Fannie Mae has made a number of changes in senior management, replacing the chief financial officer, chief business officer, and chief risk officer.
Category: Finance
GSE Update
Two bits of news about Fannie Mae and Freddie MAC that bear notice:
First, it appears that the credit default swaps, think insurance with a bunch of corruption thrown in, on the GSEs could face a 5 year delay in pay-outs in the event of a government bailout, and S&P lowered the rating on subordinated debt as a result to BBB+ from A-.
Also it appears that the foreign investors who largely bankrolled the GSE’s business during the housing boom are retrenching, meaning that it will be harder for them to find additional financing.
Economics Update
Yesterday, I talked about a historically high housing inventory, well, now we have the numbers, 4.67 million, an 11.2 month supply.
Mortgage applications are up this week, but not enough to indicate any sort of resurgence of the housing market.
We have seen an increase in orders for durable goods, but this is almost entirely export driven, which means that US consumption is flat, and if the dollar strengthens further, it’s mixed today we lose what is currently the only major driver of economic growth.
Of course, with the ECB policy makers all pointing in different directions, likely because Germany’s inflation rate is down, it’s not surprising that nothing much is moving in currency right now.
Banking is not looking good period, what with FDIC troubled bank list growing, “117 with $78 billion in assets – up from 90 banks, $26 billion in assets in 1st quarter.”
The credit markets are still frozen, with Merrill Lynch and Wachovia seeing their rates skyrocket as they attempt to rollover bonds, and Fannie Mae just sold short term debt with a spread of 89 basis points vs. US treasuries, which may be a record.
Also, the FDIC is now saying that the IndyMac failure will have a bigger price tag than earlier predicted…..Are we looking at the FDIC needing a bailout?
And it isn’t just banks having problems, personal bankruptcies are surging, with the number of filings in the 2nd quarter the highest since the 4th quarter of 2005, when people rushed to beat the new law.
In energy, oil is up on hurricane Gustav, and gasoline is down again.
Economics Update
Well, once again, we have the financial press, trumpeting so called good news, that US home prices did not fall as fast as the previous month, even though the year over year decline was 15.4%.
They are noting that home sales are up a bit, but they neglect to note how many of these sales are short sales and REO (foreclosure, basically) sales.
The numbers that I’ve seen are around 20-30%, and no one notes that inventory is still at historical highs.
On the brighter side, consumer confidence is up, largely on the fact that Gasoline has fallen over 10% over the past few weeks, as it did again today, though oil is up over concerns regarding hurricane Gustav.
Everyone is expecting a fully coupled worldwide slowdown, and so the Dollar is now at a 6 month high, even though we are seeing signs of commodities bouncing back, at least that’s what the market in copper is showing, with contracts for immediate delivery being rather higher than those for 3 months delivery.
I would also note that Fannie and Freddie are slowing the rate of mortgage purchases for their portfolio, which means two things, that mortgages will be harder to get and more expensive, and that they are “deleveraging”, which is finance speak for trying to get themselves out of the hole that they have dug.
And Now Phil “You’re All Whiners” Gramm Will Bankrupt the FDIC
It appears that Gramm-Leach-Bliley created an instrument called a Certificate of Deposit Account Registry Service (CDARS) that allows you to deposit money in a one bank, and the CD is divided across a network, allowing for, “FDIC insurance on deposits of up to $50 million.”
Yet another way that Phill Gramm is a cancer on the body politic and the economic fabric of America.
Bank of America, and The Gift that Keeps on Giving
Specifically Countrywide Financial, whose merry band of crooks have embroiled Bank of America in another action from a state attorney general, this time in Indiana, claiming, “deceptive and misleading practices in thousands of loans.”
What the hell were the management at BoA thinking when they paid for this open cesspool.
WaMu Offering Desperate for Cash
That’s really the only reason that they would offer 5% for 12 Month CDs, because attempts to secure money from the markets cost a lot more, and they need it now.
Most banks are paying less than 4%, and WaMu ain’t some web only operation trying to build market share.
They are in trouble.
Economics Update
The Philly Fed chief is calling for higher interest rates, because of inflation concerns.
The fact that there are now closings of marginal mines and the like would also indicate that the commodity plunge of the past 6 weeks or so is going to bottom out soon.
