Wednesday, 1 Dec 2010 | 4:36 PM ET

Fed Deals in Lots of Junk at Primary Dealer Credit Facility

Posted By: Ash Bennington

A preliminary analysis of the Primary Dealer Credit Facility (PDCF) source data released today by the Fed would seem to indicate a startling fact: Approximately 36 percent of the collateral posted, on average, was in the form of equity securities or junk grade debt.

Federal Reserve
Federal Reserve

Furthermore, only approximately 1.3 percent of the collateral, on average, was of the type traditionally posted at the Fed's Discount Window: U.S. Treasury or Agency Debt.

\(Those numbers, however, are difficult to interpret—because collateral might be counted multiple times. John Carney explained earlier today : "Although the total numbers appear very large, the Fed never had anywhere near $8.95 trillion of loans outstanding under the program. The loans made under the PDCF were overnight loans, which were rapidly repaid or rolled over into new loans. This inflates the total number because the Fed counts each roll-over as a new loan."\)

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  Wednesday, 1 Dec 2010 | 4:28 PM ET

And Here Are The Mug Shots of The Latest Madoff Defendants...

Posted By: Cadie Thompson
Joann Crupi
Joann Crupi

JoAnn "Jodi" Crupi, a former Madoff employee was taken into custody at her home in Westfield, N.J., according to the FBI. Crupi had worked for Madoff for more than 25 years.

»Read more
  Wednesday, 1 Dec 2010 | 3:28 PM ET


  Wednesday, 1 Dec 2010 | 3:04 PM ET

The Market on The Couch

Posted By: Lori Ann LaRocco

If the markets were a person, it would be a psychologists dream. Could you imagine the billing on the fears and economic worries plaguing investors?

Diane Swonk, Chief Economist & Senior Managing Director at Mesirow Financial, talked to me about a host of issues that have been driving some of us to neuroses.

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  Wednesday, 1 Dec 2010 | 1:13 PM ET

Did Fed Really Lend $9 Trillion Under Its Primary Dealer Credit Facility?

Posted By: John Carney

Although the Federal Reserve made loans totaling $8.95 trillion to primary dealers in exchange for a wide range of collateral under its Primary Dealer Credit Facility, the size of the facility was likely never more than a fraction of that amount.

United States Federal Reserve
Tetra Images | Getty Images
United States Federal Reserve

Beginning in March of 2008, the Fed undertook 1,376 transactions under the facility, with loans ranging from a $10 million to nearly $48 billion. The largest single loan went to Barclays Capital on September 18, 2008—the day after Barclays agreed to buy Lehman Brothers.

The biggest borrowers were Citigroup , Merrill Lynch and Morgan Stanley , each receiving loans that total more than $1 trillion.

Although the total numbers appear very large, the Fed never had anywhere near $8.95 trillion of loans outstanding under the program. The loans made under the PDCF were overnight loans, which were rapidly repaid or rolled over into new loans. This inflates the total number because the Fed counts each roll-over as a new loan.

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  Wednesday, 1 Dec 2010 | 11:25 AM ET

The Wall Street Break-Up with The Blackberry Rolls on As UBS Begins iPhone Program

Posted By: John Carney

UBS has launched a pilot program that will allow its employees to use iPhones and iPads to receive work email, according to a person inside of the Swiss bank.

Two women compare the new iPhone 4 (right) and an iPhone 3 in front of Manhattan's 5th Avenue Apple Store.
Emmanuel Dunand | AFP | Getty Images
Two women compare the new iPhone 4 (right) and an iPhone 3 in front of Manhattan's 5th Avenue Apple Store.

It’s yet another blow to Blackberry maker Research In Motion’s quasi-monopoly over the Wall Street smart phone market.

A host of other Wall Street firms have already taken the plunge into Apple’s smart phones. Credit Suisse has a pilot program allowing employees to use iPhones, according to people familiar with the matter. Bank of America has begun phasing in iPhones, according to one person at the bank. JP Morgan Chase is reportedly experimenting with the iPhone. Skadden Arps, the powerhouse Wall Street law firm, buys iPhones for attorneys who choose them, and pays for the data plan.

