[vox_mundi]

Soured Corporate Loans Surge at Biggest U.S. Banks on Oil

Soured loans to companies jumped 67 percent at the three biggest U.S. banks in the first quarter, the latest sign that corporate credit quality is eroding after energy prices plunged.

At Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., bad loans to companies reached their highest levels since at least 2013. For now, weakness is mainly confined to oil and gas and related industries, executives said. U.S. crude has tumbled more than 60 percent since June 2014, although they have rallied since February.

... Charles Peabody, a banking analyst at Portales Partners, downgraded JPMorgan to "underperform" from "market perform" in February in part because of concerns about the potential for mounting credit losses.

"We’re at the very early stages of an inflection point in corporate credit quality, and it’s getting worse from here," Peabody said.

Pri de Silva, an analyst at CreditSights, is among those who see current credit problems as limited to oil and gas and related industries.

"At this point, I don’t see much contagion," he said.

Banks have been getting ready for loans to deteriorate -- the industry added $1.43 billion in the fourth quarter to the total money it has set aside to cover bad loans, according to Federal Deposit Insurance Corp. data compiled by Bloomberg, the first time banks in aggregate added to reserves since 2009. Banks usually classify loans to companies as "nonperforming" after the borrower is delinquent for 90 days. Loans that are unlikely to be repaid are also typically designated as "nonperforming."

Now loans are actually souring. At JPMorgan, bad loans to companies more than doubled to $2.21 billion from $1.02 billion in the fourth quarter, according to company filings. Bank of America said they rose 32 percent to $1.6 billion. And at Wells Fargo, they rose 64 percent to $3.97 billion, which includes $343 million from loans it acquired from GE Capital.

The increase in bad loans to companies mirrors the increase in defaults in corporate bonds. Default rates for U.S. high-yield bonds have been rising since early 2015, and are on pace to reach around 3.9 percent in April, up from 2.1 percent in the same month last year, according to Fitch Ratings.

U.S. regulators fail 'living wills' at five of eight big banks

U.S. regulators gave a failing grade to five big banks on Wednesday, including JPMorgan Chase & Co (JPM.N) and Wells Fargo & Co (WFC.N), on their plans for a bankruptcy that would not rely on taxpayer money, giving them until Oct. 1 to make amends or risk sanctions.

The move officially starts a long regulatory chain that could end with breaking up the banks. Nearly a decade after the financial crisis, it underscored how the debate about banks being "too big to fail" continues to rage in Washington and exasperate on Wall Street.

"The FDIC and Federal Reserve are committed to carrying out the statutory mandate that systemically important financial institutions demonstrate a clear path to an orderly failure under bankruptcy at no cost to taxpayers," FDIC Chairman Martin Gruenberg said in a statement. "Today's action is a significant step toward achieving that goal."

But the agency's vice chairman, Thomas Hoenig, who was a voting member of the Federal Open Market Committee during the crisis, said the plans show that no firm is "capable of being resolved in an orderly fashion through bankruptcy."

"The goal to end 'too big to fail' and protect the American taxpayer by ending bailouts remains just that: only a goal," he said.

The three remaining large, systemically important banks, which the U.S. government considers "too big to fail," did not fare much better in their evaluations, but sidestepped potential sanctions because they were not given joint determinations.

The FDIC alone determined the plan submitted by Goldman Sachs (GS.N) was not credible, while the Federal Reserve Board on its own found Morgan Stanley's plan not credible. Citigroup's (C.N) living will did pass, but regulators noted it had "shortcomings."

Goldman Sachs said in a statement it has made "significant progress" and Morgan Stanley said resolution planning is one of its "highest priorities."

"This Sucker Could Go Down" - Bush the Lesser - Sep. 26, 2008

[Plantagenet]

"This Sucker Could Go Down" - Bush the Lesser - Sep. 26, 2008

Bush said "this sucker could go down" in 2008, and sure enough the economy collapsed in 2008.

But here we are in 2016 and the current President says the US economy is doing fantastic.

If President Obama ever starts saying "this sucker could go down" then I could see where you might be worried, but given that Obama is constantly boasting about how great the US economy is right now I don't think there is much to worry about right now.

Cheers!


The US just hit full employment---it sure seems like the US economy is going great right now!

[ennui2]

Another day, another Obama cartoon. So tiresome.

