Everyone is Talking About Bank Stress Tests

Bank Stress Test results are gracing everyone’s headlines, but before we sound the “all clear” horn you might want to take a look at some of these stories:

Recession Over & All Banks Pass the Stress Test? (The Big Picture)

Jack McHugh, questions the sunny disposition:

Good Evening: Just when the U.S. stock market seemed ready for a round of profit-taking ahead of Friday’s nonfarm payrolls figures, investors decided to throw caution to the wind. Apparently deciding that the recession and the stress over the banking system would soon be in the rearview mirror, market participants once again stampeded into large cap stocks in general and banks stocks in specific.

The Banks and Orwell (Naked Capitalism)

Yves Smith is convinced that this might be a case of regulators “talking up” their stock prices to facilitate the necessary private capital raise induced by Bank Stress Test:

So my best guess is that this is a quite deliberate effort (there are credible reports of active efforts to squeeze short sellers) to pump up the bank stocks to facilitate their fundraising. John Dizard had urged central banks sponsoring road shows nearly a year ago to help them raise the needed equity. I’d prefer an open sales effort to this mingling of hucksterism with supposed regulatory policy. And they have clearly been intermingled. Note how the prime objective of the stress tests has been above all to restore confidence. Huh? The most important aim should be to assess their condition so as to determine what if anything needs to be done. To subordinate proper regulatory action to reassuring “the markets” is backwards. If the public had faith in the integrity of the process, the need for a confidence exercise would vanish.

Geither: Why We Did Those Stress Tests (Wall Street Journal)

There is a lot of commentary that follows this line of questioning: “If everyone is so ‘okay’ why did we do these stress tests?”

In an interview with Charlie Rose, Treasury Secretary Tim Geithner said: “This financial system, at the beginning of this year, was operating under a deep cloud of uncertainty, great loss of confidence. People were very worried about whether the scale of losses that might come in a deeper recession would be sustainable for this system. And banks were unable to raise equity, could not borrow without guarantees from the government, and they were being defensive; they were pulling back on lending, and that was sucking oxygen out of recovery, deepening the recession. And that’s — fundamentally underpinning that was the sense of concern, lack of confidence, again, about how strong banks were.”

Don’t Stress About It (Slate: The Big Money)

Daniel Gross tells us to think beyond the Bank Stress Test for real answers about bank health.

But there are good reasons not to put much stock in the stress tests. The notion of the tests is that regulators, economists, and executives can project the impact of macroeconomic changes on large, highly leveraged institutions and their debt. But if there is anything we have learned in the past year, it’s that the entire financial system, from the Federal Reserve on down to the street-corner economic forecaster, has proved catastrophically unable to make such projections. Given all the complex variables involved, it’s extremely difficult to know with certainty how banks will perform in the coming months.

Other, more easily measurable metrics can give us clues about whether the financial system can function without taxpayer life support. The global financial markets provide the results of their own continuous stress test in real time. And while the results are far from satisfying, the data in recent months haven’t been uniformly negative. In fact, there are signs that some components of the system are functioning well without government support.

Thinking About a Centralized Mortgage Call Center or Social Media Marketing?

Take a look at how the acknowledged leader in online mortgage lending acquired a traditional “shoe leather” and “kitchen table” lender and pumped up the volume.

Interview With Quicken’s One Reverse Mortgage CEO (ReverseMortgageDaily.com)

John Yedinak views his skepticism about the centralized call center mortgage model, but submits that results speak louder:

Quicken was the pioneer of “forward” mortgage lending online but I was skeptical that the online/call center model would be successful in the reverse mortgage business.  For the remainder of 2008, the company flew under the radar in terms of volume but 2009 has been a different story.

As I write this, One Reverse Mortgage has seen its volume grow over 500% compared to last year and is currently the 5th largest HECM lender YTD.  I was able to talk with Sean Marsh, One Reverse Mortgage’s CEO about the company’s success and how using the web played an integral role in its growth.

This is a great interview to read if you are considering a centralized call center approach to your mortgage business (forward or reverse). There are also some great insights into how they are using online marketing and social media to get those big volume gains.

Get Updated on How HVCC Could Effect Your Mortgage Business

HVCC: Eyes Wide Shut (Arizona Mortgage Team)

I love Justin’s McHood’s style in presenting mortgage industry issues. This is another classic from Justin on how HVCC is going to change your business:

In short, the HVCC takes away the ability of the loan officer to order an appraisal for your loan. Currently if you have an FHA loan, the loan officer can still order the appraisal, but I think it isn’t too far fetched to think that someday that may not be possible any longer and all appraisals will be ordered through an Appraisal Management Company.

Also, don’t miss the HVCC video on Justin’s site done by the guys at ThinkBigWorkSmall.com. These guys also have a great RateAlert that I use daily.

Related articles by Zemanta

• Bernanke sees U.S. recovery this year (financialpost.com)
• Irrational exuberance all over again (money.cnn.com)

Tagged as: Bank, bank stress test, Central bank, Charlie Rose, hvcc, Stock market, United States Secretary of the Treasury