A friend of mine and banking consultant, Anat Bird, paraphrased a recent Wall Street Journal article with a great perspective.
Holman W. Jenkins published a brilliant article in the WSJ the other day. I feel compelled to paraphrase it and share it with you.
The article focused on the root cause of the financial crisis and Obama’s attack on the banks. The central question which Jenkins poses, which too few people ask, is: “Were the banks insolvent or were they victims of a liquidity panic?” In fact, as we all know, some banks were indeed insolvent, but others faced liquidity panics often induced by legislator (remember Schumer?) and regulator overreaction and vilification of all banks.
Jenkins points out something we all know: nearly all TARP advances, including warrants, have been returned to the taxpayers with a meaningful profit. What this means is simply that bankers are now being punished for losses that were actually incurred by Fannie and Freddie, some insurance companies and auto manufacturers which maintain union jobs at economically unsustainable levels.
Jenkins further reiterates the reason for the presence of a lender of last resort in financial systems, which is what the Fed is. The purpose of such a lender is to make sure that lenders with good collateral won’t go under when a liquidity panic occurs. “Just as an apartment building can become unsellable even though its tenants continue to pay on time, so can a triple-A rated CDO held by a bank become unmarketable even though the underlying borrowers continue to pay”.
Banks indeed made many mistakes during the period preceding the crisis. Concentrations in both commercial real estate and single large borrowers ran rampant. Stress testing wasn’t nearly as robust as it needed to be to fully capture the risk on many banks’ balance sheets. At the same time, is it appropriate for banks to lose the entire value of assets that, had they been held to maturity, would have retained their value? And isn’t it the role of the lender of last resort to facilitate that process by averting a liquidity panic to avoid economic meltdown?
Jenkins also says that moral hazard is not an aberration and can’t be eliminated. Governments should write a liquidity insurance policy for their financial systems in times of panic. These are part and parcel of sound financial systems. There is no substitute for an indiscriminate safety net in times of panic, he says. “Quite the contrary: if it threatened bank creditors with real losses (as it properly should), invoking resolution authority would only feed the panic.”
Fannie and Freddie facilitated for decades the funneling of credit to speculators and, in recent years, millions of non-credit worthy borrowers seeking to buy their first home in frothy markets. At the time, lender behavior was rational, using quasi-government entities to absorb the risk of lending during such bubbly times. In other words, Jenkins says, it’s bad public policy that was at the root of the crisis, and the Fed’s behavior as a safety net is appropriate. This situation was aggravated by the sentiment that everyone should own a home. While a noble goal, it is not financially achievable or prudent for 100% of the population.
I’d like to add my two cents’ worth to these comments. Not only do I agree with Jenkins, but, based upon this conclusion and recent history, the so called “bailout” money could have been better deployed for a more positive impact. One important benefit of TARP – restoring stability to the financial markets – could have been achieved by the Fed’s liquidity injections into the financial system, and by Treasury using the money to stabilize the housing and commercial real estate markets. Spending TARP to create stability achieved that purpose, but it also prolonged the life of “dead banks walking” and unnecessarily contributed to the on-going uncertainty of real estate markets which still seek the bottom. The Resolution Trust Corporation of twenty years ago did a solid job of stabilizing markets. Perhaps a similar structure would have been effective today as well.
Further, as panic spread and capital markets shut down or evaporated altogether, capital in the banking system was reduced dramatically through passing “paper” losses on loans, securities, collateral and goodwill, rather actual losses. Appraisals shifted from optimistic to a “mark-to-no-market” mode, and did not reflect intrinsic values, not to mention long-term values.
Losses were thus further magnified, creating a death spiral for many banks.
Treasury would have been better served by investing TARP funds in making markets in toxic real estate as originally planned, thus stabilizing the asset values on banks’ balance sheets, preventing fatal value write-downs for both loans and bank-originated securities (trust preferreds) and siphoning huge amounts of capital out of our system.
TARP did not help stimulate our economy, nor did it facilitate additional lending, as loan demand has been depressed in reflection of the economic slump. Instead, the free market has been seeking its own equilibrium, as it always does. Prices have plummeted in some markets and not so much in others. Buyers are returning to markets that have been priced to what they believe is the bottom. At this point, our economic problems are unemployment-driven, not real-estate value driven.
I am no economist, and I acknowledge this is a very complex situation. At the same time, we have always seen banks fueling the economy and leading its recovery. Beating us up is not going to help the US economic recovery. It will delay it instead.
