THE BIG 6 BANKS, AND ME

I got a report send to myself by a contact at RBC outlining an analyst report on the Big 6 banks in Canada . Interesting title, it was called ' CAPITAL PUNISHMENT ' and revolved around how the banks are wrestling with regulators in U.S. and Canada on their capital base requirements and their investments in their brokerages and personal wealth businesses . For what it's worthy RBC seemed to be positioned best, but all had positive comments .

Every day the main business story seems to be the banks , both U.S. and in Canada, where OBAMA seems to be somewhat courageously taking them on and to task ! Business and banks view all this as intrusion -

I hope the dust settles and banks can get back to anything approaching lending normalcy in Canada re small and medium sized business .

Stan

The Fed's, BDC, And Me

Ooops, they did it again, The National Post reported today that the Federal CSCF - The Canadian Secured Credit Facility did another deal, as I understand it would be deal # 2 . The first was with a Dutch owned construction equipment firm .

The deal had BDC , as administrator, buying 1.2 Billion dollars ( yes thats billion ) in floor plan receivables . From who - GMAC and FORD !

Great deal for all parties concerned I guess, kudos of course . Can I be forgiven for again thinking this facility was supposed to fund Canadian businesses in the current liquidity crunch . The more things change the more they stay the same . Don't get me started.

Stan

BIG BANKS, and Me

Last several days one of the biggest business stories in the U.S. has been OBAMA's efforts to control and regulate banks - somewhat of a punishment for their part in the sub prime and liquidity debacle we just went through .

The recurring theme has been ' too big to fail ' - I have pasted part of a recent article in BNET.COM that provides some backdrop .

As Canadians we know our banking system :

1. Is Different
2. Had little or no role in the worldwide debacle

It is very difficult for us as Canadians as imagining a bank failure in our BIG 6 banks .

I guess that's one of the benefits of conservatism , although all my business customers feel they are paying a bit of a price for conservatism .

Stan

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President Obama left out a critical element yesterday in announcing his plan to limit the size of banks — how you do it. A number of ideas are kicking around, but following are the most likely methods.

Asset Cap. This would parallel the national deposit cap, which prohibits banks from controlling more than 10 percent of domestic insured deposits. But under this approach the cap would limit a financial company’s total assets, which include loans, reserves, investment securities and real estate, to a set percentage of the banking industry’s total assets.

The U.S. banking sector has roughly $13 trillion in assets. That means a 10 percent cap would limit banks to no more than $1.3 trillion in size. That would affect Bank of America (BAC), Citigroup (C) and JPMorgan Chase (JPM). A five percent cap would also reel in Goldman Sachs (GS), Morgan Stanley (MS) and Wells Fargo (WFC).

Liability Cap. A bank’s liabilities mostly comprises its checking, savings, CD and other core deposits. Under this method, a financial firm’s maximum total liabilities would be set as a percentage of U.S. GDP, which is roughly $14 trillion. So if the cap were fixed at 10 percent, a banking company’s liabilities couldn’t exceed $1.4 trillion. That would affect Bank of America, Citigroup and JPMorgan.

BRIGHTENING , AND ME

Today's Globe and Mail had an article that I think quite accurately reflects some of the current business environment ; it was titled ' LOAN AVAILABILITY BRIGHTEN - FOR BIG FIRMS ' and highlighted the fact the the liquidity crunch seems to be easing for larger firms, but small firms are still very challenged in getting credit, and additional collateral is being requested by the banks, etc. . The article indicated that many businesses are ' high risk ' borrowers ; I am of the opinion if they are higher risk they should not get the loans, credit, operating lines etc - But businesses with solid track records and good potential , albeit smaller in size, still seemed to be lumped in with the bad . That doesn't seem fair.
Stan

Business is Getting better? and Me

The Bank of Canada today indicated today that the ' recovery is taking hold ' , with some major commentary around business financing, which is the business of 7 Park Avenue Financial .

Interestingly enough they referenced a survey of ' bank loan officers ' who indicated that lending conditions have stabilized after a period of what they referred to as ' tightening '. Again borrowers ' increased access to financing 'was referenced .

It was good to hear the many business referenced hiring potential and new equipment acquisition .

We deal with a number of these ' loan officers ' and I would agree that , as we have said before, it couldnt get any worse and it does feel better out there with respect to business financing and borrowing . Hello 2010!
Stan

SUBPRIME, CANADA, AND ME

There was a great article on BNET.con today about a fellow named Anthony Hsieh- He founded a number of the large online submprime type mortgage portals in the U.S. - He is starting another one called ' LOANDEPOT.COM' .
I don't think these online portals are anywhere near in use in Canada - we seem to prefer the personal touch I guess! Firms such as HOME TRUST and XCEED MORTAGE seems to be doing ok , and Canada was of course ' relatively' unscathed during the U.S. sub-prime bust - God knows we felt the effects though.
Stan

BUSINESS , 2010, AND ME

As we kick into the New Year ( could 2009 have been any worse for business ? ) it was encouraging to note that the Toronto Star has reported that business bankruptcies are down around 10-15% with construction, mfg, and retail accounting for most of the failures .

If we can get the Canadian business lenders to improve capital flow to Canadian business we can all reasonably expect 2010 to be a better year . We at 7 Park Avenue Financial hope so !