The banking system has backpedaled further as we move through early 2011. Not only is the
system experiencing a continuing run off of its loan book, we are now seeing a run off develop
in the system's securities portfolio as banks back away from extended maturities as interest
rates rise. On the monetary front, the Fed's program to buy Treasuries has recently been the only
game in town. Since folks have been waiting to see the banks expand their loan portfolios, it is
neatly ironic that securities holdings have started to run down as well.
A shrinking system balance sheet naturally reduces banking net revenues. To compensate, banks
are raising service fees whenever and wherever they can, and are also allowing the massive
loan loss reserve to run down in a gradual manner. And, of course, the bigger banks are generating
some profits from trading economically dubious derivatives.
Americans love irony, and the banks have been a continuing source of same. In 2005, any Tom
Dick or Harry could get a loan. Now, a half dozen years later, only Rockefellers need apply.
I have ended full text posting. Instead, I post investment and related notes in brief, cryptic form. The notes are not intended as advice, but are just notes to myself.
About Me
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!
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