“America’s banking crisis is over,” says CIBC economist, Avery Shenfeld.
He says the market now believes “the fear of failure has been shaken out of the system.”
Avery made the remarks in a research report released Friday. He expects the US banking crisis will soon “fade out as a concern for anyone other than the affected banks’ shareholders.”
As we reported in Saturday’s TED spread post, some lending indicators do seem to be getting back to “normal,” albeit slowly. That said, it could be a while before things like variable-rate premiums and lending criteria loosen up to their pre-2008 levels. Some industry watchers feel the latter (lender guidelines) could remain tighter than normal for a few years or more.
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Last modified: April 29, 2014
Who is this guy trying to kid?
http://online.wsj.com/article/SB124269114847832587.html#mod=testMod
Funny how one study can find one result while another can find the exact opposite. Anyone who thinks this recession is over is in for a nasty surprise.
He didn’t say the recession was over. He said the US banking crisis was over.
Did you read the article?
Sadly variables will not return to Prime – 80 bps. Variables and fixed-term rates are at historical lows.Even if bank borrowing costs are falling, rates at these levels provide profit margins that are mighty small. Banks still have fixed costs to cover (branches, employees, underwriting, marketing), regardless of how cheap they can get the money. The only way we get back to Prime – 80 bps is if prime starts to rise.
Hi Jim,
Thanks for the post. We’re not optimistic on the return of prime minus .80% either.
On the other hand, we’ve learned to never say never. If/when prime rises 1-2% and the BA spread increases, it’s possible that conditions could once again support discounted variables. How big a discount is another question.
As you suggest, however, this possibility is probably a long way off.
Cheers,
-rob
I like to follow CIBC’s research even though they have been off the mark a lot lately. If you want a interesting report go to the federal reserve bank of San Francisco http://www.frbsf.org/publications/economics/letter/2009/el2009-16.html In a nutshell the research team compares the US problem to Japan. If this is half true, then this problem (for US Banks and world economy) is still years away. Interest rates in Japan have been low for over ten years!
The Japanese stock market peaked in 1989 and their real estate market peaked in 1991. Now, nearly 20 years later both the stock and commercial real estate market remain more than 70% below the their peaks, while residential land prices are more than 40% below their peak.
Food for thought.
Brian