Word: loans
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...determine leverage, Schulte divided U.S. banks' tangible assets (that is, assets, including loans, minus intangibles such as goodwill) by their tangible capital (the book value of capital minus intangibles). He got a ratio of 24.8. This is a worrying multiple: the leverage of U.S. banks in 1993, years before the start of the asset bubble whose excesses have now brought the world to its economic knees, was just 20. To bring leverage back to that pre-bubble level, Nomura estimates that U.S. banks need to either shed $2.8 trillion in tangible assets (by selling loan portfolios, subsidiaries and other holdings...
...half by 2013. While the federal government must exercise more fiscal responsibility in the coming years, it serves no one to have this cost-cutting come at the expense of the country’s future labor force. Obama’s budget also proposes to make student loans available directly from the government, providing a much-needed alternative to the scandal-plagued student loan industry. It makes sense for a disinterested lender like the federal government to help out college students who might otherwise fall victim to predatory loan agencies...
...After marathon talks on Friday night, the German government approved plans by the Austrian-Canadian car-parts manufacturer Magna to take over GM's European business. Under the deal, Opel will be placed in a trust and the German government will provide a bridging loan of $2.1 billion (€1.5 billion) to provide Opel with emergency funding and keep GM's European operations running. On top of that, the German government will give $4.3 billion (€3 billion) in loan guarantees. The Canadian firm would own 20% of the new group, Russia's biggest lender Sberbank would have...
...German union leaders insist other European countries will play a role in future negotiations with Magna over the restructuring. "We need a pan-European solution and I'm sure other European countries will come up with loan guarantees in the future when the new group under Magna is reshaped," says Klaus Franz. But it could be months before GM's workers in Europe find out what its new owners have in store for them...
Kevin Pearson, executive vice president of M&T Bank, said he thinks banks will be able to avoid many of those loan losses through loan modifications or "through blocking and tackling," as he put it. Parkus, though, said that outlook was too positive. He countered that banks will have a very tough time refinancing the poor loans they made at the height of the credit bubble. "There are very large losses embedded in the system," he said...