Saturday, March 20, 2010
Sunday, March 14, 2010
Unemployment - Underemployment
January’s unemployment rate in Napa County was 11.1%, up from a December 10.2%, and above the year-ago 8.2%. This compares with an unadjusted unemployment rate of 13.2% for California and 10.6% for the nation during the same period. This placed Napa County 10th best of the 58 counties in California, a change from its historical 4th or 5th best place.
We are also finally beginning to read more of the underemployment figures – though the BLS has been tracking this rate for over 15 years. February’s national underemployment was 16.8% up from 16.3% in January. Underemployment includes three classifications of persons - unemployed workers who are actively looking for work, involuntarily part-time workers who want full-time work but have had to settle for part-time hours, and marginally attached workers who want and are available for a job, but are not actively looking. Together, they provide a more comprehensive measure of slack in the labor market.
As unemployment is a lagging indicator, underemployment is probably even more of a lagging indicator – due to those in the above definition. This rate is also somewhat nebulous, is it is difficult to quantify. A recent Gallop poll has underemployment at about 20% - that means over 30 million Americans.
The underemployed tend to spend much less than their fully employed colleagues – 35 percent less, according to Gallup. This potentially costs the economy hundreds of millions of dollars every month. Using the 20% figure - an economy where 1 in 5 are underemployed and take one-fifth of spenders out of the economy: That has huge implications in terms of our ability to mount any kind of consumer recovery. Our economy is so dependent on consumer spending that until people get back out there buying, you won’t see things improve.
So how long until things improve? Anyone’s guess at this point – but for sure it will continue to be slow.
We are also finally beginning to read more of the underemployment figures – though the BLS has been tracking this rate for over 15 years. February’s national underemployment was 16.8% up from 16.3% in January. Underemployment includes three classifications of persons - unemployed workers who are actively looking for work, involuntarily part-time workers who want full-time work but have had to settle for part-time hours, and marginally attached workers who want and are available for a job, but are not actively looking. Together, they provide a more comprehensive measure of slack in the labor market.
As unemployment is a lagging indicator, underemployment is probably even more of a lagging indicator – due to those in the above definition. This rate is also somewhat nebulous, is it is difficult to quantify. A recent Gallop poll has underemployment at about 20% - that means over 30 million Americans.
The underemployed tend to spend much less than their fully employed colleagues – 35 percent less, according to Gallup. This potentially costs the economy hundreds of millions of dollars every month. Using the 20% figure - an economy where 1 in 5 are underemployed and take one-fifth of spenders out of the economy: That has huge implications in terms of our ability to mount any kind of consumer recovery. Our economy is so dependent on consumer spending that until people get back out there buying, you won’t see things improve.
So how long until things improve? Anyone’s guess at this point – but for sure it will continue to be slow.
Article on - Vineyard Defaults Surge as Bargain Wines Hurt Napa
The following article written by Dan Levy for Bloomberg and published in Business Week on March 8th - is floating around the Napa Valley. I'll post it here in case you haven't seen it. There is no question that we are in tough times - even potentially further exasperated by this weekend's news of the new pest - the Apple Moth infecting our vineyards. This time, we in the valley are prohibited in taking fruit out of the valley - versus the prior quarantines on imports into our valley. I've already heard many debates as to how real the following article is – both better or worse. I’m sure there will be more in the media in the coming weeks.
http://www.businessweek.com/news/2010-03-08/vineyard-defaults-surge-as-lost-land-values-undermine-napa-wine.html
By Dan Levy
March 8 (Bloomberg) -- In California’s Napa Valley, producer of the most expensive U.S. wines, 2010 may be a vintage year for foreclosures as the industry is squeezed by falling land values and a consumer shift to cheaper brands. As many as 10 wineries and vineyards in Napa will change hands in distressed sales or foreclosures this year and next, up from none in 2008, according to Silicon Valley Bank. In a bank survey of vintners, 7 percent called their finances “very weak” or “on life support.” “We have 250 vintner clients saying this downturn is the worst in 20 years,” Bill Stevens, manager of the bank’s wine division in St. Helena, California, said in an interview. “Anybody who was late to the party won’t have staying power.”
