Tuesday, April 7, 2009
More Banking trouble - Mike Mayo
Mike Mayo is a guy that really threw a cat among the pigeons yesterday, causing a BIG scare and sell off of risk assets... Currencies that is... His name is Mike Mayo, and he used to work at Deutsche Bank, and now is a banking analyst at Caylon Securities... And brother can he ever move a market! To make a long story short... Mr. Mayo basically said yesterday in a report that "Bank Loan Losses Will Exceed Depression Levels"... So, all that James Brown, feeling good, that went on last week with the G-20 singing everything is beautiful, all went down the drain after Mr. Mayo spoke... The Wall Street Journal printed the following.... "One reason why he (Mayo) believes the banks will face more pressure is because the legacy loans they hold on their balance sheets have not been marked to market - he estimates the marks at about 98 cents on the dollar, a much higher estimate than what others would come up with. We see more downside with government programs regarding those bank stocks with more traditional banking since this business - aside from when involving an acquisition - is not marked to market," he writes. As a result, he believes the government's help will either result in rosier-than-expected projections that allow the banks to maintain their unwanted assets on their balance sheets, or hammer them with demands for more capital, which will "hurt traditional banking more."