Bank Profit Boost QE3

[Business_Casual]

Banks reap profits on mortgages after QE3
Bank profits from new mortgages have soared since the Federal Reserve began its third round of bond purchases two weeks ago, fuelling the debate over the fallout of the latest dose of quantitative easing.


http://www.ft.com/cms/s/3406bba8-08bb-11e2-9176-00144feabdc0.html

[Caeser25]

And people told me I was crazy this would be the result because The Almighty Ben Bernank said it was for the economy. Are people really that stupid? It's really right there, follow the money.

[ralph]

Nobody should be suprised...For a long time the FED has been part of the problem, One of the first steps toward economic recovery our Gov't should take, would be to get rid of the Fed, and take control of the printing presses... But that would also take a Gov't that actually wants to regain control of spending...So far, I've seen little evidence of that....

[austinN4]

Banks reap profits on mortgages after QE3
Bank profits from new mortgages have soared since the Federal Reserve began its third round of bond purchases two weeks ago, fuelling the debate over the fallout of the latest dose of quantitative easing.


http://www.ft.com/cms/s/3406bba8-08bb-11e2-9176-00144feabdc0.html
Your link requires me to register, so I did not read the story. But I have to wonder how QE3 so recently announced made bank profits soar? Profits, I might add, that haven't even been announced yet as the quarter just ended yesterday.

[Business_Casual]

I think they're referring to the product margin essentially. There was a point drop in the rate the banks pay for mortgage money - so if they don't pass that along to the borrowers, their margin goes up 25-30%.

bc

[austinN4]

I think they're referring to the product margin essentially. There was a point drop in the rate the banks pay for mortgage money - so if they don't pass that along to the borrowers, their margin goes up 25-30%.
Some slight margin expansion I can agree with, but it remains to be seen if profits will actually "soar" in the 4th quarter, the first quarter we can measure after QE3 since it came so near the end of the 3rd quarter.

I only know my own situation, and my mortgage rate is 2.875% and that was set as of June 1, 2012, well before QE3. Assuming a zero % cost of funds, the gross margin would be 2.875%

Since the noninterest expense of all US banks at the end of 2Q12 averaged 3%, which is heavily influenced by the big banks, I hardly see how net profits are going to soar based on mortgage activity. On other activities, maybe.