The Subcommittee on Financial Institutions oversees banks, savings associations, credit unions and other financial institutions, including deposit insurance, and e-commerce. It also oversees the Federal Home Loan Bank System, regulatory activities of the Federal Reserve System, the Office of the Comptroller of the Currency and the Office of Thrift Supervision within the Treasury Department, the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration
[edit]Members, 110th Congress
As noted here on Monday, Schumer sent letters to the Office of Thrift Supervision, the Federal Deposit Insurance Corp. and the Federal Home Loan Bank of San Francisco, saying he was "concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers."
"The FDIC estimates its takeover of IndyMac will cost between $4 billion and $8 billion."
snip
"...a run on the bank that saw depositors withdraw more than $1.3 billion during the 11 days after Schumer released a letter about the possible risks of IndyMac failing."
I love to beat dead horses, but what is amazing is that Schumer did his job and then someone is pumping around PR to discredit him in terms of using his position on The Subcommittee on Financial Institutions, where he has total authority over the people giving him shit....that seems weird!
Methinks the financial institutions are so badly leveraged right now, that any run on them would cause most of them to be instantly insolvent if they not already are.
The equity tranche of collateralised debt obligations (CDOs) is an example of loss leverage in credit markets. A typical CDO consists of a $1,000 million portfolio made up of $10 million exposure to 100 corporations. The equity investor assumes the first 2% ($20 million) of losses on the portfolio. Assuming a loss of $6 million if any corporation defaults (recovery rates are 40% of $10 million), the equity investor is taking the risk of the first three defaults. In contrast, if the investor invested $20 million in the entire portfolio ($200,000 per corporation), then three defaults in the portfolio would result in the investor losing $0.36 million (loss of $120,000 per company ($200,00 adjusted for 40% recovery rates) times 3). For three losses the equity tranche investors leverage to defaults is 56 times (if there were 3 losses then the investors loses the entire $20 million invested in the CDO equity against $0.36 million in the diversified portfolio). By reducing the tranche width (the size of the equity tranche) the credit leverage can be increased to over 83 times!
Increasing the amount of potential gain or loss for a given event is now routinely used to create leverage. The use of these techniques is poorly understood. It does not show up in traditional leverage measurements that are focused on the level of borrowings. The additional liquidity and leverage creates complex chains of risk and moral hazard in markets that may prove problematic when prices correct. It is another unknown unknown of modern markets.
There is NO way our country can survive without Steve & Berry's. Where will my wife go to buy junk made by enslaved kids from China? While I'm on the subject, is it hard to get good free slave child labor or what. Everything those Chinese kids make is broken within a week. At any rate, where will all the juvenile delinquents without jobs hang out. I heard that Bernanke and Paulson are frantically putting together a full scale buyout of any mall, strip or otherwise, due to the threat to national security that would be caused if a mall were to fail.
As to CRE - why ain't I in bed yet? -
these guys are big with malls owned by GGP, which owns a local mall here. However, S&B isn't in this mall.
I've watched GGP for about a year + as an intellectual exercise. Not shorting individual stocks yet as not enough experience; but GGP has put a boatload of money into upgrading the local mall, which they bought several years ago.
Wife works nearby and eats at mall restaurants and notes that traffic is off; I also note when driving past.
If these mall REITs are debt heavy and stuck with anchors like this, they're in trouble.
Facing second quarter loss and write downs that could rise above $6 billion, Merrill Lynch CEO John Thain is considering selling other investments to drum up captial, not just Merrills stakes in financial information powerhouse Bloomberg LP, and money manager BlackRock, people familiar with the firm say.
The FDIC has said it will reopen IndyMac on Monday as IndyMac Federal Bank, and then try to sell the company as a whole or in pieces. Regulators expect the takeover to cost the FDIC $4 billion to $8 billion. The agency insurance fund has about $52.8 billion.
"More than 300 banks could fail in the next three years, said RBC Capital Markets analyst Gerard Cassidy, who had in February estimated no more than 150."
gee i guess schumer has a lot of work ahead of him...banks cant fail unless he points a finger
Re: John D. Hawke, the U.S. comptroller of the currency (regulator of national banks) from 1998 to 2004, had more pointed words for Schumer in a story in the American Banker newspaper today.
"If Schumer continues to go public with letters raising questions about the condition of individual institutions, he will cause havoc in the banking system," Hawke said.
This is funny, I never caught this, but the reference to Hawke, suggests IMHO, that Hawke "is" in some position of power, which is very funny in this attempt at discrediting Schumer, because Hawke has been retired for four years! Great media, great hype and total bullshit -- I missed that last week!
Interestingly enough, IMHO, John C Dugan , who is The Comptroller, has said nothing about Indymac or Fannie.......huh, whadya think about that???
Several Georgia banks dominate a recent ranking of the nation's riskiest financial institutions based on a measure known as the "Texas ratio," which attempts to gauge how likely they will run into deep financial trouble.
