Thursday, May 21, 2009

BKUNA Matata

BKUNA Matata, What a wonderful phrase

BKUNA Matata! Ain't no passing craze

It means no worries for the rest of your days

It's our problem-free.... philosophy

BKUNA Matata....

Nothing to see here folks, nothing to see here. Move along now. No worries - Just a $12.8 billion asset bank failure. Well, actually, given the FDIC's press release says they expect to lose $4.9 billion, it's more like an $8 billion asset bank; 4.9 of the 12.8 is fictitious.

Doesn't that make you feel good about all the other bank balance sheets that get reported? "Oh, by 'thirteen" billion, we meant 'eight' billion. Is it wrong to overstate your assets by 60%?"

Don't worry though, Citigroup is solvent and its balance sheet, despite overflowing with toxicity, is money good.

BTW, kind of hysterical that BKUNA's stock rallied just three days ago to almost $1 per share. Wish I'd been paying attention for a short. Anyone who thought this wasn't going to have negative value with the FDIC eating explicit losses plus a loss sharing agreement on the balance hasn't been paying attention.

So, BKUNA is going to generate losses of at least 37% of their "assets". Long time followers of TILB realize that the FDIC have not really bothered with taking down banks on which they don't expect to lose at least 25% of assets and the pace of takeovers has accelerated (and generally ultimate losses have been worse than expected losses), which is a far cry from the +6% of assets as equity value that the Feds like to see in a well capitalized bank.

We at TILB can easily imagine that if, rather than waiting until the banks were worth negative twenty five percent, the FDIC was inclined to take over all banks at least 10% insolvent, we'd be closer to 1,000 failed institutions.

But who cares? No worries. BKUNA matata.

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