This Is It Fsx

FSX – DALLAS JANUARY 25, 2012

Patrick Hines Principal

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WHAT HAPPENED?

WHERE ARE WE ?

MOVING FORWARD…

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GROWTH OF ECONOMY FUELED BY BANK LOANS

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LENDING STANDARDS TAKEN OFF

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LENDING TOOK OFF !

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• Lorem ipsum geht heirBANKS LENT – WE SPENT

UNTIL WE RAN OUT OF CASH

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THE GREAT RECESSION No liquidity Inability to repay debt

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BANKING DISAPEARED

BECAME PAPER MILLS

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AND… YOUR FRIENDLY BANK ?

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Banks Brokerages Relationship Driven Transaction Driven

Separated by Glass Steagall

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GOBBLED UP

Number of Banks Fall !

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Old” Bank Balance Sheet

CASH

Other Assets

Loans

DEPOSITS

DEBT

Capital

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“SECURITZATION”

BANKS SELL LOANS

CREATE OFF BOOK

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• CDO – collateralized debt obligation • CMO - collateralized mortgage obligation • Synthetic CDO – (see above)• CBO – collateralized bond obligation • CIO - collateralized insurance obligation • Structured Finance

– asset backed securities

OFF BOOK…

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DEPOSITS

Loans

OFF BOOK

• CASH

Capital (Net Worth)

DEBT

“New” Bank Balance Sheet

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PAPER

MORTGAGE PAPER

CASH

$

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THE NEW BANKERS

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YOUNG - ATTRACTIVE

TRANSACTION DRIVEN

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CREATE PAPER

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•

THAT THEY SELL

TO WALL STREET

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TRULY A PONZI

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Banks combine with brokers Become transaction or fee driven Relationship banking dies

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THE BANKARAGES

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Institution Name

Weiss Rating Weiss Rating Definition

S&P Rating

Bank of America

D Weak A-

Bank of New York Mellon

C Fair AA-

BNY Mellon NA  B- Good AA-

Citibank NA C Fair A-

HSBC Bank USA NA

C Fair AA-

JPMorgan Chase Bank NA

D Weak A+

Wells Fargo Bank NA

D Weak AA-

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THE RESULT ?

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Access to bankCapital limited

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HOW CAN WE MOVE FORWARD ?

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Lessons from history

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The Great Depression

DEPTH IN ‘32

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NATIONAL INTEREST WAS UNIFIED

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SAVINGS GREW 300%

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INCREASED ECONOMY’S CASH CAPITAL LIQUIDITY

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LENDING AND INVESTMENT

INCREASED

`

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• Lorem ipsum geht heirUS ECONOMY TOOK OFF

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TAKE CONTROL

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BOTTOM LINE THE MANY GREAT IDEAS IN THIS ROOM

LACK ACCESS TO BANK CAPITAL

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THE OPPORTUNITY IS IN THIS ROOM

TO GENERATE RETURN

CREATE VALUE

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FED COMPRESSINIG INTEREST RATES

TRYING TO MANAGE THE ECONOMY

IT IS A NEW WORLD

U.S. Treasury Yields 1 Year 0.02% 2 Year 0.11% 5 Year 0.84% 10 Year 1.96% 30 Year 3.03%

THE BANK ENVIORNMENT

• Standard CD Rates if you Open Online• Minimum Deposit $2,500• 3months 0.05%• 6months 0.05% • 1year 0.05%

• So $100,000 x 0.05% = $5,000 pre tax…

S&P FOR 2011

VOLITILTY

MUNICIPAL BOND RATES

Maturity Yield Yesterday Last Week Last Month

2yr AA 0.61 0.64 0.67 0.69

2yr AAA 0.53 0.57 0.73 0.54

2yr A 0.94 0.94 1.12 1.10

5yr AAA 0.87 0.97 0.96 1.06

5yr AA 1.05 1.08 1.07 1.23

5yr A 1.68 1.40 1.66 1.74

10yr AAA 1.87 1.68 1.87 2.06

10yr AA 2.07 2.10 1.81 2.03

10yr A 2.18 2.40 2.17 2.63

20yr AAA 2.89 3.11 4.30 3.24

20yr AA 4.60 3.78 4.84 4.12

20yr A 4.03 3.87 4.41 4.48

CORPORATE BOND RATES

Maturity Yield Yesterday Last Week Last Month

2yr AA 0.96 0.97 0.82 1.06

2yr A 1.73 1.69 1.23 1.47

5yr AAA 1.69 1.76 1.55 1.62

5yr AA 2.17 2.06 2.01 2.16

5yr A 2.16 2.23 2.26 2.90

10yr AAA 2.29 2.14 2.10 2.36

10yr AA 3.67 3.59 3.58 3.53

10yr A 3.36 3.21 3.17 3.44

20yr AAA 4.86 4.89 4.34 4.50

20yr AA 5.31 5.34 5.15 3.84

20yr A 5.03 5.05 4.51 4.67

Data pro

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Compressed rates create opportunity for capital

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Clawing back

WHERE ARE WE NOW ?

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YOU MUST CREATE A PLAN

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Personal & Business Financial Security Analysis Tax ManagementInvestment Strategy FormulationEstate Tax Reduction and ControlRetirement Planning

To take advantage you must plan

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We did it before

We are doing it again

pkhines@rainiergroup.com

PAT HINES