Several Georgia banks rank high in terms of the so-called "Texas ratio," a risk measure from the days of the savings and loan debacle that sank hundreds of financial institutions in that state in the 1980s. The ratio measures problem loans compared to the banks' equity capital and reserves for loan losses.
National rank\tAssets*\tTexas ratio (%)
1. Integrity Bancshares, Alpharetta\t$1.21 billion\t372
4. Triangle Financial Group (The Community Bank), Loganville\t$625 million\t246
8. FirstCity Bank, Stockbridge\t$255 million\t211
11. First Georgia Community Corp., Jackson\t$293 million\t182
14. Omni Financial Services (Omni National Bank), Atlanta\t$997 million\t178
19. First Security National Bank, Norcross\t$140 million\t154
20. Southern Community Bank, Fayetteville\t$372 million\t147
23. FirstBank Financial Services, McDonough\t$432 million\t144
25. Newnan-Coweta Bancshares,** Newnan\t$240 million\t1
Even as investors were stampeding out of these stocks, the claque in Washington rushed to reassure them. Both Ben Bernanke, the Federal Reserve Board chairman, and Henry Paulson Jr., the Treasury secretary, said the mortgage giants' regulators confirmed that the companies were "adequately capitalized
But investors have good reason to be skeptical. In the first half of 2007, both Bernanke and Paulson sang a similar tune when they opined that problems in the mortgage market were "contained" to subprime loans.
"The real outrage is that none of this had to happen," said William Fleckenstein, co-author of "Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve" and president of Fleckenstein Capital in Issaquah, Washington. "We did not have to ruin the financial system and ruin the financial lives of a huge chunk of the middle class in the United States.
"It is crystal clear," he adds, "that the Fed not only made mistakes, they had the pompoms out, cheering for deregulation. Until people recognize why we are in this mess, I don't see how we get out of this thing."
"The downside is there might be a bailout and then you pay in taxes. These things don't come cost-free when government gets involved."
For a generation, U.S. policy makers have lectured the world on the need to unleash the animal instincts of the market. China's rickety banks should stop lending to protect state factory jobs, Americans said, and focus on the bottom line. Now the Bush administration is reluctantly concluding that Fannie and Freddie might need to be propped up to protect the U.S. homeowner.
About ABA
The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen Americas economy and communities. Its members the majority of which are banks with less than $125 million in assets represent over 95 percent of the industrys $12.7 trillion in assets and employ over 2 million men and women. ABA can be found on the Internet at http://www.aba.com
Trade groups representing the international banking community say that current accounting standards requiring fair-value measurement of financial instruments are, as American Bankers Association president and CEO Edward Yingling put it in a statement, "a step in the wrong direction."
Washington's importance to the sector is also reflected in the amount of money that its executives, trade groups, and corporate political action committees spend to influence Congress. In the 2006 election cycle, they collectively gave $258 million to federal candidates' campaigns and to party committees. The sector was ranked No. 1 in federal lobbying expenditures in 2006, when it shelled out nearly $385 million, according to the nonpartisan Center for Responsive Politics. National Journal's analysis of 2006 IRS filings shows that among trade associations, the finance and real estate groups account for 14 of the top 50 spenders on all forms of lobbying. The fifth-ranked National Association of Realtors led the way, spending more than $18 million.
Its 2:30 in Chicago, I got back from the airport to pick up my daughter and grand kids, and there are 26 people here on a Sunday nite? Lets see if we can move the market.
Sarah Jessica Parker at the 2007 launch of her clothing line, Bitten
Prophetic.
The sign looks like something from the movie Idiocracy. How fitting.
Beginning in 2004, the company began including some operating expenses -- a portion of store rents, for example -- in a separate expense category meant to reflect the cost of unsold inventory, people knowledgeable about the accounting say. That potentially benefited the retailer in two ways.
Steve and Barry's opened nearby last year, in a JNN-owned mall that had lost most of its anchors and was considering reinventing itself as an outlet mall. (Small city, two perimeter malls, one gets the shaft.)
If S&B closes, then it's likely to be a full-on ghost mall. And FWIW, their clothes were crap. No wonder, given they were the least important bit of their operations.
n a dramatic effort to quell the crisis surrounding Fannie Mae and Freddie Mac, the US government on Sunday night announced that it will seek unlimited authority from Congress to lend money to the troubled mortgage groups and invest in their equity.
The market will get the chance to express its views on Paulson plan today when Freddie begins marketing $3bn in short-term debt. Wall Street bankers said Treasury officials had been in touch with big investment and commercial banks to ensure they were still considering placing bids for the bond sale.
Since the almost overnight collapse of Bear Stearns earlier this year, top-level Wall Street executives have been pleading with regulators to investigate what they see as efforts by short sellers to plant false information and profit from it.
But its ok if your a CEO to lie about the financial health of your company!
Chief Executive Officer Vikram Pandit said shrinking the bank's $2.2 trillion balance sheet, the biggest in the U.S., was a cornerstone of his turnaround plan.
