“Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn’t get aid.”

Using federal bank data, they compared 940 banks in the Troubled Asset Relief Program (TARP) and 7,400 banks outside it.  That’s a pretty thorough study.

Here are some of their published findings:

Lending fell
TARP banks: Outstanding loans to businesses and individuals fell 9.1% for the 12 months ending Sept. 30, 2009,
Non-TARP banks: Outstanding loans dropped 6.2% in the same timeframe.

Employee pay rose
TARP banks: Average pay rose 9.4% in the program’s first year.
Non-TARP banks: Salaries increased 1.8%.

Cost-cutting limited
Banks in TARP cut costs less than those outside the program.
TARP banks: Increased branches by 2.7%
Non-TARP banks: Decreased branches by 1.2%.

Essentially, what this says is that the banks that the federal government bailed out showed worse behavior than the banks that were not bailed out.  And by worse behavior, I mean worse according to the very metrics the government and policy makers care about and were trying to improve by bailing out those banks in the first place.

Check out the full article at:

http://www.usatoday.com/money/industries/banking/2010-04-21-tarp-banks_N.htm

The title refers to the creation of the US Federal Reserve Bank, which took place at a then-secret meeting in 1910 (later confirmed by the participants), at a resort on Jekyll Island, just off the coast of Georgia.

Most of us grew up thinking of the Federal Reserve as a quasi-government organization that helps stabilize our money supply. How it does that is often a bit of a mystery, although it involves interest rates, and possibly reserve requirements. And it isn’t always clear what the relationship is between the Federal Reserve and the US government.

Griffin argues that, in point of fact, the Federal Reserve is a private cartel created by the banks, with the sole purpose of maximizing bank profits. Inherent in its design are the seeds of periodic financial disaster (and inevitable, eventual collapse), which result in a massive transfer of wealth from depositors and taxpayers to bank executives. This is not an accident; it is the way the system is designed.

While this may seem an extreme view, Griffin’s evidence is undisputed, his logic is sound, and his arguments are highly convincing.  Much of the banking system which is ordinarily difficult to understand becomes extremely clear and transparent when viewed through this lens.

It reminds me of the early 1990′s.  A lot of uncertainty.  A lot of opportunity.  Prices fluctuating.  Irrationality in some areas, but not across the board, much like during the peak of the bubble from 1999 to 2000.

There are some great opportunities in equities right now.  Some long — some short.

I’ve been heavily weighted in energy stocks for the past 3 years, and it’s been a great ride.  But oil won’t go up forever.  The upstream oil producers have benefited from the high price of oil, and they will suffer when it goes down.  And down it will go; despite the claims of increasing demand in China and India, there really is no fundamental justification for the current high price of oil.  It’s a bubble, and it’s clear the large oil producers understand that.

Likewise the ongoing, slow-motion real estate collapse has created some impressive possibilities.  Who is going to buy up all that foreclosed real estate?  And what about the houses that are not in foreclosure?  They may be perfectly good homes, but they won’t be able to command their previous prices.  When prices get irrational–and they will!–gobble them up while you can!  Rent them out and hold onto them.

And watch out for the financial sector.  A lot of companies got caught up in the chase for a quick buck, and are over-dependent on the real estate market.  As that bubble collapses, it’s likely to have a devastating effect on some banks.  The only financials I’m holding onto are Goldman Sachs, Bank of America, and a small position in Schwab.  I also think Wells Fargo remains pretty good.  But these stocks need to be monitored closely, as they are decent issues sitting in the middle of a minefield.

I don’t tend to do a lot of short selling–but there may be some great short opportunities in the financial sector now.