The banking industry might not be shrinking very quickly, but it is certainly shrinking. Job cuts and other adjustments are on the way this year at American Express, Morgan Stanley, ING, Deutsche Bank, and across the industry. In all, nearly 10,000 job cuts at giant banks were announced or reported this week. The scale of the job cuts, as much as 6 to 8 percent, will put pressure on competitors to also cut back so they can stay cost-competitive. This seems to be turning into an almost-annual cycle of cuts as new reductions are announced almost as soon as the previous ones are completed.
I promised to stop cataloging all the legal milestones in mortgage-backed securities, a subject that will remain in the headlines almost every week for years to come. This week, though, I must mention the more than $10 billion in mortgage-related settlements, including a huge settlement between Bank of America and Fannie Mae. That deal seemed crafted not to immediately break either company, though it must be a painful wake-up call for both.
This week it was time for President Barack Obama to nominate a new Treasury Secretary. Wall Street had been lobbying for a bank executive or venture capitalist in that role, but the White House had other priorities. The eventual nominee, Jack Lew, with a background that emphasizes government budget battles more than profit opportunities, is almost the opposite of the last two men to hold that position. The Lew nomination signals that positioning the government for a future Wall Street bailout is not on the Washington agenda at all. That is perhaps a pragmatic approach, given the pending budget problems that would make a new large-scale bailout almost impossible. Still, for those on Wall Street who were hoping for a third consecutive Wall Streeter at Treasury, there is reason to worry about the implications of a White House moving in the opposite direction.
A credit union closed in Milwaukee on Monday. State regulators closed New Covenant Missionary Baptist Church Credit Union. It had 500 members, but less than $1 million in assets.
The NCUA’s new idea of a “small” credit union raises the threshold to $50 million in assets, similar to the common idea of a small bank. This change reduces the level of detail of regulatory requirements for many small credit unions.
A Washington state bank failure occurred tonight, after a gap of 17 months. State regulators closed the two branches of Westside Community Bank, near Tacoma. The failed bank had less than $100 million in deposits. Sunwest Bank is taking over the deposits and purchasing the assets.
