US banks are scary strong
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Good morning. Today, for the first time in a little while, the gilt market has to get by without help from the Bank of England. Some observations — but no predictions — on that situation below. In the US stock market, we will find out what happens after a wild up day (last Thursday) and a wild down day (Friday). An outbreak of calm? We doubt it. Email us: [email protected] & [email protected].
The good (that is, bad) news from the big US banks
A bank cannot perform much better than the economy it operates in. Banks make loans and provide transaction services to businesses and households. They are leveraged, so in an upturn they do a bit better than the economy. But in a downturn, they do a bit worse, so it evens out. If banks try to grow much faster than their economic environment, they blow themselves up, à la 2008.
This story originally appeared on: Financial Times - Author:Robert Armstrong
