In a first on Fast interview Financial Times reporter Justin Baer reveals new developments with strong consequences for financials.
According a story that Baer co-wrote for the FT, in an effort to make sure there’s no repeat of the 2008 financial crisis, the Federal Reserve plans to again clamp down on banks.
Specifically, Baer tells us The Federal Reserve wants to subject US banks to annual stress tests, reserving the right to veto dividend pay-outs if they do not pass.
What does that mean for bank investors? Here’s an except from the FT report. (Click here to go to the full article.)
”Enforcement of annual reviews would likely scotch bank investors’ hopes for robust dividend payments and aggressive stock buy-backs. Banks are going to have to go back and ask for approvals for all sorts of actions, more so than in the past,” said Mike Mayo, analyst at CLSA. “Capital redeployment by the banks will be stretched out over time and won’t be under banks’ control as much as many investors thought.”
But before you run out and short banks, trader Joe Terranova has a word of caution.
He says, “most investors expected this to occur” and he suspects it’s largely priced in. “I don’t think it has a negative impact on the price of banks,” he says.
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Trader disclosure: On May 17, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami owns (AGU); Adami owns (C); Adami owns (GS); Adami owns (MSFT); Adami owns (NUE); Adami owns (BTU); Terranova Owns (OXY); Terranova Owns (XOM); Terranova Owns (KSS); Terranova Owns (BJ); Terranova Owns (DIS); Terranova Owns (TM);Terranova Owns (MCD); Terranova Owns (PEP); Terranova Owns (PFE); Terranova Owns (BAX); Terranova Owns (V); Terranova Owns (JPM); Terranova Owns (VRTS); Stutland Owns (INTC), Is Short (INTC) Calls; Stutland Owns (GLD); Stutland Is Short (GOOG) Put Spread, Is Long (GOOG) Call; Stutland Owns (SLV) Put Spreads, Is Short (SLV) Calls, Owns (SLV); Stutland's Firm Makes Markets In SPX Options, Holds Hedged e-Mini And Options Position; Stutland's Firm Makes Markets In VIX Option And Holds Hedged VIX Futures And Options Position; Stutland Is Long Australian Foreign Debt Held In Australian Dollars
For Joe Terranova
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
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Accounts Managed By Brian Kelly Capital Own (TLT) Calls
Accounts Managed By Brian Kelly Capital Are Long Australian Dollars
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Accounts Managed By Brian Kelly Capital Are Short Yen
For David Khani
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FBR Capital Markets Is A Market Maker Or Liquidity Provider For (CNX), (MEE), (ACI), (BTU), (SLM), (ZINC), (ANR), (PCX), (CLD)
(NRP), (ACI) Is An Investment Banking Client Of FBR Capital Markets
FBR Capital Markets Has Acted As Placement Agent On Private Offering Of Arch Coal Securities
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For Aswath Damodaran
***No Dislcosures
For Jennifer Davis
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