Home Equity Loans – Why Banks and Borrowers Both Love Them

With interest rates at all time lows why wouldn’t banks love handing out home equity lines of credit (HELOC)?  Since HELOCs are all written as adjustable rate second mortgages any increase in interest rates translates into instantly higher profits for banks.  With a HELOC the borrower takes on interest rate risk as opposed to a […]

Would Bank Living Wills/Resolution Plans Actually Help Resolve the Next Banking Crisis?

The public portions of the annual resolution plans or living wills of 17 large financial institutions were jointly released by the FDIC and the Federal Reserve Board today.  The resolution plans describe in detail a financial institution’s plans for a rapid and orderly resolution under the U.S. Bankruptcy Code to address material financial distress or […]

Oops! My Calculator was Broken – Red Faces for both Bank of America and the Fed

One “tiny little error” resulted in red faces at both Bank of America (BAC) and the Federal Reserve when bank officials disclosed they had incorrectly calculated capital levels required for the annual stress tests.  The Fed apparently did not notice the error until Bank of America notified them. This would all be very funny except […]

Bank of America Has Built a “Fortress Balance Sheet”

A short number of years ago, no one in his right mind would have associated the term “fortress balance sheet” with Bank of America.   During the financial crisis, Bank of America was forced to accept a massive $45 billion bailout from the U.S. Treasury.  As the financial system imploded during 2008 many people wondered if […]

Fed Says Largest Banks Would Lose Half Trillion Dollars Under Adverse Economic Conditions

Based on the results of the Federal Reserve’s stress tests, the nation’s 18 largest banks would collectively lose a massive $462 billion under an extremely adverse hypothetical economic scenario. Reflecting the severity of the stress scenario–which includes a peak unemployment rate of 12.1 percent, a drop in equity prices of more than 50 percent, a […]

Bank “Stress Tests” Results Due In March – Don’t Expect Anyone To Fail

Under the Dodd-Frank Act, the Federal Reserve is required to conduct stress tests which are forward-looking exercises to determine whether large institutions have sufficient capital to absorb large losses and support operations under severely adverse economic conditions. The supervisory stress tests include examining capital ratios, revenue and the size of potential losses.  The Federal Reserve […]

The Rally In Big Bank Stocks May Be Over

For over the past year, the stocks of big banks have rallied significantly.  Lower loan losses, a stabilization of the real estate market and a settlement with the government over shortcomings in foreclosure proceedings have all contributed to a growing conviction by investors that the worst is over for the banking industry. Here’s a look […]

Warren Buffett – “I Don’t Understand Why People Hate Bank of America”

Warren Buffett is probably confused. In a recent poll, consumers rated Bank of America as the second “absolute worst company in America.”  How could so many people hate a bank which has provided generations of Americans with financing to build homes and businesses across America? Even as Bank of America seemed like it was headed […]

Bank Stocks Were 2012’s Best Investment – Now What?

Bank stocks had few friends during 2011 during which time financial stocks plunged by over 18%, even as the S&P 500 eked out a slim total return of 2.1%. As financial stocks dropped last year to levels at which they were selling well below book value in many cases, buyers came back in force.  During […]

Mortgage Borrowers Pay Thousands In Excess Fees Due To Complex Bank Pricing

Few people wonder if they got the best price on that newly purchased 65” HDTV.  Transparency in retail pricing through technological advances has enabled consumers to quickly locate the retailer selling a product at the lowest cost.  A few quick clicks on the web or the use of price comparisons apps such as Amazon’s “Price […]