Suppose climate change is already happening. How might that affect banks? To take a specific example, suppose this year’s drought is an approximation of the new summer weather pattern for 16 states, as some climate scientists have theorized. These states would no longer be places where you could grow crops like corn without irrigation, and that change in the economic base would affect real estate values and business prospects across the entire region, potentially resulting in more than $1 trillion in unpaid bank loans. Are banks prepared for this kind of regional stress? Banks that have real estate loans entirely within the affected region might fare the worst, but are there less obvious effects that could put financial stress on banks?
Iran is in a full-on currency crisis, with the government taking to the streets to rein in the underground currency trade. The rial fell by about 20 percent in three days this week. Prices for consumer products increased more rapidly than that, forcing many shops in Tehran to close for one or two days. Iran’s government must take more control of ordinary banking to try to prevent an extended bout of hyperinflation.
Iceland’s economic growth is continuing nicely four years after its banking crisis, and its central bank released a report saying the financial condition of its banking system is improving. Iceland’s people-first approach to its banking crisis confounded the world’s financial experts and infuriated allies such as the United Kingdom but has proved less stressful than the approaches taken in the United States and Europe. Iceland still wants to join the European Union, but will probably not attempt it within the next ten years, given all the uncertainties of the current situation.
More than a million people turned out for rallies across Europe last weekend urging “No” votes on the euro zone’s proposed austerity treaty.
In the presidential debate focusing on the economy, candidate Mitt Romney promised to repeal many of the regulations that he says are crippling Wall Street. He specifically suggested that underwriting rules that prevent banks from lending to unqualified buyers should be rolled back. On the other hand, Romney indirectly criticized the Wall Street bailout, noting that it had contributed to a few of the hundreds of bank failures of recent years. For his part, incumbent Barack Obama hinted vaguely at a tougher stance on Wall Street, with changes needed to reduce the risk of market meltdowns.
Customer accounts holding more than $100 million in assets from bankrupt futures broker Peregrine Financial will be moved to Vision Financial Markets, according to a plan filed with bankruptcy court. Vision Financial Markets is familiar with the process that will be required to convert the accounts, having previously acquired accounts from the failed MF Global. Vision Financial Markets is paying a premium of about $20 per account for the accounts it is acquiring from Peregrine Financial.
A credit union was liquidated last weekend. El Paso’s Federal Credit Union had 1,000 members and $5 million in deposits. Some qualifying accounts were moved to El Paso Area Teachers Federal Credit Union. The NCUA sent checks to other members for their insured accounts.