zerohedge.com / By Tyler Durden / January 3, 2013, 15:16
Overnight, Frank Partnoy and Jesse Eisinger released an epic magnum opus titled “What’s Inside America’s Banks“, in which they use over 9000 words, including spot on references to Wells Fargo, JPM, Andy Haldane, Kevin Warsh, Basel II, Basel III (whose regulatory framework is now 509 pages and includes a ridiculous 78 calculus equationsto suggest that banks have to delever by some $3 trillion, which is why it will never pass) to give their answer: “Nobody knows.”
Of course, while this yeoman’s effort may come as news to a broader cross-section of the population, is it well known by anyone who has even a passing interest in the loan-loss reserve release earnings generating black boxes formerly known as banks (which once upon a time made their money using Net Interest margin, and actually lending out money to make a profit), and now simply known as FDIC insured Bank Holding Company hedge funds. This also happens to be the second sentence in the lead paragraph of the story: “Sophisticated investors describe big banks as “black boxes” that may still be concealing enormous risks—the sort that could again take down the economy.” So far so good, and again – not truly news. What however may come as news to none other than the author is that the first sentence of the lead-in: ‘Some four years after the 2008 financial crisis, public trust in banks is as low as ever” is, sadly, wrong.
Why is it wrong?
Because as we showed a week ago, the general public’s “trust” and faith in banks is not expressed through the stock price of their equities, something which these days is largely determined by the Federal Reserve and the banks themselves, who not only give each other “Conviction Strong Buy” upgrades on a frequent basis but also buy each others’ stocks in the biggest circle jerk imaginable, or even through slurred anecdotes at the local pub bashing Ken this and Jamie that. Instead it is expressed by how much trust the general population - the public - has put on deposit, literally, in the form of money, in either checking or, worse, savings (because under ZIRP there is no interest income, and having a savings account merely locks up one’s withdrawal options) accounts with various financial institutions, or as The Atlantic calls them black boxes.