Asian Economic Crisis: Implications for the U.S.
Economy - The economic crisis in Asia is now
more than one year old, yet its consequences are still
reverberating throughout the global economy. There are growing
indications that some sectors of the U.S. economy are beginning to
experience slower growth directly attributable to problems in Asia.
Consequently, lenders should be cognizant of their customers'
exposure to global markets. Lending and strategic decisions
predicated on an assumption of continued robust economic growth
should be carefully scrutinized. By Paul C. Bishop
Lure Another Major Bank Asset off the Balance
Sheet - Securitization of corporate loans and
bonds is in full swing, with 1997 issuance exceeding that of
securities backed by credit card loans. Collateralized loan
obligations (CLOs) and collateralized bond obligations, securities
with deal-and issuer-specific risks, are potential bank investments
that may grow in popularity if a current proposal to lower the risk
weights for AAA-rated securities is enacted. Banks with an ample
supply of low-margin commercial loans are expected to issue more
CLOs to an increasingly demanding secondary commercial loan market.
An institution's CLO strategy may have implications that should be
considered when evaluating its capital adequacy trends. By
Kathy Kalser and Allen Puwalski
Payment System: Emerging Issues - The payment
system is the heart of the U.S. economic infrastructure, moving
value at the rate of 90 times the U.S. gross domestic product each
year. The banking industry, although historically central to this
movement, now faces a tangle of new technologies, new exposures,
and new competitors that challenges its hold on the payments
business. Its regulators face a different dilemma--that of how much
intervention, if any, these changes warrant and how best to prevent
the systemic exposures that increasingly large and rapid flows of
money can create. Together, the issues they face frame a payment
system that is fast becoming a technical and political contest.
By Gary Ternullo
Regional Economy - Housing
permits were weak in 1997 in most states, but permit activity has
rebounded in 1998 . . . Oregon and Utah are reporting declines in
permit activity and softening housing indicators . . . in Oregon
and Nevada, the number of new permits issued has substantially
exceeded the number of new households over the past few years.
By Gary C. Zimmerman
Regional Banking -
Regional Banking--Banks and thrifts in the San Francisco Region
continue to report strong earnings and solid asset quality . . .
recent growth and high concentrations in construction lending in
some states pose risks to community banks . . . residential lending
standards have come under pressure from large bank and nonbank
competitors. By Millen L. Simpson and Catherine I.