One Year Later: Reflections From The Street
One year ago, Wall Street as we all knew it changed forever.
We are still feeling the aftershocks today.
Washington took over Fannie Mae and Freddie Mac , and extended a lifeline to AIG . Lehman Brothers filed for Chapter 11 bankruptcy protection after posting a loss of nearly $4 billion for its third quarter. That same weekend, Bank of America made a deal to buy Merrill Lynch for $50 billion. When Wall Street woke up for trading on Monday, September 15th, it was a very different environment. We were in unfamiliar territory, navigating very rough waters.
On “Closing Bell” today, Maria Bartiromoreflected on the state of the banks with key Wall Street commentators - Robert Albertson, Principal and Chief Strategist at Sandler O'Neill and Brad Hintz, Senior Analyst at Bernstein Research. Hintz was Chief Financial Officer at Lehman Brothers from 1996 to 1998 and previously Treasurer at Morgan Stanley from 1986-1996.
In assessing the environment on year on, Albertson told Bartiromo that he has some grave concerns.
While the liquidity crisis is behind us, he said "we still haven't resolved the credit crisis in the secondary markets". Albertson thinks that the markets are grossly underestimating the ongoing losses and credit problems on banks' balance sheets saying that "we are 35% in terms of loss recognition on balance sheet lenders".
Albertson is also expecting a bigger number on the number of bank failures. His calculations put that at about 1,000 banks. Mostly small ones but said "they are key to credit because they reach into the local community and small businesses".
Meanwhile, Hintz said investors should be watching what the banks are doing, instead of listening to what they're saying. Hintz observed, "the amount of excess liquidity they are maintaining is very low. It tells me the major players are worried the Fed is taking the training wheels off and the support programs are going away."
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Hintz also shared his assessment on the winners emerging from this crisis, giving the thumbs up to Credit Suisse and Barclays. No surprises there given both European banks haven't faced the same problems as their competitors here in the United States. Hintz also added that "you can make an argument that the Bank of America people despite the problems in their stock, they are coming out of this with Merrill Lynch. As long as they leave their hands off, it will be a fine franchise."
But as Bartiromo noted, it is worth pointing out that the crisis has removed so much capacity from the capital markets and as a result, the survivors are doing well as a result of less competition.
Maria Bartiromo will be hosting an hour long special "One Year Later: Reflections From The Street" on Sunday September 13th at 10pm ET. Bartiromo will have unprecedented access of the CEOs perspectives of what happened, how it happened and what will happen now.
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