Banking on Main Street

Chicago Fed Panel: Increased Capital Will Not Save The U.S. Banking System

Frank Sorrentino III — Tue, 15 May 2012 15:58:31 +0000

Following Ben Bernanke’s address on The State of the Banking System, at the 48th Annual Conference on Bank Structure and Competition in Chicago last week, I had the honor and the privilege to speak about on a dynamic panel and discuss Bank Capital. During the panel, “Bank Capital – How Much is Enough?”, I argued that increased capital is not the answer for banks.

You can read more of my thoughts on the topic in my latest Forbes post by clicking here.

After the Conference, I was asked to discuss this topic as well as the recent JP Morgan news on CNBC’s Street Signs along with former Governor Elliot Spitzer. You can watch the full interview below.

As always, I look forward to hearing your thoughts…

Don’t Look At The History Books For Insight Into This Recovery

Frank Sorrentino III — Mon, 23 Apr 2012 15:44:01 +0000

While the mood was not somber as in years past, the discussion revolving around the economy at the Federal Reserve Bank of New York’s Community Bankers Conference was one of a transitioning set of fundamentals, and a deeper understanding of “why it is different this time.”

The economy is clearly on a path of recovery, and any chart of any metric would suggest the same. The astounding facts though, were of how this recovery was different than those of the past recoveries, and the data was compelling. Eleven consecutive quarters of positive GDP growth was offset by the level of slack still in the economy. While core inflation is running higher lately, forward-looking indicators suggest a slowdown in the inflation rate.

There may be a shift occurring in our economy and whether permanent or temporary, new norms will have to be considered. One such norm was the relationship between the unemployment rate, currently at 8.3% and the employment rate, currently declining to a rate of 67%. If the employment were to rise and become positive, the unemployment rate actually may settle to a previously unthinkable new higher normal in the 6 – 7 % range.

The other very interesting shift is the relationship between new housing starts, and the formation of new households, which might suggest that there is a shift taking place in the rationale for home ownership, with many delaying the decision.

These and other indicators point to a very gradual recovery, with much slack remaining in our economy, for now. Close attention needs to be paid to trends occurring in the present, with much less reliance on historical trends. We are seeing these trends play out in real life on Main Street as well…

Tell us what you are seeing in your business…

For more, check out my interview on CNBC’s The Kudlow Report or view this post on Forbes.com.

Three Questions You Need To Ask About Your Bank…

Frank Sorrentino III — Mon, 02 Apr 2012 17:13:09 +0000

In the past year the banking industry has received quite a bit of media attention. With countless stories on fee hikes, numerous new regulations, and bank failures, one thing has gotten lost in the whirlwind: you, the consumer.

In my most recent Forbes.com post, I discuss the three questions you need to ask about your bank, to evaluate whether you are getting the most out of your bank.

When was the last time you evaluated your bank?

Qualified Homebuyers, Why Aren’t You Getting the Loan?

Frank Sorrentino III — Fri, 10 Feb 2012 21:42:23 +0000

This week I had the opportunity to speak to PBS News’ Suzanne Pratt in our Englewood Cliff’s headquarters about the challenges facing the mortgage industry. She also spoke with our client Dr. Farnaz Safi, who came to us a few weeks ago after struggling with big banks. While Dr. Safi talked about her experience working with NJCB after her disappointment with a big bank, I shared my views on mortgage and credit policies and why North Jersey Community Bank is a “Better Place to Be.” You can view the full video below. I look forward to hearing your thoughts…

Business Confidence Is Growing, Get On Board

Frank Sorrentino III — Fri, 03 Feb 2012 18:55:04 +0000

Business confidence is growing, balance sheets are improving, and the Federal Reserve is working to maintain a healthy interest rate environment, so what’s next? Click below to read more in my latest blog post on Forbes.com. I look forward to hearing your thoughts.

Bernanke Fed Has It Right: No Magic Bullet To Housing Recovery

Frank Sorrentino III — Tue, 10 Jan 2012 21:15:44 +0000

Last week, I had the opportunity to attend the New Jersey Bankers sponsored Economic Leadership Forum where William Dudley, President of the New York Federal Reserve, discussed the direction of the US Economy and housing market. This event inspired my latest post on my Forbes.com page, where I discuss that there is in fact no “magic bullet” in housing, but rather its recovery lies in well thought-out actions required by banks, servicers, and policy makers, an example of which would be the creation of an HDIC. Read my full post by clicking below. I look forward to hearing your thoughts.

America’s Recovery: Are We There Yet?

