to unravel when inflation gets rolling again.

www.telegraph.co.uk/finance/financetopics/recession/4986287/IMF-poised-to-print-billions-of-dollars-in-global-quantitative-easing.html