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This guest commentary was written by Christopher Whalen. It was originally posted on The Institutional Risk Analyst

Is The Fed Killing America’s Banks? Yes. - Fed cartoon 12.21.2015

Is the Federal Reserve Board killing America’s banks, pension funds and anybody else that saves with low interest rates? The answer we provide in the latest issue of The IRA Bank Book Q1 2020 is a resounding yes!


  • Bank interest expenses fell in Q4 as lower market interest rates and ample liquidity provided by the Fed ended the steady increase in bank funding costs since 2016. The drop in yields, however, hurt asset returns as well. Earnings are down several quarters in a row. As bank earnings fell in Q4, revenue decreased faster than funding costs.
  • Despite increasing credit provisions at most banks, overall credit continues to be a distant worry. Banks are preparing for another very strong year in residential mortgage lending, a notable bright spot in terms of volume growth.
  • In particular, Q4 2019 actually saw sales of mortgage notes into RMBS with servicing retained rise for the first time in almost a decade, again signaling a renewed interest in correspondent lending on the part of several large mortgage banks including JPMorganChase (NYSEJPM), Quicken Loans, Freedom Mortgage, Amerihome, a unit of Athene (NYSE:ATH) and Mr. Cooper (NYSE:COOP).

Is The Fed Killing America’s Banks? Yes. - 3 6 2020 8 42 26 AM


Christopher Whalen is the author of the book Ford Men and chairman of Whalen Global Advisors. Over the past three decades, he has worked for financial firms including Bear, Stearns & Co., Prudential Securities, Tangent Capital Partners and Carrington. 

This piece does not necessarily reflect the opinion of Hedgeye.