Mind Over Market

An International Monetary Fund study finds a significant correlation between lobbying by mortgage lenders in the United States and the prevalence of riskier loans and higher delinquencies in markets where lobbying lenders increased their level of lending faster than non-lobbying lenders. By Robert Stowe England MindOverMarket.blogspot.com December 31, 2009 The International Monetary Fund (IMF) has released a working paper that examines the relationship between lobbying by mortgage lenders and the performance of loans in markets where lobbying lenders originated mortgages. The working paper is titled “A Fistful of Dollars: Lobbying and the Financial Crisis” and authored by economists Deniz Igan, Prachi Mishra, and Thierry Tressel. It is posted at this link: http://www.imf.org/external/pubs/ft/wp/2009/wp09287.pdf The study analyzes detailed information on lobbying and mortgage lending activities. For loan data, the study relies on data complied under the Home Mortgage Disclosure Act (HMD...

A Treasury announcement Christmas Eve raises a lot of questions about the future of Fannie Mae and Freddie Mac. Is the Administration planning a future where the two companies become permanent government agencies? Is the Administration laying the groundwork to expand the capacity of the two agencies to retain more mortgages and buy more mortgage-backed securities? Is the Administration planning to ramp up loan modifications involving principal reductions, which would mean more near-term losses for Fan and Fred? Those are some of the questions posed by mortgage industry consultant Ed Pinto. By Robert Stowe England MindOverMarket.blogspot.com December 26, 2009 Treasury released a statement on changes affecting the role of Fannie Mae and Freddie Mac on Christmas Eve, a time when they might be expected to escape more intense press scrutiny. "The timing of this executive order giving Fannie and Freddie a blank check is no coincidence," Rep. Spencer Bachus (R-Ala.), ranking minorit...

In the financial regulatory overhaul bill that passed the House December 11, insufficient regulation of over-the-counter (OTC) derivatives 'renders impotent' the enhanced resolution powers aimed at making sure large financial institutions are not too big to fail, according to economist Robert Johnson. By Robert Stowe England MindOverMarket.blogspot.com December 13, 2009 The Wall Street Reform and Consumer Financial Protection Act that passed the House of Representatives December 11 on a 232-202 party-line vote fails to attain its intended objective to rid the regulatory regime of the moral hazard of too-big-to-fail. Thus, the bill, known in Capitol Hill short-hand as H.R. 4173, does not protect the tax payer from future financial crises when regulators will once again be compelled to bail out major financial institutions that fail, economist Robert Johnson has told Mind Over Market . The complete text of the interview with Johnson, who is the Director of Financial Reform at the...

Four out of five employers have maintained or increased their matching and non-matching contributions to their 401(k) plans during the Great Recession of 2008 and 2009, according to the Profit Sharing /401(k) Council of America. And, nearly half of all employers who reduced or suspended their match have either already restored the match or plan to restore it by the end of the next quarter. By Robert Stowe England December 8, 2009 The Chicago-based Profit Sharing / 401(k) Council of America surveyed employers who sponsor 401(k) and profit sharing plans in October and found that 76.8 percent made no changes to their matching contributions in 2008 and 2009, compared to the end of 2007. An additional 4.7 percent of plan sponsors increased the employer match, bringing the share of surveyed companies that either maintained or increased their match to 81.5 percent. Further, of 264 companies that offered a non-matching company contribution -- where the employer makes a contribution to the plan...

Gerald Celente on Ben Bernanke By Robert Stowe England December 8, 2009 Moscow-based RT, a 24/7 English language news broadcasting service, interviewed Gerald Celente, Director the Trends Research Institute, Kingston, New York, on whether or not Ben Bernanke should be confirmed for a new term as Chairman of the Federal Reserve. RT's Washington bureau reporter Cedric Moon conducted the interview via Skype broadband. In the interview Celente charges that Bernanke should not be re-appointed to the Fed because he has been a failure as its Chairman and cited several instances where he got in wrong -- most importantly by igniting a bailout bubble that will be worse than the real estate and mortgage-finance bubble that occurred because of the mistakes made when Alan Greenspan was Chairman of the Fed. Celente declines to offer another name for Fed Chairman, noting the choice is made by Wall Street insiders to protect their own interests. Citing Timothy Geithner's position as Treasury S...

Richard Bove, a financial strategist at Rochdale Securities, was a keynote speaker at The Deal Economy 2010 conference, held November 18-19, 2009 at the Union League Club in New York City. In this video Bove speaks about the run on the banks in the fourth quarter of last year.

When the New York Fed renegotiated its original $85 billion deal to bail out AIG last year, it "effectively" transferred tens of billions dollars of cash from the federal government directly into the coffers of the AIG’s counterparties, according to an audit by TARP Inspector General Neil M. Barofsky. The New York Fed pursued a negotiating strategy that failed to get the counterparties to accept anything approaching market value for the toxic assets taken off their books by the deal. This raises the question of whether or not this was a “backdoor bailout” of the counterparties, the audit suggests. By Robert Stowe England November 17, 2009 By November 2008 the emergency rescue of the giant insurance company AIG, engineered by the New York Fed two months earlier, was in trouble. Timothy Geithner, President of the New York Federal Reserve Bank, had played a leading role in that rescue, authorized by the Federal Reserve’s Ben Bernanke and then Treasury Secretary Hank Paulson, a f...

The Exchange from the Lehrer News Hours, November, 13, 2009 In an interview with Public Broadcasting System's Paul Solman, FDIC chairman Sheila Bair discusses lessons learned from the financial crisis, and looks back on the federal bailout of institutions deemed "too-big-to-fail," saying, "In retrospect, I think it was not a good idea."

Goldman Sachs was a chief potential counterparty beneficiary of AIG's federal bailout after its brush with bankruptcy in September 2008, according to structured finance analyst Janet Tavakoli. Goldman held credit default swaps with AIG against toxic derivatives it had underwritten and held. AIG was exposed to other Goldman-underwritten toxic derivatives held by other counterparties. All this was kept a secret as Goldman successfuly persuaded the Feds to pay 100 cents on the dollar for AIG's contracts, when they were worth far less in the market. By Robert Stowe England November 10, 2009 At the time AIG faced collapse in September 2008, the insurer's largest exposure was $20 billion in transaction contracts with Goldman Sachs on mortgage derivatives undewritten by Goldman. This represented one third of AIG's $62 billion in credit derivatives exposure to market pricing risk. Indeed, AIG's exposure to Goldman Sachs was the key contributor to the systemic risk posed by ...

Frontline states: In The Warning , veteran FRONTLINE producer Michael Kirk unearths the hidden history of the nation's worst financial crisis since the Great Depression. At the center of it all he finds Brooksley Born, who speaks for the first time on television about her failed campaign to regulate the secretive, multitrillion-dollar derivatives market whose crash helped trigger the financial collapse in the fall of 2008. This program, which aired October 20, performs a public service by reporting the story of the heroic efforts of Brooksley Born, the former Chairman of the U.S. Commodities Futures Trading Commission (CFTC), to address the risks in the over-the-counter (OTC) derivatives market more than a decade ago. Born's CFTC had the foresight and courage to issue a concept release in 1998 that asked the financial industry to do an analysis of the costs and benefits of potential regulation of OTC derivatives. Born had unwittingly taken a step that was seen by its opponents ...