Wikinvest Wire

Yes, things are about back to "normal"

Saturday, January 09, 2010

It appears that the recovery on Wall Street is nearly complete, key elements of banking activity quickly returning to "normal" as detailed in this report($) in the Wall Street Journal.

Banks are boosting their lending to hedge funds and private-equity firms to levels unseen since before the financial crisis, raising their risk levels and adding fuel to the buying power of key players across the stock, debt and buyout markets.

Banks and investment banks, including Citigroup Inc., Bank of America Corp., J.P. Morgan Chase & Co. and Morgan Stanley are offering levels of borrowing—known as leverage—that they haven't provided in more than two years, according to people familiar with the banks and funds.
...
While leverage injects risk into the financial system, borrowed money has always been an essential lubricant to both the economy and the Wall Street money-making machine.

By borrowing, hedge funds can amplify their bets on stocks, bonds and other securities. The leverage can boost gains if the wagers pay off but can prove costly if they sour.
It seems the big banks that survived the last few years due to the generosity of Uncle Sam are now thumbing their noses at the American public by catering to hedge funds and private equity firms rather than small businesses and consumers, this report noting that the big banks can make lots of money on the former and seem to have had their fill of the the latter.

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5 comments:

John S said...

The bankers need to read up on the French Revolution.

sedentary state said...

Well clearly you'd have to pay $$ for a report like that. Its brilliance is overwhelming.

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Anonymous said...

I wonder how long till the next taxpayer funded bank bailout? Don't you just love banks taking all these risks with taxpayer money?

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