[Plantagenet]

[Paulo1]

Nice sarcasm, Plant. Very Subtle.

[efarmer]

A fractional banking system is a confidence game, a necessary one, a productive and vital one indeed, but a con game. The people at the very top of the pyramid in the Federal Reserve, the US Treasury, the Ratings agencies, and the monster investment banks all have to play inside of the rules and schemes so that they do not break the perceived value of money. The events leading up to 2008 saw Ratings Agencies stamping AAA on crap insured by shell companies in the Cayman Islands to be sold to foreign central banks, it saw the big investment banks unload Freddie and Fannie to turn the horse manure loans after they were chopped up into fine particles into road apple pate' in gold wrappers. This same period witnessed the investment banks shrewdly work the subprime money pump while betting the economy would tank, and then profiting hugely while the investment fund investments of the working Americans got a third of their value lopped off with a chainsaw.

This sucker could go down, and did go down a bunch, and it is always that precarious because it is fractional banking and requires that there is widespread confidence in the system or else it is immediately on fire and sinking. Blaming this on one or both of the whorish political parties on the dole from corporate interest is similar in deciding if crime is caused by the Cripps or the Bloods and pretending that the argument is mutually exclusive.

The real danger is that when the entire financial system is so obviously gamed and benefits a bunch of insiders in New York, Washington, London, and Greenwich Ct., the incentive to work and invest is poisoned for an entire nation. This is not Liberal or Conservative, this is the underpinning that allows people to exist, and then arise as they see fit to express themselves and participate in their society and community instead of scrambling and tumbling in the chaos of economic distress and having no clear vision of what to do to improve themselves.

[ennui2]

You guys have your head in the sand. Here is what's really going on with the economy.

reports-of-us-economic-demise-are-greatly-exaggerated-pt-3-t70804-400.html

The US is the last bright spot in the world right now. The glass is half full.

[evilgenius]

I don't go for the conspiratorial invective. In the end it will blind you to the truth. People need to make more in order to sustain their consumption. Without those increases all consumable commodity's prices will fluctuate while markets adjust to people's attempts to live within the constraints that unreasonable economic management forces upon them. Under an inflationary paradigm real wages have to rise over time. If they don't people will supplement their income disparity with borrowing. That additional borrowing ought to be a signal to policy makers like the Fed. If the signal is not received, however, then that borrowing must become a bubble.

Without an increase in real wages there will be cycles of bubbles. They will be worse for those who might normally be insulated from such things according to how much the borrowing that working class people have to enter into in order to stay abreast within the economy are artificially sustained using various tactics such as offshoring of mid to upper class investment money so as to curtail its affect upon the rate of inflation. What will change that is not financial, nor labor market related, in terms of immigrant or outsourced labor. Eventually additional labor streams have to be included in the average over all time. Their biggest impact is their initial and trailing to the initial impact. Once they exist for long enough they too are subject to the same circumstances which all working class people toil under. No, what will change the equation for good is artificial intelligence. Bots don't borrow money. That's what will really and truly bring the sucker down.

[Outcast_Searcher]

Another day, another Obama cartoon. So tiresome.

Yes, it's so unfair an hurtful. After all, political cartoons NEVER existed before Obama became POTUS, and the press has never mocked, much less questioned a politician.

Welcome to America, where (so far at least) people are free to express their opinions, including about the POTUS.

If you can't deal with that, there is this place called North Korea where you wan't see political politicians about their "great leader" -- at least not more than once by a given cartoonist. Try living there for a decade or three and get back to us.

[Plantagenet]

Nice sarcasm, Plant. Very Subtle.

Thank you.

But like all sarcasm, there is a truth to what I am saying. Obama, Hillary, and a majority of the D party all say the US economy is in great shape, with full employment and steady GDP growth. Bernie and other Ds who are to left of Hillary think the economy is headed int he wrong direction. The working class whites supporting Trump are furious about the loss of jobs and income they've suffered.

So which is it?

Compare the Bush quote that Onlooker chose to use for this thread to what Obama is saying now. When the economy started to collapse in 2008 Bush saw it coming and said "This sucker could go down."

Obama says the exact opposite now. In his 2016 SOTU speech Obama said about the economy:

"Anyone claiming that America’s economy is in decline is peddling fiction."
---Barack Obama (2016)

[ennui2]

Another day, another Obama cartoon. So tiresome.

