ABA Banking Journal - October 2012 - (Page 8)

the economy BY JOHN SILVIA Do not underestimate QE3 The Fed’s widely expected decision last month to embark on a third round of quantitative easing (QE3) Sept. 19, 2012 $2.8 trillion ignited an unusually outspoken wave $3.0 of criticism. Doubts were voiced Liquidity about whether further expansion programs of the Fed’s balance sheet will provide any meaningful benefit to eco$2.0 nomic activity, as growing inflation MBS & concerns will likely send commodagency debt ity prices higher, further depress$1.0 ing household purchasing power— already struggling amid sluggish job and income growth, and sharply Treasuries higher food and gasoline prices. $0.0 We share these concerns on infla2009 2010 2011 2012 2008 Source: Federal Reserve tion and the potential negative effect on household purchasing, but also feel that the potential effect of QE3 is being underestimated. Shifts in manufacturing sector appears to monetary policy tend to be most successful when they come as a surprise be losing it. The Empire Manuand move with the economic tide, rather than try to reverse it. The Fed’s facturing Survey fell much more latest moves fit this description. The size of the securities purchase program than expected, sliding 4.5 points was about as expected, with the Fed stating that it plans to purchase $40 bilto –10.41 in September. Weakness lion a month in mortgage-backed securities (MBS). The surprise: The Fed was particularly notable in the new stated that the purchases will be done on an open-ended basis, and it intends orders and unfilled orders compoto continue purchasing MBS well after the labor market gets back on its feet. nents, which are the most leading The open-ended nature of the Fed’s securities purchases should further parts of this survey. n bolster the confidence of homebuilders and their lenders, which may lead to a stronger housing recovery. On this front, the Fed appears to be going with John Silvia is managing directhe tide. Homebuilders are more optimistic. The NAHB/Wells Fargo Home tor and chief economist for Wells Builders Index rose three points to 40 in September, marking the fifth conFargo. The information and secutive increase and returning the index to its highest level since June 2006. opinions herein are for general Builders noted a steady improvement in buyer traffic, with all regions seeing information use only.Wells Fargo Securities, improvement. Some of the greatest gains have come from out West. LLC does not guarantee their accuracy or The increase in home-buyer traffic has been accompanied by a steady completeness, nor does Wells Fargo Securidecline in new-home inventory. There are currently (as of Sept. 21) just ties, LLC assume any liability for any loss 38,000 completed new homes available for sale nationwide, another 78,000 that may result from the reliance by any under construction, and 26,000 not yet started; all are at or near modern-era person upon any such information lows. There also has been consistent improvement in clearing out distressed or opinions. For additional disclosures inventory. Distressed transactions accounted for just 22% of home sales in relating to reports issued by the Wells Fargo August, which is the lowest share since before the housing bust. Securities Economic Group please visit Although the housing recovery appears to be gaining momentum, the www.wellsfargo.com/economics 8| ABA BANKING JOURNAL Fed’s balance sheet growth | october 2012 $ trillion http://www.wellsfargo.com/economics

Table of Contents for the Digital Edition of ABA Banking Journal - October 2012

ABA Banking Journal - October 2012
Contents
Chairman’s View
Editor’s Column
The Economy
Bank Notes
Picture This
Ag bank rebrands—literally
Pass the Aspirin
Tech Topics
Ready for the leadership ride
Community Bank Survival: Matter of attitude?
Card biz: Playing the hand you’re dealt
ABA At Your Service
100 years of service to farmers
Compliance Inbox
Legal Issues
First Person

ABA Banking Journal - October 2012

https://www.nxtbook.com/naylor/BAKS/BAKS0515
https://www.nxtbook.com/naylor/BAKS/BAKS0415
https://www.nxtbook.com/naylor/BAKS/BAKS0315
https://www.nxtbook.com/naylor/BAKS2/BAKS1014
https://www.nxtbook.com/naylor/BAKS2/BAKS0914
https://www.nxtbook.com/naylor/BAKS2/BAKS0814
https://www.nxtbook.com/naylor/BAKS2/BAKS0714
https://www.nxtbook.com/naylor/BAKS2/BAKS0614
https://www.nxtbook.com/naylor/BAKS2/BAKS0514
https://www.nxtbook.com/naylor/BAKS2/BAKS0414
https://www.nxtbook.com/naylor/BAKS2/BAKS0314
https://www.nxtbook.com/naylor/BAKS2/BAKS0214
https://www.nxtbook.com/naylor/BAKS2/BAKS0114
https://www.nxtbook.com/naylor/BAKS2/BAKS1213
https://www.nxtbook.com/naylor/BAKS2/BAKS1113
https://www.nxtbook.com/naylor/BAKS2/BAKS1013
https://www.nxtbook.com/naylor/BAKS2/BAKS0913
https://www.nxtbook.com/naylor/BAKS2/BAKS0813
https://www.nxtbook.com/naylor/BAKS2/BAKS0713
https://www.nxtbook.com/naylor/BAKS2/BAKS0613
https://www.nxtbook.com/naylor/BAKS2/BAKS0513
https://www.nxtbook.com/naylor/BAKS2/BAKS0413
https://www.nxtbook.com/naylor/BAKS2/BAKS0313
https://www.nxtbook.com/naylor/BAKS2/BAKS0213
https://www.nxtbook.com/naylor/BAKS2/BAKS0113
https://www.nxtbook.com/naylor/BAKS2/BAKS1212
https://www.nxtbook.com/naylor/BAKS2/BAKS1112
https://www.nxtbook.com/naylor/BAKS2/BAKS1012
https://www.nxtbook.com/naylor/BAKS2/BAKS0912
https://www.nxtbook.com/naylor/BAKS2/BAKS0712
https://www.nxtbook.com/naylor/BAKS2/BAKS0612
https://www.nxtbook.com/naylor/BAKS2/BAKS0512
https://www.nxtbook.com/naylor/BAKS2/BAKS0412
https://www.nxtbook.com/naylor/BAKS2/BAKS0312
https://www.nxtbook.com/naylor/BAKS2/BAKS0212
https://www.nxtbook.com/naylor/BAKS2/BAKS0112
https://www.nxtbook.com/naylor/BAKS2/BAKS1211
https://www.nxtbook.com/naylor/BAKS2/BAKS1111
https://www.nxtbook.com/naylor/BAKS2/BAKS1011
https://www.nxtbook.com/naylor/BAKS2/BAKS0911
https://www.nxtbook.com/naylor/BAKS2/BAKS0811
https://www.nxtbook.com/naylor/BAKS2/BAKS0711
https://www.nxtbook.com/naylor/BAKS2/BAKS0611
https://www.nxtbook.com/naylor/BAKS2/BAKS0511
https://www.nxtbook.com/naylor/BAKS2/BAKS0411
https://www.nxtbook.com/naylor/BAKS2/BAKS0311
https://www.nxtbook.com/naylor/BAKS2/BAKS0211
https://www.nxtbook.com/naylor/BAKS2/BAKS0111
https://www.nxtbook.com/naylor/BAKS2/BAKS1210
https://www.nxtbook.com/naylor/BAKS2/BAKS1110
https://www.nxtbook.com/naylor/BAKS2/BAKS1010
https://www.nxtbook.com/naylor/BAKS2/BAKS0910
https://www.nxtbook.com/naylor/BAKS2/BAKS0810
https://www.nxtbookmedia.com