Press Clips

What do bank earnings tell us about the economy? By Mitchell Hartman It’s the second week of April, which means spring is in the air and daffodils, cherry trees and lilacs are blooming. Here at Marketplace, it also means earnings season is starting. Corporate profit-and-loss reports for the January-to-March quarter kicked off in earnest Wednesday with Delta Air Lines, which did quite well. Revenue rose 6% and earnings per share nearly doubled from a year ago. ..“Banks really are bellwethers of the economy,” said Karen Petrou, managing partner at Federal Financial Analytics. “Biggest issues for the larger banks: interest rates, which we — at least, I — know are going to be higher for longer. And that helps to improve bank earnings.” That’s because the banks make more money on the interest they charge borrowers. But Petrou said there’s also a downside to interest rates staying high: credit losses. As consumers [...]

When is strong hiring too strong? by David Brancaccio Hiring in the month that just ended was quite a bit stronger than expected, with more than 300,000 jobs added to payrolls and the unemployment rate falling slightly to 3.8%. That’s continuing the Fed’s interest rate predicament. We’ll discuss with Karen Petrou, co-founder and managing partner at Federal Financial Analytics. https://www.marketplace.org/shows/marketplace-morning-report/a-lot-of-businesses-want-to-use-ai-to-cut-staff/#When-is-strong-hiring-too-strong?

Buy the People: Why everyone loves to hate the Fed By Kyle Campbell Click the link below to listen to Kyle Campbell's podcast on economic  populism.  It’s a terrific survey of Fed history with authoritative insiders including Federal Financial Analytics' managing partner Karen Petrou, and then – my bit – an assessment of why recent monetary  policy has made so many Americans so angry and how that affects the political outlook , especially this November. https://www.americanbanker.com/podcast/buy-the-people-why-everyone-loves-to-hate-the-fed

By MICHAEL STRATFORD and ZACHARY WARMBRODT First look: A bank merger rethink — MM has a preview of a provocative bank M&A talk that Federal Financial Analytics managing director Karen Petrou will give at a Kansas City Fed workshop today. As banking agencies signal tougher scrutiny of proposed mergers, Petrou makes the case that regulators are failing to use tools they already have to address conflicts of interest, concentration and unfair competition ahead of M&A reviews. “How much of this is necessary in merger review and how much could be accomplished by better prudential regulation along with vigilant supervision and meaningful enforcement?” she says in remarks prepared for her talk, which you can read here. https://www.politico.com/newsletters/morning-money

Why Is Trump’s Truth Social Worth Billions? Experts Have Theories By Eric Cortellessa On the cusp of a financial crisis, Donald Trump got help from an unlikely source: His struggling social media platform. Investors approved a plan on Friday to take Truth Social public, increasing his net worth by billions as he’s drowning in legal expenses and owes New York state half a billion dollars in a civil fraud case. The company will start trading on the ​​Nasdaq exchange on Tuesday. But the financial statements of Trump’s firm show scant evidence of a booming business worthy of the $4.7 to $5.6 billion market capitalization reported on Monday. Trump Media & Technology Group, which owns Truth Social, lost money last year, according to regulatory filings....It’s not the first time that markets have embraced social media companies at levels that appear to exceed their value, according to Karen Petrou, managing partner of [...]

The U.S. Economy Is Booming, But Only for a Few By Karen Petrou “Our economy is literally the envy of the world,” President Biden declared in his recent State of the Union address. There’s some truth to this exceptionalism talk. However, the U.S. economy seems to be doing better than other advanced economies thanks also to data badly distorted by U.S. economic inequality. Here, we’re also exceptional, just in the bad way of being less equal than all other advanced democracies. Big-picture numbers show the U.S. economy beating much of the rest of the world. Gross domestic product grew 2.5% in 2023, compared to 1.9% in Japan, 0.5% in the U.K., and negative 0.3%—a mild recession—in Germany. Unemployment numbers are similar. What these apparently favorable comparisons miss, however, is how spending and investing by the few Americans who own so much of American wealth and receive so much of its income [...]

Banks knock FDIC over growing tab for last year's failures By Polo Rocha One year after Silicon Valley Bank and Signature Bank failed in the span of three days, big banks are miffed about their growing tab from last March's wild weekend. The gripes stem from decisions made between March 10-12, 2023, when the Federal Deposit Insurance Corp. stopped deposit runs by taking over the two banks and declaring a systemic risk exception to ensure that the vast quantities of uninsured deposits at those failed banks were covered....Karen Petrou, the co-founder of the consulting firm Federal Financial Analytics, said the $4 billion difference is a "very significant mistake" that calls into question the FDIC's credibility in gauging the costliness of bank resolutions. "When an agency gets something this wrong, it's not unreasonable for those picking up the tab to ask," Petrou said. The agency has been gradually getting rid of [...]

How November's election could shape antitrust policy by David Brancaccio It’s the morning after Super Tuesday primaries, and for people making money decisions large and small, the election results are not a paradigm shift. We’ll discuss why with Karen Petrou, managing partner at Federal Financial Analytics. https://www.marketplace.org/shows/marketplace-morning-report/this-elections-big-trust-issue-maybe-not-the-one-youre-thinking-of/

The latest on NYCB By Zachary Warmbrodt .... MM has a first look at the political and policy impacts to watch from Federal Financial Analytics. A few highlights: The bank reported deposit inflows but what they are and how long they last is uncertain. A big factor: The government will likely be hard-pressed to do anything resembling a bailout or a systemic designation. Details about NYCB's reliance on Federal Home Loan Banks will be key. The FHFA – the agency overseeing the FHLBs — is taking a sterner view of troubled bank advances than it once did. GOP lawmakers may focus on the FDIC’s decision to sell Signature Bank’s assets to NYCB, given it had yet to integrate Flagstar Bank and already had significant concentrations in New York-area commercial real estate. It could feed into Republicans’ push to force out FDIC Chair Martin Gruenberg. https://www.politico.com/newsletters/morning-money

There’s a Silver Lining for the Middle Class in High Interest Rates By Matt Peterson Americans are starting to feel better about the economy, but it might be a while before they release their anger at the Federal Reserve and Chairman Jay Powell. His approval rating has fallen even farther than President Joe Biden’s, according to Gallup. The Fed is seen as presiding over a period of inflationary agony. Its interest-rate increases were intended to slow price gains across the economy, but in the process they’ve made important aspects of American life more expensive. Sen. Elizabeth Warren (D., Mass.) and other Democrats urged Powell to cut rates this week, citing the high cost of mortgages, among other issues.... Banking analyst Karen Petrou’s 2021 book, Engine of Inequality: The Fed and the Future of Wealth in America, described the Fed in unflattering terms. The prolonged period of low rates helped boost stock [...]