Tuesday, May 5, 2015

Monday, May 4, 2015 Recap: FRB Reports on Credit & Lending Practices, May CRA, Deutsche Bank MaintainsWKSI Status, Peer Analysis May Lead To Overvaluation


A summary of noteworthy news and publications from financial regulatory agencies on Monday, May 4, 2015:
The IMF published a host of working papers
The New York Fed published two papers on negative interest rates and peer analysis benchmarking 
 
The Federal Reserve Bank of New York released interactive maps highlighting credit conditions in communities across the United States. Referred to as the "Community Credit  interactive" the tool provides users with a way to measure credit inclusion at the county level. Data runs from 2005 to 2014 and shows that, for the most part, Americans are paying bills on time. North Dakota (87 percent) ranks the highest, whereas Mississippi (71 percent) ranks the lowest. New Hampshire ranked the highest for inclusion rates (# of people with a credit file) and Alaska ranked the lowest. The county with the lowest percentage of on-time payers, at 48 percent was in New Mexico, the county with the highest at 93% was in Sioux County, Iowa.
The Bureau of Economic Analysis (BEA) launched a tool that gives users statistics on trade and investment between the United States and another country. Data within the tool includes:
  • Total exports, imports and trade balance between the United States and the country you select.
  • The top five categories of goods and services the United States buys from and sells to that country.
  • Country level data on U.S. direct investment abroad and foreign direct investment in the United States and on the activities of multinational enterprises such as employment and sales.
You can also view a country specific factsheet with canned graphs and charts for each country.

SEC Commissioner Kara M. Stein dissented against the decision to grant Deutsche Bank a waiver allowing the bank to maintain "well-known seasoned issuer" status. This status would have been automatically revoked if it weren't for the waiver. 
Deutsche Bank’s illegal conduct involved nearly a decade of lying, cheating, and stealing. This criminal conduct was pervasive and widespread, involving dozens of employees from Deutsche Bank offices including New York, Frankfurt, Tokyo, and London. Deutsche Bank’s traders engaged in a brazen scheme to defraud Deutsche Bank’s counterparties and the worldwide financial marketplace by secretly manipulating LIBOR. The conduct is appalling. It was a complete criminal fraud upon the worldwide marketplace.
Stein, the Fed's most ardent advocate on the benefits of financial regulation, believes the "WKSI status is available 'for the most widely followed issuers representing the most significant amount of capital raised and traded in the United States.'" This status gives certain firms advantages over other firms in the way of capital access and Stein doesn't think Deutsche Bank should be allowed to maintain this status -- I'm inclined to agree. 

The IMF was busy over the weekend and published a host of working papers including: 
Liberty Street Economics, the research leg of the New York Federal Reserve published a post entitled Interest-Bearing Securities When Interest Rates are Below Zero - "This post discusses some of the challenges that may be encountered as money and capital markets adjust to negative rates."

They also published another working paper entitled Asset Price Effects of Peer Benchmarking: Evidence from a Natural Experiment - "We estimate the effects of peer benchmarking by institutional investors on asset prices." "We find that these peer effects generate excess stock return volatility, with stocks exhibiting short-term abnormal returns followed by returns reversal in the subsequent quarter. Additionally, peer benchmarking produces an excess in comovement across stock returns beyond the correlation implied by fundamentals". Look for my analysis on SeekingAlpha about this paper shortly. Be sure to follow us there to read more ---> (http://seekingalpha.com/author/celan-bryant/articles)

The FDIC issued a list of banks examined for CRA compliance. Of the 80+ banks examined only The Morris Plan Company of Terre Haute, Inc located in Indiana received a poor rating.
32907 The Morris Plan Company of Terre Haute, Inc. P.O. BOX 869 TERRE HAUTE IN 47808-0869 NI
Two banks received outstanding (see below) and the rest were listed as "S" for satisfactory.
13292 The Bank of Castile 90 MAIN STREET BATAVIA NY 14020-0000 O
9204 Central Bank 75 NORTH UNIVERSITY AVENUE PROVO UT 84601-0000 O

The Federal Reserve published the April 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices which is only published once a quarter. The report addresses "changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months." The report summarizes the responses from 76+ banks. Look for my analysis of this report on SeekingAlpha as well.

Upcoming Events/Speeches/Meetings

Wednesday, May 6 @ 9am: Scott Bauguess, Deputy Director and Deputy Chief Economist, Division of Economic and Risk Analysis, will participate in the NRS Investment Adviser and Broker-Dealer Compliance Conference. Location: The Westin, 321 N. Fort Lauderdale Beach Blvd., Fort Lauderdale, Fla. Contact: Elisabeth Law, lizzie.law@nrs-inc.com 

Wednesday, May 6 @ 10:45 a.m. ET: SEC Commissioner Kara Stein will participate in a panel entitled, “Other People’s Money: Governance, Integrity and Ethics” at the Institute for New Economic Thinking’s “Finance and Society” Conference. Location: International Monetary Fund, 1900 Pennsylvania Ave. N.W., Washington, D.C. Contact: events@ineteconomics.org

May 7 @ 8:30 a.m. ET: James Schnurr, Chief Accountant, will be a featured speaker at the Annual Financial Reporting Conference. Location: Zicklin School of Business, 55 Lexington Ave. Room 14-220, New York Contact: Matthew LePere, 646-312-3231, Matthew.LePere@baruch.cuny.edu
  
May 7 @ 10 a.m. ET: SEC Chair Mary Jo White will participate in a Q&A discussion with Julie Lutz, Director, Denver Regional Office, at the Rocky Mountain Securities Conference. Other SEC senior officials will also participate in the event. Location: Denver Marriott City Center, 1701 California Street, Denver Contact: Mary Dilworth, mdilworth@cobar.org

May 8 @ 8 a.m.: SEC Chair Mary Jo White will participate in a Q&A discussion with Investment Company Institute’s (ICI) President and CEO Paul Schott Stevens at their Annual Regulatory General Membership Meeting. Location: Marriott Wardman Park Hotel, 2660 Woodley Road, N.W., Washington, D.C. Contact: Olivia Caverly, 202-326-5945,   olivia.caverly@ici.org