-“finance has gotten so complicated with so much interdependency, what you’ve done is interconnected the solvency of institution to a degree that probably nobody anticipated.” this looks so much true here!
US Banks are fighting for the survival of the fittest, biggest of the biggest dinasours are trying to make their way out of extinction.
With their great efforts to retain the trust of its stakeholders, the banks are trying to unveil their healthy financial states and their capability to overcome further economic and financial hurdles.
two major players in financial sector ,citi group and bank of America are playing up with words to reflect their financial health to the world.
In current economic downturn, the banks like citigroup and bank of America impressively performing well by generating billions of revenue enough to persuade its stakeholder which is clearly visible through their shot up shares.
What they are trying to convey is, time is all that they need to overcome the losses they need to show in their balance sheet resultant of drastic downslide in market value of its assets.
Bank of America has a balance sheet of around$2.4 trillion,if their current earnings persist in future period also,still they will have to bear a 2% write off in its balance sheet before putting its hand into tier 1 capital.
Still wondering whats the big deal in it??!! Time for some quick calculations:
Lets see now, according to bank of America ‘s balance sheet--- full 2% write off on $2.4 trillion.
Making it more simpler----2% of $2,400,000,000,000 is equal to $48,000,000,000!!! Thats $48 billion.
This $48 billion can buy you around 500 cristiano ronaldo!!that huge it is!
This infer that bank of America will have to figure its asset value with a loss of $48 billion in its balance sheet.similiar is the case with citigroup which will to write off $40 billion of its pretax earnings.
With the financial injection by the us government, major banks are strong enough to raise out of the current banking crisis and make a coarse pathway through recession.so does that make us say hurray?? Not yet, hold it right there.lets refer back to what Japanese government did in its 1990s recession. It permitted its dead banks to work further and boom!! Had to face an economy 10 years backward.
And US forced japan to accept its negative growth in economy,recognize its bad assets and inject funds in to banks.a follow up would ‘ah-ah’ investors,loads of pink slips and perhaps more’ouch’ to stakeholders.
These banks can probably sneak out in their own ways. But the question is will that be a source methodology of extracting the financial fuel to ignite the us economy like before?? What ever it is all that the investors can do is sit back and bite their nails for the show to happen.
Cut to scene 2----US antitrust unit says ‘I got my eyes on you!’
Well, they say every dog has its own day, but for the US antitrust unit, everyday is their day!
Mergers and acquisitions are getting POOF! Disappear which end up with fewer monopoly to be watched over. After a prolonged period of 8 years, they have pumped up a more interventionist administration.
Since the regulations were already strict and rigid, antitrust unit got idle, that’s why they decided to systematically go through the aftereffects and status of approved mergers in past says the obama government.
Re-examining the approved mergers sounds so mean its like asking to pull down your pants in public! But there isn’t ‘right’s’ and ‘wrong’s’ about this admistration too. This ain’t the first dart, the bush admistration had once sued a company called microsemi earlie in December which attempted to rebound its acquisition of a rival.
Antitrust regulators have the magic wand and desperate enough to wave this bling bling. The hot case which is likey to get first hammered is cvs caremark created in 2007 by merger of a drugstore chain with a pharmacy benefit manager.
In 1990s, merck,’the drug store chain’ agreed to buy medco,’pharmacy benefit manager’. Bush said yes but Clinton striked back saying no,claiming that vertical integration of drug middlemen like invited anticompetitive behavior.because of so many ‘ to do’ on the list by the government, merch eventually dropped the idea of merger.
History repeats in 2007, but this time it was cvs’ the drugstore chains’ who wanted to acquire caremark ‘the drug middlemen’ and rival of medco which got a flags up.now with obama’s pick of new antitrust unit,things can turn up pretty much bad for CVS caremark merger.
But CVS caremark are seemingly very confident about their secure data sharing. So they fear nothing. Any how they must not ignore the fact that antitrust unit got their eyes on them!!