Frank Sorrentino III — Thu, 29 Dec 2011 16:53:27 +0000

As we entered 2011, there was fear of a double-dip recession which caused a downturn in consumer confidence bringing the housing market to a near standstill. Now, as the year draws to an end, we are seeing some optimistic indications of a recovering economy.

In my recent interview on Fox Business News’ After the Bell, I discussed the signs of a turnaround in the housing market and how we are seeing incremental progress where homebuyers are beginning to take advantage of low interest rates and depressed housing prices. For a more in depth look on my thoughts on 2011, and outlook of 2012, read my most recent Forbes.com post “ America’s Recovery: Are We There Yet?”.

Housing Market “On Sale” May Be The Year’s Best Holiday Gift

Frank Sorrentino III — Wed, 21 Dec 2011 20:58:51 +0000

In my most recent Forbes.com post, I discuss the bubbling improvements in both the housing market, and the economy. Despite the numerous lucrative opportunities in housing, consumers are staying put, instead focusing on negative news. Does the shift in psychology signal a downturn, or a unique buying opportunity? Read more in my post by clicking below. I look forward to hearing your thoughts.

Why More Bank Capital Won’t Cure All The Economy’s Ills

Frank Sorrentino III — Wed, 14 Dec 2011 15:18:09 +0000

Since the advent of the economic crisis, banks have been forced to increase capital ratios. In my recent blog post on Forbes.com, I discuss why this may not be the solution for the banking industry, and may actually cause more harm than good. You can click here to read the post, or click on the image below. As always, I look forward to hearing your thoughts.

U.S. Homebuyers And Business Owners Need A Sense Of Urgency

Frank Sorrentino III — Wed, 30 Nov 2011 22:11:05 +0000

I am proud to announce that I am now a contributor on Forbes.com’s Investing Channel. Below is my first post, which can also be read here on Editor Stephen Schaefer’s Exile Wall Street Blog. Your thoughts are welcome.

A key driver in most businesses is a sense of urgency. It forces management to kick up the thought process to think about risks whether real or perceived, and in a compressed time frame. Complacency kills businesses.

The current state of our economy has created a dangerous sense of stability. That stability is encouraged by seemingly intractable problems such as high unemployment, low GDP growth, low interest rates, and a general sense that things will not change. I believe that thinking this will always be the case, is a mistake.

It has been typical that when we are in a prolonged period with a unidirectional focus, passive inertia sets in. Shock occurs when things change, most probably in a somewhat violent and unpredictable manner.

A good example of this is how most business owners and consumers today are not concerned in any way about the direction of interest rates. Today, we will likely see low numbers for New Home Sales and tomorrow’s FHFA House Price Index will likely show prices are still low. It’s clear that homeowners do not feel a sense of urgency that interest rates may rise, and also sense that home prices will continue to fall. This situation cannot continue indefinitely. Rates are artificially low, with the Federal Reserve working overtime to keep them there. Home prices remain depressed mostly because of overbuilding and oversupply, coupled with a shadow inventory of foreclosure units. Both of these events have created one of the most favorable entry points for those looking to buy a home…So why isn’t there more excitement around these facts? It’s because a sense of urgency is missing. No one believes that current conditions will be changing anytime soon.

But let’s look at some of the facts. Interest rates can rise, and may do so despite all the efforts of the Fed. With the crisis in Europe, a real possibility exists that European Banks will no longer be buying U.S. Treasuries. Add a slight increase in GDP growth, and the 10-year U.S. Treasury Bond Yield could be substantially higher than today, which could in turn lift mortgage rates. Additionally, the latest data show that building permits for new homes actually increased over 10%, and some markets actually saw increased prices in housing costs.

Some small business owners seem frozen in their fear with respect to the condition of the economy even though they have been able to not only survive, but actually grow in this environment. Some of the worry may be about matters outside their control, and may in fact be needless. Many business owners we speak to are so consumed with the goings on on the national and global scene that they leave no time to consider the issues important to this dynamically changing environment. Complacency and fear are a dangerous combination.

A genuine sense of urgency would clearly help the general economy as potential homeowners would move off the sidelines, and business owners would start to lean into upcoming growth by hiring ahead of the growth they are experiencing instead of managing for as long as possible in an understaffed position.

So, let’s not be lulled into this negatively-biased complacency, and instead look at the changes that are occurring around us, and employ a sense of urgency in all the decisions we make. There are many positive developments beginning to surface in this economy, and those prepared will be best positioned to take advantage. The rest will be stuck playing catch up…