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TowerGroup Reviews Progress of Financial Services Industry After Obama Administration's First 100 Days.

Firm's Analysts React to New Government's Initiatives, Provide Forward-Looking Financial Outlook

NEEDHAM, Mass., April 28 /PRNewswire/ -- Analysts from leading research and consulting firm TowerGroup today issued the following assessment of the impact on the domestic business and financial environment of the new US presidential administration, as the anniversary of President Obama's first 100 days in power fast approaches.

"The financial challenges facing Mr. Obama upon entering office were frankly enormous, and this predicament has yet to change," said Bob Egan, Global Head of Research & Chief Analyst at TowerGroup. "How the president handles restoring confidence in the markets in the wake of the global financial meltdown will be the hallmark of this administration."

The five major areas of analysis from TowerGroup experts, which correspond to the firm's current research themes, are as follows:
 Healing the Financial Services Industry
 -- 1Q Results: Positive earnings from financial services institutions
 (FSIs) reflect windfall profits from Obama's emergency financial aid
 and finance/accounting adjustments. These adjustments mask structural
 challenges that most FSIs face in fixing their underlying business
 -- Government Intervention: Lack of clarity in installing a repayment
 plan for the Troubled Asset Relief Program (TARP) has strained the
 relationship between bankers and the U.S. Treasury. The Obama
 administration needs an exit strategy from TARP that returns
 stability, risk taking and business decision making to the banking

 -- G-20: Obama faces huge obstacles for practical agreement, coordination
 and implementation of structural changes needed to stimulate the
 global economy. He also faces challenges in maintaining global
 collaboration, especially because America's interests may not be well
 served by taking an all-for-one approach.

 Improving Risk Management and Regulation
 -- Financial Regulation: TowerGroup still expects Obama to introduce
 significant change in the domestic regulatory structure. However, the
 odds of a truly uniform system across banking, securities, and
 insurance jurisdictions are extremely low.

 -- Stress Testing and Systemic Risk: Stress test results may fall short
 of probing the overall financial strength of large FSIs and could mask
 systemic issues. Most FSIs remain vulnerable to further severe and
 unexpected downturn conditions. TowerGroup believes that the Obama
 administration has yet to address and fix the systemic risk issues
 that led to the collapse of the financial system.

 Reenergizing Consumer Finance
 -- Consumer Lending: TowerGroup believes that net macroeconomic
 contraction will continue to starve the retail financial sector. As
 long as credit remains tight, consumers will keep their wallets in
 their pockets and most consumer lending areas will remain frozen.
 -- Consumer Deposits: Deposits are a vital source of liquidity and
 funding for banks. Uncertainty remains over how already uneasy
 consumers will react to the impending return to the basic insurance
 cap of $100,000 per FDIC-insured deposit account (except for certain
 retirement accounts) from the temporary cap of $250,000 to which it
 was raised by the Federal Deposit Insurance Corporation in October

 -- Student Loans: Obama aims to disintermediate FSIs in student lending.
 Lenders that are unable to originate loans under Federal Family
 Education Loan (FFEL) Program after July 1, 2010, will find eligible
 borrowers moving to the subsidized loans of the Federal Direct Student
 Loan Program (FDSLP). Most higher education institutions indicate a
 preference for the competitive marketplace offered by lenders.

 Reviving Mortgage Lending
 -- Refinancing: TowerGroup expects the newly introduced Homeowner
 Affordability and Stability Plan (HASP) and Making Home Affordable
 Program (MHAP) to save many consumers from foreclosure and provide
 some stability to fragile real estate markets. Lenders inundated with
 refinance and loan modification requests will need to add staff and
 automate quickly to implement the programs successfully.
 -- Toxic Assets: Positive upticks in mortgage refinancing and origination
 revenues do not seem to support the deterioration of toxic assets and
 rising credit losses. TowerGroup anticipates continued tightening of
 capital and a shortage of consumer credit.

 -- Bankruptcy Legislation: Congress is considering legislation to allow
 bankruptcy judges to reduce mortgage principal. TowerGroup expects
 Obama to encourage Congress to give these reduction programs a chance,
 eliminating the need for judicial cram-downs.

 Remodeling the Credit Card Business
 -- Balancing Act: Obama must sustain the $1 trillion credit card industry
 while navigating the highly sensitive issue of protecting consumers
 and preventing further reductions in revolving balances. New
 restrictions on card issuers could extend the current recession.
 -- Operational Efficiency: Banks should focus on improving their
 operating models. More efficient operations will help in driving
 fundamental change in the U.S. consumer payments business, thus
 impacting consumers, both global and local banks and global trade.

 -- Business Constraints: Obama is likely to restrict issuers' ability to
 raise interest rates unnecessarily. TowerGroup expects tighter
 controls and restrictions on fees and management of open lines,
 resulting in credit line reductions that will shrink profit margins.

Please contact Tom Steiner at +1.212.704.8272 if you would like to set up a time to speak with a TowerGroup analyst.

About TowerGroup: TowerGroup is the leading research and advisory services firm focused exclusively on the financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world's leading financial institutions, technology companies, and professional services firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in North America and Europe, TowerGroup serves a global client base. Visit for more information.
 Tom Steiner
 Edelman for TowerGroup

CONTACT: Tom Steiner, Edelman for TowerGroup,, +1-212-704-8272

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Date:Apr 28, 2009
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