What the government will do when prime mortgages go foul
Posted on November 20, 2009 at 11:10 am
Analyst David Hendler of CreditSights sees more of what got us to today’s government-supported, not-really-healthy-at-all housing and banking sectors.
“[T]he prime residential mortgage crisis is probably going to require another massive government assistance program in that range of half a trillion [dollars] or more,” Hendler said. “And if this program is extended, it will lead to more bank regulatory restrictions with more capital and higher prudential liquidity levels. This would reduce the banks’ appetite and ability to take lending risks and put pressure on profitability.”
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Another wave of CRE handwringing
Posted on November 17, 2009 at 8:00 amIf you’re looking for even the slightest bit of optimism on the commercial real estate sector, you’re very much in the wrong spot. Fitch Ratings says the delinquency rate on office-building loans rose by a fifth in October.
“Though longer leases on office properties have historically mitigated sharp changes in performance, continued job losses are expected to increase pressure on the office sector,” said Managing Director and U.S. CMBS group head, Susan Merrick. “With the looming possibility of leases expiring on space under-utilized by companies that have downsized, office performance may not reach a trough for a few years.”
A page from First Horizon’s recently updated investor presentation provides a microcosmic view of how the property market is getting sicker. (Go to page 19.)
Worryingly, regional banks as a whole have a lot more CRE loans on their books as a percentage of their capital — although many bankers contend that this statistic is skewed by the inclusion of owner-occupied property loans, which they treat as more conventional C&I holdings.
SEE ALSO: Clusterstock’s concise, but detailed account of how we got here. For all the doom and gloom, it ends on a hopeful note (that I think isn’t meant to be ironic.)
Fortunately, this time around we have an advantage. We know how a contained credit problem can morph into a monster that destroys financial institutions and cripples the economy. Living through the housing bust may make us better able to cope with the commercial real estate bust. At least, it’s pretty to think so.
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Counterfeit checks issue for big community bank
Posted on November 9, 2009 at 10:44 amFor the second time in two months, a local bank has alerted the FDIC that fake checks bearing its name are making the rounds. This time around, the counterfeit cashier’s checks are being presented in the name of First Farmers and Merchants Bank, the $940 million institution based in Columbia with 19 offices in seven counties on the south side of the Nashville MSA.
SEE ALSO: Lebanon Bank warns of fake checks
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In defense of the maligned market
Posted on November 6, 2009 at 9:18 am
NYU professor Viral Acharya says we need to be careful when we talk about the financial crisis being caused by ‘the market’ failing to function properly. Regulators are there to patch up holes and prevent problems, he says, “but regulation also reduces market discipline” by introducing distorted incentives.
For instance, insured depositors are unlikely to “run” but they also freely deposit at the highest-yielding bank, not worrying about its credit risk. Thus, when regulators deem a bank as well-capitalized, the onus is on regulators that this be right. Markets may not have the incentive to gather this information nor possess the details of regulatory supervision that led to such an assessment. Conversely, when regulation allows itself to be arbitraged, the financial sector becomes more opaque exposing markets to unexpected outcomes.
Methinks we’ll need a 12-step program for this
Posted on November 4, 2009 at 1:25 pm
Dylan Ratigan gets on the soapbox and outlines a few steps Congress should follow to overhaul ‘too big to fail’ and produce some real financial regulatory reform. Among the thoughts guiding his plan: “Fortunes should not be made in minutes, but over years.”
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Fed orders West Tenn. bank to shape up
Posted on October 30, 2009 at 7:33 amRegulators from the St. Louis Federal Reserve Bank last week formally ordered the leadership of West Tennessee Bancshares to shape up its oversight and risk management and boost its capital. West Tennessee is the parent of the Bank of Bartlett, which has seven offices and about $450 million in assets but lost $3.1 million in the first half of this year.
