14 © <strong>Brand</strong> F<strong>in</strong>ance plc 2011
USA At <strong>the</strong> end of 2009, America’s Federal Deposit Insurance Corporation (FDIC) reported that American banks as a whole reported earn<strong>in</strong>gs only “slightly above breakeven”. While that passed for good news at <strong>the</strong> time, it seems that <strong>the</strong> headl<strong>in</strong>es <strong>in</strong> its September 20<strong>10</strong> report were positively gush<strong>in</strong>g: 1 : • Year-Over-Year Earn<strong>in</strong>gs Improve for Fifth Consecutive Year • Asset Quality Trends Cont<strong>in</strong>ued to Improve • Industry Assets Increase by $163 Billion From a time before <strong>the</strong> first of <strong>the</strong>se reports and <strong>the</strong> recent one, a dizzy<strong>in</strong>g level of public discussion has transpired regard<strong>in</strong>g what should be done regard<strong>in</strong>g <strong>the</strong> restoration of <strong>bank<strong>in</strong>g</strong> <strong>in</strong> <strong>the</strong> United States, <strong>in</strong>clud<strong>in</strong>g reversion to <strong>the</strong> separation between depository and <strong>in</strong>vestment <strong>bank<strong>in</strong>g</strong> per <strong>the</strong> Glass Steagall Act of 1933, <strong>the</strong> break<strong>in</strong>g up of <strong>in</strong>stitutions “too big to fail”, enact<strong>in</strong>g early warn<strong>in</strong>gs to detect systematic risks, limit<strong>in</strong>g executive pay, <strong>in</strong>creas<strong>in</strong>g <strong>bank<strong>in</strong>g</strong> reserve requirements, <strong>in</strong>creas<strong>in</strong>g regulatory authority for Federal Reserve over banks, severely reduc<strong>in</strong>g banks’ rights to engage <strong>in</strong> proprietary trad<strong>in</strong>g among many, many o<strong>the</strong>r suggestions. Some of <strong>the</strong>se suggestions were enacted <strong>in</strong> <strong>the</strong> Dodd-Frank Wall Street Reform and Consumer Protection Act <strong>in</strong> July 20<strong>10</strong>, though some criticized this law s<strong>in</strong>ce it did little to address what many feel was a major contributor to <strong>bank<strong>in</strong>g</strong> difficulties and hence <strong>the</strong> underm<strong>in</strong><strong>in</strong>g of many <strong>bank<strong>in</strong>g</strong> <strong>brands</strong>, namely <strong>the</strong> role of Freddie Mac and Fannie Mae -- <strong>the</strong> government sponsored companies formed to trade <strong>in</strong> secondary mortgage obligations and <strong>the</strong>refore expand <strong>the</strong> pool of funds available as mortgages. 1 FDIC Quarterly Bank<strong>in</strong>g Profile, September, 20<strong>10</strong> Country Focus Only time will tell who is right, but for now <strong>the</strong>re is no question that <strong>the</strong> <strong>bank<strong>in</strong>g</strong> <strong>in</strong>dustry <strong>in</strong> <strong>the</strong> United States is improv<strong>in</strong>g and <strong>the</strong> American <strong>bank<strong>in</strong>g</strong> <strong>brands</strong> on this year’s <strong>in</strong>dex are no exception, issues rema<strong>in</strong>. Many small bus<strong>in</strong>esses do not feel that banks, despite <strong>the</strong>ir ga<strong>the</strong>r<strong>in</strong>g strength, have played a sufficient role yet <strong>in</strong> stimulat<strong>in</strong>g <strong>the</strong> US economy with capital formation. Perhaps this should not be a surprise s<strong>in</strong>ce <strong>the</strong> number of banks classified as “problems” by <strong>the</strong> FDIC cont<strong>in</strong>ues to rise, albeit at a slower pace 1 : Year Quarter Number 2009 1 305 2 416 3 552 4 702 20<strong>10</strong> 1 775 2 829 3 860 In America <strong>the</strong> contrast between big bus<strong>in</strong>ess and local bus<strong>in</strong>ess is embodied <strong>in</strong> <strong>the</strong> phrases “Wall Street” and “Ma<strong>in</strong> Street”. In many commercial endeavors, this contrast is stark and dist<strong>in</strong>ct. In <strong>bank<strong>in</strong>g</strong>, it is less so s<strong>in</strong>ce <strong>the</strong> Wall Street banks also have thousands of branches as deposit-receiv<strong>in</strong>g and mortgage lend<strong>in</strong>g channels throughout <strong>the</strong> American Ma<strong>in</strong> Streets. And on Ma<strong>in</strong> Street, <strong>the</strong> mortgage crisis is not yet over. Phoenix, for example, recently reported that it is only halfway through <strong>the</strong> restructur<strong>in</strong>g of its mortgage crisis. If this is emblematic of all of <strong>the</strong> Ma<strong>in</strong> Streets of America, <strong>the</strong> rebuild<strong>in</strong>g of <strong>bank<strong>in</strong>g</strong> <strong>brands</strong> <strong>in</strong> <strong>the</strong> US still has a way to go. Most observers of <strong>the</strong> <strong>in</strong>dustry believe that even among (and perhaps especially) <strong>the</strong> biggest <strong>bank<strong>in</strong>g</strong> <strong>brands</strong>, consolidation will 15 © <strong>Brand</strong> F<strong>in</strong>ance plc 2011
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