Yellen's Ordeal Begins ThursdayThen again, there were plenty of negative items in the employment situation report on Friday, including a decline in the labor participation rate of 0.4% to 62.8%. "The civilian labor force was down by 720,000 in October," the Labor Department said. That underlines the case for a continued delay in tapering of bond purchases by the Fed. Investors are also looking ahead to a Senate Banking Committee hearing Thursday, which will consider President Obama's nomination of current Federal Reserve Vice Chair Janet Yellen to succeed Ben Bernanke as the next Chairperson of the central bank. It will be fascinating to see how Yellen navigates difficult questions from Republican members of the committee, including Senators Richard Shelby (R., Ala.) and David Vitter (R., La.). Vitter during an interview on Bloomberg TV last week said he wanted the Fed to take stronger measures to force the nation's largest banks to hold more capital. He also shared with Yellen his "concerns about this zero interest rate policy forever into the future. I am concerned that we're having little to no impact on the positive economic side, with diminishing returns on that sort of policy, but we are building up inflationary pressures, etc."
State StreetShares of State Street have returned 50% this year. The stock trades for 13.5 times the consensus 2014 earnings estimate of $5.19 a share, among analysts polled by Thomson Reuters. State Street's return on average tangible common equity (ROTCE) for the 12-month period ended Sept. 30 was 17.70%, according to Thomson Reuters Bank Insight. That's an impressive figure, exceeded among KBW Bank Index components only by U.S. Bancorp of Minneapolis, with a 24.00% ROTCE of 24.00% and M&T Bank of Buffalo, N.Y., with an 18.57% ROTCE. Please see TheStreet's earnings coverage for a discussion of State Street's third-quarter performance. Following a meeting with State Street CEO Joseph Hooley and other senior managers of the company, KBW analyst Robert Lee in a client note on Nov. 4 wrote that "Regulatory uncertainty around capital was a focal point" for the bank, because of a change in the Federal Reserve's annual stress tests for large banks. The annual stress tests are a two-part process. Following an analysis of banks' ability to whether a "severely adverse" economic scenario while remaining well-capitalized, the Fed will run a second set of tests -- called the Comprehensive Capital Analysis and Review (CCAR) -- incorporating the banks' plans for deploying excess capital through dividends, share buybacks and/or acquisitions.
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