Nowhere mentioned in the accompanying 66-page handout were the additional $1.1 trillion of assets that New York-based Citigroup keeps off its books: trusts to sell mortgage-backed securities, financing vehicles to issue short-term debt and collateralized debt obligations, or CDOs, to repackage bonds.
Seven of the biggest U.S. banks, including Citigroup, are on the hook for at least $300 billion of credit and liquidity guarantees for off-balance-sheet loans and bonds, according to a June 30 report from consulting firm RiskMetrics Group Inc. in Rockville, Maryland.
Despite verbally supporting a strong dollar, U.S. authorities had preferred a softer currency over the past years to rein in a widening trade deficit, but with inflation on the rise this is not an option anymore, Redeker said.
"We are going to see intervention in the dollar when we see the first undershoot in the dollar," Redeker said. "Inflation expectations are undermining the bond market and impose a risk premium on the long end of the market."
I guess this genius has missed all those pushbacks every time it goes near EUR 1.60
Where do they find these dolts, Midland, TX?
You could put together a CR hedge fund and clean some clocks as long as Sebastian isn't managing protfolios( except an inverse fund that he thinks isn't.)
Schumer could have sent his letter privately. Making it public was an unprecedented act either of extreme incompetence or extreme malice. And I do not believe that bastard is incompetent.
I am no fan of IndyMac, but anyone who believes Schumer did anybody any good by starting a run (except maybe his donors in the hedge fund industry) is an idiot.
While Sarkozy is attempting to consolidate and expand French influence with his new "Mediterranean Union" the Bush administration continues to alienate our friends and allies with the export of "financial timebombs."
Le jour de gloire est arrivé, mais non pas ici. (The day of glory has arrived, but not here).
Making it public was an unprecedented act either of extreme incompetence or extreme malice.
The car was headed straight off the cliff with or without Schumer, he just gave it a little push. I have to agree with the people who've been saying that his intention was to not allow the Bush administration to run out the clock.
The car was headed straight off the cliff with or without Schumer, he just gave it a little push.
What he did was try to warn the people who lost 1 Billion dollars to get out. I find it almost uncomprehensable that Americans will be "scared" of Chinese and Russian investors and not let them take the risk the got paid to take (50 billion a year in 'risk premium' for FNM bonds)-- and yet cry FOUL when a fellow American trys to save Americans from loss. You guys really deserve what is happening to you!
Message received, Nemo. We all need keep quiet, and keep the public uninformed. The masses can't be fleeced if they are making informed choices. And heaven forbid, the industry think twice before spreading its own bs about how little risk it has on its books, and how everything is 'adequately capitalized'.
The books should be thrown open (especially Citi's given today's news)- and people should be allowed to move their money where they feel it is safe.
Btw, everyone, Bernanke included, has said banks are going to fail in this crisis.
NPR's Steve Inskeep questioned WSJ economics editor David Wessel regarding the problems at Fannie and Freddie this morning - particularly whether the fundamental problems arise from liquidity or from solvency issues.
"This is a bailout by any other name," Gross, chief investment officer at Pacific Investment Management, known as Pimco, told Reuters in an email.
Gross said he expected both mortgage companies to sell preferred stock to the Treasury or the public -- probably the Treasury -- once the authority is approved by Congress and the President.
Hey, I know that a lotta guys around here believe that the Iraq war power act allows the Unitary Executive and that it extends to the financial area as well. I am surprised that Schumer hasn't been accused of helping Al Quida but making his letters to regulators public.
But that is the balance of powers.
The fact that the Congress abdicated their powers in favor of the President is yesterdays news.
The Senate should air the dirty linen of the administration.
It is the regulators who allowed IMB to run itself into insolvency. This was to help their political base as long as possible.
Schumer gave them some rope and then pulled the trap.
I expect that Democrat shovels will turn over a lot of this stuff. Those of you who slept in the gutter with the dogs will have fleas.
Oh Gee
To me, the oddest thing about the Steve and Barry's "business model" is that mall owners apparently gave them up-front funds. I've never known any kind of tenant improvements to be paid for in that way. Usually you have to actually do the construction work and submit invoices, lien waivers, etc., etc. to get any kind of payment at all.
Desperate to fill empty department-store spaces, mall owners courted the retailer with fat payments to outfit its cavernous stores. Those checks, not clothing profits, fueled the company's runaway growth, according to people familiar with the company's finances. When the payments slowed, Steve & Barry's collapsed.
Looks like the markets are poised to jump up on the Fannie-Freddie news. Doubtless fueled by 26 year old traders who believe that now that the Fed is backstopping Fannie & Freddie, things are going back to normal. Sure, LEH et al may take a hit, but finally the crisis is over.
Well, as Henry Kissinger once said, "In a real crisis, everything suddenly turns quiet, because you've run out of options."
I think these guys simply cannot conceive that there might be problems too big for the Fed to fix. I think that come December, they might finally begin to realize this. To be honest, I thought I was a real bear, but I never once thought it through to the point of thinking that this bubble might actually threaten Fannie and Freddie.
