Friday, January 11, 2008

"Tis better to give -- and get

Now that there's a credit crunch of sorts going on, it seems polite to tip-toe around the sensitivities associated with leverage, capital raising and the sort. In these straitened times, it is politic to respect Franklin's Almanac: "Never a lender nor a borrower be".

That was Guambat's take on reading The Morning Brief in the WSJ today and following on to read its link to another WSJ story. (It was also the tip-off for the prior post about Northern Rock, thank you very much.)

TMB reported, "A Mideast government fund is expected to give between $3 billion and $4 billion to Merrill Lynch...."

Mighty bloody nice of 'em Guambat reckons. 'Tis better to give than to receive.

Chasing up the storyline in the related article, Guambat reads that Merrill and Citigroup are in line "to get additional infusions of capital from investors, primarily foreign governments."

Merrill is expected to get $3 billion to $4 billion, much of it from a Middle Eastern government investment fund. Citi could get as much as $10 billion, likely all from foreign governments.
The Journal reckons all this gettin' and givin' is "salubrious":
It's better for capital-short banks to raise money from investors than to sell assets and cut back on lending -- thereby spreading the credit crunch from Wall Street to Main Street.
The Journal article also notes that Citigroup is thinking about putting away some preserves of its own:
"The board of Citigroup is expected to meet on Monday, a day before it reports earnings, and to discuss cutting the firm's hefty dividend in half."
Felix Salmon (thankfully) instructs how a real journalist looks at the Journal article.

Guambat will just be gettin' back in his burrow now while he gives some thought to moving out past the black stump, far away from the streets.


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