How Well Capitalized Are Surviving Banks? Latest FDIC Dealing on Failed Banks.
More FDIC Dealing On Failed Banks
This week, the FDIC closed sales of 40% equity interest in three limited liability companies it set up to hold commercial and residential assets of 26 failed banks. $620 million in unpaid principal on these portfolios was sold for roughly $198 million, less than one-third of the face amount. California-based investment firm Colony Capital, the New York-based private equity company The Cogsville Group, and Cache Valley Bank out of Utah were involved in the purchases.
How Well Capitalized Are Banks?
Maybe Basel III capital control rules for banks will not be as onerous as many banks around the world had feared. Here is the latest.
Market & Rate Update
Pundits continue to analyze QE2, and whether, given the pickup in economic news lately, QE2 was even needed. A month ago Ben Bernanke stated that the Fed’s purchases of U.S. Treasuries “affect the economy primarily by lowering interest rates on securities of longer maturities,” and that Treasury purchases, which is what is happening, “work by affecting the yields on the acquired securities” and forcing investors to buy higher-yielding, riskier assets. Certainly stocks have rallied, helped by the tax bill, and the credit spreads (the difference between the yields on risk-free Treasuries and other debt securities) have narrowed. As we all know, rates have moved higher – which many suggest will help our economy. Right?
Yesterday fixed income security prices advanced, pushing the yield on the 10-year note toward a one-week low. Still, rates have increased about 1% from their 2010 low on speculation the U.S. extension of tax cuts will spur economic growth and widen the budget deficit. Mortgage bonds improved .250-.375, although some lenders seemed hesitant to pass this along to loan originators to offer as consumer rate improvements—they were waiting to see if it held today, which it didn’t after slightly higher than expected GDP and existing home sales. More on these topics later today.