Also, the WSJ article notes that leases for many smaller tenants contain clauses that lower their rents if the anchor tenant goes dark.
That right there explains some of the absurd payments. S&B was manipulating the system to their own advantage. The mall operators did the spreadsheet math and found the that the payment to S&B was a small expense in the great scheme of things... except they never considered that S&B might be a legal-ponzi.
On could have bought SKF at the open for $163.70 and it's currently trading at $183.18 - FNM & FRE turned negative after 20%+ early gap ups. Where nowhere near a bottom folks. No fear.
I am no fan of IndyMac, but anyone who believes Schumer did anybody any good by starting a run (except maybe his donors in the hedge fund industry) is an idiot.
My experience over the past seven decades is that folks who think supressing the truth is a good idea, rarely have my best interests in mind.
If Schumer had kept quiet, Americans would be better off? Would it be even better if he had lied?
If more people spoke the truth more often, perhaps our political and business leaders would be a bit more circumspect.
If Schumer had kept quiet, Americans would be better off? Would it be even better if he had lied?
We can speculate all day long, but the fact remains that there was a slow-motion run occurring in the days immediately after Schumer made his letter to the regulators public. OTS/FDIC has stated that they were in talks with several potential buyers, who then backed away from the table (either due to the letter, or due to the mini-run screwing up the numbers).
This was a damned if you do, and damned if you don't situation. Schumer made his thoughts public, and the public responded. I consider his actions poorly advised under the situation. He may have cost the FDIC insurance fund several billion dollars.
who else is up?
Right here with CR & Yankee. Watching the Asian markets.
and WHO is Steve and Barry? I know retail, but they're not around me
BTW -- for those that care, here is a link to futures at CNN:
http://money.cnn.com/data/premarket/index.html
Yeah . 1:30am and I'll need to leave for my cubicle job in 6 hours. I think this week is going to be a doozy
Ah.. so it's commercial now.
Dollar is being strengthened
This should be an interesting day.
Jeez, looks like this was an actual pyramid scheme.
Watching that too, BB.
(On)T Maybe they can reorganize and reopen as Switch & Bait
This is about Schumer isn't it?
Whatever Bucky strengthening is going on, I'd characterize it as a fart in a whirlwind.
Gross Likes Dollar More Than Euro for 1st Time on EU
Gross Likes Dollar More Than Euro for 1st Time on EU (Update2) - Bloomberg.com
More on the dollar.
Hey is the contest still on?
iDep(tm)
OT here, but this is kinda interesting Re: Schumer:
United States Senate Banking Subcommittee on Financial Institutions - Wikipedia, the free encyclopedia
Jurisdiction
The Subcommittee on Financial Institutions oversees banks, savings associations, credit unions and other financial institutions, including deposit insurance, and e-commerce. It also oversees the Federal Home Loan Bank System, regulatory activities of the Federal Reserve System, the Office of the Comptroller of the Currency and the Office of Thrift Supervision within the Treasury Department, the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration
[edit]Members, 110th Congress
Ok, did anyone read that? Schumer warns people about Indymac and then you have some retard (John D. Hawke, the U.S. comptroller).
Re: Regulators to Schumer on IndyMac: Please shut up
Regulators to Schumer on IndyMac: Please shut up | Money & Company | Los Angeles Times
As noted here on Monday, Schumer sent letters to the Office of Thrift Supervision, the Federal Deposit Insurance Corp. and the Federal Home Loan Bank of San Francisco, saying he was "concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers."
"The FDIC estimates its takeover of IndyMac will cost between $4 billion and $8 billion."
snip
"...a run on the bank that saw depositors withdraw more than $1.3 billion during the 11 days after Schumer released a letter about the possible risks of IndyMac failing."
Expired
7 billion minus 1.3 equals what ever was above and beyond any blame that can be cast schumers way....the bank was insolvent period.
I love to beat dead horses, but what is amazing is that Schumer did his job and then someone is pumping around PR to discredit him in terms of using his position on The Subcommittee on Financial Institutions, where he has total authority over the people giving him shit....that seems weird!
mock turtle writes:
....the bank was insolvent period.
Methinks the financial institutions are so badly leveraged right now, that any run on them would cause most of them to be instantly insolvent if they not already are.
if schumer is guilty of anything, he is guilty of not castigating the regulators, and warning the public earlier.
if this were china some regulators would be tried and set before a firing squad...a few CEOs too
From Satyajit Das:
Tales of Leverage
Satyajit Das's Blog - Fear & Loathing in Financial Products: Tales of Leverage
The equity tranche of collateralised debt obligations (CDOs) is an example of loss leverage in credit markets. A typical CDO consists of a $1,000 million portfolio made up of $10 million exposure to 100 corporations. The equity investor assumes the first 2% ($20 million) of losses on the portfolio. Assuming a loss of $6 million if any corporation defaults (recovery rates are 40% of $10 million), the equity investor is taking the risk of the first three defaults. In contrast, if the investor invested $20 million in the entire portfolio ($200,000 per corporation), then three defaults in the portfolio would result in the investor losing $0.36 million (loss of $120,000 per company ($200,00 adjusted for 40% recovery rates) times 3). For three losses the equity tranche investors leverage to defaults is 56 times (if there were 3 losses then the investors loses the entire $20 million invested in the CDO equity against $0.36 million in the diversified portfolio). By reducing the tranche width (the size of the equity tranche) the credit leverage can be increased to over 83 times!