Land values in Napa, home to about 400 producers, have fallen 15 percent from the 2007 peak, driven in part by slumping demand for high-end wine, said Robert Nicholson, principal at International Wine Associates, a consulting and financing firm in Healdsburg, California. The decline makes it harder for owners to refinance mortgages, especially if the property is worth less than the loan. Napa winery and vineyard loan defaults rose fourfold to 18 in the year through January, according to San Diego-based research firm MDA DataQuick. In the survey by Silicon Valley Bank, whose clients are mostly high-end West Coast wineries, 71 percent of respondents said credit is harder to get. The bank didn’t attach names to its estimates or survey. The recession has set in motion a “secular change,” with budget-conscious consumers trading down to less expensive wines, said Peter Kaufman, managing partner at Pleasanton, California- based Bacchus Capital Management LLC, a private-equity fund that provides mezzanine financing to wineries.
Sales Fall
The dollar value of U.S. retail wine sales dropped 3.3 percent to $29 billion in 2009 after rising every year and almost tripling from 1991 through 2008, according to Gomberg, Fredrikson & Associates in Woodside, California. Though consumption increased 1.9 percent to 323 million cases last year, people are buying less expensive labels, the industry consultant said in a March 5 report. Sales of super-premium bottles priced more than $15 declined 10 percent last year, and those over $30, defined as ultra-premium, fell at least 15 percent, according to Rabobank Nederland NV, the Utrecht, Netherlands-based bank that finances agriculture businesses. Napa and neighboring Sonoma are the top U.S. producers of premium wine, the bank said.
Screaming Eagle
“No more is it about stocking wine cellars with 5,000 bottles of Screaming Eagle,” said Bacchus Capital’s Kaufman, referring to a Napa “cult cabernet” that can sell for $750 or more a bottle. “High-rollers are discovering that there are lots of drinkable $20 to $40 bottles of wine.” Kendall-Jackson, based in Santa Rosa, California, is the top-selling U.S. brand over $15 a bottle, said Eileen Fredrikson, partner at Gomberg Fredrikson. The “Franzia box,” a five-liter vessel that retails for about $8 from Livermore, California-based Wine Group LLC, is the most popular overall. Super-premium wineries are likely to bear the brunt of changing consumer habits, and lenders will pressure clients who can’t cover costs to “seek solutions before the loan goes into default,” Rabobank said in a January report. Cheaper imports from countries such as Chile, Argentina and Australia are cutting U.S. winery margins, according to Stephen Rannekleiv, lead analyst on the Rabobank report.
Grapes of Recession
“Consumers are looking at price point and saying that Napa is not the price they want to be buying at,” New York-based Rannekleiv said in an interview. “Wine prices drive grape prices drive land prices.” Bill Harlan, maker of Napa’s Harlan Estate Proprietary Red that counts four perfect ratings from widely followed critic Robert Parker, said he expects to see foreclosures mount. “No area is going to be unaffected by this financial meltdown,” he said in a telephone interview. Harlan, whose Oakville, California, winery is 60 miles (97 kilometers) north of San Francisco, has seen the distress up close. In December, he acquired 21 acres next door known as Diamond Oaks Winery from businessman Dinesh Maniar, owner of two separate Napa parcels that are facing foreclosure, according to county land records and documents in U.S. Bankruptcy Court in Santa Rosa, California. David Chandler, an attorney for Maniar, didn’t return calls seeking comment. Diamond Oaks lists a $35 bottle of pinot noir and a $30 cabernet sauvignon as “new products for March” on its Web site.
Few Deals
There have been few recent property deals because sellers are reluctant to accept the low bids they are seeing, said Tony Correia, an appraiser in Sonoma for Correia-Xavier Inc. More than 30 wineries are for sale in California, Oregon and Washington, the most ever, according to Rob McMillan, executive vice president and founder of the wine division of Silicon Valley Bank, a unit of SVB Financial Group in Santa Clara, California. The properties have too much debt, were new arrivals to the wine market or have owners who are looking to retire as competition rises and profit margins fall, he said. Some Napa land deals that were never publicly disclosed or confidentially recorded at the county assessor will unravel this year and in 2011, according to Vic Motto, chief executive officer of Global Wine Partners LLC, an investment bank and advisory firm in St. Helena that brokers property sales. He declined to identify which of the buyers may not be able to hold onto their properties. “There were heavily leveraged transactions that occurred that were private, not transparent, and there is no data to show that,” said Motto.
