“I wanna know. Just who’s dick do I have to suck to get a loan? Can you tell me that?”
You could’ve heard a pin drop for a second or two. The banker looked like he’d been hit with a shovel. A red-faced manager comes out of a hole and leads the lady out. It’s over in seconds.
Half the people start laughing. The other half don’t know what to make of it. I am watching this bit of drama and I am thinking of shorting bank stocks and what a bizarre world we live in.
Banks aren’t really making any loans. They are doing their very best to avoid that pitfall. It is much easier for them to buy securities with a fixed coupon from big cap multinationals, bankrupt government guaranteed agencies and of course the Treasury Department. The banks are having an easy time of it. With ZIRP as their ally they can just ride the yield curve. No need for complicated loans. No wonder America is hating its banks.
-The equity markets are soaring and so is gold. An unlikely outcome. One market is the measure of optimism the other is the best "smell test" of the collective fear of the future.
-Banks aren’t lending, but they are making a bundle.
-The economy has recovered to a significant extent. We will not get back to the growth and 5% unemployment we had three years ago. The emergency is clearly over both in the US and overseas. But the Federal Reserve is about to start a meeting that will set in motion another multi-trillion monetization program.
None of these things (including people going postal at the bank) make sense to me. The sum of all of these pieces takes me one place. Instability.
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"A red-faced manager comes out of a hole and leads the lady out."
ReplyDeleteThe questions is whether the manager came back in immediately? Maybe she did get a loan?
No. This was about anger. It was meant as an insult. It was not an effort to get a loan. That had already been decided by others. This was shock and awe.
ReplyDeleteBanks are not lending ... why should they as they were capitalized by TARP and now that money sits at the Fed as Excess Reserves.
ReplyDeleteUnder FASB 157, they have had had an entitlement to value real estate at managers best estimate rather than to market.
But a new dynamic is at work: on September 23, 2010, there was a 2.8% fall in real estate, as seen in the chart of Active Real Estate, PSR.
When taken in conjunction with the fall in Banks, KBE, the FASB 157 entitlement to value real estate at the bank manager’s best estimate rather than at market has ended.
The ability for the real estate cartel consisting of the banks and the the GSEs Fannie Mae and Freddie Mac, to pretend and extend unreal real estate prices is done and over.
This means that the GSE policy of loss mitigation will be taken seriously and those living payment free in the bank’s shadow inventory will be foreclosed upon and then either evicted or asked to pay rent.
The corporate mission of banks will change from one of lending to one property management and renting of REO properties.
I think of the FASB 157 entitlement as an options contract, and the reemergence of the bear market, this time knocking down real estate sector value has made the FASB 157 entitlement/option contract expire worthless.
Americans will be very much surprised to see the value of their home values plummet in value.
And unfortunately, it won’’t be like in Hungary, where the government lets people go scotch free in paying of Swiss Franc and Euro denominated carry trade mortgages.