Yes, it's so unfair an hurtful. After all, political cartoons NEVER existed before Obama became POTUS, and the press has never mocked, much less questioned a politician.

Welcome to America, where (so far at least) people are free to express their opinions, including about the POTUS.

If you can't deal with that, there is this place called North Korea where you wan't see political politicians about their "great leader" -- at least not more than once by a given cartoonist. Try living there for a decade or three and get back to us.

Get real. I'm not the only one who has pointed out Planty's unhealthy obsession with Obama. It goes way beyond normal political satire. He's taken it as a mission to spam this site with at least 1 Obama cartoon a day no matter whether it has any relationship to the discussion or not. He's a troll.

[Tanada]

A fractional banking system is a confidence game, a necessary one, a productive and vital one indeed, but a con game. The people at the very top of the pyramid in the Federal Reserve, the US Treasury, the Ratings agencies, and the monster investment banks all have to play inside of the rules and schemes so that they do not break the perceived value of money. The events leading up to 2008 saw Ratings Agencies stamping AAA on crap insured by shell companies in the Cayman Islands to be sold to foreign central banks, it saw the big investment banks unload Freddie and Fannie to turn the horse manure loans after they were chopped up into fine particles into road apple pate' in gold wrappers. This same period witnessed the investment banks shrewdly work the subprime money pump while betting the economy would tank, and then profiting hugely while the investment fund investments of the working Americans got a third of their value lopped off with a chainsaw.

This sucker could go down, and did go down a bunch, and it is always that precarious because it is fractional banking and requires that there is widespread confidence in the system or else it is immediately on fire and sinking. Blaming this on one or both of the whorish political parties on the dole from corporate interest is similar in deciding if crime is caused by the Cripps or the Bloods and pretending that the argument is mutually exclusive.

The real danger is that when the entire financial system is so obviously gamed and benefits a bunch of insiders in New York, Washington, London, and Greenwich Ct., the incentive to work and invest is poisoned for an entire nation. This is not Liberal or Conservative, this is the underpinning that allows people to exist, and then arise as they see fit to express themselves and participate in their society and community instead of scrambling and tumbling in the chaos of economic distress and having no clear vision of what to do to improve themselves.

Uhm let me repeat the relevant part of the quote first,

A fractional banking system is a confidence game, a necessary one, a productive and vital one indeed, but a con game.

The first clause is 100 percent accurate, fractional reserve banking is absolutely a confidence game.

The remainder of the statement I take full issue with. You have to ask yourself, necessary for whom? Productive for whom? Vital for whom? In all cases the answer is the same, it is all those things for the people running the con, not for the 99 percent of the population who are being conned by the way the current system is structured.

Fractional reserve banking is not a new idea, however it is not a requirement for a healthy culture either. Sure if you eliminate fractional reserve banking you eliminate easy credit and growth rates greater than about 1 percent for the economy. In the process you also eliminate inflation from the economy by stabilizing the currency. You create a stable financial environment from top to bottom, to see what that means look at the economy of for example Boston, Massachusetts from its founding in the early 1600's until the 1790's. For that entire 150 year period wages were stagnant, but so were expenses. If you made $1/d in 1640 and your great grandchild made $1/d in 1790 it had the same buying power. Why is that a bad thing?

Try comparing a dollar in 1910 and a dollar in 2010 and see what inflation has done to our culture. The only, and I do mean only, people who have benefited from inflation are the very top members of the banking industry. For everyone in the working class, and for the majority of those in the salary class, you have lost far more in purchasing power than you have gained in the apparent pay increases that have come along over the last 100 years.

One way or another the con game is almost played out. there are only two options left, push the banking system up all the way to being a global currency where the top tier bankers can run the game through one more cycle, or watch the whole system fall apart as people lose confidence in the value of inflated fiat currencies.

[onlooker]

"The remainder of the statement I take full issue with. You have to ask yourself, necessary for whom? Productive for whom? Vital for whom? In all cases the answer is the same, it is all those things for the people running the con, not for the 99 percent of the population who are being conned by the way the current system is structured." That is a great observation. Yes, the economic system has slowly but surely been concentrating wealth at the top at the expense of all below. That is not just in this country but throughout the world. Look at the Panama papers revelations as a side note, they are about the corruption endemic within the system. Fractional banking in the end is corrupt along with compound interest and I would go as far as to say the stock markets. They all are about sucking the system dry. About utilizing and leveraging the productive economy to the end of aggrandizing the benefits to the elite/wealthy. So then not about the general main st. economy but wall st. and the oligarchs and financial wheelers and dealers. The planet in case any of us has not noticed is under the weight of enormous onerous debt. Oh and Plant not my post, it is Vox.

