The CFPB is proving to be tough minded on the mortgage front. The Wall Street Journal reports that it intends to require banks to consider a modification request before proceeding with a foreclosure:
Read more...I have to confess I’m really enjoying the dust up between the New York Superintendent of Financial Services, Benjamin Lawsky, and his opponents, namely, his target, Standard Chartered, and the flummoxed Federal regulators that he is showing up as so deeply captured that they genuinely can’t tell regulatory theater from the real thing.
Read more...Neil Barofsky continues to take issue with the Administration’s efforts to depict itself as the friend of ordinary Americans when its real loyalties are to banks. In a Reuters op-ed, he took on the hypocrisy of the Administration and its allies in their “fire DeMarco” messaging. If you are late to this row, Ed DeMarco, head of Fannie’s and Freddie’s regulator, the FHFA, nixed the idea of having his wards make principal reductions on mortgages, despite the fact that top mortgage industry analyst Laurie Goodman has ascertained they are far more successful than mods that don’t lower principal balances.
As various commentators, including yours truly, have pointed out, the criticism of DeMarco is sheer scapegoating.
Read more...The New York Superintendent of banks dropped a bombshell today, filing an order against Britain’s Standard Chartered Bank. It charges the bank with having engaged in at least $250 billion of illegal transactions with Iranian banks, including its central bank, from 2001 to 2010, and of engaging in similar schemes with Libya, Myanmar and Sudan (those investigations are in progress). It threatens SCB with the loss of its New York banking license and termination of access to dollar clearing services. The latter alone is as huge deal. You are not a real international bank unless you have dollar clearing. Sumitomo Bank looked at giving up its US banking license in 1985 when it was examining deal structures for making an investment in Goldman, and ascertained that giving up access to Fedwire would cost it over $100 million a year and considerably weaken its position in Japan. SCB is certain to be a much more active dollar player than Sumitomo was and the volume of international transactions has grown hugely since then.
SCB squealed like a stuck pig, claiming that only $14 million of transactions were out of compliance. But the bank has nowhere to go.
Read more...No sooner had some astute Euro commentators noted that Draghi might have found a path through the Euro mess to keep it patched up long enough for to impose austerity on the periphery and drive all of Europe into a lovely depression, various elements of his plan look as if they were coming unglued.
Read more...While many citizens favor criminal prosecutions of bankers (I recently had a BSchool classmate of Jamie Dimon ask me when he was going to jail), it’s been remarkable how little mention of it there has been in the mainstream media in connection with the Libor scandal (yes, sports fans, price fixing is criminal per the Sherman Anti-Trust Act). This interview of Dennis Kelleher and Felix Salmon by Eliot Spitzer provides a badly-needed counterpoint.
Read more...Nothing like being reminded on a regular basis that you live in the best of all possible worlds.
The New York Times tells us a new study is being presented today at the American Accounting Association which defends the revolving door.
Read more...Ambrose Evans-Pritchard of the Telegraph, who correctly called that ECB would not take action last week, argues in his latest article that Mario Draghi and Italy’s Mario Monti have isolated the Bundesbank and are closing in on being able to buy bonds along side the Eurozone rescue facilities once the ESM presumably goes live (the assumption is that the German constitutional court will lift its injunction on September 11). Draghi hopes to keep Mr. Market at bay till then by a combination of happy talk and threats.
Read more...Yves here. Although this VoxEU is heavier on economese than may suit the tastes of most NC readers, it’s nevertheless worth your attention. It takes issue with a popular view among economists, that one of the ways to reduce systemic risk is to reduce cyclical swings in asset prices (or more accurately, to prevent banks from all following some great new lending fad and running off a cliff tout ensemble). The wee problem with that is economists were patting themselves on the back in 2007 that they had engineered a Great Moderation and the overwhelming majority were in denial about the existence of a global credit bubble. In fairness, many are thinking about how to create automatic counter-cyclical stabilizers, since as Ian MacFarlane, the former Governor of the Reserve Bank of Australia pointed out, an asset bubble looks like increased wealth to the community, so anyone who stands in its way is going to be extremely unpopular.
This VoxEU article offers an alternate line of thinking on how to to lower systemic risk.
Read more...In case you needed more proof of the utter incompetence of the SEC, two new items emerged late last week.
Read more...By Yanis Varoufakis, Professor of Economics at the University of Athens. Cross posted from his blog
First came the impressive declarations: The ECB will do whatever is necessary to ensure that those who go short on the euro, who bet on its disintegration, will lose. “And, believe me”, he added “it will be enough”. He also, rather significantly, uttered the term ‘convertibility risk’ (code-words for the risk that funds kept in some part of the Eurozone will be forcefully converted to some new, devalued, currency) and pledged to eradicate it. No wonder, the markets responded with considerable enthusiasm.
Then came the moment to put up or forever lose his credibility. Alas, probably under incredible pressure from the Bundesbank, he opted for the latter.
Read more...Given all the varieties of bank-perpetrated mortgage fraud that have come to light in recent years, one that got comparatively little attention were abuses under the Servicemembers Civil Relief Act.
Read more...The verdict is in: nearly 20 years of keeping the SEC budget starved and cowed have rendered a once competent and feared agency incapable of doing more than winning cases on illegal parking, um, insider trading.
The SEC’s performance in the case at issue, SEC v. Stoker, was such a total fail that the odds are high that any motivated member of the top half of the NC readership would have done a better job of arguing this case pro se than the SEC did.
Read more...Today, Acting FHFA Director Ed DeMarco wrote to Congress, after due consideration, reaffirming his position that he will not permit Fannie and Freddie to lower principal balances of mortgages of borrowers that are delinquent. This is despite the fact that the top analyst in this space, Laurie Goodman, has determined that principal modifications are the most effective form of mortgage modification, resulting in much lower refault rates than interest rate mods or capitalization mods. And that makes sense. Why should a borrower struggle to hang on to a home when even if they make all the payments, when they sell they they are stuck with a big tax bill? And as we’ve stressed, private label investors are overwhelmingly in favor of deep principal mods for viable borrowers, and that’s because foreclosure is costly and leaves them worse off.
As much as this blogger is firmly of the view that this is a poor economic decision (deep principal mods are a sound idea, as long as you have a decent approach for vetting borrower income and other debt payments to see if they are viable with a mod), I have to hand it to DeMarco as a bureaucratic infighter.
Read more...The more news comes out, the more it looks like Mario Draghi’s pledge that the ECB would do all it would take to save the Euro was a bluff.
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