The Biggest Bank Robbery in History...

Posted by Ian Cooper - Wednesday, January 19th, 2011

From Zero Hedge:

"Up until recently, the banks have been enjoying a free ride at the savers expense.  The yield curve is at its steepest slope since 1977.  The spread between the US 2 year and 30 year is 400 bps while the 2-10 spread is 275 bps.  The plan was for that big fat spread to add up to big fat bank revenues (witness Citigroup 4Q net interest revenue of over $12 billion).  But just like most bank robberies, the plan usually goes wrong and the robbers  are caught by the cops.  This time the cops are the bond market.  Prices on treasuries dropped 13% in the 4Q of 2010.  This has wrecked havoc on the banks free money plan and we are now seeing this in the investment portfolio losses of the banks (witness State Street earnings report this morning where their revenue dropped 12% due to “investment portfolio repositioning”).

The Fed has outright stated that they want the stock market to go higher to help bring confidence back to the economy.  They are trying to force John Q. Public to take his money out of his 0% yielding savings account and pump it into riskier assets like stocks.  It appears for the past 5 months that their plan was going according to script.  But unlike the movie “The Town” which had a very good ending (we won’t spoil it for you here), we are not quite sure that the Bernank will enjoy his movie’s ending and neither will we."

Read more here.

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