The Institutional Risk Analyst

The sad fact is that even with another 2% capital, most US banks are arguably insolvent thanks to the Fed “going big.”

The “winners” in the mortgage sector will be those larger players with equally large servicing books that can access bank funding

The world of secured finance is still coming to grips with the idea of several more increases in the federal funds rate this year.

JPM is really a large mutual fund with a bank attached, as shown in the table below.

If the FOMC raises the target rate for fed funds further, then banks like CMA are likely to come under renewed selling pressure.

We look for lower prices for legacy MBS and MSRs as new allocations are used up and P&Ls sink deeper into the red...

If you agree with our view that the short-selling of the stock was mistaken, then the discount for SCHW is unwarranted.

If the FOMC raises fed funds further, bank failures and perhaps even a market access crisis for the Treasury are next.

With inflation fears moderating, look for Buy Side managers to buy bank stocks – even if earnings remain constrained...

Remember, for every $1 in debt redeemed on the books of the Fed, a bank deposit disappears.

What can SYF tell us about the bleeding edge of unsecured consumer credit?

If it’s artificial, then it’s not intelligent.

How much of book value do banks lose as the Fed adjusts interest rates to fight inflation?

If we assume that asset returns will continue to rise, but that bank funding costs will rise 5x asset returns, then US banks have a problem

If you believe that the Fed is going to keep interest rates at or above current levels through to 2024, then we have a problem....

Persistent talk about a 5.5% 30-year mortgage rate later this year is badly wrong as TBAs flip from 5.5% to 6% coupons for delivery in June

To survive long-term, both WAL and PACW need to get that beta back down below 2 and closer to 1, but the hawks on the FOMC may not cooperate

We think that further Fed tightening, plus sales of MBS from FDIC and banks generally, may force mortgage rates higher into the 7% range

The Fed's 5.5% increase in short-term interest rates has thrown the pricing for trillions of dollars in real estate into disarray.

The price volatility injected into markets by the Fed is a primary reason why the FDIC cannot easily find buyers for smaller banks.