The Federal Reserve Board’s revisions to capital rules for big banks, approved today, promise in its 972 pages to hike the capital requirements for large, internationally active banks. At the same time, the new rules treat community banks with less stringent regulations.
The Federal Reserve publication entitled the Beige Book is not, as its title might suggest, a handbook for interior designers with a preference for inoffensive colors. It is an eight-times yearly published report of the Federal Reserve Board also known as Commentary On Current Economic Conditions. The reports gather “anecdotal information on current economic conditions” in each of the eight Federal Reserve Bank Districts.
On top of a doubling over the last five years, plains states farmland prices have risen 26% in the quarter ending June 30. Current drought conditions are slowing the market down somewhat, but what’s the long-term picture for agriculture?
A report of survey published this week by the Kansas City Federal Reserve Bank noted that farmland values across its region rose less than 3% versus the prior quarter, half the rate seen earlier this year. More than 75% of the survey’s respondents expected farmland values to stay roughly flat for the rest of the growing season, which ends in early fall.
The Federal Reserve has issued some changes concerning commercial real estate. One is a clear positive in its new Beige Book, or collection of economic conditions across the country, and another change is more ambiguous — a proposed update in the Fed’s capital requirements made of banks.
Most CRE pros say the banks aren’t where they want them in terms of extending credit. Financing in all its forms remains high on the want list for the industry as a whole. But how healthy are banks? In what state is their capital and liquidity health? A quick look at a CNBC video in the wake of the Federal Reserve accounting “stress tests” of the largest banks show a clean bill of health for enough of them that former Deputy Scretary of the Treasury Roger Altman spoke of “unmitigated good news”.
Of course, as he said this, some mitigation in fact appeared on the bottom of the screen, mentioning that four of the nineteen tested banks — Citigroup, Aimtrust, Ally Financial and Metlife — failed the Fed’s testing for a record of 15 out of 19. In baseball terms, a .789 average is great, maybe not so much in terms of accounting solvency. More discussion about timing and the politics surrounding the testing follow in the clip.