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  Monday, 22 Nov 2010 | 12:04 PM ET

Countrywide Documentation Disaster to Explode at Bank of America?

Posted By: Ash Bennington

The mortgage documentation mess keeps getting stickier.

Mortgage
CNBC.com
Mortgage

The latest is this: Countrywide Financial, now owned by Bank of America , appears not to have properly transferred necessary mortgage documents when it sold loans to other banks, which then in turn created residential mortgage backed securities (RMBS) from the loans.

The documents Countrywide failed to provide are critical to the owners of the RMBS because without them homeowners can question the legal right of banks to foreclose on their homes.

What's new here? Based upon testimony delivered in a New Jersey bankruptcy court, this may have been a matter of policy at Countrywide—not just a case of a one-off error.

Based on Bank of America's current ownership of Countrywide Financial, it is possible that the largest bank in America, when ranked by deposits, may potentially be held liable for the problem.

Perhaps the biggest challenge in grasping the nature of the problem is that the details can overwhelm our ability to see the forest for the trees, so let's walk through it one step at a time.

» Read More
  Monday, 22 Nov 2010 | 10:33 AM ET

Here’s the Real Story Behind the Bailout of Ireland

Posted By: John Carney

Why did Eurozone officials push so hard for a bailout of Ireland?

CNBC.com

On the face of it, it was a very strange dynamic. Irish government officials had been insisting that they were well-funded through at least the first quarter of next year. Without any current need to roll debt, Ireland could afford to be indifferent as its spreads blew out. The yields on Irish debt may have blown out, but it wasn’t costing Ireland anything.

The pressure for a bailout of Ireland did not come from Ireland itself—it came from Eurozone officials. If anything, Irish Finance Minister Brian Lehnihan’s announcement over the weekend that Ireland would seek a bailout was a concession to its European Union friends.

So why would the Eurocrats demand a bailout of Ireland when Ireland insisted it didn’t need one?

» Read More
  Monday, 22 Nov 2010 | 10:02 AM ET

The Return of Rudy G

Posted By: Larry Ribstein

The WSJ has breathlessly reported :

Federal authorities, capping a three-year investigation, are preparing insider-trading charges that could ensnare consultants, investment bankers, hedge-fund and mutual-fund traders, and analysts across the nation, according to people familiar with the matter.

The criminal and civil probes, which authorities say could eclipse the impact on the financial industry of any previous such investigation, are examining whether multiple insider-trading rings reaped illegal profits totaling tens of millions of dollars, the people say. Some charges could be brought before year-end, they say.

The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways nonpublic information is passed to traders through experts tied to specific industries or companies, federal authorities say.

Peter Lattman’s NYT story provides some perspective, noting that Justice and the SEC “have taken an increasingly aggressive — and public — stance in pursuing insider trading” and that the prosecutor in the latest case (as in the Galleon case), Manhattan U.S. attorney Preet Bharara, is among those taking the “hardest line.”

» Read More
  Monday, 22 Nov 2010 | 9:44 AM ET

Preet Bharara’s Arms Race Theory of Insider Trading

Posted By: John Carney

Lurking just below Peter Lattman’s report of the broad federal dragnet apparently underway against insider trading, you can faintly make out the outlines of a new theory of criminalizing insider trading.

NYSE trader
Getty Images
NYSE trader

Lattman, who covered the legal beat and later private equity at the Wall Street Journal before moving over to the New York Times, provides an especially informative report on the campaign, which is being led U.S. Attorney Preet Bharara.

“Illegal insider trading is rampant and may even be on the rise,” Lattman quotes Bharara as saying in a speech last month. “Disturbingly, many of the people who are going to such lengths to obtain inside information for a trading advantage are already among the most advantaged, privileged and wealthy insiders in modern finance. But for them, material nonpublic information is akin to a performance-enhancing drug that provides the illegal ‘edge’ to outpace their rivals and make even more money.”

The idea that insider trading is a “performance-enhancing drug” could merely be an attempt to ramp-up public anger at insider-trading by analogizing it to the drug-scandals in professional and Olympic sports.

