February 2010

Fannie Mae & Freddie Mac Buy Back Bad Mortgages

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Fannie Mae and Freddie Mac have announced they will buy back mortgages which are delinquent:

The two companies are repurchasing mortgage loans for which borrowers have missed at least four months of payments. At the end of last year, Fannie had about $127 billion of such loans, while Freddie Mac had about $70 billion.

Now they are doing this supposedly because it's cheaper. They guarantee the underlying securities and have to pay interest on those MBS (bonds) and it's turning out to be cheaper to just buy the bad loans back.

Yet, Bloomberg reports:

Investors would lose about $12.5 billion in forgone interest.

Bond holders pay more than the face value due to expected interest payments.

Outrage Du Jour - Sallie Mae Lobbies Against Student Loan Reform

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The Outrage Du Jour is Sallie Mae spent $4 million dollars, U.S. taxpayer dollars to lobby against student loan reform.

This call out is coming from the White House and what a right on target to choose.

Sallie Mae had launched an intense lobbying effort to push the Senate's hand, including "sit-downs with lawmakers, town-hall-style meetings and petition drives to plead their case and stay in business." Over the past year, the company spent more than $4 million lobbying Congress, a review of campaign finance records showed. That was the equivalent of $25,000 for every day Congress was in session.

U.S. Education Secretary Duncan:

Former Toyota Lawyer: Toyota hid flaws from regulators

This is sure to raise a stink.

In an exclusive interview with ABC News, a former top lawyer for Toyota claims the automaker regularly hid evidence of safety defects from consumers and regulators, and fostered a culture of "hypocrisy and deceit." ....

Biller also said that Toyota's gas pedal was not the real cause of random acceleration incidents. "It's the electronic throttle control," he said. Biller said he based his opinion on information he'd learned while at Toyota, but could not disclose the evidence because "that would be privileged information."

Remember that Toyota tried to blame the supplier of brake pedals for its problems.

Why would anyone buy a Toyota at this point?

Outrage Du Jour - California Anthem Blue Cross to raise health insurance rates 39%

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This one is just incredible.

California's largest for-profit health insurer is moving to dramatically raise rates for customers with individual policies, setting off a furor among policyholders and prompting state insurance regulators to investigate.

Anthem Blue Cross is telling many of its approximately 800,000 customers who buy individual coverage -- people not covered by group rates -- that its prices will go up March 1 and may be adjusted "more frequently" than its typical yearly increases.

The insurer declined to say how high it is increasing rates. But brokers who sell these policies say they are fielding numerous calls from customers incensed over premium increases of 30% to 39%, saying they come on the heels of similar jumps last year.

Look at that, a Medical Doctor is going to have a tough time paying those premiums.

Greece gets its bailout

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The game of chicken is over. Europe blinked.

European governments have agreed in principle to support struggling euro-zone member Greece and are considering various options, including bilateral aid, a senior German coalition source said on Tuesday.
"The decision on help for Greece has been taken in principle within the euro zone," the source said.

A Brief History of Securitization

Or....

Shadow Bankers Gone Wild

 

 

Preamble

Recently the New York Times published yet another article expressing surprise at the previous existence of securitized financial instruments prior to the last several decades. Securitized financial instruments, or actually securitization, has been around for at least several centuries, and whenever it becomes widely used a Great Depression, or economic meltdown, ensues.

This is the foundation for that bandied about term, “shadow banking.” Without securitization, there would be no such capability. With securitization, the process for creating debt-financed billionaires and multi-millionaires reaches critical mass.

Unfortunately, so to does the dramatic increase in unemployment and poverty.

Those so-called “experts” or “pundits” who continue misleading the populace with extravagant claims as to the recent origins of the securitization process have done a major disservice to society. This brief blog will attempt to rectify this situation.

Economic Stress hits new record

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There may be lots of talk about recovery out there, but the AP Economic Stress Index just surpassed the March 2009 peak.

The AP's Economic Stress Index found that the average county's score in December was 10.8. That's a sharp jump from the 10.2 reading in November. The previous worst reading since the recession began in December 2007 was 10.3 in March 2009.
The index calculates a score from 1 to 100 based on a county's unemployment, foreclosure and bankruptcy rates. A higher score indicates more economic stress. Under a rough rule of thumb, a county is considered stressed when its score exceeds 11.
Nearly 45 percent of the nation's 3,141 counties were deemed stressed in December. That compares with less than 39 percent in the previous month.

The Federal Reserve's Exit Plan is Another Bank Bail Out Pig Fest

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The Federal Reserve is announcing an exit strategy for credit tightening, according to the Wall Street Journal.

The centerpiece will be a new tool Congress gave the central bank in October 2008: an interest rate the Fed pays banks on money they leave on reserve at the central bank. Known as "interest on excess reserves," this rate is now 0.25%.

So, the Fed pays banks interest on money lent to the Fed from the banks.

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