The Commerzbank buy-out of Dresdner Bank was not a shotgun wedding. Neither institution was failing. The severe balance sheet problems facing may other global money center banks were not an important consideration.
The Commerzbank decision was based simply on added scale and eliminating costs. Media reports are that at least 9,000 people will be cut out of the new company. But, the action does add a level of preparedness if the credit markets get much worse.
Late news from the bank and airline industries found analysts in surly moods.
Goldman Sachs issued a report saying US banks will have to raise as much as another $65 billion. According to Reuters, "The new capital would be on top of $120 billion already raised by the industry." The brokerage cut its price targets on sixteen banks including Wachovia (WB) and Washington Mutual (WM).
Not to be outdone, the airline industry said it would lose $10 billion this year. The Air Transport Association said total fuel costs for domestic carriers will hit $61 billion.
Douglas A. McIntyre
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