Professor Mark J. Perry's Blog for Economics and Finance
The World’s 50 Safest Banks 2009 were selected through a comparison of the long-term credit ratings and total assets of the 500 largest banks around the world. Ratings from Moody’s, Standard & Poor’s and Fitch were used.
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
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All of the "Top 5" Canadian Banks (by size) are recognized as safest banks on this list. Most of them the banks on this list are those that shy away from globalized operations (unlike some of the US and European Banks). Are there any lessons to be learnt from this?
U.S. banks did their jobs, i.e. distributed "excess" capital to the U.S. masses (excess capital has to be distributed to borrowers who aren't creditworthy).
Note: Wells Fargo was also on the list at #21. Thanks for the post.
Obama Says U.S. Can’t Afford ‘Bubble-and-Bust’ Cycles
March 12 (Bloomberg) -- President Barack Obama warned a group of chief executive officers that the U.S. can’t continue with “endless cycles of bubble and bust” and must build a new foundation for future economic growth.
The current turmoil can’t be used “as an excuse to keep ignoring the long-term threats to our prosperity” from the rising costs of health care and energy and a faltering education system, Obama said to the group.
“I’m not choosing to address these additional challenges just because I feel like it, or because I’m a glutton for punishment,” Obama told the business leaders. “I’m doing so because they are fundamental to our economic growth and to ensuring that we don’t have more crises like this in the future.”
Obama blamed the crisis on “reckless speculation and spending beyond our means; on bad credit and inflated home prices and overleveraged banks.”
‘Illusion of Prosperity’
“Such activity isn’t the creation of lasting wealth,” he said. “It’s the illusion of prosperity, and it hurts us all in the end.”
My comment: So, thanks to Obama's trillions of dollars of spending, we'll no longer be able to afford efficiencies in production, cheap assets and goods, excess capital, and a higher standard of living; or a third superbubble, similar to 1995-00 or 2002-07.
During the 2002-07 bubble U.S. firms became much more efficient, resulting in a record 20 consecutive quarters of double-digit earnings growth, there were massive real asset booms, and the real goods market expanded strongly.
Foreigners sold their goods too cheaply and lent their dollars too cheaply, while U.S. firms offshored their high cost goods or goods with declining prices, imported those goods at lower prices and for big profits, and then shifted limited resources into higher quality U.S. goods, e.g. goods with market power.
It seems, we're heading into stagflation, including asset inflation. U.S. living standards will decline through inefficiencies. We'll see accelerating inflation (too few goods), higher interest rates (less capital), and Americans will work harder and longer for fewer and smaller assets and goods.
#34 on the list, DnB NOR Bank (Norway), is 100% safe. It's the largest bank in Norway and the biggest 'investor' is the government. The bank will never ever be allowed fail.
SPX may not trade far away from its long-term trend line for at least a "lost" decade:
http://www.raymondjames.com/images/technical/0220091229_2lrg.png
I was going to mention this on my site, and then I read the fine print that this list was based on ratings from some of the same ratings agencies that slapped triple-A ratings on mortgage-backed CDOs now priced at ~30 cents on the dollar.
"All of the "Top 5" Canadian Banks (by size) are recognized as safest banks on this list. Most of them the banks on this list are those that shy away from globalized operations (unlike some of the US and European Banks). Are there any lessons to be learnt from this?"
No, not really Thoota. Scotiabank is a big Canadian International Bank with banks all over the globe. If you look closely at the list you will notice that quite a few are like Scotiabank. Perhaps the lesson is good management is more important?
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