Meredith Whitney speaks again

Wed, 21 May 2008 06:59:57 -0400

In times such as these, an analyst really can make a name for herself. Oppenheimer's Meredith Whitney rocketed to fame based in part on prescient prediction that Citigroup would be forced to cut its dividend. She's been a bear for a while now, and judging from her latest report to client, there is no reason for anyone to change stances now. As reported by Portfolio, Whitney says the "real harrowing days" of the credit crunch remain ahead of us. That puts her at odds with the many who say the opposite. In her view, banks will need to cover another $170 billion in loan losses by the end of 2009, and earnings projections are still way too rosy. You have to wonder what it will take for her turn a bit more optimistic.

For more:
- here's the Portfolio article

Wachovia's life insurance policies lead to huge loss

Fri, 09 May 2008 06:59:57 -0400

We've all been talking about writedowns for leveraged loans, subprime-related securities, and heck even plain loan losses. But life insurance policies? Huh? About $315 million of Wachovia's first-quarter loss of $708 million was due to writedowns stemming from a revaluation of the life insurance policies it takes out on its own employees. The Financial Times reports that banks take out such policies on their own employees. They pay off when employees die, even if they are no longer with the company. There are also some tax benefits. The article also notes that shareholders and regulator have criticized such policies, in part because few employees know about them. Hey, anything for revenue. You've got to wonder what other banks are thinking. Are more revaluations coming?

For more:
- here's the Financial Times article