Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.

ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEngine

covers over 5,000 stocks every day.

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January 25, 2010 – All Banks Must Face Increased Scrutiny

President Obama has drawn several lines in the sand with more to come. Wall Street hates the
“Volcker Rule”, but Main Street wants scrutiny of all bank regulators. Bank Failure Friday!
President Obama is listening to Paul Volcker turning his back to his banking regulators.
While implementation will take years to accomplish I believe that the “Volcker Rule” is part of the
correct long term solution to end “The Great Credit Crunch”. After all, Federal Reserve policy has been
ill-advised in my judgment since the 21st Century began. The US Treasury came up with TARP, and
then used this taxpayer money in unintended ways with little impact on Main Street. The FDIC has not
been quick enough to resolve failing banks.
Paul Volcker was the Fed Chairman during the Reagan years, and his unpopular monetary policy
decisions back then paved the way for a twenty-five year bull market for stocks.
The President has drawn several lines in the sand when he said, “We want our money back” and he
wants Wall Street to pay. The cheap money given to Wall Street by Treasury, the Fed and the FDIC
resulted in huge profits and record bonuses, while Main Street suffered through job losses, loan
defaults and mortgage foreclosures. The signs of life on Main Street are meager at best. I am all for the
“Wall Street Greed” tax to provide funding for future banking problems. I favor putting an end to
proprietary trading by banks that take in consumer deposits.
I say that there should be three more lines drawn in the sand: End “off balance sheet” trusts that house
billions of toxic mortgage securities and derivative-related exposures. Establish a mark to market for
derivative contracts that have ballooned to $206 trillion in the US banking system alone. Tell all banks
that are overexposed to C&D and CRE loans to get back within regulatory guidelines or face failure.
I say forget establishing a super bank regulator, and replace existing regulators instead.
Each of our banking regulators has skeletons in their closets. Treasury Secretary Geithner had income
tax issues and now he runs the IRS. As NY Fed Chief he was the architect of the bailouts of Bear
Stearns and AIG and was the protagonist in the Lehman failure, and other non-publicized background
financial deals.
Fed Chief Bernanke has not come clean on his involvement in his discussions between Bank of
America and Merrill Lynch. He cannot even price the Bear Stearns collateral. His monetary policy
decisions created and popped bubbles in Gold, Crude Oil and Stocks. Bernanke will be re-elected as
Chairman of the FOMC at this week’s meeting. Bernanke will be re-appointed as Chairman of the
Board of Governors by the Senate in a close call. Regardless, Bernanke is a member of the Board of
Governors into 2020, which is the regulator of Commercial Banks, whose over-leverage brought the US
economy to its knees,
FDIC Chair Sheila Bair took out two mortgages worth more than one million from Bank of America
during the ongoing negotiations concerning that bank’s bailout. The FDIC prohibits employees from
participating in regulatory issues involving a bank from which they are seeking a loan.
I am sure that under the advisement of Paul Volcker the president can find honest replacements.
The FDIC closed another Five Banks on Bank Failure Friday for a total of nine in 2010 so far. All
five banks were overexposed to C&D and CRE loans. In 2008 there were 25 failures, in 2009 there
were 140, so the total for “The Great Credit Crunch” is now 174. Of the five failed banks two were
publicly traded Evergreen Bank (EVGG) and Columbia River Bank (CBBO). Both were on the
ValuEngine List of Problem Banks. If you do not have our list of problem banks go to
www.ValuEngine.com and subscribe.
Assuming the FDIC collected $45 billion in Deposit Insurance Fees for 2010 through 2012 this fund is
down to less than $25 billion. This fund will run dry this year as more than 150 additional banks fail.
Send me your comments and questions to Rsuttmeier@Gmail.com. For more information on our
products and services visit www.ValuEngine.com
That’s today’s Four in Four. Have a great day.

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Richard Suttmeier
Chief Market Strategist
www.ValuEngine.com
(800) 381-5576
As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I
have daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters as
well as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as the
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issues of my research.

“I Hold No Positions in the Stocks I Cover.”