Is 5% a big deal

With all of the talk lately surrounding the ingredients necessary for the economy to recover and keep moving forward, there is one fact that pretty much everyone seems to agree upon.

Credit creation and expansion – whether you personally think that more debt is the solution is another topic altogether (but I’d love to hear your opinions)

Banks, both regional and national, have a traditional purpose in the economy of lending to qualified individuals and small business owners; I am definitely not encouraging the reckless lending that occurred during the housing bubble that popped in 2007-2008. What I am talking about is banks lending money to qualified borrowers in order to generate a reasonable rate of return to their shareholders. This gives people the ability to finance ideas and ventures that they would be unable to do so on their own; everybody wins, but if venture fails the banks collects whatever collateral was pledged, and all parties move forward a little wiser.

I think all of that seems perfectly reasonable and legitimate; especially with the Federal Reserve beginning to indicate it wants to dial down its current purchasing operations, the private sector needs to re-assume the leadership role.

It is interesting to note the debate surrounding an FDIC rule concerning the leverage of financial institutions; the FDIC would require banks to have equity equal to at least 5% of their of their assets (don’t forget that the deposits you and I are liabilities – the loans and investments made by the bank are their assets).

Is this a big deal – if the big banks cannot handle a few more percentage points in required equity possibly they might want to rethink some of their business strategies.

http://www.cnbc.com/id/100870726

Thoughts!

Also – an earnings calendar, tis the season after all (for earnings that is!)

http://www.cnbc.com/id/15906175