Thursday, January 20, 2011

An Inside Look at Global Money Center Bank Activities

An EPJ reader writes:
I met you, briefly, in Boston during the Murphy-Wenzel lectures at the Omni Parker...

Confidentially, by way of background, I manage all aspects of funding for a large commercial finance company... I have been extremely active in the wholesale capital and securitization markets for the past 10 years raising well over $2 Billion of structured debt credit facilities, securitizations and warehouses. Consequently, I have a great vantage point to observe the anecdotal behavior of the global money center banks. From 2004 through most of 2007 these shops were throwing money at their clients. That approach to lending ceased in mid-to-late 2007 and the wholesale funding and securitization markets remained relatively dormant until early 2010.

I firmly believed this was going to continue and that the memory of 2007-2008 would remain planted in bankers minds. I also expected a long period of deflation as a result. However, what I am observing presently is that the TBTFs are becoming much more aggressive in their pitches to clients and offering substantially better credit terms and rates on debt facilities. It appears the excess reserves are [slowly] starting to flow from the money centers to targeted segments of the economy.

Whether this continues is anyones guess.
This report dovetails nicely with my analysis of Fed activities and changes in the attitude of banks (and others) with the desire to hold cash balances. The Fed money printing is kicking off the show and impacting the economy. This slowly nudges economic actors to decrease the desire to hold cash balances. Both these factors will continue to intensify as long as the Fed maintains its current money printing stance. It will, of course, ultimately result in severe price inflation, but in the short-term it looks like Fed manipulated happy days are here again.

If you need a loan, now is the time to get it. Lock in rates for as long as you can. Rates have ticked off their lows, but they are still headed much higher from here. Higher rates will come either becasue of the inflation or because Bernanke stops printing, which will push rates higher.


  1. Personally I would have thought that the optimism would ramp up outside the finance industry faster than it does inside, but it would seem like it is the other way around. Perhaps it is because of so much free cash lying around for the bankers to loan.

  2. For the last 3 or 4 months, I've been receiving about 6 offers per week from credit card issuers. They're all of the "0% interest for the first 12 months" variety. I keep the offers for novelty's sake. I have a huge stack of them now.

    I used to get these offers all of the time, but they stopped coming in around the 2006-2007 period. And I mean stopped. I heard nothing from Visa, Mastercard, Amex or Discover. They're back with a vengeance now.

  3. Hang onto those credit card 0% offers and maybe they can keep you warn with any extra dollars you might have around. They will make good kindling.