Valuing Land
Napa land values, the highest among U.S. wine regions, are based on wine appellation, or a property’s geographical boundary, and soil quality, according to Correia, the appraiser. On-premises wineries are also valued by production facility and capacity and proximity to main tourist thoroughfares, he said. Napa Valley runs about 30 miles from the city of Napa in the south to Calistoga in the north. Average prices are $150,000 to $200,000 an acre for a vineyard planted with red varietals such as cabernet sauvignon and $115,000 an acre for white grapes such as chardonnay, said Sean Maher, president of Maher Advisors Inc., a brokerage in St. Helena. The most desirable sites in Rutherford and Oakville can fetch $250,000 an acre, he said.
Napa Premium
Napa wine grapes have been the most expensive in California since the 1970s, said Terry Hall, a spokesman for the Napa Valley Vintners Association in St. Helena. Last year they cost an average $3,401 a ton, 56 percent more than second-place Sonoma grapes and more than double those from third-place Mendocino, a preliminary 2009 report from the state Department of Food and Agriculture shows. California produces 90 percent of all U.S. wine, according to the U.S. Tax and Trade Bureau in Washington. Mortgage defaults will also hit Napa residential parcels owned by hobbyists, or those who intend to produce 100 to 300 cases a year, said Deborah Steinthal, principal of Scion Advisors. In October, the Napa-based consultants forecast that “hundreds of properties will go into foreclosure.” That’s the scenario facing Sandra Sutherland, who bought a four-bedroom house and more than seven acres of chardonnay, merlot and pinot noir grapes for $2 million in 2005. She and her business partner haven’t made loan payments to Charlotte, North Carolina-based Bank of America Corp. since January 2009.
‘Blind Fools’
“We went in like blind fools,” Sutherland said. “We didn’t really expect to get the loan, but felt committed when we did.” Owners who have invested for years and managed land prudently should survive the tumult, said Harlan, who has produced 18 vintages since buying the property in 1984. The 2007 vintage of his flagship wine, the most recent, sells for $500 a bottle. “In the long run, those that don’t compromise the quality, manage their wines better and manage their land better will be fine,” he said. “We just need to make sure we get through the short run.”
http://www.businessweek.com/news/2010-03-08/vineyard-defaults-surge-as-lost-land-values-undermine-napa-wine.html
By Dan Levy
March 8 (Bloomberg) -- In California’s Napa Valley, producer of the most expensive U.S. wines, 2010 may be a vintage year for foreclosures as the industry is squeezed by falling land values and a consumer shift to cheaper brands. As many as 10 wineries and vineyards in Napa will change hands in distressed sales or foreclosures this year and next, up from none in 2008, according to Silicon Valley Bank. In a bank survey of vintners, 7 percent called their finances “very weak” or “on life support.” “We have 250 vintner clients saying this downturn is the worst in 20 years,” Bill Stevens, manager of the bank’s wine division in St. Helena, California, said in an interview. “Anybody who was late to the party won’t have staying power.”
Land values in Napa, home to about 400 producers, have fallen 15 percent from the 2007 peak, driven in part by slumping demand for high-end wine, said Robert Nicholson, principal at International Wine Associates, a consulting and financing firm in Healdsburg, California. The decline makes it harder for owners to refinance mortgages, especially if the property is worth less than the loan. Napa winery and vineyard loan defaults rose fourfold to 18 in the year through January, according to San Diego-based research firm MDA DataQuick. In the survey by Silicon Valley Bank, whose clients are mostly high-end West Coast wineries, 71 percent of respondents said credit is harder to get. The bank didn’t attach names to its estimates or survey. The recession has set in motion a “secular change,” with budget-conscious consumers trading down to less expensive wines, said Peter Kaufman, managing partner at Pleasanton, California- based Bacchus Capital Management LLC, a private-equity fund that provides mezzanine financing to wineries.
Sales Fall
The dollar value of U.S. retail wine sales dropped 3.3 percent to $29 billion in 2009 after rising every year and almost tripling from 1991 through 2008, according to Gomberg, Fredrikson & Associates in Woodside, California. Though consumption increased 1.9 percent to 323 million cases last year, people are buying less expensive labels, the industry consultant said in a March 5 report. Sales of super-premium bottles priced more than $15 declined 10 percent last year, and those over $30, defined as ultra-premium, fell at least 15 percent, according to Rabobank Nederland NV, the Utrecht, Netherlands-based bank that finances agriculture businesses. Napa and neighboring Sonoma are the top U.S. producers of premium wine, the bank said.