Increasing the amount of potential gain or loss for a given event is now routinely used to create leverage. The use of these techniques is poorly understood. It does not show up in traditional leverage measurements that are focused on the level of borrowings. The additional liquidity and leverage creates complex chains of risk and moral hazard in markets that may prove problematic when prices correct. It is another unknown unknown of modern markets.
BB
what you say is scary but likely true.
yankee,
yeah i'm watching asia also.
There is NO way our country can survive without Steve & Berry's. Where will my wife go to buy junk made by enslaved kids from China? While I'm on the subject, is it hard to get good free slave child labor or what. Everything those Chinese kids make is broken within a week. At any rate, where will all the juvenile delinquents without jobs hang out. I heard that Bernanke and Paulson are frantically putting together a full scale buyout of any mall, strip or otherwise, due to the threat to national security that would be caused if a mall were to fail.
As to CRE - why ain't I in bed yet? -
these guys are big with malls owned by GGP, which owns a local mall here. However, S&B isn't in this mall.
I've watched GGP for about a year + as an intellectual exercise. Not shorting individual stocks yet as not enough experience; but GGP has put a boatload of money into upgrading the local mall, which they bought several years ago.
Wife works nearby and eats at mall restaurants and notes that traffic is off; I also note when driving past.
If these mall REITs are debt heavy and stuck with anchors like this, they're in trouble.
More Merrill Assets May Be Up For Sale
Facing Writedowns, Other Merrill Assets Might Be Up For Sale - CNBC
Facing second quarter loss and write downs that could rise above $6 billion, Merrill Lynch CEO John Thain is considering selling other investments to drum up captial, not just Merrills stakes in financial information powerhouse Bloomberg LP, and money manager BlackRock, people familiar with the firm say.
More US Banks May Fail After IndyMac
More US Banks May Fail After IndyMac - CNBC
The FDIC has said it will reopen IndyMac on Monday as IndyMac Federal Bank, and then try to sell the company as a whole or in pieces. Regulators expect the takeover to cost the FDIC $4 billion to $8 billion. The agency insurance fund has about $52.8 billion.
Paul Krugman has a good smackdown of the director of the Office of Thrift Supervision's complaints about Chuck Schumer
Look who’s talking - Paul Krugman Blog - NYTimes.com
from BB's link above
"More than 300 banks could fail in the next three years, said RBC Capital Markets analyst Gerard Cassidy, who had in February estimated no more than 150."
gee i guess schumer has a lot of work ahead of him...banks cant fail unless he points a finger
shoot the messenger.
Simon going to zero.
S&B, mills group aquisition, xanadu, the concept od malls in this environment.
thanks alex, I think I will go throw-up now...
Re: John D. Hawke, the U.S. comptroller of the currency (regulator of national banks) from 1998 to 2004, had more pointed words for Schumer in a story in the American Banker newspaper today.
"If Schumer continues to go public with letters raising questions about the condition of individual institutions, he will cause havoc in the banking system," Hawke said.
almost everything is down in asian indicies ...minus 1/2 to 1.5%...
except Kuala Lumpur
On list of risky banks, Georgia companies dominate
'Texas ratio' tries to predict failures; some metro Atlanta execs call it misleading
Metro Atlanta Business News | ajc.com
Several Georgia banks dominate a recent ranking of the nation's riskiest financial institutions based on a measure known as the "Texas ratio," which attempts to gauge how likely they will run into deep financial trouble.
Several Georgia banks rank high in terms of the so-called "Texas ratio," a risk measure from the days of the savings and loan debacle that sank hundreds of financial institutions in that state in the 1980s. The ratio measures problem loans compared to the banks' equity capital and reserves for loan losses.
National rank\tAssets*\tTexas ratio (%)
1. Integrity Bancshares, Alpharetta\t$1.21 billion\t372
4. Triangle Financial Group (The Community Bank), Loganville\t$625 million\t246
8. FirstCity Bank, Stockbridge\t$255 million\t211
11. First Georgia Community Corp., Jackson\t$293 million\t182
14. Omni Financial Services (Omni National Bank), Atlanta\t$997 million\t178
19. First Security National Bank, Norcross\t$140 million\t154
20. Southern Community Bank, Fayetteville\t$372 million\t147
23. FirstBank Financial Services, McDonough\t$432 million\t144
25. Newnan-Coweta Bancshares,** Newnan\t$240 million\t1
The mortgage lender illusion
The mortgage lender illusion - The New York Times
Even as investors were stampeding out of these stocks, the claque in Washington rushed to reassure them. Both Ben Bernanke, the Federal Reserve Board chairman, and Henry Paulson Jr., the Treasury secretary, said the mortgage giants' regulators confirmed that the companies were "adequately capitalized
But investors have good reason to be skeptical. In the first half of 2007, both Bernanke and Paulson sang a similar tune when they opined that problems in the mortgage market were "contained" to subprime loans.
