Economic expansion remains sluggish in many Fed districts (as noted in Chart 1). Some of the worst performers in terms of employment growth, such as the Atlanta and San Francisco districts, confront still-troubled commercial and residential real estate markets. Significant losses and capital write-downs on residential construction and commercial land development loans pressure banking capital, limiting the ability to lend. In some states in these regions, housing prices fell 30 to 50 percent, engendering negative household wealth effects. The Atlanta and San Francisco districts consequently attracted fewer new residents and saw some of the country’s highest unemployment. Reflecting housing wealth declines, overextended consumer mortgage debt and high-risk home equity lending, many homeowners in these regions owe more on their mortgages than their houses are worth. Negative-equity issues remain severe in Nevada (63 percent of mortgaged properties), Arizona (50 percent), Florida (46 percent) and California (31 percent).Following the 1980s collapse, Texas regulators bolstered rules governing loan-to-value ratios on residential real estate loans and limited or delayed implementation of home-equity lending, reverse mortgages and home-equity lines of credit. Given this oversight and other factors such as ample land availability and fewer development and zoning restrictions, Texas housing stock increased during the national boom without the rapidly rising home prices and lax lending standards found elsewhere. Burdened by less housing fallout, and consequently less household leverage, the Texas economy remained relatively healthy, with greater job-creating capability. The state also avoided a major wealth shock and loss of collateral value underpinning loans, allowing the asset-price and wealth channel of monetary policy to remain relatively unblocked. Additionally, Texas sustained relatively fewer credit card and other consumer loan delinquencies.
The above is the essence of the Texas Sunburn Belt exception. The same is true for Pennsylvania, specifically Pittsburgh. Banks in both states learned from past financial crises. Both states entered into the recession in a strong policy position. The current financial crisis reshuffled the national bank powers (new spatial fix). The TARP stimulus reinforced this new order, which Seeking Alpha details in a recent blog post:
Ongoing bank weakness in the United States is still evident in industry-wide metrics followed by MarketGrader.com, such as average return on assets, currently at 0.43% and a still elevated solvency ratio of 55.6%, which represents banks’ non-performing assets as a percentage of tangible equity plus loan loss reserves. However, despite all the work still ahead for the banking industry in the United States, many banks today are in much better shape than they were three years ago in the throes of the financial crisis as a result of the actions they’ve undertaken during this period.Such actions are beginning to separate a few banks from the pack, putting them in a favorable position to gain market share and rebound strongly when the U.S. economy returns to a path of higher growth. The following three banks are, based on MarketGrader.com’s analysis, the best three major banks in the United States today. (JP Morgan Chase (JPM), which is highly graded by MarketGrader.com, has been excluded from the report since its business encompasses much more than traditional commercial banking, including wealth management, capital markets and investment banking.)
The #1 US major bank is Pittsburgh-based PNC Financial Services Group. Not coincidentally, Pittsburgh's CBD is one of the healthiest real estate markets in the entire United States with PNC announcing a new skyscraper to be built. Contrast that with Manhattan:
There are currently more than 600 stalled construction sites around NYC according to the Department of Buildings, and given the moribund economy, it doesn't look like they'll unstall anytime soon. So in the meantime, why don't we do turn lemons into lemonade, Manhattan Borough President Scott Stringer wants to know! He's shining a spotlight on the 129 stalled construction sites in Manhattan, and according to his new "Arrested Development" report, 37% of these sites had problems with litter, 60% had fencing that was in disrepair or vandalized, and half of the sites had sidewalk obstructions. 100% of them are butt ugly.
Pittsburgh's Golden Triangle is booming and Manhattan is being overrun with blight. Talk about your new spatial fix. The Steel City is zooming past more than just banking center Charlotte and Rick Perry can't take credit for it. The biggest losers of one recession are often the biggest winners emerging form the next major bust. Desperation is the mother of policy innovation.