This page is temporarily not available. Please check later as it should be available shortly. If you have any questions, please email customer support at email@example.com or call 800-767-3771 ext. 9339.
For Immediate Release
Chicago, IL – January 28, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include JPMorgan Chase & Co. (JPM - Analyst Report), Bank of America Corporation (BAC - Analyst Report), The Goldman Sachs Group, Inc. (GS - Analyst Report), Citigroup, Inc. (C - Analyst Report) and Deutsche Bank AG (DB - Analyst Report).
Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513
Here are highlights from Friday’s Analyst Blog:
Should “Too Big to Fail” Banks Be Carved Up?
Richard Fisher has once again sounded a familiar clarion call: "Too big to fail” cannot be a principle the US financial system continues to abide by.
Speaking at the National Press Club in Washington on Wednesday, the Federal Reserve Bank of Dallas President said the Dodd-Frank legislation had done little to alleviate several of the issues that confront the financial system. He went on to add that if anything, the law had made things even worse.
The current scheme of things is such that in the absence of a bailout we would be faced with the collapse of the financial system as we know it. He went on to emphasize the need to split banking behemoths into smaller units.
Bank concentration has increased significantly over the years, particularly from 1970 to 2010. But what is of particular interest is how sector concentration has changed after the financial crisis. According to data from the Federal Reserve Bank of Dallas, the leading 100 banks in the US had an 84% market share. By the third quarter of 2012, concentration had increased further. The top 82 banks now had an 88% market share. Given this situation, if another banking crisis occurs, the impact would be clearly larger.
Further, Dallas Fed data also shows that Lehman Brothers, which had to face bankruptcy following the crisis, was a small player compared to JPMorgan Chase & Co. (JPM - Analyst Report), Bank of America Corporation (BAC - Analyst Report), The Goldman Sachs Group, Inc. (GS - Analyst Report), Citigroup, Inc. (C - Analyst Report), etc. This conclusion is based on an analysis of non-deposit liabilities, subsidiaries and number of countries of operation. In fact, Lehman didn’t even figure in the top ten.
Fisher’s call to split up the megabanks seems to have found support in the actions of Germany’s financial markets regulator. The regulator has asked Deutsche Bank to undertake a simulation exercise which would examine a scenario where it splits up its securities and retail business.
However, this proposal, named after Erkki Liikanen, Governor of the Bank of Finland, would go on to raise costs for clients, says Deutsche Bank AG (DB - Analyst Report) co-CEO Anshu Jain. Therefore, he says, it should only be implemented if all banks worldwide have no choice but to comply with such regulations.
Speaking at a panel discussion in Koenigstein, near Frankfurt, Jain and JPMorgan’s CEO Jamie Dimon said banks and regulators should work on creating a system where in the event of a crisis, large banks can close down without damage to the public. These closures should also happen without the costs associated with the large bailouts which occurred after 2008’s financial crisis.
Dimon added that banks as large as JPMorgan can be shut down without harming taxpayers. But such a process would require regulators across countries to work together closely because of the global nature of these bank’s operations. He also said new capital and liquidity requirements collectively known as Basel III will further strengthen the banking system.
Fisher wishes to address the situation by clearly defining where safety nets for the banking system should end. He argues that only commercial banks would have access to deposit insurance provided by the Federal Deposit Insurance Corporation (FDIC) and discount window loans provided by the Federal Reserve.
This would in turn be reinforced by a new disclosure statement that declares the unprotected status of participants not protected by the safety net. This includes customers, creditors and other interested parties.
Jain and Dimon still argue against splitting up larger banks. Clearly, they offer a wide basket of services which greatly benefit the economy. They also continuously point to the greater costs this would entail to clients. Splitting up a megabank, therefore, may not be the magic wand for the financial system’s problems. Strengthening the regulatory framework and ensuring more effective implementation may be a more practicable solution.
Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leon Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Zacks Investment Research
800-767-3771 ext. 9339