Sunday, 01 November 2009 19:00

Reggie Middleton on BOKF's 3Q09 Results

Here is my review of the BOKF 3rd quarter results. BOKF has performed relatively well in comparison to other regionals, but the caveats and basis of the orignal thesis that we warned about in the forensic preview are still valid. See:

BOK 1Q09 BOK 1Q09 2009-05-07 06:34:52 460.74 Kb

BOK 2Q09 review BOK 2Q09 review 2009-08-01 05:04:06 1.05 Mb

March Actionable Note - Banking Sector BK March Actionable Note - Banking Sector BK 2009-03-03 11:58:22 184.25 Kb

March 2nd Actionable Note Preview - banking March 2nd Actionable Note Preview - banking 2009-03-02 09:44:20 61.88 Kb

and an off topic piece that BOKF just happened to be involved in... Deposit Insurance Arbitrage

Sunday, 01 November 2009 19:00

Reggie Middleton on BOKF's 3Q09 Results

Here is my review of the BOKF 3rd quarter results. BOKF has performed relatively well in comparison to other regionals, but the caveats and basis of the orignal thesis that we warned about in the forensic preview are still valid. See:

BOK 1Q09 BOK 1Q09 2009-05-07 06:34:52 460.74 Kb

BOK 2Q09 review BOK 2Q09 review 2009-08-01 05:04:06 1.05 Mb

March Actionable Note - Banking Sector BK March Actionable Note - Banking Sector BK 2009-03-03 11:58:22 184.25 Kb

March 2nd Actionable Note Preview - banking March 2nd Actionable Note Preview - banking 2009-03-02 09:44:20 61.88 Kb

and an off topic piece that BOKF just happened to be involved in... Deposit Insurance Arbitrage

Tuesday, 27 October 2009 20:00

Deposit Insurance Arbitrage

I'll coin this term in order to explain the travesty that is being allowed in the banking industry. Institutions are literally paying little old ladies' less than a half a percent on their life savings and using said funds to gamble in the risk fraught derivatives market, with the risk being totally underwritten by the government through the:

  1. FDIC (deposit insurance and bond insurance - although to date this expense has been born by the industry, the FDIC is insolvent and may very well have to tap the Treasury, ie. the taxpayer: see I'm going to try not to say I told you so...),
  2. Treasury (via TARP and associate measures, see America, You have been outright lied to! Bamboozled! Swindled! Hoodwinked! The Worst Case Scenario) and
  3. Federal Reserve (ZIRP, QE, and a whole slew of programs I only wish I knew about - see The Fed Believes Secrecy is in Our Best Interests. Here are Some of the Secrets).

A perfect example of how the big banks are carrying this arbitrage out is outlined in "The Next Step in the Bank Implosion Cycle???", but the global economy risking behemoths are not the only one's that arbitrage bank deposit funds via FDIC guarantees. Earlier this year, I featured research on a smaller bank, Bank of Oklahoma, which I found participated in some pretty suspect accounting moves. Despite these "gimmicks" the stock floated higher with the general market and particularly the banking sector. OF course, this does nothing to cure the ills that they have been papering over. Subscribers should reference:

BOK 1Q09 BOK 1Q09 2009-05-07 06:34:52 460.74 Kb

BOK 2Q09 review BOK 2Q09 review 2009-08-01 05:04:06 1.05 Mb

March Actionable Note - Banking Sector BK March Actionable Note - Banking Sector BK 2009-03-03 11:58:22 184.25 Kb

March 2nd Actionable Note Preview - banking March 2nd Actionable Note Preview - banking 2009-03-02 09:44:20 61.88 Kb

Well, one of my subscribers have pointed out another "gimmick" that they are into, and that is the FDIC arbitrage thing. That's right, not the giga-billion dollar Wall Street TARP babies, but the Bank of Oklahoma. Here's how it works:

  1. As a deposit taking institution, CDs and savings accounts are insured by the FDIC. The banks use the funds from these CDs and savings accounts to fund their operations, which use to be primarily loans and checking/cash management services.
  2. The Fed has enabled expanded margins for many of these institutions through ZIRP (zero interest rate policy), but that is not enough to help the truly sick banks. See "The Anatomy of a Sick Bank!".
  3. Thus, many banks have ventured off into the arcane world of derivatives to boost earnings, and avoid having to polish all of those toasters to offer to Grannie! These banks include JP Morgan, Citibank, and Bank of America (see The Next Step in the Bank Implosion Cycle???"), but also much smaller regional and even some local institutions. The Bank of Oklahoma is offering what appears to be option-embedded CDs that sport the FDIC insured moniker on them. These instruments allow the owner to participate in the equity markets while having the federal guarantee on the principal. So, you ask, what's so bad about that? Well, let's walk through what their marketing material has to say, "For discussion purposes only", of course...