Banks--- Betting on the recovery Message Board

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Non-Tech : Banks--- Betting on the recovery

WFC 86.04

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Nov 7 3:59 PM EST

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To: Asymmetric who wrote (947)	5/30/2010 8:47:15 AM
From: Madharry	Read Replies (1) of 1428

Although im admittedly biased as GS is a big holding in my portfolio, the article has a garish headline and is misleading to boot. I know that in the case of GS the reason their cost of capital is so low is because of they have swapped out some of their long term borrowing cost into short term rates which are much lower. Also as their cost of capital increases over time the will continue to allocate that capital efficiently and require greater returns if they continue to lend and invest at the same rate. Bottom line is that increasing the cost of capital to the banks will end up hurting the economic recovery much more than the banks themselves. After the multiplier effect kicks in and tax revenues continue to decline and Municipal rates of default soar, more teachers get put on half time salaries,and the garbage stops being collected, perhaps Congress will reassess.

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