Here the major bank servicers are about to get a screaming bargain via a hoped-for multi-state-Federal mortgage settlement, and what is number five service Ally doing, but threatening to thumb its nose at the deal as being to hard on them.
Per Housing Wire, Ally CEO Michael Carpenter made some pretty cheeky statements on an investor conference call today:
Read more...By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)
This four part paper deals with a key element of derivative market reform – the CCP (Central Counter Party). The first part looked at the idea behind the CCP. This second part looked at the design of the CCP. The third part looked at the risk of the CCP itself and how that is managed. The last part looks at the market effects of the effects of the CCP on the market.
In the Renaissance, popes often annulled the marriages of Catholic monarchs. The annulment preserved, theoretically, both the authority of the Papacy and the sanctity of marriage. The CCP proposal is similar. It gives the impression that regulators and legislators are reasserting control over the wild beasts of finance. In reality, the proposal may not work or materially reduce the risks it is intended to address.
Read more...Even though the Greek move to blow up the latest Eurorescue plan caught the world’s attention, another pushback is underway, this via the blue chip lobbying group, The International Institute for Finance.
The threat, which has surfaced before and is picked up in an article by Bloomberg, is that raising capital levels as mandated under the latest version of the Eurorescue plan, won’t take place by selling equity, retaining earnings (which would almost certainly mean constraining pay levels) or accepting government equity injections (which will come with nasty strings attached). Instead, banks will just shrink to meet the targets by selling risky assets. (Note that the targets, which are being met with howls by the industry, are for them to write down sovereign and reach a core capital level of 9% by June 30, 2012).
This is meant to be a threat. “Shrinking assets” implies less lending. Less lending would put a downward pressure on economic growth. Recessionary or near recession conditions tend to lead voters to throw elected officials out. So this sabre rattling is clearly meant to get the officialdom back in line.
How seriously should we take this?
Read more...Greek Prime Minister George Papandreou has managed to put the European crisis game of financial fakery into turmoil. Pretty much no informed commentator expected the latest gimmick-larded rescue package to work; there were simply too many points of failure. And even if this program had miraculously come to fruition, a later train wreck was still inevitable, since Germany was persisting in wanting two contradictory outcomes: running trade surpluses in Europe, and not lending more to its trade parters.
But no one anticipated that a long suffering debtor would revolt, which is what Papandreou’s announcement of a referendum on the punitive bailout amounts to.
Read more...A key German finance leader is talking tough about financial reform. But will his peers follow?
Read more...Yves here. Frieda makes a very important point in this Project Syndicate column, that of the role of the banking system in the European debt crisis. On one level, it may seem trivial to say that the sovereign debt crisis is the result of financial crisis. But the Eurozone leadership has not drilled into the next layer: how did this come about? The superficial explanation, that they all ate too much US subprime debt and got really sick, is superficial and shifts attention away from the real issues. European banks have huge balance sheets with a lot of low-return investments. I did some consulting work for some European banks over a decade ago (one of the remarkable things about banking is how little things change over time) and they tended to target commodity areas of banking in the US, not simply because that was where they could break in, but also because the returns were tolerable (although they did hope to move up the food chain into more lucrative business).
Frieda argues that merely having banks raise capital ratios to the 9% level stipulated in the current version of the Eurozone rescue is inadequate. Absent more aggressive measures, “no amount of capital will restore investors’ faith in eurozone banks.”
By Gene Frieda, a global strategist for Moore Europe Capital Management. Cross posted with author permission from Project Syndicate.
Read more...By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)
This four part paper deals with a key element of derivative market reform – the CCP (Central Counter Party). The first part looked at the idea behind the CCP. This second part looked at the design of the CCP. The third part looks at the risk of the CCP itself and how that is managed.
The key element of derivative market reform is a central clearinghouse, the central counter party (“CCP”). The CCP is designed to reduce and help manage credit risk in derivative transactions – the risk that each participant takes on the other side to perform their obligations (known as “counterparty risk”). The CCP also simplifies and reduces the complex chains of risk that link market participants in derivative markets. However, the proposal relies on the ability of the CCP itself to manage risk.
Read more...There have been so many rumors about the so-called 50 state attorney general settlement (which now is more like a 43 state settlement) being on the verge of having a deal that we’ve discounted them. We’ve said from the beginning that this was a cash for release deal. Basically, because the Federal regulators and state AGs, by design, had done no meaningful investigations, they didn’t have any threats to bring the banks to heel. So they’d have to offer a bribe, and the bribe has always been a “get out of jail free” card.
Put it more simply: The banks got bailed out, and the rest of us got left out.
Read more...The New York City General Assembly website has a section for a recently-formed Alternative Banking group, which has started meeting on Sundays from 3:00 to 5:00 PM. You can read the notes from last week’s session here.
Read more...I suppose there is no point in being part of the 1% unless you can throw your weight around.
Greg Palast writes in the Guardian of how Goldman took a wee bit of revenge on Occupy Wall Street via the itty bitty credit union ($30 million in assets) that OWS chose for its bank account, Peoples Bank.
Read more...This Institute for New Economic Thinking interview with economist Ed Kane discusses how systemic risk should be measured. Kane argues that taxpayer are essentially disadvantaged bank shareholders, getting the downside and none of the bennies, like dividends or capital gains. He argues that banks should be paying taxpayers for the privilege of having them and their counterparties rescued, and that is over $300 billion a year.’
And that isn’t the only freebie banks are getting.
Read more...What happens when you get a default that equates to a 50% loss for most investors without triggering default insurance? Massively negative unintended consequences. Europe has just made a mockery of the sovereign credit default swap (CDS) market by trying to structure a default via voluntary 50% haircuts in order to avoid triggering CDS claims. […]
Read more...By Warren Mosler, an investment manager and creator of the mortgage swap and the current Eurofutures swap contract and Philip Pilkington, a journalist and writer based in Dublin, Ireland
Are these haircuts on Greek debt really such a good idea? Or are they really just a stopgap that will make things all the worse in the long-run?
Read more...The mortgage securitization industry has just had a new major front open on its battle with those who are less than happy with the way it has run roughshod over the law. While there are a significant number of court rulings questioning foreclosures in the name of MERS or other practices commonly associated with the use of MERS (for instance, in Oregon, its violation of recording requirements mandated at the state level), no major regulator or public official (beyond county registers of deeds) has gone after MERS in a serious way (New York’s AG has opened an investigation, but it has not led to any litigation).
This has changed with the Delaware attorney general Beau Biden’s filing.
Read more...When failure is too painful to contemplate, any halting motion in something resembling the right direction will be hailed as success.
Eurozone leaders had a session well into the night and announced a sketchy deal that dealt with one major stumbling block, which was getting a deep enough “voluntary” haircut on Greek debt. Government officials regarded it as key that any debt restructuring be voluntary, since no one wanted to trigger payouts on credit default swaps written on Greek debt (a default or forced restructuring would be deemed a credit event and allow CDS holders to cash in their insurance policies, and that could trigger a bigger rout). The banks were unwilling to accept the 60% haircut sought by the Eurocrats, but agreed to a 50% reduction.
Read more...