Screaming Eagle
“No more is it about stocking wine cellars with 5,000 bottles of Screaming Eagle,” said Bacchus Capital’s Kaufman, referring to a Napa “cult cabernet” that can sell for $750 or more a bottle. “High-rollers are discovering that there are lots of drinkable $20 to $40 bottles of wine.” Kendall-Jackson, based in Santa Rosa, California, is the top-selling U.S. brand over $15 a bottle, said Eileen Fredrikson, partner at Gomberg Fredrikson. The “Franzia box,” a five-liter vessel that retails for about $8 from Livermore, California-based Wine Group LLC, is the most popular overall. Super-premium wineries are likely to bear the brunt of changing consumer habits, and lenders will pressure clients who can’t cover costs to “seek solutions before the loan goes into default,” Rabobank said in a January report. Cheaper imports from countries such as Chile, Argentina and Australia are cutting U.S. winery margins, according to Stephen Rannekleiv, lead analyst on the Rabobank report.
Grapes of Recession
“Consumers are looking at price point and saying that Napa is not the price they want to be buying at,” New York-based Rannekleiv said in an interview. “Wine prices drive grape prices drive land prices.” Bill Harlan, maker of Napa’s Harlan Estate Proprietary Red that counts four perfect ratings from widely followed critic Robert Parker, said he expects to see foreclosures mount. “No area is going to be unaffected by this financial meltdown,” he said in a telephone interview. Harlan, whose Oakville, California, winery is 60 miles (97 kilometers) north of San Francisco, has seen the distress up close. In December, he acquired 21 acres next door known as Diamond Oaks Winery from businessman Dinesh Maniar, owner of two separate Napa parcels that are facing foreclosure, according to county land records and documents in U.S. Bankruptcy Court in Santa Rosa, California. David Chandler, an attorney for Maniar, didn’t return calls seeking comment. Diamond Oaks lists a $35 bottle of pinot noir and a $30 cabernet sauvignon as “new products for March” on its Web site.
Few Deals
There have been few recent property deals because sellers are reluctant to accept the low bids they are seeing, said Tony Correia, an appraiser in Sonoma for Correia-Xavier Inc. More than 30 wineries are for sale in California, Oregon and Washington, the most ever, according to Rob McMillan, executive vice president and founder of the wine division of Silicon Valley Bank, a unit of SVB Financial Group in Santa Clara, California. The properties have too much debt, were new arrivals to the wine market or have owners who are looking to retire as competition rises and profit margins fall, he said. Some Napa land deals that were never publicly disclosed or confidentially recorded at the county assessor will unravel this year and in 2011, according to Vic Motto, chief executive officer of Global Wine Partners LLC, an investment bank and advisory firm in St. Helena that brokers property sales. He declined to identify which of the buyers may not be able to hold onto their properties. “There were heavily leveraged transactions that occurred that were private, not transparent, and there is no data to show that,” said Motto.
Valuing Land
Napa land values, the highest among U.S. wine regions, are based on wine appellation, or a property’s geographical boundary, and soil quality, according to Correia, the appraiser. On-premises wineries are also valued by production facility and capacity and proximity to main tourist thoroughfares, he said. Napa Valley runs about 30 miles from the city of Napa in the south to Calistoga in the north. Average prices are $150,000 to $200,000 an acre for a vineyard planted with red varietals such as cabernet sauvignon and $115,000 an acre for white grapes such as chardonnay, said Sean Maher, president of Maher Advisors Inc., a brokerage in St. Helena. The most desirable sites in Rutherford and Oakville can fetch $250,000 an acre, he said.
Napa Premium
Napa wine grapes have been the most expensive in California since the 1970s, said Terry Hall, a spokesman for the Napa Valley Vintners Association in St. Helena. Last year they cost an average $3,401 a ton, 56 percent more than second-place Sonoma grapes and more than double those from third-place Mendocino, a preliminary 2009 report from the state Department of Food and Agriculture shows. California produces 90 percent of all U.S. wine, according to the U.S. Tax and Trade Bureau in Washington. Mortgage defaults will also hit Napa residential parcels owned by hobbyists, or those who intend to produce 100 to 300 cases a year, said Deborah Steinthal, principal of Scion Advisors. In October, the Napa-based consultants forecast that “hundreds of properties will go into foreclosure.” That’s the scenario facing Sandra Sutherland, who bought a four-bedroom house and more than seven acres of chardonnay, merlot and pinot noir grapes for $2 million in 2005. She and her business partner haven’t made loan payments to Charlotte, North Carolina-based Bank of America Corp. since January 2009.
