Banking Industry

The downside, if one can call it that, of being out in front on a reform issue is that occasionally you get asked to put your principles in action. So it is with Phil Angelides, who as California's Democratic state treasurer from 1999 to 2007 pressed for disclosure and transparency for investments by CalPERS, the state pension fund. He also threatened to stop giving state business to Wall Street firms that didn't meet conflict-of-interest standards.

Throughout history, men braved the odds to perform great feats. Outmatched generals snatched victory from the jaws of defeat. Titans of industry gambled on bold innovations to reap jackpots. Athletes tested the limits of human endurance in quests for glory. Riad Toufic Salame, the governor of Lebanon's central bank, is not one of those men. Instead, the silver-haired banker became a hero by playing it very, very safe.

Bank of America Corp. set the tone for the banking industry's response to California's decision to issue IOUs. That message, essentially, is this: "We'll help you for a week. If you can't get your act together and nail down a budget by then, you're on your own." Bank of America announced late Wednesday that it would redeem in full the state's IOUs (formally, "registered warrants") from current BofA customers who want to cash them in. But the bank set a cutoff date of July 10.

The chilling realization that some things in high finance will never change, notwithstanding the current crisis, came to me the other day when I discovered that the Federal Reserve would accept only AAA-rated securities as collateral for its new program to finance consumer loans. On the surface this seems only prudent -- after all, what could be more gilt-edged than paper given a top investment grade by two of the three most-recognized credit rating agencies, as the Fed demands?

In these uncertain times, you take your certitude where you find it. Platoons of academic economists and business commentators spent all weekend griping about the emerging details of the Obama administration's latest attempt to mount a bank bailout. Then Treasury Secretary Timothy F. Geithner unveiled the plan in detail Monday morning, and the stock market delivered a decisive thumbs-up, with the Dow Jones index rocketing nearly 500 points higher.

Denial, noun: An unconscious defense mechanism characterized by refusal to acknowledge painful realities, thoughts or feelings. -- The American Heritage Medical Dictionary -- The banking industry wasted no time last week declaring its opposition to President Obama's proposal for a regulatory agency that would protect consumers from rapacious lending practices. While acknowledging that "regulatory reform is badly needed," Edward Yingling, president of the American Bankers Assn.

Today is judgment day for the country's biggest banks as the government releases results of "stress tests" to gauge their stability, but Wall Street celebrated a day early after concluding that there would be no bombshells about the financial industry. As a group, the 19 banks are likely to be forced to add tens of billions of dollars to their front-line cushions of capital to guard against a deeper-than-expected recession.

The arrival of March is unlikely to bring much relief to a stock market battered by bad news throughout February. Trepidation is more like it after a month that saw the major indexes fall to their lowest levels in 12 years. The Dow Jones industrial average fell for the sixth straight month and is now worth less than half its record high of 14,164.53. All because no one has a clue about when the economy will begin to pull out of recession.

The major banks now collecting federal bailout money were not unwitting victims of the mortgage meltdown but instead were directly linked to the root cause of the problem: a subprime lending machine concentrated in Southern California, a new study asserts. The banks were "enablers that bankrolled the type of lending threatening the international financial system," according to the study being released today by the Center for Public Integrity, a Washington-based watchdog group.

Critics across a broad ideological spectrum are ramping up their attacks on the Treasury Department's $700-billion banking bailout, saying it is now doing more damage to credit markets than good. Lending is flat, investors are fleeing bank stocks, and the huge investment by the government into troubled banks has plummeted in value by more than $100 billion, according to some recent studies.