The Fed Keeps Twisting and Tells Us the Economy is in the Wind

twistThe Federal Reserve will extend their Operation Twist past the June 2012 deadline and downgraded the economic outlook. Originally Operation Twist was $400 billion in Treasuries that were maturity dates of 3 years of less turned into T-bills with maturity dates of 6 to 30 years.

Here is the twist details from the NY Fed:

The Fed Does the Twist!

twistThe Federal reserve announced Operation Twist, an action from 1961 where the Fed swaps out treasuries of short maturity lengths, for longer ones, all in an attempt to flatten, or twist the yield curve. From the Economist:

Operation Twist has long been considered a failure. Early studies found little impact on yields, vindicating those who argued that the price of a security depends only on expectations—of inflation, for example, or monetary policy—not its relative supply. Eric Swanson, an economist at the Federal Reserve Bank of San Francisco, disagrees. Previous studies, he reckons, didn’t properly isolate the influence of Operation Twist from countervailing factors. By studying the behaviour of bonds right around announcements related to Operation Twist, he concludes the programme lowered yields by 15 basis points in total.

From the FOMC statement:

MERS Leaves the Field

By Numerian
How the banks could inflict such damage on the country’s home title and mortgage registry system would take another investigation by Congress to determine – assuming Congress was interested.
The Mortgage Electronic Registration Systems company (known as MERS), which has been at the center of legal problems affecting the securitization of home mortgages and foreclosures, has given up one of its principal corporate objectives. It is now instructing its members to cease foreclosing on residential properties in the name of MERS, and to begin immediately to register all assignments of mortgages with local county recorders of deeds. (Image)

The whole purpose of MERS when it was established in 1996 was to by-pass the county recording process, and the billions of dollars of fees that banks and mortgage companies would have had to pay to comply with state and local real estate laws. MERS operated on a legal assumption that it could have its cake and eat it too, by acting as an agent for its member banks in their real estate transactions, but also acting if necessary as a principal in its own name when it came to assigning mortgages and foreclosing on properties.

Saturday Reads Around The Internets for January 22, 2011

Welcome to the weekly roundup of great articles, facts and figures. These are the weekly finds that made our eyes pop.

Banks Want Pieces of Freddie & Fannie Mae

The New York Times reports Banks want to securitize mortgages with a government guarantee:

Wells Fargo and some other large banks would like private companies, perhaps even themselves, to become the new housing finance giants helping to bundle individual mortgages into securities — that would be stamped with a government guarantee.

The banks have presented their ideas publicly through trade groups. Housing industry consultants and people familiar with recent meetings at the Treasury Department say these banks view the government’s overhaul of the mortgage market as a potential profit opportunity. Treasury officials have met with executives from several institutions, including Wells Fargo, Morgan Stanley, Goldman Sachs and Credit Suisse, according to a public listing of the meetings.

Incredible, instead of regulating derivatives which caused the Financial Crisis, banks now want to make them and get the government to guarantee them.

We Gives Businesses Our Money, They Move to China