ABA Banking Journal - November 2008 - (Page 12)
briefing Will strong and simple banks inherit the business? Investment banker Jimmy Dunne sees good times ahead for banks that stuck to the basics I t was predicted that the meek shall inherit the earth, and that they who sowed the wind would reap the whirlwind. Some of that has been coming to pass, these days. But after today’s financial storm has moved through and things begin to settle, investment banker “Jimmy” Dunne thinks there is a cadre of financial institutions that will be standing tall and which will gain control of segments of the banking industry that will undergo significant, renewed consolidation. For many today, looking ahead to such times has been difficult, with so much bad news. But Dunne—officially James J. Dunne III, senior managing principal at Sandler O’Neill & Partners, L.P.—believes that, as it gains traction, the “TARP” program, the capital infusion program, and related efforts will bring a return to relative stability in the markets and the banking business. As the dust clears over the next year, those institutions that didn’t forget the essentials of sound banking will be sitting pretty. And they will see opportunities. Not that things won’t be challenging for all. “We’ve got a lot of wood to chop here,” says Dunne, head of his firm’s executive committee and one of the founders of the 20-year-old company, which specializes in financial institutions. Sheltering under a TARP “The bailout will have a positive effect,” says Dunne, who actually hates the term, “bailout,” because it’s a bad representation By Steve Cocheo, executive editor 12 NOVEMBER 2008/ABA BANKING JOURNAL of what the program does. Dunne expects a positive result “because it will be the beginnings of a lubricant for financial institutions.” He sees TARP—the Troubled Asset Relief Program—as a good idea, and a necessary one. He expects it will chiefly be larger institutions that will benefit directly from the asset-purchase program. But this doesn’t mean that midsized and smaller banking companies—where, he adds, problems aren’t as severe—won’t benefit. Now, says Dunne, “there will be a buyer in the market who is willing to put a price on highly complicated toxic types of investments.” Many of those assets are still paying, Dunne points out, “which will have greater relevance once there is a return to stability in the markets.” For now, TARP and other elements of the Emergency Economic Stabilization Act of 2008 hold the promise of slowing and reducing the destruction of capital wreaked this autumn. Dunne says the effort will bring some credit back into the market, and add some certainty about the value of many of the nation’s financial institutions. Bound-up capital will be freed, banks will lend to each other again, in time, and this will affect the mindset of many players. So, too, Dunne believes that the mid-October announcement that the government would infuse a group of large banks with capital, and make it available to additional institutions, will improve perceptions of the financial sector. Many mid-size and smaller banks can still raise capital, he notes, but the government program brightens the picture. “This crisis is all about Subscribe at www.ababj.com
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