Party Like It’s January 7, 2010

Time for my typical New Year’s resolution.  I’m hoping to write more and keep the posts short.  You can feel comfortable that this will last as long as most of my resolutions (three to five days)…

Today, three quick topics on today’s blog:

1. McCombs alumni — join me in Dallas on Wednesday

2. improvement in banks

3. party like it’s January 7, 2010

McCombs Alumni — Join Me in Dallas

I’m speaking this Wednesday night (January 11^th) in Dallas at a McCombs alumni event.  Join us.  Here is the link.  (In the coming months, I’ll also publicize events in Austin, Washington DC and New York.)

Improvement in Banks

Fed Governor Elizabeth Duke gave a great speech on Friday with her thoughts on the economy and housing.  (I’ll discuss housing later this week.)  She made a great point that banks are in much better condition than they have been in a long time.  Banks are crucial to economic growth.  In the past, we’ve discussed research that shows that recessions accompanied by a financial crisis are more severe and recoveries are slower.  Below, I describe her thoughts and display her slides.

Some reasons for optimism:

1. Financial institutions in the US have stronger capital positions and can withstand stress.  See chart 14.

2. Bank deposits have grown substantially.  This reduces banks’ dependence on more volatile wholesale funding.  See chart 15.

3. Loan balances have increased but are well below their peak.  There is substantial liquidity available.

4. Credit quality (nonperforming assets, delinquencies and charge-off rates) is improving.

5. Banks are actively seeking loan growth to improve profitability.  A survey of loan officers shows that there are fewer banks tightening standards on commercial and industrial loans.  (It’s not an impressive chart, but it’s an improvement.)  See chart 16.

6. Spreads on business loans have stopped increasing.  See chart 17.

These are all small steps, but they are consistent with the cyclical recovery that we’ve been experiencing.  Of course, this could all come undone due to problems in Europe.  In addition, we have huge long-term structural issues that are not improving.  But, we’re not going to improve if the banks aren’t healthy and lending.

Party Like It’s January 7, 2010

As you read this blog, I’m partying like it’s January 7, 2010.  If that date doesn’t mean anything to you, that’s the last time that Alabama won the national championship.

Big game tonight.  I’m nervous.  I went to the game the last two times that the Tide won the national championship (Jan. 1993 and Jan. 2010).  I’m not going to be at the game tonight.  (If we lose, maybe you Tide fans will pay for my trip next time?)

Let me say something that will really annoy the LSU fans.  This is something that annoys them even more than “the keg is empty – you’re going to have to have something else with your cereal.”  Here it is…you’d be nothing without Saban.  In the two seasons before he resurrected LSU football, you were 7-15.  Monday night is a great night for you to pay homage to him.  Roll Tide!

Have a great week.

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