Change in the Nature of Earnings for Banks: Whalen

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August 8 (Bloomberg) -- Christopher Whalen, Executive Vice President and Managing Director at Carrington Investment Services, discusses the state of U.S. banking and the affect of real estate on financial institutions. He speaks on Bloomberg Television's “Bloomberg Surveillance.” (Source: Bloomberg)

Morning on civil moving over to criminal allegations.

Chris whalen, you've seen this before three at the backdrop to me is business.

How is the business of american banking?

In terms of revenue, it is relatively flat.

It has been a cost-cutting store for the past couple of years.

Loss rate coming down sorting seven coming up.

If you look at housing that is probably been the biggest line item for many of these bangs, we expect volumes to fall this year and next.

Mortgage this, fannie this, freddie that.

All of a sudden we're talking about mortgage volume following.

We have had two cyclical recoveries.

In 2010, we had a tax credit that drove a lot of volume.

This time it was refinancing.

But what we aren't seeing his purchases of new homes.

We don't see young families coming in -- that isn't that more of an inventory issue?

It has been like a short squeeze the past few years.

Especially in hot markets were you saw four or five years ago yet at 30% discount for bank owned home compared to comparable house.

No discount today.

I want to go back to what we talked about earlier, all of these worries and back-and-forth and complex articles on the minutia of all of this, do i care if i am a shareholder?

I think you should care because between the increased revelatory burden that all banks face, you will have lower equity returns.

Going forward, you're really going to see a change in the nature of earnings much more like the utility on the banking side.

The universal banks will still have -- paul barrett, with your experience, i don't get the utilities.

Their suits are too expensive.

If you take the macro view, we have sifted through a few years ago a crisis of historic proportions and all of these burdens raging from increased regulation to margaret's of litigation by the same federal regulators is actually part of a larger picture.

And that is to slow the banks down and push them back closer to what they were in the 1950s in the 1960s, which is more like -- is a reporting that can be possible?

It is happening.

It is not a question of whether it is possible or not.

What is not clear is whether he will have a good effect on the overall economy and whether it will make inking safer.

It is not going to help because in order to have job road, you have to have growth in the fed has failed to get credit growth on the ballot sheets.

Quantitative easing, all of these policies, they really have not gotten that kind of growth.

If anything, we still have disinflation.

That is why ben bernanke keeps talking about inflation.

This text has been automatically generated. It may not be 100% accurate.


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