Hedge fund manager Tom Brown says the Obama administration's latest budget includes a $61 billion "Financial Crisis Responsibility Fee" that suggests the White House sees the banking sector as "its piggy bank and its whipping post all at once." The fee is ostensibly there in part to recoup TARP funds, but Brown says that's hogwash.
Yes, TARP overall has cost the government money. But that’s because the investments in the non-banks in the program, AIG, Chrysler, and G.M., are still money losers. But those three are non-banks! If the government is so keen to get its TARP money back, why doesn’t it dream up new ways to tax the auto industry? Yet I somehow doubt that that’s going to happen.
Hedge fund manager Tom Brown disputes one regulator's assertions that the Dodd-Frank bill will benefit community banks. More than anything, he says, the costs of complying with the reforms' stipulations will drive smaller banks into the arms of bigger players.
What will be a minor inconvenience at big banks (who already have bloated compliance departments) becomes a crushing new cost burden at small ones. And he forgets to mention, too, the Durbin Amendment. Small banks are supposed to be exempt from Durbin, of course, but they know they’ll have to price interchange by it anyway if they want merchants to accept their debit cards.
Financial stocks hedge fund manager Tom Brown is upbeat about the upcoming round of earnings reports from the bank sector. Looking back to how lenders emerged from the recession of the early '90s, he says there's a good chance the fourth-quarter kitchen sink was too big.
Human nature having not changed much since the 1990s, I don’t see why the same pattern shouldn’t hold now. If it does, the effect on companies’ bottom lines figures to be substantial. At this point in the cycle, provision expense is by far the biggest swing item on a bank’s P&L. My prediction, therefore: look for no small number of earnings surprise from banks in the coming reporting season.
Trust me, if you attended a banking conference like the one I was at last week and listened to some of the bankers’ horror stories, you’d become more sympathetic to bankers. They of course can’t go public with their stories of regulatory abuse—that would just earn them a new slap-down. Nor do many politicians yet have enough courage to defend the banks. It’s truly incredible: the excessive burdens wrought by bank regulators have surely held back credit creation and economic growth.
The resulting single bank regulator would of course have many responsibilities; the two most important would be supervision of products and ensuring the safety and soundness of institutions. Combining regulatory agencies would create both efficiency and regulatory consistency. Plus, banks would no longer be able to push back with the threat of charter switching.
Here’s an important difference between residential and commercial real estate lending: mortgaged commercial properties usually throw off cash flow; mortgaged residential properties don’t. That can make a big difference to lenders when the commercial mortgage goes delinquent. The commercial lender can temporarily rework the loan to accommodate the property’s reduced cash flows. Recent accounting and regulatory changes even encourage this.
...[S]equential monthly improvement in the index usually deteriorates seasonally in July. This month, though, the change in the rate of change rose by 18 bps. So instead of a seasonally monthly slowing, we’re seeing month-on-month acceleration.CNBC's Diana Olick says the numbers are a lot closer to reality when they're seasonally adjusted.
whether we're in a housing boom or bust, home prices always rise in the spring/summer months, due to the type of buyer largely in the market. Families, i.e. move-up home buyers, looking to close and move over the summer so as not to disrupt school, dominate the market in the spring and summer. They are, for the most part, buying larger, more expensive homes, and they therefore skew the median home price in their market higher. In the fall and winter, you tend to see more first-time buyers as well as more single buyers who want smaller, lower-priced homes.Stephen Stanley of RBS says focusing on seasonality doesn't matter too much; the improvements are simply a case of the market coming off the absolute bottom of early this year.
...[I]n retrospect, a rebound of some magnitude was likely as demand recovered from non-existent to merely weak.
But the company’s outlook isn’t nearly as bleak as the market seems to think. In the runup to an equity offering last week (about more of which in a minute) the company made it pretty clear that it’s in the process of getting its credit issues under control, and that its underlying profitability is strong. In particular Synovus says that its ongoing program of aggressive problem loan disposition is on track, and that the run-rate on new non-performers continues to improve. Meanwhile, pre-tax, pre-credit cost earnings continue to rise.Shares of Synovus (Ticker: SNV) have traded either side of $4 for most of the past two months.
For the record, the recession so far isn’t even as bad as the one that occurred in 1981, let alone as bad as the Great Depression. Yet the President flatly states that unless Congress passes his vast stew of a bill, the country will enter a period of permanent economic decline.And for those folks cavalierly tossing around the word 'depression,' here's a stat: Unemployment in the United States was still at 15 percent in 1940.