» Read More
  Monday, 22 Nov 2010 | 8:46 AM ET

Massive Insider Trading Probe

Posted By: Ash Bennington

Economists Hold Mixed Views on Inflation Risks (CNBC via Reuters) The debate about whether deflation or inflation is a bigger risk to the U.S. economy isn't merely political: "About a third of NABE [National Association for Business Economics] panelists view the Fed's second asset purchasing program as somewhat lessening the risks of deflation, while another 33 percent saw the step as risking inflation." While that may seem less than definitive, note the following: "Still, they forecast the Fed's preferred measure of consumer inflation—the personal consumption expenditures price index excluding food and energy —to rise to 1.5 percent by the end of 2011 from a projected 1.0 percent this year." That range would be "below the Fed's considered comfort zone between 1.7 percent and 2.0 percent." One imagines that those who see inflation as the bigger threat may quibble with the exclusion of more volatile food and energy prices from the sample.

»Read more
  Friday, 19 Nov 2010 | 3:50 PM ET

Soc Gen Trader Convicted of Stealing Code

Posted By: Ash Bennington

Is China's Reserve Rate Hike a Countermove to QE2? (New York Times) As widely reported today: "Commercial banks were ordered to transfer an additional 0.5 percent of their assets by Nov. 29 to very low-yielding accounts at the central bank, the People’s Bank of China." How could that be viewed as a countermove against the Fed?

»Read more
  Friday, 19 Nov 2010 | 3:24 PM ET

Bernanke Tells the World to Shut Up About Quantitative Easing

Posted By: John Carney

Perhaps the most interesting part of Ben Bernanke's speech today was his claim that the Fed is not conducting quantitative easing at all.

Getty Images

Bernanke said:

» Read More
  Friday, 19 Nov 2010 | 1:56 PM ET

Paul Krugman's Solution to the Debt Problem: Government Spending

Posted By: John Carney

Paul Krugman and Gauti Eggertsson of the New York Fed have a new paper out arguing that the recession and persistent unemployment could have been ameliorated by aggressive government spending. It'll be getting lots of attention, I suspect, so you might as well start reading it now.

Paul Krugman
Getty Images
Paul Krugman
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  Friday, 19 Nov 2010 | 1:33 PM ET

If Quantitative Easing Will Fix the Economy, Why Didn't We Do This in 2008

Posted By: John Carney

Bryan Kaplan asks an important question about Ben Bernanke's policy choices:

As Sumner keeps telling us, all of Bernanke's research prescribed a simple solution : Maintain nominal GDP, and let the other chips fall where they may. This might have meant quantitative easing instead of targeting short-term interest rates, but that's it. Instead Bernanke became a key accomplice for the disgraceful series of bailouts, fiscal stimulus, and obfuscation about the zero nominal bound. The latest round of quantitative easing makes Bernanke's doublethink plain; if he thinks it's going to work in 2010, why wouldn't it have worked in 2008? And if it would have worked in 2008, why did he join Paulson and Bush's stampede?

In the end, Bernanke's behavior baffles me. He abandoned his own intellectual positions without explanation, humiliated himself, sparked a terrible recession, set a long list of dangerous precedents, and pushed the U.S. and the world down the road to serfdom. My best guess is that he simply didn't have the backbone to tell people like Paulson and Bush that they didn't know what they were talking about. Whatever the reason, though, the crisis forced me to rethink my optimism about the Fed. Bernanke and company ignored their own research, got predictably bad results, and pleaded impotence. Instead of playing the voice of reason, they acted like they'd believed in bailouts and fiscal stimulus all along. I expected better. I was wrong.

»Read more
  Friday, 19 Nov 2010 | 11:18 AM ET

Mike Bloomberg Kills Chances for White House by Sticking up for Rattner

Posted By: John Carney

Dan Primack at Fortune has been doing a heroic job covering Steve Rattner's travails. His post about NYC Mayor Mike Bloomberg yesterday should be read by everyone.

AP

Primack wrote :

"Here's a sign that Bloomberg isn't seriously considering a run for president: His stubborn refusal to cut Steve Rattner loose, or even acknowledge that his friend is involved in a serious public corruption scandal.

For example, here's what he said back in June:

'I don't think [Rattner] did anything wrong… I happen to think the charge against him is ridiculous... I've always stood up for anybody that works with me who gets attacked by the press.'

» Read More

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  • NetNet is where you'll find the low-down and the high jinks of Wall Street. It's the place for insider stories, trader gossip, and tales of the foibles of the moneyed crowd and the culture of finance.Wall Street news and commentary served fresh all day long.

 

  • Jeff Cox is finance editor for CNBC.com.

  • Lawrence Develingne

    Lawrence Delevingne is the ‘Big Money’ enterprise reporter for CNBC.com and NetNet.

  • Stephanie Landsman is one of the producers of "Fast Money."

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