Cincinnatus BLOG *** Political Commentary - Social Commentary

  The stress tests appear to be boiling down to one critical measurement of bank capital, Tangible Common Equity (TCE). While the assets themselves may be tangible, the intangible result could be a tectonic shift to a politicized banking system. To avoid any confusion it is probably best that I define my terms at the outset: 1. Tangible Common Equity  (TCE) equals book value minus intangible assets, goodwill, and preferred equity. Essentially this is the most conservative measure of bank capital and represents what common shareholders would have left if a bank were liquidated. 2. Tangible Book Value (TBV) equals book value minus intangible assets and goodwill. This measure would include preferred shares held by the government and private investors and gives a broad view of… Continue reading | 3 Comments

In an ironic twist of fate, it may be the fiscally responsible communist Chinese who save capitalist America from its budgetary excesses. They may well have to teach the wayward youngster a lesson in fiscal responsibility by refusing to fund continuing trillion-dollar deficits. Tough love from the Chinese may be the only prescription that rescues America from impending financial doom. The new administration is behaving like a kid in a candy store and it will take a bitter pill from the Chinese to bring them to their senses. Federal outlays will soar in fiscal 2009 to $4 trillion, or 27.4% of our $14 trillion GDP, up from $3 trillion or 21% of GDP in 2008, and 20% in 2007. If we take the administration's rosy recovery scenario at face… Continue reading | 1 Comment