Market Currents
The big U.S. banks are considering defying the Fed and announcing capital return plans shortly...
-
Thursday, March 7, 11:01 AM ETThe big U.S. banks are considering defying the Fed and announcing capital return plans shortly after stress tests are released this afternoon, reports Bloomberg. The Fed wants the lenders to wait another week, but bank lawyers worry the plans will leak out. It's under discussion, JPM CFO Lake told an investor conference (transcript) Tuesday. XLF +0.6%.
Other date
Latest Articles on Financials
This news story has 34 comments:
To me the gov't should put in place policy and the banks should work within that framework. As long as they are working within that framework they should have no further restrictions on how they manage their shareholders and capital structure.
Yes, you are returned capital, and yes I think that banks HAVE DONE and ARE DOING much better executing their business in what has turned into a solid credit cycle. But this is the point -- sensitivity testing the turns and the need for additional capital buffers falls more into the Fed's area of expertise, and if their stress tests advise against it, I am inclined to believe them. I am confident that no one on the committee wants to face another crisis, and no one at the banks should either. Things are structurally no different than the time preceding the last crisis. Way too early to leverage their capital in this manner.
These are just my two cents. I do tend to be a bit of a dividend hawk.
The banks are much better capitalized than they were in 2007, and there are fewer bad actors. I don't expect the Fed to allow banks like Citi and BofA to jump right to returning 50% of excess cash to shareholders, but certainly they can deploy more than they currently are.
"Lets face it there are socialists here that believe they should only be a pass through from the Federal government and not make any profit at all. They believe the shareholders are evil people who want to gouge money out of helpless homeowners who have to pay interest to own a home. "
So true the above bears repeat. Even if banks were a government "pass-through" there would be the government overhead that either the tax payer or the borrower would need to pay or US Banks would eventually become like Greece Banks.
It is so darn difficult for non-investing people to understand that the interest rate on money saved in a bank is like gravity on the water vapor of a heavy cloud. It causes the rain to fall in the latter and money to be lent in the former. It allows the young to borrow for education, the old to invest for retirement and those in between to buy homes, start business and have children. It's what makes an economy and a civilization instead of a barter-system Third World hell hole that we see so often on the news.
They need to consider that its the people who stopped paying their mortgages that caused the financial crisis.
I'm with you. There are something like 28 federal agencies that have some regulatory say over the home mortgage business (but there is absolutely no fat in the federal budget!) Suffice to say that perhaps if even half of them had been performing their responsibilities as stipulated by federal law instead of hiding behind Standard & Poor's pronouncements the crisis would have been much less severe. The meter hasn't been invented that could measure the hypocrisy of those federal agencies since the fall of 2008.
I would never assert the banks were blameless in the affair. But to lay the entire mess at their "grubby, greedy" feet is just flat wrong.
"They need to remeber it was the bankers who recklessly handed out mortgages."
Why did the bankers to that if it resulted in their crash?
Tom, the -only- thing that makes financial shareholders constantly wonder 'if this is even a good idea' is concern about the guvm't and their endless actions. Else, given the number of your responses that show a healthy interest in the markets, it should take you seconds to see that the industry is healthy. Pre-disposed, sir?
ONE bank needed guvm't help, and like all things guvm't, it snowballed into recklessness and reactionary. Thankfully, that snowball is finally slowing and getting the needed review it avoided during the guvm't 'panic'.
Had the guvm't simply offered TARP to those that 'needed' it and 'spun' it positively in the press, markets woulda' shaken everything out just fine, thank you. The alternative was basically stating that the system HAD collapsed, but not to worry, your guvm't will fix you.
Followed voraciously by a headline seeking press. Yecch.
aka hoist by his own petard..
To think that the subprime securitization blow up was a one-institution isolated event is way off in my opinion. Sure, maybe the number of banks absorbed or in need of money was limited, but there were many players culpable on the loan origination side. The MBS' or whatever bad collateral could be anyone's burden, and with the information asymmetries around these securities, the Fed's macro-level auditing is absolutely necessary. In fact, I doubt it is even stringent enough. Realize that I've tried to create a derivatives market around this belief, it is dormant.
This is not to say that I am not bullish on banks or real estate at the current levels. Read my articles, I am. But I don't think capital disbursements should even be in the discussion until tail risk is completely off the table.
The forced withholding of normal dividends has hurt the industry so the weak can recover relatively invisibly. Common wisdom is that due to this guvm't control, all banks are healthier now, but there is no alternative view discussed - how healthy would the banks that continued to thrive through the guvm't fueled crisis be, had they not been forced into Least Common Denominator-ville.
One institution got hit from every angle that you describe and arguably caused the term 'Too Big To Fail' to enter the lexicon. TARP, as well. 'Post TARP', referring to period of time that TARP created, speaks volumes (IF your institution takes TARP, you MUST spin on one toe daintily until further notice - that is the price you pay for getting a bailout from the taxpayer. OH, incidentally, you MUST accept TARP and may not speak publicly about it).
The loan-origination-side problems were in reaction to the ninja guidelines enacted by the guvm't. I cannot agree that they will prove more reliable in oversight, post ninja, as I don't see them owning up to that issue in any public way.
Macro-level auditing has always been and will be a way of life for the banking industry, as it must. The fact that the oversight failed to recognize the coming meltdown must rest with the regulatory agencies. Their internal debates, and the Repercussions of that guvm't self-audit, are the necessary and painful result of that failure, but 'controlling' dividends to force behavior that is contrary to free-market, for this long, is only intrusive.
Clearly, I believe 'tail-risk' IS off the table in most cases, and so I believe that blanket regulation and intrusive control hurt the industry in order to protect the least deserving.
IMO, that must cease.
The financial reform legislation was so vague that it, for all intents and purposes, didn't pass....
I agree with your notion about "blanket" regulation, agree with freedoms, just disgusted by the gall of the banks that they would consider it. Good banks took TARP money because it was cheap money, and could understand their gripe to an extent. But they still work WITHIN monetary system that needs to be somehow centrally governed. After all you don't have JPMorgan Notes in your wallet.
Tail risk is tail risk...unknown unknowns...I do think the tail has gotten shallower, but has it gotten shorter or disappered? I very much doubt it.
Please PM me if interested in further discussion.
I'm sorry Tom, I must patently disagree with this or any statement that continues the 'bailout' moral line, so popular in some press. I spent unnecessary words in my reply to humorously define my conclusions regarding TARP. Anyone now removed from possible Fed blackmail has stated categorically what happened that fine day - my hero Dick Kovacevich is possibly the most famous for saying so, but there are many others, and the story doesn't change.
TARP may have been well-intentioned, but it is a smear the financial industry will carry for years to come. Press loves to beat anything when it is down, saving special venom for easily pointed, impossible to refute 'fatcats'. It was never easy, from a publicity perspective, to thrive in this industry - the Fed basically added reckless disregard to that assumption pool by making it illegal to even discuss the terms of TARP publicly.
Apologies to anyone not interested in this conversation, but I am compelled to battle the TARP dogma. b well, Tom.
http://seekingalpha.co...
http://seekingalpha.co...