- Jan 31, 2005
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I think we should all pause for a minute and say "No shit?"
The banks want to keep the money given to them to help out their own balance sheets, not to lend it out. Seems that bailout sure is helping....
Article
Banks Hoard Money Meant to Boost Economy, Lender Says (Update1)
By Jody Shenn
Oct. 23 (Bloomberg) -- Banks getting $125 billion from U.S. taxpayers to unlock the credit crunch are saying they'd rather hoard the money than use it for loans, the head of the largest independent mortgage company said.
Treasury Secretary Henry Paulson is injecting capital into institutions including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. on the expectation they would step up lending and investing to prevent the economic slowdown from getting worse. That isn't happening, said Lee Farkas, chairman of Ocala, Florida-based Taylor, Bean & Whitaker Mortgage Corp.
Many large banks have told Farkas the U.S. rescue isn't boosting their interest in offering or expanding credit lines to lenders such as his, even for borrowing secured by ``low-risk, highly liquid loans,'' he said.
``By their own admission, they're taking the money and they don't want to put it to work,'' he said in an interview during the Mortgage Bankers Association's conference in San Francisco. ``Every single one you talk to, from the biggest to medium biggest, is saying the same thing, they want to de-lever.''
Farkas, whose 26-year-old home lender is among the 10 largest overall, said yesterday he encouraged Taylor Bean's 2,700 employees to call lawmakers in support of Paulson's $700 billion rescue package. Now, he's ``disappointed'' with the results.
``The big banks are acting irresponsibly,'' Farkas said. ``They're going to continue to reduce their balance sheets. Period. That's not what the Treasury wants.''
Scarcer Credit
Mortgage banks such as privately held Taylor Bean rely on so-called warehouse lending to make new loans and then hold the mortgages until they're sold. The credit lines have gotten scarcer and more expensive over the past year, Farkas said.
Smaller lines cut the amount of loans the companies can make in a given period, potentially reducing competition and boosting home buyers' borrowing costs amid the worst housing slump since the Great Depression. Costlier lines force the lenders to offer loans at higher interest rates relative to current mortgage-bond yields or with larger fees to maintain profit margins.
Farkas, 56, declined to name the banks, saying they weren't necessarily current lenders to his firm. He wouldn't identify the company's lenders.
Scott Silvestri, a spokesman for Charlotte, North Carolina- based Bank of America, wrote in an e-mail that ``we will add to our capital which will increase our capacity to expand our balance sheet and make more loans.'' Brian Marchiony, a spokesman for New York-based JPMorgan, didn't immediately respond to a phone call and e-mail seeking comment. Christina Pretto, a spokeswoman for New York-based Citigroup, declined to comment.
Government Intent
Bank of America Chief Executive Officer Kenneth Lewis said on the CBS news show ``60 Minutes'' on Oct. 19 that the government's plan will bolster his company's lending. ``The intent will be to use it to grow loans and to make more net income,'' he said.
JPMorgan CEO Jamie Dimon said on an Oct. 15 conference call, that ``we hope to be able to find ways to use it to benefit our shareholders and to continue to be there for our clients.''
Citigroup will spend the taxpayer capital if opportunities make sense, ``even if that would imply growth in the balance sheet as we're bringing down other balance sheet categories,'' Chief Financial Officer Gary Crittenden told analysts on a Oct. 16 conference call.
Rivals Collapse
Taylor Bean made $17 billion of loans in the first half of this year, ranking 12th among U.S. mortgage originators and ahead of larger companies such as National City Corp., HSBC Holdings Plc and Sovereign Bancorp., according to newsletter Inside Mortgage Finance. Since then four of its bigger rivals, including Countrywide Financial Corp. and Washington Mutual Inc., have been sold, failed or ended most lending.
Paulson on Oct. 14 announced his plan to inject $125 billion into nine of the biggest U.S. banks, and potentially another $125 billion into other financial companies. He said that ``the needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it.''
Governments worldwide have made similar injections this month, including into U.K., Swiss and Dutch banks.
The reluctance of the biggest U.S. banks to expand in a mortgage warehouse business now offering much safer loans as collateral appears to stem mostly from their desires to bolster capital ratios to appease shareholders, even though many of the companies also benefit from reduced competition, Farkas said.
Kill Competitors
``The best way to kill your competitors is to not lend to them,'' said Farkas, whose company lends mostly through brokers and community banks.
Taylor Bean has survived while independent lenders including First Magnus Financial Corp. and American Home Mortgage Investment Corp. failed because the company never strayed from a focus on loans that meet Fannie Mae, Freddie Mac or Federal Housing Administration guidelines, Farkas said.
The company's capacity to warehouse new loans, through bank credit lines and a unit that issues commercial paper, contracted by $4 billion to $3 billion since July 2007, Farkas said. His current challenges also include maintaining the financing needed to hold contracts to service outstanding loans, he said.
