Banking/Financial Institutions

Bank earnings roared back in the second quarter of this year, posting a $26 billion gain over the same period last year.

The Federal Deposit Insurance Corporation (FDIC) reported Tuesday that banks posted $21.6 billion in earnings in the second quarter of 2010 compared with a net loss of $4.4 billion in the same period last year.

"This is the best quarterly profit for the banking sector in almost three years," said FDIC Chairman Sheila Bair in a statement. "Nearly two out of every three banks are reporting better year-over-year earnings. As long as economic conditions remain supportive, most institutions should maintain profitability and increase their capacity to lend."

Earnings are at their highest since the third quarter of 2007, although they remain below historical standards.

Still, the number of banks on the "problem list" grew from 775 to 829. 

The boost in earnings for the banking industry comes amid strong signs that the broader economy is weakening. Unemployment remains at near double-digit levels. The Commerce Department said last week that the economy grew at a 1.6 percent annual rate in the second quarter, which was slower than the 2.4 percent rate that was initially estimated.

The housing market remains weak, with steep declines in the sale of existing and new homes. Housing and Urban Development Secretary Shaun Donovan said Sunday on CNN that the administration is "concerned" about the industry and is looking at ways to boost the housing market.

The Federal Deposit Insurance Corporation will hold its first roundtable discussion on Tuesday to discuss its new resolution authority, provided under the recently enacted financial regulatory reform law for the largest financial firms. 

The FDIC will meet with external groups such government officials, industry executives, academics and investors to discuss the framework of the resolution process, the treatment of creditors and the creation of living wills, according to a Monday statement. 

The roundtables are "part of the FDIC's overall effort to bring transparency into the process," according to the statement. 

Earlier in the month, the FDIC announced that it was seeking input from a broad audience by encouraging the public to submit views by e-mail on how the FDIC should implement the new law. 

Sen. Chris Dodd (D-Conn.) said he will not start lobbying after his 36-year Senate career ends this year.

In an interview with the CT Mirror, Dodd, chairman of the Senate Banking Committee, said he has not yet decided what he'll do next year, but was firm that he would not start a lobbying career as many prominent lawmakers have done in recent years.

"No lobbying, no lobbying," he said in an interview.

It could take years to eliminate the negative equity from many markets; HUD to unveil new plans this week.

HUD Secretary Shaun Donovan said Sunday the housing market's July woes were "worse than expected."

With unemployment weighing heavily on the housing market, banks will need more capital to bolster the sagging sector. 

“There’s nothing more important to the economy than unemployment,” said analyst Meredith Whitney on Friday on Bloomberg Radio’s “The Hays Advantage.” 

“You have to make structural changes in the economy to address that problem. They’re not monetary issues.”

Foreclosures dropped in the second quarter for the first time since the housing market began its slide in 2006, but it's still higher than at this point a year ago. 

Loans in the foreclosure process declined last quarter to 4.57 percent from 4.63 percent in the first three months of the year, partly because of a federal government tax credit and lenders relaxing payments for homeowners, the Mortgage Bankers Association said Thursday in its quarterly delinquency report.

At this time last year, 4.3 percent of loans were in foreclosure. 

Overall, nearly 10 percent of homeowners had missed at least one payment during the summer, and the number of newly delinquent homeowners increased, according to the report. 

Short-term delinquencies are connected to unemployment benefits claims, which have been increasing, said Jay Brinkmann, the MBA's chief economist.

"On the surface, there is good news on the foreclosure front, but not on short-term delinquencies," Brinkmann said. "There’s a little pause. It could be short-term factors instead of a trend."

Rep. Maxine Waters said the exclusions are especially troubling given the involvement of foreign firms in the sale.

A Washington trade association for bond dealers is undergoing a revamp and adding new members.

The Regional Bond Dealers Association announced Tuesday that it has renamed itself the Bond Dealers of America and has added Minneapolis-based Piper Jaffray as a member. Piper has 25 offices in the United States, as well as in London and Hong Kong.

The association's membership has increased from 14 in 2008 to 35 firms this year. The association represents banks and securities firms in the U.S. fixed-income market.

"In a very short period, this association has become the established, go-to organization for the industry, as well as legislators and regulators seeking expert perspectives on U.S. fixed income markets," said Ken Williams, president and CEO of Stone & Youngberg and chair of the association, in a statement.

Other large members include Raymond James and Wells Fargo.

A federal appeals court won't reconsider a March ruling that requires the Federal Reserve to disclose documents naming financial firms that could have failed without government aid.

The Fed is expected to review the decision and could appeal next to the Supreme Court. 

On May 4, the Fed asked the U.S. Second Circuit Court of Appeals to review a unanimous March decision by a three-judge appellate panel that it must release documents showing what firms borrowed from $2 trillion in lending programs started after Lehman Brothers failed in 2008. 

The decision was dated Aug. 20. The ruling upheld a decision of a lower-court judge in Manhattan who ordered in August 2009 that the information be released.