Regulate and Pretend
Donald Trump’s pickapalooza continues at Mar-a-lago with potential bank regulators being asked if the current deposit insurer and bank regulator (FDIC) can be folded into the Treasury department. The WSJ’s Gina Heeb writes, “Trump advisers and potential nominees have also discussed plans to either combine or otherwise restructure the main federal bank regulators: the FDIC, OCC and the Federal Reserve, the people said.”
“We could use some streamlining on financial regulation,” said former FDIC Chair Sheila Bair. “But it is really hard to get done.” She went on to tell the WSJ that bankers like to have a relationship with their regulators and prefer the status quo.
Status quo has not changed in dealing with problem loans, it remains to extend and pretend. Bisnow.com reports “Loan Modifications Ramp Up At Regional Banks As They Begin Realizing Property Value Drops.”
“Property owners typically seek modifications when facing repayment or refinancing issues, and an uptick in their usage at smaller lenders signals those institutions are facing more exposure to commercial real estate credit risk,” writes Matt Wasielewski.
Mid Sized banks modified 1.93% of loans during the first nine months of the year, while big banks averaged 0.79% loan modifications. Modifications have slowed in recent months at all banks except those with assets under $100B, according to Moody’s.
Regional banks have been slow to write down their loans, according to Bloomberg and while big banks have been more aggressive, “many analysts, including the Federal Reserve Bank of New York, suspect they aren't cutting values deeply enough — and setting aside cash to pay for what are seen as inevitable losses.”
Can the banks, big and small, be trusted? Paul Krugman writes in his final NT Times article, “It’s not just governments that have lost the public’s trust. It’s astonishing to look back and see how much more favorably banks were viewed before the financial crisis.”
There were over 14,496 FDIC-insured U.S. banks in 1984. As of June 30 2024, the number had decreased to 4,539. Three regulators fighting over fewer than a third of the banks that were operating 40 years ago. Thousands of regulators overseeing bankers pretending bad loans are good. The status quo.