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New home appraisal rules put on ice
Posted on October 23, 2009 at 7:57 amAs part of their vote on a new consumer finance regulation bill on Thursday, lawmakers placed an 18-month moratorium on the Home Valuation Code of Conduct, a controversial new(ish) rule that governs the home appraisal process. The HVCC separated the mortgage broker from the appraiser, who instead reported to the lender. Not surprisingly, the broker community reviles the rule, which they say adds time and cost to the loan closing process.
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TARP opens its doors to small banks
Posted on October 22, 2009 at 7:11 amBut small banks aren’t rushing to line up for President Obama’s proposed expansion of the SBA’s main lending program. And in moves reminiscent of the ongoing health reform debate, other proposals already are making the rounds.
“There are different ways to skin this cat,” said the Senator, who suggested the creation of a $50 billion loan pool that would combine TARP funds, Federal Reserve loans and bank contributions that lenders could use to service small businesses. That idea has gained the support of about 30 other senators.
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Some advice from your friendly neighborhood bank regulator
Posted on October 16, 2009 at 7:23 am
Sheila Bair and her team are ready to help banks tackle the looming CRE crunch.
Prudent loan workouts are often in the best interest of financial institutions and borrowers, particularly during difficult economic circumstances and constrained credit availability. This guidance reflects that reality, and supports prudent and pragmatic credit and business decision-making within the framework of financial accuracy, transparency, and timely loss recognition.
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FDIC hits up industry for three years of payments
Posted on September 29, 2009 at 1:28 pm
Rather than impose another special one-time assessment to replenish its coffers, the Federal Deposit Insurance Corp. is proposing that banks pay their dues for 2010, 2001 and 2012 before the end of this year. It’ll hurt, but not as much as the alternative.
“It’s certainly a better solution than taking a large chunk of money out of banks’ income and capital,” James Chessen, chief economist at the American Bankers Association, said after the meeting.
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Another banking bailout coming?
Posted on September 28, 2009 at 6:39 amThis time, smaller banks who were deemed too weak to get TARP cash — remember how that program was first pitched as ‘good money for good banks’ — may be given government capital. One potentially critical catch: They may have to raise private money to match the federal funds.
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Oh. The. Irony.
Posted on September 22, 2009 at 10:49 amStephen Labaton at The New York Times says regulators are seriously considering turning to bank loans as a means of replenishing the FDIC’s reserve fund.
“Borrowing from healthy banks, instead of the Treasury, has the advantage of keeping this in the family,” said Karen M. Thomas, executive vice president of government relations at the Independent Community Bankers of America, a trade group representing about 5,000 banks. “It is much better for perceptions than having the fund borrow from somewhere else.”
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BofA looks to wriggle free of the government
Posted on at 8:02 am
Bank of America said Monday it has exited several government assistance programs and will pay back $425 million it received as a backstop against Merrill Lynch losses.
“We are a stronger company than we were even a few months ago,” Mr. Lewis, the chief executive, said in a statement. “We believe we have all the pieces in place to emerge from this current economic crisis as one of the leading financial services firms in the world.”
Next up: a partial TARP payback, some legal dancing and plenty of political posturing related to the Merrill acquisition. BofA shares (Ticker: BAC) have almost tripled since March, but have barely budged since early August.
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Pet DRx has to get back to the buck
Posted on September 21, 2009 at 7:36 amThe Nasdaq’s rule makers have told execs at animal hospital venture Pet DRx that the company’s shares (Ticker: VETS) need to close above $1 for 10 consecutive sessions by next March. The Brentwood-based company’s board already has taken some steps that would allow it to conduct a reverse split.
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Lebanon bank warns of fake checks
Posted on September 18, 2009 at 2:46 pm
Via the FDIC, First Freedom Bank in Lebanon says someone is writing counterfeit cashier’s checks that bear its name.
The counterfeit items display the routing number 064109086, which is assigned to First Freedom Bank. A security feature statement is embedded in a darkened top border and along the bottom border between two padlocks. The words “CASHIER’S CHECK” appear slightly off center at the top of the items.
Three-year-old First Freedom has about $220 million in assets and lost $1.1 million in the first half of this year.
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