In-depth analysis on Credit Writedowns Pro.

The Fed cannot support net interest margins

On Christmas Eve, the Wall Street Journal had two interesting articles on the credit situation in the U.S., one from the banks’ perspective and one from the households’ perspective. In general, the data were positive but I believe the analysis was incomplete because it fails to consider net interest margins, which are coming down.

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My conclusion here is that banks are not passing on profits because these profits are fictional, the result of accounting gains that are probably not sustainable. When the cycle turns down, I would expect us to see that banks had under-provisioned for loan losses.

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Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.