All Articles Finance While You Were Working - April 28

While You Were Working – April 28

Status quo working for US banks, Wall Street unkind to Freinds of Donald, SEC flirts with fiduciary rule and PIMCO weighs Trump's first 100 days

3 min read


Lehman Brothers

Lehman Brothers says Citi was cherry-picking during the crisis - Photo credit: Nicholas Roberts/Getty Images

Programming Note: WYWW will be publishing a couple hours later each day next week. I will be covering the Milken Institute Global Conference in Beverly Hills, Calif., and will be waiting until the day’s agenda concludes to post updates. If you are at the conference, be sure to say hello.

US banks keep thumping European banks

The faster response by US policymakers to the financial crisis is continuing the pay dividends as American banks capture increased market share from European rivals. Amid a competitive landscape that has benefitted US banks so dramatically, it’s hard to fathom why anyone with an “America First” mentality would want to mess with the status quo.

FODs not feeling the love on Wall Street

It turns out some of the companies that have been most closely aligned with President Donald Trump (Friends of Donald) are not enjoying the market rewards others have enjoyed thus far. And even industries that enjoyed an initial Trump Bump – like steel – have seen choppy waters as of late. Perhaps the biggest surprise has been the fate of coal mining companies. CONSOL Energy is down 16% while Cloud Peak Energy has fallen 32%. And for those hoping the coal industry – with all the support Trump gives it during his speeches – is set for a long-term rebound, this story has to be very inconvenient.

Dodgy headline about “dodgy” mortgage lending

The headline and even the first three paragraphs of this Bloomberg story make the reader think no-doc, “liar loans” are starting to take hold once again in the mortgage market. Anyone who knows anything about the housing meltdown would read that and feel their blood starting to boil.

And then they would read the next paragraph:

“In this case, the low-documentation mortgages backing the bonds, originally made by Sterling Bank & Trust, include other features that make them less risky. For example, borrowers made high down payments– an average of about 45 percent of the purchase price. Size of down payments is often one of the strongest predictors of a mortgage’s performance, because borrowers with more of their own money invested are often reluctant to give their home up to a bank. No loans in this lending program have been delinquent since October 2011. A representative for Sterling Bank declined to comment.”

A 45% down payment on a house is incredibly big. This loan program bears zero resemblance whatsoever to the run-and-gun lending that crashed the housing market. That’s why none of the loans have defaulted in more than 6 years. Seems like this story should have a headline touting a lending best practice (large down payments) than a mortgage lending no-no.

Fiduciary rule tango continues

Of course the SEC thinks it should weigh in on the Great Fiduciary Rule Debate. And of course doing so would not exactly be a rapid, lickety-split kind of exercise. Then again, when it comes to adding regulations, the SEC has always taken the view that less speed is more. After all, while the Labor Department spent years on the matter, the SEC opted not to get involved – even though there was nothing stopping it.

WYWW Appetizers

  • Lehman Borthers says Citi “cherry picked” them during their collapse.
  • PIMCO weighed in on Trump’s first 100 days.
  • Wells Fargo’s board couldn’t prevent the company from breaking rules its directors fully understood. Harvard Law School looks at what happens when boards tread into areas about which they know little.