The Good, Bad, and Ugly Banks

Today is the long-awaited report-card day for the nation's stress-tested banks, and if the steady dose of leaks is to be believed, there is some good news for taxpayers and some not-so-good news for some very big banks. First, the good news. The New York Times kicks off its business coverage saying "the findings, to be released Thursday by the Obama administration, suggest that the rescue money that Congress has already approved will be enough to fill the gaps. If so, the big bailouts for the banks may be over." This dose of good news—all speculation, mind you—helped the markets achieve lift-off Wednesday, sending the Dow, Nasdaq, and S&P 500 all higher, the Washington Post reports.

And now, the not-so-good news. The NYT, the Wall Street Journal, and Financial Times all calculate that some of the worse-off banks will need to raise billions more in capital if they are to survive any further downturns in business. The WSJ reckons the seven neediest banks must raise a combined $65 billion. The NYT and FT say the figure is even higher. The FT reports, Citigroup (C) and Bank of America (BAC) "emerged as the banks with the biggest capital shortfalls, with Citi’s equity needs projected to be more than $50bn and BofA requiring about $34bn in fresh equity." While the math is still open to debate, there is consensus on which banks emerge as the "strong" and which limp along in the "weak" category. In the sturdy grouping are: JPMorgan Chase (JPM), Goldman Sachs Group (GS), MetLife Inc. (MET), American Express Co. (AXP), Bank of New York Mellon Corp. (BK), and Capital One Financial Corp. (COF), according to the WSJ. And the not-so steady? They include Citi and BofA, plus Wells Fargo & Co. (WFC) (yes, despite the cheerleading this past weekend by Warren Buffett, Wells Fargo makes the "weak" list), GMAC LLC (GMA), Morgan Stanley (MS), State Street Corp. of Boston (STT), and Regions Financial Corp. (RFF).

To the tech industry now, and Cisco Systems delivered a dose of positive news on Wednesday, when it reported it sees a turnaround in corporate spending on the horizon. It's not a full recovery in tech spending, mind you, more a "leveling out," as CEO John Chambers calls it. The WSJ pounded on the significance of the tempered optimism. "The remarks are nonetheless a turnabout from earlier this year, when Mr. Chambers said businesses were increasingly scaling back their technology spending," the newspaper writes. Still, Cisco (CSCO) reported a 24 percent drop in profit and a 17 percent decline in sales for its fiscal quarter. If only Microsoft (MSFT) CEO Steve Ballmer could agree with Cisco's Chambers. Speaking at Stanford University yesterday, Ballmer called the economy "really bad," Dow Jones news wire reports. Ah, but there's a silver lining. "The fact that there is more of a 'critical screen', the fact that customers are pickier with their money ... all of that is really a chance to make products better," Ballmer told Stanford students. No doubt present were tomorrow's tech innovators. 

Another day, another auto merger ... but at least this one makes sense, if only because of family ties, however dysfunctional they may be. The FT reports that Porsche and Volkswagen have agreed to merge and so create an “integrated car-manufacturing group” with 10 marques united under one roof, but Porsche retains its distinct identity. Porsche already has a majority stake in Volkswagen; the VW chairman, Ferdinand Piëch, is a member of the Porsche family that controls the luxury car manufacturer. But Piëch and his cousin Wolfgang Porsche (chairman of the family brand) "could not agree on how to combine the two companies or how to lower Porsche’s debt of 9 billion euros ($12 billion)," reports the NYT. Now those issues seem to have been settled, and in a time of major industry consolidation, the merged company would be in a much stronger position to attract outside investors. "Several sovereign wealth investors from the Middle East, one from Qatar, had expressed interest in investing in a combined VW/Porsche group," notes the FT. Back home in the United States, Detroit's downfall is attracting a host of foreign companies that are looking to cherry-pick parts of GM's business, "as the contraction of the U.S. auto industry sets the stage for a global reshuffling," writes the WSJ. China's Geely automaker is eyeing GM's (GM) Saab business while France's Renault is looking to sell its cars in the United States through GM's Saturn dealers.

The beef over beef is over. The WSJ reports that the European Commission and the United States have announced a provisional deal in the dispute over the European Union's ban on hormone-treated beef. The agreement will see the EU accepting an additional 20,000 metric tons of hormone-free U.S. beef over each of the next three years and brings to an end a 13-year trade spat. In return, the United States will drop its threat to impose retaliatory import duties on Italian mineral water and French Roquefort cheese, writes Forbes via the AP. The issue at the heart of this dispute—the U.S. practice of feeding hormones to cattle to make them bigger, which the EU contends can cause cancer in humans—appears to have been conveniently overlooked in this outbreak of entente cordial.

And, finally, an iPhone app that tracks stimulus spending? That's right, CNNMoney.com reports. The state of Arkansas on Wednesday unveiled a free (they couldn't possibly think of charging for such a thing) downloadable application that can search a database of state projects funded with taxpayer stimulus funds. It's all in the spirit of transparency and, let's admit it, cool publicity.