‘Blind Fools’
“We went in like blind fools,” Sutherland said. “We didn’t really expect to get the loan, but felt committed when we did.” Owners who have invested for years and managed land prudently should survive the tumult, said Harlan, who has produced 18 vintages since buying the property in 1984. The 2007 vintage of his flagship wine, the most recent, sells for $500 a bottle. “In the long run, those that don’t compromise the quality, manage their wines better and manage their land better will be fine,” he said. “We just need to make sure we get through the short run.”
JANET YELLEN NOMINATED AS FOMC VICE CHAIR
I saw this article in the Banc Investment Daily - as published buy the Pacific Coast Banker's Bank on March 12th. I thought it gave a good perspective of Janet Yellen.
JANET YELLEN NOMINATED AS FOMC VICE CHAIR
Lots of people walking around think they have game, but the actual odds that a high school basketball player will be drafted by the NBA are 1 in 3,333. Now, we don't know the odds of getting the nod for the Vice Chair position at the FOMC, but they are surely higher. The good news is that President Obama will reportedly nominate Dr. Janet Yellen, who currently serves as San Francisco Federal Reserve Bank President. She is eminently qualified and a supporter of community banking.
By way of background, she is an economist by trade (is coincidentally married to Nobel prize-winning economist) and was a voting member of the FOMC in 2009. She is considered to be an inflation dove, which is someone who promotes monetary policies that favor low interest rates (as a means of encouraging consumer activity to spur growth within the economy) and are less worried about the effects low interest rates may have on inflation. Doves generally worry about unemployment more than higher interest rates. While this is a simple way to try and box Dr. Yellen's thinking up into a sound byte you will undoubtedly see repeated in the press, it is much too simple an explanation for the way we believe she will act as Vice Chair of the FOMC.
She is also plenty smart, having graduated summa cum laude from Brown University with a degree in economics in 1967. She then went on to get her Ph.D. in economics from Yale in 1971.
She has already had a great career that includes teaching (Harvard University, London School of Economics and Haas Business School); research (Massachusetts Institute of Technology, National Bureau of Economic Research) and advisory (Chair of the President's Council of Economic Advisors 1997 to 1999, Brookings Panel on Economic Activity, Congressional Budget Office). She has served on the Federal Open Market Committee in 2009, as well as 1994 to 1997 and has been the President of the San Francisco Fed since 2004.
Dr. Yellen will be focused on fixing the unemployment issue, which is a good thing if you ask us, since few seem to be really doing much on that front. She is also realistic, recently indicating in a speech that the US could continue to see slow employment growth, with an economy that will not operate at full potential until probably 2013. Dr. Yellen also stated in the same speech that full economic recovery isn't just the Fed's job and more will be needed, saying, "monetary policy can't give the same kick to the economy that it delivered in past recoveries."
We have had the pleasure of talking to her directly at various banking functions and can tell you that she is extremely bright, understands many of the issues facing community bankers and is both open and willing to listen. That is a good person in our humble opinion to have on the decision-making board of the Fed, because she truly seems to understand that small business hiring will come from small business lending - ultimately sparked by community banks in local towns and cities all over the country.
We are happy to see Dr. Yellen get nominated to a four-year term as the Fed's 2nd most powerful member, behind Mr. Bernanke himself. We expect the Senate will move quickly to confirm her for the position and know she will do a great job for the economy, small businesses and community bankers across the country. Dr. Yellen certainly has game.
JANET YELLEN NOMINATED AS FOMC VICE CHAIR
Lots of people walking around think they have game, but the actual odds that a high school basketball player will be drafted by the NBA are 1 in 3,333. Now, we don't know the odds of getting the nod for the Vice Chair position at the FOMC, but they are surely higher. The good news is that President Obama will reportedly nominate Dr. Janet Yellen, who currently serves as San Francisco Federal Reserve Bank President. She is eminently qualified and a supporter of community banking.
