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The Biz Roundup February 21

In a preview of the next fall’s “Geithner’s Anatomy,” upstarts stress test the big four. On envelopes, of course.

Citigroup has a projected leverage ratio of just 3.8% — far lower than what it would need to be considered well capitalized [i.e., 5%]. How much would the U.S. have to give the bank to nurse it back to good health? About $22 billion. . . .

JPMorgan is in better shape than other big banks are. Its post-test leverage ratio drops to 6.4%, from nearly 8% — still a picture of financial health. . . .

BofA is still on the monitor, but it’s not far from being healthy again. It has a stressed leverage ratio of 4.6%. Just $7.3 billion in new capital would put BofA back on its feet. And with Uncle Sam finalizing its deal to guarantee $118 billion of BofA debt, the bank may already be on the mend. . . .

Wells Fargo is generally considered one of the banks that are least likely to fail. But our stress test says otherwise. Even with its $58 billion loan-loss buffer, Wells is still in the hole for $59 billion, or 60% of its capital. With $40 billion remaining and an expected $5 billion in income, the bank could sink to a less-than-rosy leverage ratio of 3.7%.

(“Can Your Bank Pass the Stress Test?,” Time, February 19) Feel free to quibble with their model, as Wells Fargo clearly does. I think they’re being optimistic, frankly.


I’ll take your money but I don’t want it. In theory.

With state budgets teetering, Gov. Arnold Schwarzenegger of California, who supported the stimulus bill, stressed the need for Republicans in state houses and in Congress to be “team players” in facing the economic crisis and not to hold fast to their party orthodoxies. “You’ve got to go beyond just the principles,” he told George Stephanapolous on ABC’s “This Week.”

Florida Governor Charlie Crist, also a Republican, voiced a similar sentiment on NBC’s “Meet the Press,” where he urged Republican to give President Obama “a shot.” . . .

“I’m more than happy to take his money or any other governor in this country that doesn’t want to take this money,” Mr. Schwarzenegger said in response to South Carolina Gov. Mark Sanford, who also said he would reject a portion of the stimulus money: “I take it, because we in California can need it.”

(“http://www.nytimes.com/2009/02/23/us/politics/23governors.html?_r=1&hp,” New York Times, February 21) There is a truism in business that is just as true in politics: whatever you think you know about a person, whatever they say about themselves, whatever they believe, whatever moral system they claim to uphold, whatever they personally believe about themselves, is almost never true when money is involved. Welcome to the post-partisan age we’re-all-going-bankrupt style.


What happens when the news goes out of business, part gazillion.

Journal Register Co., the debt-strapped owner of the New Haven Register and 19 other daily papers, filed for Chapter 11 bankruptcy protection Saturday, at least the third newspaper publisher to tip into bankruptcy court in recent months.

Journal Register has been plagued for more than a year by an unsustainable level of borrowing, made worse by an industry-wide plunge in revenue. Journal Register’s woes stem from an acquisition binge, the pinnacle of which was a 2004 deal to buy a chain of Michigan newspapers for more than $400 million.

(“Journal Register Files for Bankruptcy Protection,” Wall Street Journal, February 21) Oh, well, there’s always Drudge. Or total ignorance. Or both, really.

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