ALTERNATIVE TRADE POLICIES

International Relations/Trade,

Eleventh District banking industry weathers financial storms

In 2009, the banking industry continued to feel the fallout from the financial crisis that began in mid-2007. Some good news was revealed in recently available first-quarter data, however, which showed profitability rebounding and increases in asset-quality problems slowing down. Whether measured by profits or problems, Eleventh District banks were roughly "twice as good and half as bad" as their counterparts across the nation. Most likely, this reflects the fact that the economic downturn was less severe in the district than in other parts of the nation. ; Another noticeable difference emerges when comparing district banks' recent performance with an earlier period when the economy turned south and the industry suffered significant damage--the mid- to late 1980s. At that time, students of banking history may recall, a sharp decline in oil prices triggered a deep regional recession. Bank failures soared, and the financial landscape in Texas and other parts of the Southwest changed considerably. ; This raises the question of why the district's banking industry has been able to weather the current downturn--so far--with less damage than in the 1980s. The answer likely can be found in the changing nature of the district's economic environment since then.Federal Reserve District, 11th ; Financial services industry ; Global financial crisis ; Bank profits ; Loans ; Recessions

Banks venture into new territory

Financial modernization legislation passed in 1999 allows banking organizations to directly invest in any type of company. This merchant banking authority gives banks greater opportunities to provide venture capital to start-up companies and later-stage equity financing to more mature firms. Kenneth Robinson examines how banks have pursued their new merchant banking powers. Robinson finds evidence that organizations that engage in merchant banking tend to be larger than those that do not. His findings are also consistent with the hypothesis that banks may be attempting to lower their average costs by combining merchant banking with other nonbank activities. Allowing banking organizations to pursue this new activity will provide them with an additional source of earnings and greater diversification opportunities and will likely increase private equity financing, which has been a vital component of economic activity.Banks and banking

Regional lending in a world of interstate banking

Bank loans ; Banks and banking - Texas

TALF: Jump-starting the securitization markets

In the financial crisis that began in August 2007, securitization activity virtually dried up. When the housing bubble burst, the value of the collateral backing much of the asset-backed securities (ABS) declined sharply, and so did the value of the securities themselves. The Federal Reserve responded by creating the term asset-backed securities loan facility, or TALF. Its purpose is to boost securitization by providing loans to people holding certain highly rated ABS. These loans will then support new ABS issues and help thaw out the securitization markets. Judging from both new issues and spreads in secondary markets, the TALF appears to be meeting its objective of jump-starting the securitization markets.Securities ; Asset-backed financing ; Financial crises ; Federal Reserve System

Random coefficients models of the inflationary consequences of discretionary central bank behavior

Banks and banking, Central ; Inflation (Finance) ; Monetary policy - United States

INFLATION AND FOOD PRICES

Demand and Price Analysis,

Bank profits rebound as loss set-asides ease

Banks across the U.S., including the Eleventh Federal Reserve District, appear to be recovering from the financial crisis that began in mid-2007. The news is welcome because a healthy banking sector spurs economic growth by providing financing for businesses to expand investment spending and for consumers to purchase goods and services. ; Data for 2010 show strong profit growth, with banks across the nation rebounding from a net loss in 2009 and those in the Dallas-based Eleventh District almost doubling their profits. There was also good news regarding asset quality: Problem loans are starting to moderate. And there are indications that the banking industry has grown more efficient, supporting more operations at lower cost. ; However, concerns linger about the sustainability of profits because the recent improvement can be attributed almost entirely to a reduction in what banks set aside to cover future loan losses. Banks refer to this as their provision expense, and it usually falls as asset quality improves. But there is a limit to how far it can decline and contribute to profitability.Business conditions ; Profit

Banking on Basel : an alternative for capital requirements

Equity capital represents a bank’s net worth—the difference between its assets and liabilities. Put another way, it’s the value of assets financed by the bank’s owners, rather than depositors or other sources of funds. Capital serves as a buffer to absorb losses and prevent failures and figures prominently in the banking industry’s ability to lend.Equity ; Asset pricing ; Liabilities (Accounting) ; Capital ; Risk ; Basel capital accord

Stock returns and inflation: further tests of the proxy and debt- monetization hypotheses

Inflation (Finance) ; Stock - Prices