Top 10 at 10: US bank lending down 23%; Stress test leak queried; CDS pain worsens (Updated)

Top 10 at 10: US bank lending down 23%; Stress test leak queried; CDS pain worsens (Updated)
Here's my top 10 links from around the Internet at 10am. I welcome your additions below. (Updated to include more on the apparent stress test leak, including the US Treasury denial there is anything in it) 1. Here's the blog post at Turner Radio Network that helped hammer the Dow nearly 3% lower overnight. It claims to have the leaked results of the stress tests on the top 19 US banks. Under the worst case scenario of a 10.3% jobless rate in 2010, 16 of the 19 banks are technically insolvent. None of those 16 banks can handle any cash flow disruptions or deterioration in loan past dues without further government injections. If any 2 of the 16 collapse that would wipe out the funds in the Federal Deposit Insurance Corporation. 5 of the 19 are so undercapitalised they are unlikely to survive. No wonder the Dow fell 289 points. HT Daniel Barnes. Since this blog post, the Treasury has said there is no basis for the blog post, Bloomberg reports, pointing out Turner has been accused of being an anti-Semite against immigrants and blacks. The Federal Reserve will release the results on May 4. 2. The near US$1 trillion pumped into US banks in the last 6 months was a waste of time. That can be the only conclusion from a Wall St Journal analysis of bank lending data showing lending by the 21 US banks assisted by the TARP actually reduced lending by 23% since October. 3. Paul Krugman at the New York Times has an excellent summary of the problems in Ireland and how they could strike America too. 4. Rich Europeans have pulled US$500 billion out of hedge funds in the last year, the FT reports. Here's a billboard duel between BMW and Audi in California that is a bit of fun. HT Unique Daily 5. Nouriel Roubini and friends compare the high-growth financial system of pre-2008 to the Concorde. Both were high flying, fast, dangerous and soon to be extinct. 6. Here's a fascinating piece from Alex Felix Salmon at Reuters about how the existence of credit default swaps (CDS) on bonds is potentially distorting the natural business of debt restructuring where debt is swapped for equity in any bankruptcy. Instead, now, many bondholders actually want a liquidation and default because they're protected for a larger amount through the CDS than if they opted for a restructuring. The end result is the writer of the CDS is landed with the debt. And guess what? Who was by far the largest writer of CDSes? AIG. So now bond holders are effectively participating in the bailout of AIG. God help us all. This means, potentially, that much of the debt guaranteed with CDSes is now partially backed by the US government, either directly through AIG or through the investment banks who wrote the rest of the CDSes and are likely to get more government bailouts. I would be starting a riot if I was an American taxpayer. Dilbert.com 7. This is a must read for anyone who thinks they should invest in the stock market or thinks a financial advisor can be trusted. Investors shouldn't invest in the stock market and financial advisors can't be trusted. Jeffrey Goldberg at The Atlantic has an excellent thinkpiece in the wake of the market collapse. It's long, but worth the read. 8. It turns out there was more than one warning about Bernard Madoff. We've had the extraordinary story of Harry Markopoulos, who warned the SEC repeatedly about Madoff, but now we have a report in the New York Times that a fund manager suspected as much years before. 9. Twenty of Ireland's leading economists say in this letter published in the Irish Times that the nation's biggest banks should be nationalised rather than have the government buy their 90 billion euros of toxic loans off them. Fair enough. 10. An interesting interview on the issue of Peak Oil at theOilDrum. HT/ Neven 911

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.