Banks Give Us One Less Thing to Worry About
Banks Basically Fine
(Bloomberg Opinion) -- There’s a lot to worry about in this terrible world, but for the moment, 10 years after the financial crisis, the banking system really isn’t one of them.
America’s biggest banks just took their annual Federal Reserve stress tests, which are about as pleasant for them as an annual physical is for you. They got clean bills of health, meaning they’re unlikely to set all your money on fire today, thanks to post-crisis financial reforms and risk aversion. I mean, look at this chart from Nir Kaissar:
That is very not worrisome! Of course, banks don’t much care for regulation or the unprofitability of risk aversion, and they’re always working the refs to ease up. Eventually everybody will forget the lessons of the crisis, and the banks will lever up again, planting the seeds of the next one. But for now, not worrisome.
You might even be tempted to ask whether we need stress tests at all anymore. The banks certainly would like to do away with them. It’s hard to say exactly what made bank stocks fall for 13 straight days leading up to the tests, and anxiety about the results may have played a role. But as Stephen Gandel points out, the tests are still useful.
For example, they help identify problems at places like Deutsche Bank AG’s U.S. business, which flunked the second part of the Fed’s tests. Its stock rebounded along with the rest of the banking sector when the tests were over. But Lionel Laurent thinks investors are celebrating prematurely — Deutsche Bank still has a lot of problems to solve and no coherent plan to solve them.
Despite all this, Deutsche Bank is not having the kind of existential crisis banks faced a decade ago. That whole thing was so scary that we instinctively look to them as the next trouble spot. But in Nir’s piece, he notes the source of the next crisis is almost never the source of the previous crisis. If anything has that crisis-y feel, Nir writes, it’s stocks:
That is more worrisome.
Why Can’t America Have Stricter Gun Laws?
Another day, another mass shooting in America. The latest was at the Capital Gazette newspaper in Maryland, killing five people. Most Americans want tougher gun laws to bring this madness to an end, but they don’t seem to be coming anytime soon. Francis Wilkinson and Jonathan Bernstein got together to talk about why. Here are their opening statements:
- Wilkinson: The easy answer is three letters: N, R and A. The harder question is why a lobby representing gun manufacturers is so influential. The usual reply is that the National Rifle Association is highly organized, and its members highly motivated, to exert maximum political pressure.
- Bernstein: It’s all about the parties. In an era of strong party polarization in Congress, very few policy areas are likely to produce significant legislation unless there’s unified government for a party that makes action on that issue a priority.
Keep Attacking the Travel Ban
About 24 hours before liberals became despondent about Supreme Court Justice Anthony Kennedy’s retirement, they were despondent about Kennedy’s support for President Donald Trump’s travel ban. But Noah Feldman says opponents of the ban shouldn't despair — Kennedy may have left them a parting gift: “On his way out the door, Justice Anthony Kennedy buried a nugget in his concurring opinion that allows the challengers to go back to the district court and demand a trial on whether President Donald Trump’s travel ban was motivated by anti-religious animus.”
If the travel ban, family separation and all the other ugliness around immigration feels unprecedented to you, at least take heart (sort of) in the fact that we’ve actually been down this road before, writes Stephen Mihm.
Another Trade War Casualty
General Motors Co. joined fellow iconic American company Harley-Davidson Inc. in warning Trump's trade war could cause it to shrink U.S. operations. Trump may tweet mean things at GM just as he did Harley, but he'd better have his tweeting thumbs in peak physical condition, because GM won't be the last company to say this, warns Brooke Sutherland.
Amazon’s Health-Care Splash
Amazon.com Inc. is a mega-company apparently hellbent on taking over every retail business in the world, but its new foray into the pharmacy business might also do some good for health care along the way, writes Faye Flam. And it won’t be about making drugs cheaper (though that may happen, too) — simply getting the right drugs to people at the right times more often could make a big difference.
Plainer Labels, Please
The USDA has come up with some pretty silly new labels for genetically modified foods, write Bloomberg’s editors. Plain labeling will better inform consumers and even make them more likely to accept GM foods.
Credit-rating agencies give General Electric Co. and Honeywell International Inc. the same ratings … which is weird, writes Brooke Sutherland, but also an opportunity for Honeywell.
The bond bull market’s death knell hasn’t sounded yet, observes Brian Chappatta.
A recession’s coming! One of these days, anyway. Conor Sen and Noah Smith debate what could bring it on.
Mexico’s election on Sunday has global implications. – Komal Sri-Kumar
But Mexico’s likely next president won’t be a populist. – Jonathan Bernstein
London’s bankers are overpaid and underproductive. – Lionel Laurent
We need better arguments for automatically enrolling people in retirement accounts. – Miles Kimball
Are antibacterials worse than bacteria? It depends! – Faye Flam
How not to fritter away $650 million. – Barry Ritholtz
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