[EdwinSm]

Back to the bank loans of the Original Post. One more bank shows falling profits.

US bank Citigroup has reported a 27% fall in first quarter profits compared with a year earlier.

It came as Citi said it had set aside more cash to cover losses on energy loans, and as the cost of shrinking some of its businesses increased.

http://www.bbc.com/news/business-36056072

But at this time the banks are still making profits despite the failing loans to the energy sector.

While there are problems does any one have good figures to show that the defaulting loans will (or will NOT) cause big enough losses to the banks that would threaten their existence? I.e. What should my level of worry be about the health of banks due to low oil prices?

[Plantagenet]

... Obama.

For some reason you have appointed yourself the defender of all things Obama. It doesn't matter what the discussion is about---it clearly disturbs you whenever Obama is mentioned in discussions here, and you feel compelled to divert every such conversation by posting ad homs. I hate to break it you, ennui, but your nutty insistence, repeated over and over again, that there should be no mention of Obama at this site and above all no discussions his decisions or the effects of his policies, wars, etc., and ABSOLUTELY NO CARTOONS!!! ...... isn't entirely rational.

Basically, since you turned into a cornucopian you don't post much and when you do post it's nothing but demands that discussions stop. Its a shame---you used to join in the discussions and have interesting things to say.

Please let the rest of us talk about this topic with anymore of your trolling. Thanks.

Cheers!


Obama and ennui meet in troll-land

[onlooker]

troll.jpg

[Tanada]

Tanada, isn't full-reserve banking impossible without total complete government oversight of every loan and every account? Otherwise a black market would arise and someone (like a loanshark) will always lend out their money twice. This increases the money supply for good or worse, even without government regulation. Might as well have a government around to at least try to manage the inflation?

One of my ex's was in the management portion of a large credit union. You can take my word for it, or look it up on your own, but all financial institutions in the USA are already experiencing significant federal oversight. One thing I would do to fix banking is something strongly supported by many libertarians, which is to completely separate commercial banking and consumer banking like it was back before the S&L crisis. My funds, if any, should not be available for my consumer bank to loan out to businesses that may or may not be successful. It wasn't all that long ago that consumer and commercial banks were required to be completely separate entities and we managed to survive as a country with that system. Now we have the issue of 'too big to fail' because if one of the big banks goes under all the FDIC insured consumer deposits in that bank instantly become a federal taxpayer burden. That is just a really really bad idea.

[Plantagenet]

One thing I would do to fix banking is something strongly supported by many libertarians, which is to completely separate commercial banking and consumer banking like it was back before the S&L crisis. My funds, if any, should not be available for my consumer bank to loan out to businesses that may or may not be successful. It wasn't all that long ago that consumer and commercial banks were required to be completely separate entities and we managed to survive as a country with that system. Now we have the issue of 'too big to fail' because if one of the big banks goes under all the FDIC insured consumer deposits in that bank instantly become a federal taxpayer burden. That is just a really really bad idea.

Yup. The repeal of the Glass-Steagal regulations under Bill Clinton was a disaster.

This is a clear difference between Hilalry and Bernie.....unless we get Bernie as president, we're not going to get Glass-Steagal reinstated.

The banking establishment doesn't want Glass-Steagal reinstated, and the banksters fund give big bucks to those candidates who won't buck their corporate masters and reinstate it. You can see this from the fact that the much ballyhooed Dodd-Frank bank regulations that Obama got passed and Hillary is now praising to the skies did not reinstate Glass-Steagal and are already being criticized as being too weak and ineffective to stop other banking crisis, especially since the Obama administration banking regulators don't enforce the rules on the big banks.

[/img]big banks not being held to Dodd Frank rules by regulators

As long as we have presidents like Obama or Hillary who are in the pockets of the Wall Street Banksters, we won't see Glass-Steagal reinstated and we won't even see the existing rules followed.

Cheers!

[onlooker]

It would take more than Bernie to repeal Glass-Steagall. It would take a cooperating Congress. I do not see that happening anytime soon.