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Ailing Wall St. banks far from DOA

Thursday, June 07, 2012 - 02:09

June 7 - Business may be bad on Wall Street, with reports of pink slips growing, but that doesn't necessarily mean an imminent Lehman-type meltdown. Bobbi Rebell reports.

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Business is just plain bad at Wall Street banks. Analysts are slashing their earnings estimates. Reports of pink slips are growing. That's creating worries about the vulnerability of these banks. U.S. Fed Chairman Ben Bernanke, testifying before Congress Thursday, was asked about the danger of a Lehman type meltdown. SOUNDBITE: BEN BERNANKE, CHAIRMAN, U.S. FEDERAL RESERVE (ENGLISH) SAYING: "We are already taking some actions- important actions - notably that we are working to ensure that banks have adequate capital and liquidity and as I noted, banks are now much better capitalized than they were prior to Lehman which is helpful." That capitalization does create a buffer. Rochdale Securities banking analyst Dick Bove: SOUNDBITE: DICK BOVE, VICE PRESIDENT, ROCHDALE SECURITIES (ENGLISH) SAYING: "The Wall Street banks may have a bad quarter but they are going to make money and their balance sheets are in a relatively strong position. In other words they have a significant amount of capital, a significant amount of liquidity; much more than they have had in a decade." At the global level, The Lehman-type meltdown fears are real. Earlier this week ECB President Mario Draghi tried to re-assure the markets saying: "We are still far away from a Lehman-type situation." And while Bove is optimistic about the sector- it has been a bad few months. SOUNDBITE: DICK BOVE, VICE PRESIDENT, ROCHDALE SECURITIES (ENGLISH) SAYING: "Business is just shut down for the last you know couple of months. In other words the fears related to Europe, related to the direction of the U.S. economy related to just about anything you can think about have caused people to stop trading and have caused CEOs to stop getting involved with mergers. So the net effect is you are seeing a reduction in trading activity in commodities, currencies, fixed income, high yield. The treasuries still trading pretty well but most of the other areas have slowed down dramatically." Add to that a murky regulatory environment that's limiting fees, raising costs, and demanding more capital. Bobbi Rebell, Reuters.

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Ailing Wall St. banks far from DOA

Thursday, June 07, 2012 - 02:09