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Bank Dividends Are a Sham and a Con

After taking 3 of 4 days off between March 10 and March 15 the Fed resumed daily pumping last week, and is scheduled to continue pumping about $25 billion a week into the market through April 11. Along with that the market will be getting the benefit of $25 billion a week in Supplementary Financing Program Cash Management Bill paydowns through March 24. Another plus appears to be a seasonal upsurge in bank purchases of Treasuries. All of this comes when Treasury supply will be light. No new supply will settle until the end of the month.

But there are problems inherent in the timing of all this. And data on the condition of banks suggests that the too big to fails are losing money again. The Fed’s decision to allow the resumption of dividends is a scam on the public.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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  3 comments for “Bank Dividends Are a Sham and a Con

  1. ter
    March 21, 2011 at 3:07 pm

    My guess: they’re planning on issuing more stock soon The promise of a larger dividend, or the initiation of a dividend, will make the carrion easier to sell to those bereft of the sense of smell.

  2. slogic
    March 24, 2011 at 2:23 pm

    Just wanted to share an idea. I really appreciate your liquidity updates, Lee, but they are hard to follow in the narrative form. I was thinking, would it make sense to plot them on the graph? Like, forward-looking POMO and any other sources of inflowing liquidity into the market separately and then summarized into one single graph. Also, all outflows that you can track, such as new treasury issuance, MBS selling by treasury, change in bank reserves at the FED, adjustment for FCB buying. With a summary of cash outflows on another graph. Finally, the summarized graph of forecasted marginal liquidity in/outflow into the stock market. Would be really helpful, even if it was a rough approximation.

  3. March 24, 2011 at 2:49 pm

    Thanks for the kind words! Years ago I tried a one size fits all chart, but indexing them all to a single scale was next to impossible. In general I like the idea, but in practice, I’m not sure it can be done in a way that makes sense. But I will revisit it. I often get brainstorms about things that turn out to be quite illustrative. Hopefully, I can figure something out along these lines. In the meantime, stay focused on the SOMA chart. That’s the fountainhead.

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