The banks want to keep the money given to them to help out their own balance sheets, not to lend it out. Seems that bailout sure is helping....
Article
Banks Hoard Money Meant to Boost Economy, Lender Says (Update1)
By Jody Shenn
Oct. 23 (Bloomberg) -- Banks getting $125 billion from U.S. taxpayers to unlock the credit crunch are saying they'd rather hoard the money than use it for loans, the head of the largest independent mortgage company said.
Treasury Secretary Henry Paulson is injecting capital into institutions including Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. on the expectation they would step up lending and investing to prevent the economic slowdown from getting worse. That isn't happening, said Lee Farkas, chairman of Ocala, Florida-based Taylor, Bean & Whitaker Mortgage Corp.
Many large banks have told Farkas the U.S. rescue isn't boosting their interest in offering or expanding credit lines to lenders such as his, even for borrowing secured by ``low-risk, highly liquid loans,'' he said.
``By their own admission, they're taking the money and they don't want to put it to work,'' he said in an interview during the Mortgage Bankers Association's conference in San Francisco. ``Every single one you talk to, from the biggest to medium biggest, is saying the same thing, they want to de-lever.''
Farkas, whose 26-year-old home lender is among the 10 largest overall, said yesterday he encouraged Taylor Bean's 2,700 employees to call lawmakers in support of Paulson's $700 billion rescue package. Now, he's ``disappointed'' with the results.
``The big banks are acting irresponsibly,'' Farkas said. ``They're going to continue to reduce their balance sheets. Period. That's not what the Treasury wants.''
Scarcer Credit
Mortgage banks such as privately held Taylor Bean rely on so-called warehouse lending to make new loans and then hold the mortgages until they're sold. The credit lines have gotten scarcer and more expensive over the past year, Farkas said.
Smaller lines cut the amount of loans the companies can make in a given period, potentially reducing competition and boosting home buyers' borrowing costs amid the worst housing slump since the Great Depression. Costlier lines force the lenders to offer loans at higher interest rates relative to current mortgage-bond yields or with larger fees to maintain profit margins.
Farkas, 56, declined to name the banks, saying they weren't necessarily current lenders to his firm. He wouldn't identify the company's lenders.
Scott Silvestri, a spokesman for Charlotte, North Carolina- based Bank of America, wrote in an e-mail that ``we will add to our capital which will increase our capacity to expand our balance sheet and make more loans.'' Brian Marchiony, a spokesman for New York-based JPMorgan, didn't immediately respond to a phone call and e-mail seeking comment. Christina Pretto, a spokeswoman for New York-based Citigroup, declined to comment.
Government Intent
Bank of America Chief Executive Officer Kenneth Lewis said on the CBS news show ``60 Minutes'' on Oct. 19 that the government's plan will bolster his company's lending. ``The intent will be to use it to grow loans and to make more net income,'' he said.
JPMorgan CEO Jamie Dimon said on an Oct. 15 conference call, that ``we hope to be able to find ways to use it to benefit our shareholders and to continue to be there for our clients.''
Citigroup will spend the taxpayer capital if opportunities make sense, ``even if that would imply growth in the balance sheet as we're bringing down other balance sheet categories,'' Chief Financial Officer Gary Crittenden told analysts on a Oct. 16 conference call.
Rivals Collapse
Taylor Bean made $17 billion of loans in the first half of this year, ranking 12th among U.S. mortgage originators and ahead of larger companies such as National City Corp., HSBC Holdings Plc and Sovereign Bancorp., according to newsletter Inside Mortgage Finance. Since then four of its bigger rivals, including Countrywide Financial Corp. and Washington Mutual Inc., have been sold, failed or ended most lending.
Paulson on Oct. 14 announced his plan to inject $125 billion into nine of the biggest U.S. banks, and potentially another $125 billion into other financial companies. He said that ``the needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it.''
Governments worldwide have made similar injections this month, including into U.K., Swiss and Dutch banks.
The reluctance of the biggest U.S. banks to expand in a mortgage warehouse business now offering much safer loans as collateral appears to stem mostly from their desires to bolster capital ratios to appease shareholders, even though many of the companies also benefit from reduced competition, Farkas said.
Kill Competitors
``The best way to kill your competitors is to not lend to them,'' said Farkas, whose company lends mostly through brokers and community banks.
Taylor Bean has survived while independent lenders including First Magnus Financial Corp. and American Home Mortgage Investment Corp. failed because the company never strayed from a focus on loans that meet Fannie Mae, Freddie Mac or Federal Housing Administration guidelines, Farkas said.
The company's capacity to warehouse new loans, through bank credit lines and a unit that issues commercial paper, contracted by $4 billion to $3 billion since July 2007, Farkas said. His current challenges also include maintaining the financing needed to hold contracts to service outstanding loans, he said.
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