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Posts Tagged ‘community banking’

Time to Reinstitute Glass-Steagall

Posted by Larry Doyle on December 3rd, 2009 3:16 PM |

A car needs gas to run. An engine needs steam. A factory needs power. The fact is without a steady source of energy nothing can operate. Welcome to the Uncle Sam economy circa 2009.

You may be thinking, wait a second LD . . . the Federal Reserve is flushing the system with liquidity. Money is easy and it is propping the markets. While availability of credit may be tight, the demand for credit is also weak. So what am I talking about?

Thanks to RM for providing the FDIC Third Quarter 2009 Banking Profile (a link to the full document is provided at the end of this commentary). For those who care to rip apart the inner workings of our banking system, this report is the owner’s manual. The report highlights the following:

> Industry Posts Net Profit of $2.8 Billion
> Increased Revenues, Lower Securities Losses Offset Higher Loan-Loss Provisions
> Net Interest Margins Improve at Most Institutions
> Troubled Loans Continue to Rise, But Rate of Growth Slows
> Loan balances Decline by 2.8% in the Quarter

Based on this overview, it would appear that the banking industry is slowly recovering. In aggregate, perhaps that may be the case. But what doesn’t this report tell us? (more…)

Back to the Future

Posted by Larry Doyle on March 24th, 2009 4:02 PM |

back-to-the-futureAre we returning to the days of white picket fences, hot dogs, Mom, baseball, and apple pie? Perhaps some people never got away from those endeavors so there is no need to return.  However, given forces within the banking industry far outside our control, perhaps we will be returning to the days of community and regional banking. 

Our nation experienced the development of a handful of mega-banks given the economies of scale with that model. The leverage created by combining systems, cross-selling products, and outsourcing labor allowed these  institutions to redeploy capital into higher risk securities and situations often housed in off-balance sheet vehicles. Pardon my cynicism, but that model does not put a lot of emphasis on customer or employee loyalty, despite what management at many of those institutions may say. That model promotes the concept of volume and efficiency over individual and relationship. Regrettably, that model never fully developed the risk management and risk managers to control those behemoths. (more…)






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