> -----Original Message----- > From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On > Behalf Of John Williams > Sent: Tuesday, September 30, 2008 10:11 AM > To: Killer Bs (David Brin et al) Discussion > Subject: Re: My contribution to the bail-out > > "We" don't have to hope that. Personally, I hope that if either Barclay's > or Deutsche Bank made a lot of bad choices in their investments, then they > >will fail and be replaced by a stronger bank or banks.
As had been mentioned here before, they are both very highly leveraged. My memory is that Barclay's leveraged 30 to 1 and Deutsche Bank is leveraged about 50 to 1. That means a modest run on ether bank will result in them becoming unable to give people who request the money they put in the bank that money. Now, you may mention the recent purchases of banks that have had runs on them by other banks (after the FDIC paid off part of the bad debt). Let's look at the assets of these banks from Wikipedia: Citibank $1.50 trillion Chase $1.78 trillion Wachovia $783 billion WaMu $307 billion You notice that Citibank is almost twice the size of Wachovia and Chase is over 5x the size of WaMu. Both have 10% reserves, so they felt they were in position (with the Feds covering part of the bad debt) to buy the assets of the smaller banks. Now, let's look at Barclay's and Deutsche Bank. Barcley's 1.27 trillion pounds 2.3 trillion dollars Deutchbank €2.020 trillion 2.9 trillion dollars If there is a run on one of them, the obvious thing to do is to find a bigger bank with less leverage than 30-50 to take over the assets. Do you know of any candidates who are in place to do so? Even if they didn't make toxic loans, good loans can turn bad with a panic pretty soon. Even if the long term position for the banks look good, they have precious little margin to survive a run. If there is a run on either bank that causes a failure, who is big enough to step in? As far as I know, the answer may be the EU & the US government put together, but no private institution. Dan M. _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
