{"id":34512,"date":"2018-05-24T07:37:16","date_gmt":"2018-05-24T12:37:16","guid":{"rendered":"http:\/\/olduvai.ca\/?p=34512"},"modified":"2018-05-24T07:37:16","modified_gmt":"2018-05-24T12:37:16","slug":"oops-its-starting-says-this-chart-from-the-fdic","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=34512","title":{"rendered":"Oops, It\u2019s Starting, Says This Chart from the FDIC"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"https:\/\/wolfstreet.com\/2018\/05\/23\/oops-its-starting-says-this-chart-from-the-fdic\/\">Oops, It\u2019s Starting, Says This Chart from the FDIC<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>And its eerie exhortations to the banks to prepare for a downturn to avoid \u201cundue disruption to the financial system.\u201d<\/strong><\/p>\n<p>The FDIC\u2019s quarterly report on commercial banks and savings institutions was cited in the media mostly for the $56 billion in profits that FDIC-insured commercial banks and savings institutions made in the first quarter, which was up 27% from a year ago. An estimated $6.6 billion of the profits were due to the tax-law changes.<\/p>\n<p>It remained mostly unmentioned that this increase in profits came after the huge charge-offs banks took in the fourth quarter mostly due to write-downs of tax assets, also a result of the new tax law. These write-downs slashed bank profits in Q4 to $25 billion, the worst quarter since the Great Recession.<\/p>\n<p>Overall, Q1 was really exciting. Banks were firing on all cylinders, according to the FDIC: Net income jumped, loan balances rose, net interest margins improved, and the number of \u201cproblem banks\u201d edged down.\u00a0But worries are creeping up:<\/p>\n<blockquote><p>The interest-rate environment and competitive lending conditions continue to pose challenges for many institutions. Some banks have responded by \u201creaching for yield\u201d through investing in higher-risk and longer-term assets.<\/p>\n<p>Going forward, the industry must manage interest-rate risk, liquidity risk, and credit risk carefully to continue to grow on a long-run, sustainable path.<\/p>\n<p>The industry also must be prepared to manage the inevitable economic downturn, whenever it comes, smoothly and <strong>without undue disruption to the financial system<\/strong>.<\/p><\/blockquote>\n<p>I added the bold. This is a goodie. We had an \u201cundue disruption to the financial system\u201d during the last downturn, and we don\u2019t want another one, the FDIC says.<\/p>\n<p>\u201cUndue disruption\u201d would be when banks stop lending. That\u2019s when credit freezes up in a credit-dependent economy. Everything comes to a halt. Paychecks start bouncing. So, don\u2019t do that again.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Oops, It\u2019s Starting, Says This Chart from the FDIC And its eerie exhortations to the banks to prepare for a downturn to avoid \u201cundue disruption to the financial system.\u201d The FDIC\u2019s quarterly report on commercial banks and savings institutions was cited in the media mostly for the $56 billion in profits that FDIC-insured commercial banks [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[63,3453,6333,4254,4255],"class_list":["post-34512","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banks","tag-fdic","tag-private-banks","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/34512","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=34512"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/34512\/revisions"}],"predecessor-version":[{"id":34513,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/34512\/revisions\/34513"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=34512"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=34512"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=34512"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}