The Fed is giving the green light to banks to resume paying divvies. I guess this means things are okay, everything is getting back to normal. This must also mean their extraordinary accommodation via zero interest rates should be ending soon as well, right?

“The Federal Reserve cleared some of the 19 largest U.S. banks to increase dividends, buy back shares or repay government aid after “significant improvement” in their capital and the economy.

The banks, including firms such as Goldman Sachs Group Inc. and JPMorgan Chase & Co., have increased common equity by more than $300 billion from the final quarter of 2008 through the end of 2010, the Fed said in a paper released today in Washington on its most recent review of bank capital.”

Here is the punchline to the joke:

“Overall, both the quantity and quality of capital at many large bank holding companies have improved since the financial crisis,” the Fed said. “The return of capital to shareholders under appropriate conditions is a step in the process of improvement in the financial sector and will help to promote banks’ long-term access to capital.”

If I didn’t see the humor, I might end up crying . . .

>

Source:
Fed Says Some Banks Can Resume Dividends After Stress Tests
Craig Torres and Josh Zumbrun
Bloomberg, March 18 2011  
http://noir.bloomberg.com/apps/news?pid=20601087&sid=a7BT9GzEj0.E&pos=1

Category: Bailouts, Dividends, Federal Reserve

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

17 Responses to “If Banks Can Resume Dividends, Can the Fed Resume Normalized Rates?”

  1. Francois says:

    Resume dividends after Stress Tests…Hmmm!

    Do they mean these stress tests? http://xrl.in/7hvn

  2. Francois says:

    Hey Barry,

    Still not convinced that you shouldn’t accept an invitation to testify before Congress? The truth of the matter is, they can’t harm you for being blunt.

    ~~~

    BR: * sigh *

    I would be happy to, just not on 3 days notice when conflicting unbreakable plans preceded them

  3. John says:

    From the article:

    “Regulators in this review made one of the largest data requests in Fed history, outside of normal regulatory reporting, asking banks for information about their securities, loans and other holdings. This gave the Fed the ability to check and even challenge the assumptions banks make about their portfolios.”

    But this information is not available on public companies for investors to do their own due diligence to “check and even challenge”, suggesting owning the securities of these companies is doing so blindly. “Trust us” says the Fed (you know, that institution that regulated the banks all the way up and into the economic disaster).

    I’m curious if the private data the Fed examined was real or mark-to-fantasy.

  4. ottnott says:

    Everyone knows that you can fill up a bucket faster if you punch a few holes in the bottom of it.

    In addition to the resumption of normalized rates, will the banks also have to resume normal accounting practices and report their holdings of securitized debt at market value?

  5. michael-D says:

    hey BR … have you seen don rumsfeld? bill daley is on the line and wants to know if anyone has seen bush’s “mission accomplished” banner …? rummy might know where it is.

  6. socaljoe says:

    Seems to me rates must remain low to prevent a rise in the interest rates of new treasury issuance which would expose the unsustainable nature of our perpetual fiscal deficits.

    The banks are not the only institution in need of artificially cheap borrowing.

  7. samglick says:

    This might be counterintuitive but you gotta figure the fed will keep rates at zero to make sure banks can afford to pay dividends. At this point, the payouts are free money courtesy of our federal government. A flatter yield curve should abruptly end bank dividends.

  8. b_thunder says:

    “The return of capital to shareholders under appropriate conditions is a step in the process of improvement in the financial sector and will help to promote banks’ long-term access to capital.”

    should read:

    “The TRANSFER of TAXPAYER capital to shareholders under appropriate conditions is a step in the process of ENRICHING the financial sector and will help to promote banks’ long-term BONUS PAYING ability.”

  9. tjgpdx says:

    Golly, if these institutions are in such fine shape, what’s the hurry in eliminating trust preferreds as Tier 1 capital?

  10. farfetched says:

    b_thunder is about spot -on.

    Clearly Ben is a wealth re-distributor. Now only does he transfer taxpayer capital, but he hijacks the fair return on capital of all depositors and owners.

    I suggest the idea of offsets. Higher rates are a double edged sword with a good and bad side. If rates go up, so does the return on deposits of those who OWN capital or live on long term yields. If retirees, savers and those who were RESPONSIBLE with their savings and spending were to make a fair return on THEIR capital, they might actually feel wealthier, and in this environment, take measured risk with it and drive the economy forward. They would also tend to save more capital which would recapitalize the banks further.

    Afterall, these are people who know the value of savings and how to borrow and invest responsibly. They were the people punished first by irresponsible overspending defaulting spendthrifts, and then by politicians and the Fed rescuing those who lent the SAVER’S hard earned and saved funds to unworthy high risk flakes.

    The savers, retirees, responsible owners of capital and taxpayers should be paid FIRST. Bankers and bank equity owners…..the back of the line is WAY BACK THERE. -> -> -> Don’t let the door….ooops!

  11. DeDude says:

    So if they are that healthy can we also ask them to replace mark-to-fantasy with mark-to-market?

  12. philipat says:

    Timmy is being a naughty boy again?

    Must be that “Virtual” GS stock account in waiting for him?

    “Even the Basel III requirements for core Tier 1 capital (Which German Banks can’t meet for 10 years) are less than Lehman had on its balance sheet the week before it collapsed”. Next Financial crisis anyone?

  13. MikeG says:

    The Fed props up the banks. They’re not working for the general benefit of the national economy or living standards.

  14. philipat says:

    @BR: * sigh *

    “I would be happy to, just not on 3 days notice when conflicting unbreakable plans preceded them”

    Barry, you seem to be missing the plot. Congress is the center of the Universe so how dare you not drop everything to serve us and attend, even at one day’s notice? It’s people like you that make it hard for “We, the Government” to instruct you Ordinary people what to do with (Where to stick?) your “Pursuit of hapiness”

    Double SIGH.

  15. furiouschads says:

    18 percent of FL housing is vacant. So, I guess all those mortgages (and their seconds) have been marked to market and the losses booked before the banks start paying out dividends again.

  16. Roy C. says:

    Welllllll….

    “both the quantity and quality of capital at many large bank holding companies have improved”

    Well it has, hasn’t it… they have billions more ‘assets’ on the books collected from failed banks. /cynicism.

    If any of these ‘assets’ actually pan out then the bank owns and takes credit for them.

    If they’re toxic losses then broke-ass Uncle Sam buys them off the balance sheet with a pile of freshly borrowed, hot-off-the-presses, Uncle Ben’s Instant Money.

    Joe & Jane Schmuck get to bequeath ever more astronomical debt to their heirs and Uncle Ben, Lloyd B., Jamie D., etc., are heroes for saving the global financial industry.

    Or… did I misinterpret something?

  17. Becky says:

    Why are banks allowed to pay out dividends when they still aren’t using mark to market accounting? Am I missing something here?

    I wish someone would ask Bernanke this question: If banks used mark to market accounting, would they be solvent or insolvent?