"The real outrage is that none of this had to happen," said William Fleckenstein, co-author of "Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve" and president of Fleckenstein Capital in Issaquah, Washington. "We did not have to ruin the financial system and ruin the financial lives of a huge chunk of the middle class in the United States.
"It is crystal clear," he adds, "that the Fed not only made mistakes, they had the pompoms out, cheering for deregulation. Until people recognize why we are in this mess, I don't see how we get out of this thing."
So what's the punchline? We're all Schumer now...
A new American reality: The government as provider
Search - Global Edition - The New York Times
"The downside is there might be a bailout and then you pay in taxes. These things don't come cost-free when government gets involved."
For a generation, U.S. policy makers have lectured the world on the need to unleash the animal instincts of the market. China's rickety banks should stop lending to protect state factory jobs, Americans said, and focus on the bottom line. Now the Bush administration is reluctantly concluding that Fannie and Freddie might need to be propped up to protect the U.S. homeowner.
I like SIFMA, but these guys look good too:
About ABA
The American Bankers Association brings together banks of all sizes and charters into one association. ABA works to enhance the competitiveness of the nation's banking industry and strengthen Americas economy and communities. Its members the majority of which are banks with less than $125 million in assets represent over 95 percent of the industrys $12.7 trillion in assets and employ over 2 million men and women. ABA can be found on the Internet at http://www.aba.com
Bankers: Fair Value Is Like Throwing Gasoline on a Fire
Bankers: Fair Value Is Like Throwing Gasoline on a Fire - - CFO.com
Trade groups representing the international banking community say that current accounting standards requiring fair-value measurement of financial instruments are, as American Bankers Association president and CEO Edward Yingling put it in a statement, "a step in the wrong direction."
That's Where the Money Is
NATIONAL JOURNAL: That's Where The Money Is (02/15/2008)
Washington's importance to the sector is also reflected in the amount of money that its executives, trade groups, and corporate political action committees spend to influence Congress. In the 2006 election cycle, they collectively gave $258 million to federal candidates' campaigns and to party committees. The sector was ranked No. 1 in federal lobbying expenditures in 2006, when it shelled out nearly $385 million, according to the nonpartisan Center for Responsive Politics. National Journal's analysis of 2006 IRS filings shows that among trade associations, the finance and real estate groups account for 14 of the top 50 spenders on all forms of lobbying. The fifth-ranked National Association of Realtors led the way, spending more than $18 million.
Its 2:30 in Chicago, I got back from the airport to pick up my daughter and grand kids, and there are 26 people here on a Sunday nite? Lets see if we can move the market.
Hey guys, do you remember when money was something you earned exchange for producing something of value? Boy, those were the good old days.
Be sure to tune into our special mini-series next week.
Leveraged and Leverageder:
The Steve and Barry True Wall Street Story
Oh well, back to arbitraging cowardly scoundrels and the citizens that employ them.
This easy money is like shootin' sheep in a barrel.
BB writes:
The mortgage lender illusion
Search - Global Edition - The New York Times morg14.php
Great article. And by Gretchen!
Sarah Jessica Parker at the 2007 launch of her clothing line, Bitten
Prophetic.
The sign looks like something from the movie Idiocracy. How fitting.
Beginning in 2004, the company began including some operating expenses -- a portion of store rents, for example -- in a separate expense category meant to reflect the cost of unsold inventory, people knowledgeable about the accounting say. That potentially benefited the retailer in two ways.
lama, what is that all about?
The sector was ranked No. 1 in federal lobbying expenditures in 2006, when it shelled out nearly $385 million
You can buy a lot of pragmatism for $385 million!
Steve and Barry's opened nearby last year, in a JNN-owned mall that had lost most of its anchors and was considering reinventing itself as an outlet mall. (Small city, two perimeter malls, one gets the shaft.)
If S&B closes, then it's likely to be a full-on ghost mall. And FWIW, their clothes were crap. No wonder, given they were the least important bit of their operations.
OT-
Japan considering TIPS,(no link, in today's FT.)
What would they pay in a deflationary environment?
nonetheless it seems the helis are warming up.
Rescue plan for US mortgage giants
FT.com / US / Economy & Fed - Rescue plan for US mortgage giants
n a dramatic effort to quell the crisis surrounding Fannie Mae and Freddie Mac, the US government on Sunday night announced that it will seek unlimited authority from Congress to lend money to the troubled mortgage groups and invest in their equity.
The market will get the chance to express its views on Paulson plan today when Freddie begins marketing $3bn in short-term debt. Wall Street bankers said Treasury officials had been in touch with big investment and commercial banks to ensure they were still considering placing bids for the bond sale.