The ongoing infiltration of the iPhone into Wall Street could create a serious problem for RIM.

As I said back in September :

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  Wednesday, 1 Dec 2010 | 8:56 AM ET

Gold, Silver and the Fear Factor

Posted By: Lori Spechler

Gold and silver continue to confound the naysayers, moving higher along with the U.S. dollar as investors flock to so-called safe haven investments.

Gold Bars
Gold Bars

Taking the pulse of the market, the overriding theme is fear of the crisis in Europe—here is some of the commentary:

Citing concerns about sovereign risk in Europe and the stand-off in Korea, Rohit Savant, Sr. Commodity Analyst at CPM Group says investors are buying "gold, silver, platinum in that order". And while there might be some profit taking into a rally, he says investors see sell-offs as buying opportunities.

Ashraf Laidi, CMC Markets Chief Market Strategist says, "...surging Eurozone bond spreads and a broadening selloff in the single currency \(euro\)" are helping to feed investor demand for gold. "This is a repeat of the Feb-June period when the yellow metal broke to new highs due to uncertainty with Greece and Spain."

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  Wednesday, 1 Dec 2010 | 8:47 AM ET

Euro Zone Bonds Stronger on ECB Purchase Hopes

Posted By: Ash Bennington

ADP Report Show Improvement: 93,000 New Private Sector Jobs (CNBC) According to new employment numbers released by ADP at 8:15 this morning: "The economy created 93,000 private sector jobs in November, pointing to the first signs of a turnaround in the labor market, according to the latest report from ADP and Macroeconomic Advisors.

Job creation came primarily from the service sector, which rose by 79,000, gaining for the 10th month in a row. Goods producers added 14,000, while manufacturing lost 16,000."

Euro Zone Bonds Stronger on ECB Purchase Hopes (Financial Times) "On Tuesday, Portuguese bonds rallied strongly as traders said the eurozone central bank was an active buyer. Sovereign bonds of peripheral eurozone nations continued climbing on Wednesday in response with yields on 10-year Spanish debt falling 13 basis points to 5.30 per cent and 10-year Portuguese yields down 11bp at 6.57 percent." There was also a lessening of fear in credit default swaps: "Five year CDS spreads fell 49bp to 495bp on Portugal and were 20bp lower on Spain trading at 345bp."

"Mortgage Tax Break in Crosshairs" \(Wall Street Journal\) "The co-chairmen of the White House's bipartisan deficit-reduction commission said Tuesday they would propose a significant paring of popular middle-class tax breaks, including the mortgage-interest deduction…" You have to wonder two things: 1\) How popular will deficit reduction become on Main Street — if the proposed austerity package includes significantly reducing the ability of Americans to deduct the interest component of their mortgage payments? and 2\) What impact would such a reduction have on home sales? To the latter point: "Joe Stanton, chief lobbyist for the National Association of Home Builders, said his organization would use 'the full weight of our grass roots' to prevent any reduction of the mortgage-deduction tax break. 'You are already talking about an industry that is completely battered, and this will kill us,' he said."

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  Tuesday, 30 Nov 2010 | 5:01 PM ET

Deloitte Partner—and Wife—Charged with Insider Trading

Posted By: Ash Bennington
A roundup of the day's headlines. »Read more
  Tuesday, 30 Nov 2010 | 4:13 PM ET

Bank of America Case Hurtles Toward the Great MBS Unwind

Posted By: Ash Bennington

A little over a week ago, I wrote a story about how a personal bankruptcy case in New Jersey might affect the mortgage repurchase fiasco currently underway in many of the big banks.

A Bank of America trader inside the NYSE.
Oliver Quillia for CNBC.com
A Bank of America trader inside the NYSE.

The upshot of the story is this: A Bank of America executive testified under oath in a bankruptcy hearing that Countrywide Financial did not properly transfer a mortgage note. Proper transfer of that note was required to maintain compliance with the legal terms of a document called the pooling and servicing agreement, which governs how individual loans are turned into mortgage-backed securities.

Moreover, the Bank of America executive, in the words of court documents "testified further that it was customary for Countrywide to maintain possession of the original note and related loan documents."

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