Christopher Whalen

Forget Everything You Heard About Rising Interest Rates

La Jolla | This week The Institutional Risk Analyst is in La Jolla for The Chairman’s Conference of The California Mortgage Bankers Association. Click here to download our keynote presentation. Last Friday we got to talk banks with Brian Sullivan on CNBC. We noted that investors need to forget everything they were told in 2018 about rising interest rates. Many investors got killed last year positioning for rate increases in 2019. Hint: When your prime desk coverage is selling the short bond/long

Is there a bull case for Wells Fargo & Co?

New York | Last week Senator Elizabeth Warren (D-MA) finally got her scalp. Tim Sloan, CEO of Wells Fargo & Co (WFC) resigned, part of the blood letting demanded by progressive politicians in recompense for the bank’s numerous acts of fraud, stupidity and malfeasance. WFC shareholders are paying for these sins and omissions in a number of different ways. As usual, the officers and directors are largely unscathed. “Impacted consumers” are not really being made whole in any meaningful fashion. But

Bank Earnings and QE/QT

New York | In the most recent edition of The IRA Bank Book, we note that the rate of increase in funding costs for US banks in 2018 was a bit over 70% year-over year. The rate of change in this key component of bank earnings is not particularly correlated to the broad swings in market interest rates and, by implication, investor confidence. But the normalization of bank funding costs is relentless. As we describe in some detail in the IRA Bank Book for Q1 2019, rising bank interest expense is a

The IRA Bank Book + Top Ten US Banks

In this edition of The Institutional Risk Analyst, we announce the release of The IRA Bank Book for Q1 2019. We focus on some of the key financial and credit factors affecting the US banking industry. We also provide the detailed credit charts that have become one of the favorite features for readers of our publication. And with this edition of The IRA Bank Book, we include the Top Ten list of US banking organizations, this quarter selected and sorted by return on equity for the subsidiary bank.

Financial Repression Falls — A Little

New York | First a travel note. The Institutional Risk Analyst will be at the Structured Finance Industry Group (SFIG) conference in Los Vegas this week to participate in a discussion about permanent financing for MSRs. Please come say hello if you are attending this important event. And if you’re really lucky, you’ll meet former GNMA head and SFIG CEO Michael Brite.We’ll also be speaking at the Docutech event at the Phoenician later in the week about the outlook for interest rates, the Federal

The Trade: Sell Servicing, Buy a Bank

Washington | Consider the irony of the American housing sector. In the District of Columbia, various pundits, market retreads and spin-meisters (many employed by hedge funds) obsessively focus on “reforming” the government sponsored enterprises known as Fannie Mae and Freddie Mac, together the “GSEs.” The third and largest GSE, the Federal Home Loan Banks, along with the fourth, the Government National Mortgage Association or Ginnie Mae, are also included in the prospective policy mix. None of

The New Confidence

New York | This week in The Institutional Risk Analyst, we note a couple of reader comments. First, we’ve been accused of having an HNA fixation. Another reader claims we have a CLO fetish. Guilty on both counts. And it was suggested that we don’t give leveraged loans sufficient credit for the equity cushion included in the capital stack. Sure we do. But since the median debt levels of non-financial companies relative to earnings now exceed levels seen before the last financial crisis, this

Bigger Balance Sheet Bullish? Really?

New York | This week in The Institutional Risk Analyst, contributor Ralph Delguidice ponders the aftermath of the retreat last week by the Federal Open Market Committee following the latest market volatility tantrum. Suffice to say that the FOMC has no stomach for deflation of any duration, thus we see the magical appearance of the “Powell Put” in financial commentaries. But riddle us this: When is easing really tightening? First the Fed backed off further rate hikes, now we are talking about

Fed Blinks as Housing, CLOs Slump

“How did you go bankrupt?” “Two ways. Gradually, then suddenly.”Ernest Hemingway,”The Sun Also Rises”New York | Last week the Federal Open Market Committee under Chairman Jerome Powell blinked, again. Last week, The Wall Street Journal reported what bond traders and the readers of The Institutional Risk Analyst have known for months. Rate hikes are on hold and the FOMC is preparing to end the shrinkage of the Fed’s system open market account (SOMA) portfolio.