Mind Over Market

Wells Fargo's ceo Dick Kovacevich talks about the causes of the financial crisis on CNBC's Squawk Box, September 12, 2012 The following transcript has not been checked for accuracy. right now, though, more from our guest host today, dick kovacevich who is the former chairman and ceo of wells fargo. when we were talking a little bit ago, you were talking about how the financial crisis was caused, in your view, this was eight banks, 12 s & loans, citi, you could go back to those and go to the heads of those at that time. you think there were real problems happening. yeah, 11 and 12 s & ls, and one commercial bank, the rest were commercial banks. i think it was greed. they had to know that this stuff was not good. we went from -- there's always been subprime mortgages. we went from about 10% of the mortgage market to at the peak to 50% of the mortgage market being subprime lending. and this is no doc, low doc stated income, an open invitation for frau...

Peter J. Wallison of the American Enteprise Institute has outlined several alternative futures for Fannie Mae and Freddie Mac, from nationalization to privatization. Unfortunately, the most likely outcome is that they will return as Government-Sponsored Enteprises and sow the seeds for yet another bailout in the future. Only privatization can stop the dead GSEs from returning as zombies. By Robert Stowe England February 18, 2010 In the current issue of Financial Services Outlook , Peter J. Wallison of the American Enteprise Institute lays out alternative future scenarios for Fannie Mae and Freddie Mac, both of which are currently under the conservatorship of the federal government. The January-February 2010 issue of Financial Services Outlook , devoted entirely to Wallison's article, can be found at this link: http://www.aei.org/docLib/01JanFSOg.pdf Wallison assesses the probability of each scenario and the likely outcome if that scenario is realized. Nationalization The first scen...

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...

Watch CBS Videos Online Here is the text of the CBS News' 60 Minutes segment "Financial WMDs" that was broadcast August 30, 2009 The Bet That Blew Up Wall Street Steve Kroft On Credit Default Swaps And Their Central Role In The Unfolding Economic Crisis Note: This story was first published on Oct. 26, 2008. It was updated on Aug. 27, 2009. Anyone with more than a casual interest in why their 401(k) has tanked over the past year knows that it's because of the global credit crisis. It was triggered by the collapse of the housing market in the United States and magnified worldwide by the sale of complicated investments that Warren Buffett once labeled financial weapons of mass destruction. They are called credit derivatives or credit default swaps. As correspondent Steve Kroft first reported last fall, they are essentially side bets on the performance of the U.S. mortgage markets and some of the biggest financial institutions in the world - a form of legalized gambling ...

The deal dynamics in the 'securitization process' expanded the overall level of subprime lending and boosted the degree of risk in subprime residential mortgage-backed securities (RMBS) deals, according to a Fed working paper analysis of 1,267 securitization deals between 1997 to 2007. A new SEC rule in 2004 that, on paper, increased capital in five large broker-dealer banks -- Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley -- led to greater demand for lower credit quality subprime mortgage purchases. The evidence in deals from these investment banks in 2005 suggest they engaged in ‘ratings arbitrage’ to bring to the secondary market the lowest cost subprime loans that could earn an AAA investment rating, according to the Fed authors. By Robert Stowe England MindOverMarket.blogspot.com July 30, 2009 The securitization process – how loans are put together and assigned credit ratings – drove up the flow of credit in subprime residential mortgage-ba...