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Alan Greenspan Blames Securitization for Crisis
Tweet Share on Facebook October 23, 2008 Comment (7)With financial crisis finger-pointing season in full swing, former Fed chief Alan Greenspan appeared on Capitol Hill Thursday to offer his take on the root cause.
Greenspan—who himself has faced stiff criticism for his role in creating the current crisis—argued instead that the explosion of home mortgage securitization sits at the problem's core.
From Greenspan's prepared testimony:
What went wrong with global economic policies that had worked so effectively for nearly four decades? The breakdown has been most apparent in the securitization of home mortgages. The evidence strongly suggests that without the excess demand from securitizers, subprime mortgage originations (undeniably the original source of crisis) would have been far smaller and defaults accordingly far fewer. But subprime mortgages pooled and sold as securities became subject to explosive demand from investors around the world. These mortgage backed securities being "subprime" were originally offered at what appeared to be exceptionally high risk-adjusted market interest rates. But with U.S. home prices still rising, delinquency and foreclosure rates were deceptively modest. Losses were minimal. To the most sophisticated investors in the world, they were wrongly viewed as a "steal."
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Waxman Digs Into Moody's, S&P With Internal Docs
Tweet Share on Facebook October 23, 2008 Comment (3)In the latest chapter of its investigation into the financial crisis, the House Oversight and Government Reform Committee dragged the ratings agencies before lawmakers Wednesday.
And as usual, Rep. Henry Waxman's gang made sure to have plenty of internal documents on hand for questioning.
From Rep. Waxman's opening statement:
In their testimony today, the CEOs of Standard and Poor's, Moody's, and Fitch will tell us that "virtually no one...anticipated what is occurring." But the documents the Committee obtained tell a different story.
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Banks, Feds Get Suspicious Powder-Laced Letters
Tweet Share on Facebook October 22, 2008 CommentFrom the Associated Press:
WASHINGTON (AP) — More than 30 letters containing a suspicious powder were mailed to Chase bank branches and federal banking regulators' offices in nine cities, authorities said Tuesday in what was being investigated as a first, if extreme, public backlash over the nation's financial crisis.
Initial tests on the powder proved negative for poisonous or otherwise dangerous toxins, the FBI said. An FBI spokesman in Oklahoma, where eight letters turned up, said local preliminary assessments showed the powder was harmless calcium.
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Mortgage Bankers Heckled at Annual Convention
Tweet Share on Facebook October 22, 2008 Comment (3)Looks like there were some uninvited guests at the Mortgage Bankers Association's annual convention in San Francisco...
From the San Francisco Chronicle, via patrick.net
A noisy but contained protest greeted delegates to the Mortgage Bankers Association's 95th annual convention, which began Monday at Moscone Center, as the real estate finance industry is tarred by association with a housing market that's collapsed like a deck of cards along with the financial strife that followed...
The resulting consumer anger was palpable Monday morning when about 40 protesters greeted some of the early attendees of the mortgage bankers' gathering. Marching before the conference center, they carried signs saying "Jail them, don't bail them" and "Grand theft bailout." A steady stream of slogans and chanting accompanied the signs, laying blame at the gathered industry.
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Bankers Told to Fly Coach
Tweet Share on Facebook October 22, 2008 Comment (4)Good news: On your next flight from Bangkok, Thailand, to Phnom Penh, Cambodia, you might get a chance to give those bankers a piece of your mind.
From Bloomberg, via Housing Doom:
Merrill Lynch & Co., UBS AG and JPMorgan & Chase Co. are telling senior bankers in Asia to fly coach on short-haul flights and reduce nonessential travel as they step up cost cuts, officials at the firms said.
UBS advised bankers this month to travel economy class for flights of up to five hours, two officials at the biggest Swiss bank said, asking not to be identified because it's an internal policy. Merrill employees have been told to travel economy for flights of as much as three hours since mid-September, two executives at the firm said.
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A Post-9/11-Style Review of the Financial Crisis?
Tweet Share on Facebook October 21, 2008 Comment (27)During a hearing in the House Financial Services Committee on Tuesday, Joel Seligman, the president of the University of Rochester, brought up the idea of having Congress examine the financial crisis in the same way the terrorist attacks of September 11 were investigated.
From Seligman's prepared testimony:
I would strongly urge each house of Congress to create a Select Committee similar to that employed after September 11th to provide a focused and less contentious review of what should be done. The most difficult issues in discussing appropriate reform of our regulatory system become far more difficult when multiple Congressional committees with conflicting jurisdictions address overlapping issues. This is a time when it is important that all appropriate alternatives be considered, including consolidating regulatory agencies, creating new regulatory agencies and transferring jurisdiction. This type of review is far more likely to succeed before a single Select Committee, presumably including the chairs or appropriate representatives from the existing oversight committees.
Lawmakers seemed favorable to this approach during the hearing. And given the enormous fallout from the crisis, I'd be surprised if they don't end up doing something like this.
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Phony Realtor Rents Home to Unsuspecting Family
Tweet Share on Facebook October 21, 2008 Comment (1)Another scam worth noting, as reported by the Associated Press:
A Long Island, N.Y., family thought they got a good deal when they found a rental house for $1,000 a month—until the owner showed up and asked what they were doing there.
Nassau County police arrested Gregory Garvin on Wednesday for posing as a real estate agent and renting out the house in the hamlet of Roosevelt. Garvin was charged with grand larceny and fraud.
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Feds: Why Banks Will Lend Their Bailout Cash
Tweet Share on Facebook October 20, 2008 Comment (2)Much of the success of Treasury's $250 billion capital injection plan will depend on banks' willingness to lend the cash out rather than simply hoard it as protection against the rickety U.S. economy. Treasury has already earmarked $125 billion of this money for nine leading financial institutions and is now looking to get a wide array of other financial institutions to participate in the program.
During a background briefing with the press on Monday after Treasury Secretary Hank Paulson gave this address, government officials argued that the program will succeed in boosting bank lending. (Please note: Under the terms of the "background briefing," reporters weren't permitted to name the government officials who answered their questions.)
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Treasury Commercial: 'Biggest Bailout Ever!
Tweet Share on Facebook October 20, 2008 CommentThe folks over at the Nightly Business Report have put together this hilarious spoof, poking fun at the federal government's massive intervention into the financial markets.
(Video via patrick.net)
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Bailout Impact: Libor Improving
Tweet Share on Facebook October 20, 2008 Comment (2)Although we've seen some counterproductive fallout from the $700 billion financial bailout, the efforts of governments around the world to unlock credit markets have produced some encouraging results as well.
Below is a table from acrossthecurve.com, which shows that Libor rates—a key measure of interbank lending—have begun easing. The movement demonstrates that banks are growing less terrified—at least for now—of lending to one another. This is a key step in the recuperation of the credit markets.
From acrossthecurve.com, via Paul Krugman's blog:
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