Want a bigger sallary? Pay back your debt.

While markets seemed to be happy with the news of BoA paying back government bailout funds, I think this event is  not inflationary, especially for the dollar, - money are taking off the table and go back to  their creator.
And, naturally, it's a good way to motivate other bank executives: "Wanna more money, pay back your debt".

The recession has ended, but US banks don't take it seriously

A strange thing is happenning in US bank sector. The recession has ended, but banks are still reducing their loans to the real economy:

And they rise their reserves as if there is no tomorrow:

Really strange, if we look at previous recessions ends. Or may be, they just think there is still too much risk in the system.

China goes CDO

Caijing is reporting the slowdown in the big banks landing and shifting in new loan issues to smaller banks and rural credit unions. What a deja vu of Eastern Europe!
But the most interesting, in my opinion, are the packaging efforts of western bankers and spreading of financial services in non-financial firms:

Now, said a banker at a joint-stock bank, the latest trend is to bundle loans for wealth management packages.

Trust products are another increasingly popular type of investment playing a role in the credit shift. Banks have transferred credit assets to financial firms through trust companies, which then issue trust products that are in turn purchased by financial firms.

In this way, data indicate that finance companies are taking up the loan torch with enthusiasm. In September, financial firms issued 87 billion yuan in new loans, representing nearly 17 percent of total credit issued by all financial institutions and second only to the Big Four.
That marked a major change since August, when financial firms accounted for only 5.5 percent of all credit lending in China, issuing loans worth a combined 22.8 billion yuan.
Financial companies are generally attached to large enterprise groups. They mainly service capital pools held by the groups while focusing on intra-group financial needs.
A source at the petroleum financial subsidiary attached to China National Petroleum Corp. said the credit business at these companies includes proprietary lending and agent commissioned loans, all serving businesses within the group.
According to the central bank, agent commissioned loans are classified as trust loans, and include both loans issued by trust companies as well as agent commissioned loans issued by financial firms.
Financial firms also can receive credit assets transferred from banks. But, technically, financial firms and banks should sign buy-back credit asset transferring agreements.

 Good luck China!

Mish on USD and Gold

An excellent post from Mish about the US dollar and Gold and where we're with it. Just wanted to correct his thoughts about the European banks:
1) European banks are arguably in as bad a shape as US banks because of loans to Latin America and the Baltic states.

We should add a higher level of leverage of European banks if compared with their American peers. The loans were given to the whole Eastern Europe, not only Baltic states. Much of them were spent on real estate speculations of all sorts and  the bear market in many countries has barely begun. The problems in continental Europe exist as well but we didn't even see the beginning of their resolution. I'm very bearish on the European bank system in the long run and hence on the Euro its self.
Will the single currency become the deception of 2010?