By way of background, she is an economist by trade (is coincidentally married to Nobel prize-winning economist) and was a voting member of the FOMC in 2009. She is considered to be an inflation dove, which is someone who promotes monetary policies that favor low interest rates (as a means of encouraging consumer activity to spur growth within the economy) and are less worried about the effects low interest rates may have on inflation. Doves generally worry about unemployment more than higher interest rates. While this is a simple way to try and box Dr. Yellen's thinking up into a sound byte you will undoubtedly see repeated in the press, it is much too simple an explanation for the way we believe she will act as Vice Chair of the FOMC.
She is also plenty smart, having graduated summa cum laude from Brown University with a degree in economics in 1967. She then went on to get her Ph.D. in economics from Yale in 1971.
She has already had a great career that includes teaching (Harvard University, London School of Economics and Haas Business School); research (Massachusetts Institute of Technology, National Bureau of Economic Research) and advisory (Chair of the President's Council of Economic Advisors 1997 to 1999, Brookings Panel on Economic Activity, Congressional Budget Office). She has served on the Federal Open Market Committee in 2009, as well as 1994 to 1997 and has been the President of the San Francisco Fed since 2004.
Dr. Yellen will be focused on fixing the unemployment issue, which is a good thing if you ask us, since few seem to be really doing much on that front. She is also realistic, recently indicating in a speech that the US could continue to see slow employment growth, with an economy that will not operate at full potential until probably 2013. Dr. Yellen also stated in the same speech that full economic recovery isn't just the Fed's job and more will be needed, saying, "monetary policy can't give the same kick to the economy that it delivered in past recoveries."
We have had the pleasure of talking to her directly at various banking functions and can tell you that she is extremely bright, understands many of the issues facing community bankers and is both open and willing to listen. That is a good person in our humble opinion to have on the decision-making board of the Fed, because she truly seems to understand that small business hiring will come from small business lending - ultimately sparked by community banks in local towns and cities all over the country.
We are happy to see Dr. Yellen get nominated to a four-year term as the Fed's 2nd most powerful member, behind Mr. Bernanke himself. We expect the Senate will move quickly to confirm her for the position and know she will do a great job for the economy, small businesses and community bankers across the country. Dr. Yellen certainly has game.
Tuesday, March 2, 2010
The Value of Community Banking
In late December, the Huffington Post ran an article about the strength of the community banking system in America. Noting that the community banks in America understood the local economy and would be leaders in the economic recovery – lending to small businesses - where the job growth would occur. In the article, it mentions a list of community banks, unfortunately, newer banks were not listed. However, our clients recognize that we are still well capitalized, have a clear understanding of the needs of our community and work to solve those needs. Here is the Huffington story – click on the video clip, which is mid-way through the article. It is a takeoff of the movie It’s a Wonderful Life, with Jimmy Stewart.
http://www.huffingtonpost.com/arianna-huffington/move-your-money-a-new-yea_b_406022.html
Last week, the Bay Area television station KTVU ran a similar story. (The story runs after the advertisement.)
http://www.ktvu.com/video/22678440/index.html
And then this past weekend, CBS News Sunday Morning Show ran the story.
http://www.cbsnews.com/stories/2010/02/28/sunday/main6253064.shtml?tag=cbsnewsTwoColUpperPromoArea
Here is the video of the CBS Sunday Morning show.
http://www.youtube.com/watch?v=uI1tqeuXy80
While I’m no George Bailey – we are here to be that community bank that works with our clients. Yes, banking regulators have tightened the lending parameters – but in spite of that, we are working with our community on the economic recovery here in the Napa Valley. Thank you for your support. And if you haven’t – then please “Move-Your-Money”.
http://www.huffingtonpost.com/arianna-huffington/move-your-money-a-new-yea_b_406022.html
Last week, the Bay Area television station KTVU ran a similar story. (The story runs after the advertisement.)
http://www.ktvu.com/video/22678440/index.html
And then this past weekend, CBS News Sunday Morning Show ran the story.
http://www.cbsnews.com/stories/2010/02/28/sunday/main6253064.shtml?tag=cbsnewsTwoColUpperPromoArea
Here is the video of the CBS Sunday Morning show.
http://www.youtube.com/watch?v=uI1tqeuXy80
While I’m no George Bailey – we are here to be that community bank that works with our clients. Yes, banking regulators have tightened the lending parameters – but in spite of that, we are working with our community on the economic recovery here in the Napa Valley. Thank you for your support. And if you haven’t – then please “Move-Your-Money”.
Subscribe to:
Posts (Atom)
