Category Archives: Credit markets

David Dayen: Hedgies Bet on Fannie/Freddie Status Quo

The new CBO budget projections showing debt stabilization over the next decade and a reduction of the expected FY 2013 deficit to $642 billion hasn’t been deemed by Washington as a “scandal,” although falling deficits amid high unemployment and below-trend growth is actually, you know, a bit scandalous. But even more unremarked upon is one of the primary reasons for this near-term deficit drop, mentioned in passing by CBO on page 1:

CBO’s estimate of the deficit for this year is about $200 billion below the estimate that it produced in February 2013, mostly as a result of higher-than-expected
revenues and an increase in payments to the Treasury by Fannie Mae and Freddie Mac.

Mel Watt, Nominee to Head FHFA, Opposes Administration by Voting to Deregulate Derivatives

Good progressives like MoveOn, New Bottom Line, the Alliance of Californians for Community Empowerment, AFR, Elizabeth Warren, and Richard Trumka, head of the AFL-CIO have all fallen in line with Obama’s nomination of Mel Watt, Representative from ~~Bank of America~~ North Carolina.

It might help if they looked harder at Watt. If they were honest about it, there’s not much to like.

Lynn Parramore: Your Retirement for a Bottle of Champagne – How Wall Street Fraudsters Ripped You Off, Again

By Lynn Parramore, a senior editor at Alternet. Cross posted from Alternet

The LIBOR price-fixing scam has cost at least $110 million — in the state of Oregon alone!

Congressional Influence as a Determinant of Subprime Lending

A relatively unforeseen implosion in housing markets figured prominently in the 2007 meltdown in capital markets and the subsequent downturn in the global economy. This column presents new research on the political geography of subprime lending. Congressional leaders – as well as other recipients of campaign contributions – may have benefited from gains to trade in the direction, pricing, and sizing of subprime mortgage loans.

Abigail Field: Is Schneiderman’s Plan to Sue Bank of America and Wells Over Mortgage Settlement Violations a Wet Noodle Lashing?

By Abigail Field, an attorney and writer

Eric Schneiderman gets buyers’ remorse. But can he do anything about it?

Did the Euro Kill Governance in the Periphery?

Yves here. We’re a little EU-centric tonight as a result of a wealth of particularly good material, which is often a sign that stresses are rising (there was tons of good material in the runup to the crisis as well).

By Jesús Fernández-Villaverde, Professor of Economics, University of Pennsylvania and Luis Garicano, Research Fellow with the Productivity and Innovation Programme, Centre for Economic Performance; Professor of Economics and Strategy, Departments of Management and of Economics. Cross posted from VoxEU

By the end of the 1990s, under the incentive of Eurozone entry, most peripheral European countries were busy undertaking structural reforms and putting their fiscal houses in order. This column argues that the arrival of the euro, and the subsequent interest-rate convergence, loosened a tide of cheap money that reversed the incentives for further reforms. As a result, by the end of the euro’s first decade, the institutions and governance in the Eurozone periphery were in worse shape than they were at the start of the decade.

France Versus Reality

By Delusional Economics, who is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.

Yesterday I noticed an interesting paragraph over at efxnews about France and its parallels with what many see in the market today:

It’s a big surprise for some that France is high on the crisis susceptibility index…

Bank “Zombie Title” Rises, Hurting Communities and Borrowers, as OCC and Fed Sit Pat

We’ve written before about the perverse phenomenon known as “zombie title.” Kate Berry of American Banker provides an update.

Vice Chairman of Chinese Accounting Association Warns Chinese Local Debt Could Create Bigger Crisis than US Housing Implosion

On the one hand, Bloomberg today tells us retail demand for stocks is as hot as ever. On the other, we have someone well-placed in China telling the world that its local debt is a train wreck waiting to happen, a classic Minksy Ponzi unit, but the timing of the unraveling is uncertain.

Richard Alford: Has the Household Sector Delevered?

By Richard Alford, a former New York Fed economist. Since then, he has worked in the financial industry as a trading floor economist and strategist on both the sell side and the buy side.

The post raises three questions. How has the risk appetite of the household sector, as reflected in the leverage ratio and the asset mix, changed over time? Does it appear as if the household sector has completed the rebuilding of its balance sheet? What are the implications, if any, if the deleveraging of the household sector balance sheet is incomplete?

Troika Demands Another €6 Billion from Cyprus, Making “Rescue” Bigger Than GDP

Nothing like dramatic proof that austerity is a failure

Banks Resorting to Old Tricks to Reduce Capital Levels

Wow, did I miss it? Didn’t we have a crisis just a bit over four years ago? And wasn’t one of the big drivers the fact that banks were overlevered and took on too much risk?

Well, not only do we seem to be rerunning that playbook, banks are using strategies right under regulators’s eyes last time around to create phony capital. Worse, are pulling the exact same tricks they did last time around. Worse, regulators seem to be doing nothing to stop it.

Fed Argues that Mortgage Abuses are Trade Secrets, Meaning Institutionalized Fraud

When the media discusses how banks have ridden like a steamroller over borrowers and investors, the typical response is a combination of minimization and distancing: that the offense wasn’t such a big deal and that it was a mistake. Recall the PR barrage in the wake of the robosigning scandal: its was “sloppiness,” “paperwork errors”.

Two major government settlements later, this position is looking awfully strained. And the Fed, in stonewalling Elizabeth Warren’s and Elijah Cumming’s efforts to get more information about the Independent Foreclosure Reviews, presented the bad practices as servicer policies, which means that they were deliberate, hence, fraudulent.

Why Gary Gensler Should be #2 at Treasury

Last week, Simon Johnson pumped for Gary Gensler, now chairman of the CFTC, to become the Deputy Treasury Secretary. Frankly, it would have been better if Gensler were Treasury secretary (an idea Johnson also promoted), but we are past that point. Obama is serious about selling catfood futures via deficit scaremongering, and he’s tagged budget maven Jack Lew as his perfect front man.

Gensler, along with Sheila Bair, has been one of the few financial services regulators who has stood up to industry demands and scored some wins.

QE Forever?

Ambrose Evans-Pritchard, in a provocative column, argues that the monetary authorities are not going retreating from QE, and that might not be a bad thing. But in its current form, it probably is.