Mind Over Market

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 ...

From 2002 to 2007, Fannie Mae and Freddie Mac loaded up on $1.73 trillion of subprime and $1.44 trillion of Alt-A loans and securities, taking the lion's share of these markets, according to mortgage market guru Edward Pinto. The agencies' share of these riskier loans and securities, then, was higher than the total for all private label mortgage-backed securities held outside the agencies' purchases -- contrary to widely-held views in the mortgage industry. The two agencies hid the level of risky lending and investment in securities by failing to classify most of the loans initially as subprime or Alt-A. By Robert Stowe England MindOverMarket.blogspot.com October 10, 2009 On Thursday, October 8, at a hearing before the Senate Finance Committee, Senator Robert Menendez (D-N.J.) asked Edward DeMarco, acting director of the Federal Housing Finance Agency, how much subprime was loaded onto the balance sheets of Fannie Mae and Freddie Mac. DeMarco indicated that the Government-S...

Bank of America Home Loans has forged its new identity with a focus on customer satisfaction and quality loan origination. The 2008 acquisition of Countrywide has given the bank the production platform and technology prowess of a former industry leader. Add to that, B of A's internal discipline and a focus on profitable origination, and you have the makings of a lending powerhouse. By Robert Stowe England Mortgage Banking October 2009 “The whole is more than the sum of its parts,” the ancient Greek philosopher Aristotle famously stated. It’s a powerful idea that resonates today in the dynamic business culture of mortgage banking, which has dramatically consolidated in these times of financial pain and market turmoil in ways no one would have imagined two years ago. In the case of Bank of America Home Loans, Calabasas, California, the company has sought to implement a strategy to make the merged whole better than the sum of its parts. Those parts being the former Countrywide Home Lo...

Part 1 Karl Denninger, who offers his commentary on the markets at market-ticker.org, speaks on the economic crisis at Liberty Alliance's stop in Tallahassee, Florida. http://www.youtube.com/watch?v=LNaBYZ6IDWk For more information on Liberty Alliance, go to this link: http://americanlibertytour.com/ Selected Quotes: "Credit has expanded in our economy in the last 28 years faster than the economy has grown in every year but one . . . . Eventually, it's going to blow up." "We have to return to sound credit and sound banking." "All the people who broke the law need to go to jail." "We need to stop the looting and start prosecuting instead." Part 2 http://www.youtube.com/watch?v=yvvZlguz2fg Selected Quotes: "Henry Paulson, our Treasury Secretary at the time, went to the SEC in 2004 and had them remove the leverage limits from the investment banks. Formally 14 to 1, he had them take it off so they could put on as much leverage as they wa...