Friday, December 23, 2011

Cleveburgh Watch: A Tale of Two Banks

So to admit upfront, this is all parasitic on some neat reporting from Bloomberg out on the Analytic Journalism frontier.  They have acquired and made available to the public (which means they want us to use it right?) data as they describe "Once secret " from the Federal Reserve on its lending to major banks during during the peak of the financial crisis. I suspect the Fed would describe this all as merely 'confidential' data.

As they describe it in detail the data:

The data reflect lending from the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, the Term Auction Facility, the Term Securities Lending Facility, the discount window and single-tranche open market operations, or ST OMO.

Got that?  I have pulled the files for PNC and National City which now are one of course.  Some may recall there was a certain bit of angst up the Turnpike that for some reason National City was denied TARP funding that might have kept it around a bit longer.  The PNC takeover followed immediately on the heels of the government's denial of TARP dollars.  Some thought it a bit less than fair since along the way PNC used some of the same money to implement the takeover.

Well.. if there is any doubt over the flawed logic of a straight one on one comparison of the financial situation of the two banks at the time, here is what the Bloomberg data has for Fed lending to the two institutions as a percentage of their market capitalizations day by day.

Yes at one point near the end, Fed lending to National City well exceeded its market capitalization. PNC's lending looked to be in itinerant blocks of a billlion.  I am speculating completely when I wonder if that was $ pushed by the Fed as it wanted to shore up confidence in the system.. not really money desperately needed by PNC at the time. 


Anonymous Anonymous said...

If you get a chance to watch HBO's Too Big To Fail you will see them talk about how they forced banks that didn't need capital to take capital.

Friday, December 23, 2011 11:41:00 AM  
Anonymous MH said...

I strongly suspect the bankers that complained loudest about being forced to take capital were more likely than not to be the ones who really needed the money. Solvent banks didn't need to scream about it quite so much.

Happy Holidays to Chris and the internet.

Friday, December 23, 2011 12:12:00 PM  
Anonymous DBR96A said...

PNC was profitable without TARP. They didn't need the money, but were forced to take it anyway.

Friday, December 23, 2011 1:09:00 PM  

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