S.E.C going after rumours, its all the fault of shorts:
S.E.C. Warns Wall Street: Stop Spreading the False Rumors - NY Times
Since the almost overnight collapse of Bear Stearns earlier this year, top-level Wall Street executives have been pleading with regulators to investigate what they see as efforts by short sellers to plant false information and profit from it.
But its ok if your a CEO to lie about the financial health of your company!
Citigroup's $1.1 Trillion of Mysterious Assets Shadows Earnings
Citigroup's $1.1 Trillion of Mysterious Assets Shadows Earnings - Bloomberg.com
Chief Executive Officer Vikram Pandit said shrinking the bank's $2.2 trillion balance sheet, the biggest in the U.S., was a cornerstone of his turnaround plan.
Nowhere mentioned in the accompanying 66-page handout were the additional $1.1 trillion of assets that New York-based Citigroup keeps off its books: trusts to sell mortgage-backed securities, financing vehicles to issue short-term debt and collateralized debt obligations, or CDOs, to repackage bonds.
Seven of the biggest U.S. banks, including Citigroup, are on the hook for at least $300 billion of credit and liquidity guarantees for off-balance-sheet loans and bonds, according to a June 30 report from consulting firm RiskMetrics Group Inc. in Rockville, Maryland.
Time Is Ripe for Dollar Intervention: Strategist
Time Is Ripe for Dollar Intervention: Strategist - CNBC
Despite verbally supporting a strong dollar, U.S. authorities had preferred a softer currency over the past years to rein in a widening trade deficit, but with inflation on the rise this is not an option anymore, Redeker said.
"We are going to see intervention in the dollar when we see the first undershoot in the dollar," Redeker said. "Inflation expectations are undermining the bond market and impose a risk premium on the long end of the market."
dollar intervention?
No shit, Sherlock
I guess this genius has missed all those pushbacks every time it goes near EUR 1.60
Where do they find these dolts, Midland, TX?
You could put together a CR hedge fund and clean some clocks as long as Sebastian isn't managing protfolios( except an inverse fund that he thinks isn't.)
Ko No6 --
but what is amazing is that Schumer did his job
Intentionally starting bank runs is his job?
Can I get a job like that?
Schumer could have sent his letter privately. Making it public was an unprecedented act either of extreme incompetence or extreme malice. And I do not believe that bastard is incompetent.
I am no fan of IndyMac, but anyone who believes Schumer did anybody any good by starting a run (except maybe his donors in the hedge fund industry) is an idiot.
Happy Bastille Day everybody!
While Sarkozy is attempting to consolidate and expand French influence with his new "Mediterranean Union" the Bush administration continues to alienate our friends and allies with the export of "financial timebombs."
Le jour de gloire est arrivé, mais non pas ici. (The day of glory has arrived, but not here).
Making it public was an unprecedented act either of extreme incompetence or extreme malice.
The car was headed straight off the cliff with or without Schumer, he just gave it a little push. I have to agree with the people who've been saying that his intention was to not allow the Bush administration to run out the clock.
Brave Helios, wake up your steeds
Bring the warmth the countryside needs
The car was headed straight off the cliff with or without Schumer, he just gave it a little push.
No, he just yelled at the pasengers to get the Hell off of it.
Banco Santander to buy troubled UK mortgage outfit Alliance & Leicester
The car was headed straight off the cliff with or without Schumer, he just gave it a little push.
What he did was try to warn the people who lost 1 Billion dollars to get out. I find it almost uncomprehensable that Americans will be "scared" of Chinese and Russian investors and not let them take the risk the got paid to take (50 billion a year in 'risk premium' for FNM bonds)-- and yet cry FOUL when a fellow American trys to save Americans from loss. You guys really deserve what is happening to you!
Message received, Nemo. We all need keep quiet, and keep the public uninformed. The masses can't be fleeced if they are making informed choices. And heaven forbid, the industry think twice before spreading its own bs about how little risk it has on its books, and how everything is 'adequately capitalized'.
The books should be thrown open (especially Citi's given today's news)- and people should be allowed to move their money where they feel it is safe.
Btw, everyone, Bernanke included, has said banks are going to fail in this crisis.
NPR's Steve Inskeep questioned WSJ economics editor David Wessel regarding the problems at Fannie and Freddie this morning - particularly whether the fundamental problems arise from liquidity or from solvency issues.
Wessel says solvency.
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broken link . . .
U.S. Treasury, Fed Step In To Assist Freddie, Fannie : NPR
Sonic Robespierre Seuss writes:
Happy Bastille Day everybody!
Make sure you have your coffee first!
YouTube - Rush Bastille Day live 1976
Pimco: US Actions a Bailout for Fannie, Freddie
Pimco: US Actions a Bailout for Fannie, Freddie - CNBC
"This is a bailout by any other name," Gross, chief investment officer at Pacific Investment Management, known as Pimco, told Reuters in an email.
