BREAD BEANS AND BANKING

You've most likely never heard of the 3B virus. But as they say there's first time for everything.

Some banking officials last week expressed surprise that the market has downed their stock prices of  late. The selloff comes in the face of a reasonably good earnings period.

Some on the financial press are calling this a disconnect since many Wall Street bankers are expecting the U.S. economy to grow this year around 2.5%, the same as several economists are predicting. Now keep in mind many of these are the same executives who couldn't see any bloat in their industry right up to and even past part way through the last banking crisis.

When discussing the old notion that people see whatever they want to see, it is never more apropos then when discussing bureaucrats, Wall Street bankers and economists. A recession means the end or at least fewer interest rate hikes by the Fed and a flattening of the yield curve. Wall Street bankers make their bread and beans off the yield curve.

Investors are scouring bank holdings, big and small, for signs of exposure to the fracking business. But that's hardly all of the story. Banks--especially the bigger boys--are repeat offenders, recidivists of the first order. They get a lot of help from their friends at the Fed and it has little to do with what's good for you and me or the economy. Those subjects are mere smoke screens.

The WSJ over the weekend quotes a big banking official, "It's starting to spread," referring to more and more energy loans going south, affecting "anybody who was in the game as the oil boom started."

To know who was in the game one just has to recall what Voltaire noted about bankers, all bankers.
"If you see a banker jump out of a window, it's a good idea to follow because there is probably a profit in it." If one banker sees another raking in money on loans--think subprime here--you know what he or she's going to do.

The WSJ piece goes on to say: "Banks have remained relatively lenient with cash-strapped energy companies rather than set tougher lending constraints that could make their survival harder." Wonder  if you and I could get the same deal? This is not about whether the economy is doing better. It's about what bankers want your perception of the economy to be. And that's doing better.

People get upset and concerned about the Ebola virus spreading. But there's another virus--probably not as old as Ebola but just as sinister--that's nearly as bad for your financial health. It's called the 3B virus--bread, beans and banking.