Scoff if you like but bitcoin, despite its myriad defects and detractors, is getting an increasing level of focus in high finance.» Read More
Fed Officials Debate the Wisdom of $600 Billion of Asset Purchases—Publicly (CNBC.com with Reuters) The view among Federal Reserve board governors on QE2 seems far from uniformly positive, even among those who voted for easing, based on recent public statements.
Everyone these days is citing the findings of Narayana Kocherlakota of the Minneapolis Federal Reserve explaining why unemployment rate has risen even while the job vacancy rate has as well.
In the aftermath of the Wall Street bailouts, nearly everyone agreed that one of the greatest priorities for reforming the financial system was to make sure that this wouldn't happen again.
"Never again will the American taxpayer be held hostage by a bank that is too big to fail," Barack Obama told the American people.
The primary mechanism put in place to avoid another round of bailouts is called "resolution authority." The idea is that instead of keeping failing financial giants alive, regulators will swoop into a failing financial institution, fire the executives, cram down the creditors and wipe-out shareholders.
The dire prospects of falling into resolution are supposed to discipline managers to avoid excessive risk and incentivize bondholders to monitor risk at banks. The combination of management and bondholder risk awareness should improve performance and decrease systemic risk.
How much is Citi likely to have to spend to buy back mortgages from investors?
Well-known banking sector analyst Dick Bove thinks that Citi is at risk for $40 billion in put-back claims. Only $8 billion of those claims will ulimately be successful, in Bove's view. And, after recovering on the mortgages which it will have to repurchase, the total loss could be as low as $5 billion.
Bove begins his analysis of Citigroup's potential repurchase exposure with Citigroup's $504 billion portfolio of serviced but not held (SBNH) loans.
Bove nets out 22 percent of Citi's SBNH loan portfolio, to account for Citi's third party indemnifications. \(Third party indemnifiers have agreed, according to Citigroup, to cover losses on the indemnified portion of the SBNH portfolio.\) Once the indemnified portion of the portfolio is removed, we are left with the remaining 78 percent, or $393 billion. This number represents the total unhedged exposure of Citi's SBNH loan portfolio.
Silver has been rallying off the charts, fueled in part by some of the same issues behind the gold rally: very low interest rates, easy money and fear of inflation.
But, here are three things to consider before jumping into the pool.
The four bank failures over the weekend take the 2010 total past the previous year as the industry struggles to recover from the beating it took during the financial crisis.
Regulators shuttered four new banks over the weekend — two in California, one each in Washington and Maryland — bringing the year’s total to 143 and past the 2009 mark of 140. The collapse of the subprime mortgage system and the ensuing fallout has claimed 311 institutions \(not to mention the entire industry’s credibility\) since 2007.
All the investors out there snapping up stocks in this seemingly tireless rally have one more reason to rejoice: Dow Theory says the cyclical bull run is for real.
Industrials and transports both broke their April highs last week, a key metric to tell whether Dow Theory applies. The idea is that if the two indices break out consecutively then Dow Theory comes into play and the market is likely to trend higher.
“Based on the Dow Theory, the US equity market is in a primary bull trend from the summer 2009 Dow Theory buy signal,” Bank of America Merrill Lynch analysts wrote in a research note.
While the growth of income inequality in the United States is shocking and is surely transforming the economic and political landscape, the transformation may be very different from what many analysts expect.
Over the weekend, New York Times columnist Nick Kristoff drew attention to an epically-long series on inequality by Slate's Timothy Noah . I won't pretend to have read the entire thing yet. But Kristoff summarizes the jumping off point nicely: "The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976.
Keep in mind that when Noah and Kristoff discuss income inequality, what they are discussing is a relative measure of yearly household income. By many absolute measures, Americans of all economic classes are far better off than they were 35 years ago.
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."