Gross said he expected both mortgage companies to sell preferred stock to the Treasury or the public -- probably the Treasury -- once the authority is approved by Congress and the President.
Hey, I know that a lotta guys around here believe that the Iraq war power act allows the Unitary Executive and that it extends to the financial area as well. I am surprised that Schumer hasn't been accused of helping Al Quida but making his letters to regulators public.
But that is the balance of powers.
The fact that the Congress abdicated their powers in favor of the President is yesterdays news.
The Senate should air the dirty linen of the administration.
It is the regulators who allowed IMB to run itself into insolvency. This was to help their political base as long as possible.
Schumer gave them some rope and then pulled the trap.
I expect that Democrat shovels will turn over a lot of this stuff. Those of you who slept in the gutter with the dogs will have fleas.
Oh Gee
To me, the oddest thing about the Steve and Barry's "business model" is that mall owners apparently gave them up-front funds. I've never known any kind of tenant improvements to be paid for in that way. Usually you have to actually do the construction work and submit invoices, lien waivers, etc., etc. to get any kind of payment at all.
I just heard Senator Dodd say that Indymac Bank was NOT on FDIC's troubled bank list.
who the hell is on that list if Indymac wasn't?????
This sounds like classic ponzi finance:
Desperate to fill empty department-store spaces, mall owners courted the retailer with fat payments to outfit its cavernous stores. Those checks, not clothing profits, fueled the company's runaway growth, according to people familiar with the company's finances. When the payments slowed, Steve & Barry's collapsed.
"Desperate to fill empty department-store spaces, mall owners courted the retailer with fat payments to outfit its cavernous stores"
how could this happen? I thought there wasn't overbuilding? [/snark]
"Leasing to them would have been like bringing prostitutes to a party to look popular," he says. "They might look good, but you're paying for it."
That's just the simile I need to start my Monday morning.
"Desperate to fill empty department-store spaces, mall owners courted the retailer with fat payments to outfit its cavernous stores"
Sort of like a private-sector bailout.
Red or blue pill? Kuntsler at his finest.
James Howard Kunstler
ot a banker,
Been a long time since I've listened to Rush, I forgot they even had a song about Bastille Day! Thanks for posting the link!
Looks like the markets are poised to jump up on the Fannie-Freddie news. Doubtless fueled by 26 year old traders who believe that now that the Fed is backstopping Fannie & Freddie, things are going back to normal. Sure, LEH et al may take a hit, but finally the crisis is over.
Well, as Henry Kissinger once said, "In a real crisis, everything suddenly turns quiet, because you've run out of options."
I think these guys simply cannot conceive that there might be problems too big for the Fed to fix. I think that come December, they might finally begin to realize this. To be honest, I thought I was a real bear, but I never once thought it through to the point of thinking that this bubble might actually threaten Fannie and Freddie.
I suspect the real crisis will be beginning soon.
Anyone hear how the FRE auction is going? Think it closes at 9:45 EST...
"I suspect the real crisis will be beginning soon."
That happened over the weekend the US final coughed up to the fact that it is no more then a banana republic.
Also, the WSJ article notes that leases for many smaller tenants contain clauses that lower their rents if the anchor tenant goes dark.
That right there explains some of the absurd payments. S&B was manipulating the system to their own advantage. The mall operators did the spreadsheet math and found the that the payment to S&B was a small expense in the great scheme of things... except they never considered that S&B might be a legal-ponzi.
Looks like the bulls' rally is fizzling.
On could have bought SKF at the open for $163.70 and it's currently trading at $183.18 - FNM & FRE turned negative after 20%+ early gap ups. Where nowhere near a bottom folks. No fear.
I am no fan of IndyMac, but anyone who believes Schumer did anybody any good by starting a run (except maybe his donors in the hedge fund industry) is an idiot.
My experience over the past seven decades is that folks who think supressing the truth is a good idea, rarely have my best interests in mind.
If Schumer had kept quiet, Americans would be better off? Would it be even better if he had lied?
If more people spoke the truth more often, perhaps our political and business leaders would be a bit more circumspect.
If Schumer had kept quiet, Americans would be better off? Would it be even better if he had lied?
We can speculate all day long, but the fact remains that there was a slow-motion run occurring in the days immediately after Schumer made his letter to the regulators public. OTS/FDIC has stated that they were in talks with several potential buyers, who then backed away from the table (either due to the letter, or due to the mini-run screwing up the numbers).
This was a damned if you do, and damned if you don't situation. Schumer made his thoughts public, and the public responded. I consider his actions poorly advised under the situation. He may have cost the FDIC insurance fund several billion dollars.
The sales model for steve and barry while times were good was that nothing in the store sold for over $10 and shirts regularly sold at 2/10 or 3/10
What is the going out of business sale going to look like? Nothing over $5 and $1 t-shirts?
"What is the going out of business sale going to look like? Nothing over $5 and $1 t-shirts?"
Walgreens is almost that cheap already, every day, for tees and hoodies.