With the Fed taking a slow walk to the sidelines, diminished returns ahead seem to be on the minds of many market participants.» Read More
A new Bloomberg article out today on the topic of the mortgage repurchase fiasco is a treasure trove of insight into the current state of affairs between Fannie Mae and Freddie Mac on the one hand and the big banks on the other. First, the big picture.
Here's the upshot of the story: Banks are starting to push back against Fannie and Freddie on loan repurchases. According to the Bloomberg article, "Lenders say they are resisting buybacks because McLean, Virginia-based Freddie Mac and Washington- based Fannie Mae are unfairly second-guessing old appraisals, accusing originators of failing to verify income, or pinning failed loans on minor technical errors."
Perhaps I'm missing something.
Are the lenders asserting that the three points listed above are not relevant in evaluating the validity of a loan repurchase? Think about each in turn: 1\) the value of the underlying asset being purchased with the loan; 2\) the credit worthiness of the borrower; and 3\) the lender's ability to document and verify the information attested to in the loan documentation.
We know that one of the principal focuses of the government in their investigation into insider trading in general—and into hedge funds in particular—are the so-called "expert-network" firms.
The purpose of the expert network firms is to provide information and insight about companies that investors are interested in—and also, perhaps more crucially, to help manage the relationships between the investors and the managers of companies they seek to invest in. Think about the nature of that scenario: Investors and managers chatting together informally, outside the scope of more traditional venues like earnings calls and IR events. It seems a safe bet that, amid allegations of widespread insider trading, the government might be interested in exploring that channel to see if material nonpublic information might have changed hands.
Today, the news is that Gerson Lehrman Group, the largest of the expert network firms, had at least one of its consultants questioned by the FBI . For those not familiar with the hedge fund/expert network axis, the significance of this may not be immediately obvious.
While the leaked diplomatic cables published this week by Wikileaks have been roiling the global political scene, bank executives should be on guard. Wikileaks founder Julian Assange just announced that he has a trove of documents revealing unethical behavior at one of the largest banks in the US.
In an interview with Forbes, Assange declined to name the bank. But he hinted at its identity. It is one of the biggest banks in the country. It still exists—ruling out Bear Stearns, Merrill Lynch or Lehman Brothers.
That leaves us with a handful of candidates: Citigroup, JP Morgan Chase, Wells Fargo, Bank of America, Morgan Stanley, and Goldman Sachs.
Assange says he has tens of thousands of documents showing an "ecosystem of corruption." The publication will prompt investigations and reforms, according to Assange.
Is the new European Stability Mechanism behind the price plunge of Spanish sovereign debt?
The Financial Times blog Alphaville, which has been covering the mechanics of the European debt crisis in great detail has raised just that question . And they have provided a link to a very ugly looking curve that shows the yield of Spanish sovereign debt spiking.
Alphaville cites Harvinder Singh of Royal Bank of Scotland:
"We expected a relief rally—even if the only relatively safe place was seen as the short end of rescued countries such as Ireland—but in the event the market has moved very quickly to the title of the research note: European periphery crisis: no turning point in sight yet. The spread widening after the initial tightening should frighten policymakers. Make no mistake this is a crisis of EMU."
One important estimate of what mortgage put-backs will cost banks just leaped by more than 20 percent.
Paul Miller of FBR Capital now estimates that banks will face between $54 billion and $106 billion . That’s up from his September estimate of $44 billion to $91 billion.
The banks that have the greatest loss exposure, according to Miller, are Bank of America, Citigroup, JP Morgan Chase and Wells Fargo.
The register for deeds in Southern part of Essex County, Massachusetts has asked the state’s attorney general to investigate whether the Mortgage Electronic Registration system has failed to pay recording fees required when mortgages are transferred.
MERS, an electronic mortgage database that touches 3 out of 5 mortgages in the United States, has come under fire from an array of critics. Some say it encourages sloppy record keeping and contributed to the robo-signing scandals that led Bank of America and others to suspend foreclosures last month. Others say the system is an attempt to privatize public land records. And some say the system is so flawed it could result in a great unwinding of the mortgage backed securities whose assets passed through it.
John O’Brien, the Salem based register for deeds in Southern Essex County, said in the letter to Coakley that it had come to his attention that a number of states have alleged in court filings that MERS intentionally failed to pay recording fees, and failed to disclose the transfer and assignments of interest in property, solely to avoid and decrease the recordation fees owed to the counties and the state.
Yesterday morning, the economist Nouriel Roubini sent out the following tweet: "Greece & Ireland are solvency not liquidity."
Professor Roubini of course was referring to the European debt crisis.
And his meaning was perfectly clear: The financial situation in Greece and Ireland isn't the result of a short-term cash crunch—rather, its causes are deep and profound economic failures that can't simply be fixed through short-term monetary policy.
But what exactly is the difference between a liquidity crisis and a solvency crisis? Like many other concepts in economics, the terminology can be challenging, and best described metaphorically. So I began searching for a way to adequately capture the bad planning, ludicrous assumptions, and occasional inexcusable behavior that led to the crisis in the first place. After twenty minutes of skimming through the Financial Times, the obvious allegory presented itself to me: My own life during my twenties.
John Carney is a senior editor for CNBC.com, covering Wall Street and finance and running the NetNet blog.
Jeff Cox is finance editor for CNBC.com.
Lawrence Delevingne is the ‘Big Money’ enterprise reporter for CNBC.com and NetNet.
Stephanie Landsman is one of the producers of CNBC's 5pm ET show "Fast Money."
Mastercard capped a busy year by executing one of the main drivers of the stock rally: A buyback.
With the Fed taking a slow walk to the sidelines, diminished returns ahead are on the minds of many market participants.
It's time for bond traders to place their bets on whether the Fed is ready to begin tapering its bond buying program.