Though, truth be told, I’m not sure that it will make much of a difference, as the the fact that spread between LIBOR and the Fed Funds rate is 78 basis points, near an all time high, and an indicator that the Fed has largely lost control over interest rates in the rest of the economy, as well as indicating that the credit system is still frozen up.
Mean while, in real estate, we have bad news presented as good news, with stories trumpeting an increase in existing home sales in July, and soft pedaling a 7% year over year house prices.
Why is this National Association of Realtors (NAR) Bulls$#@?????
Because, Seasonally adjusted it’s ignoring seasonal adjustments July and August are always big months, particularly for parents who do not want their children to change schools mid year. It’s actually the worst seasonally adjusted numbers since 2000.
This is why 75% of Americans have negative view of economy, because the financial press is a bunch of Pollyannas, who ignore the the fact that aggregate weekly hours have been experiencing continuous negative growth on a month-to-month basis since January 2008.
Meanwhile, among the Wall Street Banks, we are now getting reports of a dead pool for Lehman CEO Dick Fuld. He’s expected to be out within a year, which does not bode well for the company as a whole.
Meanwhile, Robert Rubin is stepping down from his position chairman of the board’s executive committee, though he will remain on the board, which probably means something, but I do not know what, but considering Citi’s record, I’m assuming bad news.
Meanwhile, oil is up today, even though the Baku-Tbilisi-Ceyhan pipeline has resumed flow, but gasoline prices continues their downward course.
Thedollar is mixed today.
Big Three Welfare Queens
They are looking for $25 billion in federal loans…..at 4.25%……about 1/3 of what they are paying now….with the government having an option to defer any payments 5 years.
In 1980, Ronald Wilson Reagan rode into the white house on the story of a welfare mother who drove a Cadillac.
Now it appears that the welfare recipient is Cadillac, with John Dingell and the rest of the whores in Michigan backing it.
If they want a bailout, then shareholders and senior management need to lose, and lose big.
FDCI Closed Another Bank Friday
Damn….Always happens when I’m offline for Shabbos.
Must be FDIC policy to only close banks on Fridays after close of business.
This time, it’s The Columbian Bank and Trust, Topeka, KS.
Grob Aerospace Files Bankruptcy
The delays in certification and testing, along with a backer pulling out, have resulted in them filing for reorganization as they attempt to complete their all-composite Jet program, the SPn.
Fed Chairman Calls for More Financial Regulation
He was vague on specifics, but described the need in a speech at the Fed’s economic symposium.
I agree that more regulation is needed, but I do not agree with what appear to be his suggestions.
Bailout should not be what is done when an institution is too big to fail, that creates perverse incentives. Nationalization, where investors and share holders are wiped out to the greatest degree possible should be.
Additionally, I would modify anti-trust law to add “too big to fail” to the reasons for a breakup.
Finally, I believe that the complex secularization mathematics should be severely restricted.
All that “innovation” in the financial markets has gotten us the mess that we are in now.
Economics Update
Well, it appears to be a slow news day, with the only major news being that it appears that the ratings agencies are trying to get their sh&% together, as yesterday Moody’s started uprating government bonds, and today Moody’s downgraded its ratings for Fannie and Freddie preferred stock.
As to commodities and currency, oil down, gasoline down, and dollar up.
Banks Object to Credit Card Regulation
There’s a big surprise, they want to continue to treat their customers like garbage.
This bill is pretty mild:
- Requires 45 days’ notice of interest rate increases
- prohibits companies from changing the terms of the contract at any time for any reason, so called “Universal Default”.
- Makes issuers mail billing statements 25 days before the due date, instead of the current 14-day minimum.
- Require that payments be applied to all balances proportionally, as opposed to the lowest (often introductory) rate first.
But even this very weak tea is too much for the banks.
Economics Update
Ummm….This is not a day for pleasant economic news.
First, the Leading Economic Indicators indicate a bigger slowdown than anticipated, dropping 3x more than expectations, and then the Philly Fed index fell for the 9th straight month.
Employment isn’t good either. While new unemployment claims fell, the 4 week rolling average rose, and in any case at 432,000 claims (seasonally adjusted, which is the elephant in the room), it’s still too damn high.
If you are a monetarist, then we have more bad news, because the growth rate for M3 has dropped off a cliff (chart pr0n below):
Note that this is a graph or the rate of growth, not the money supply, so the effect on the overall money supply is less than it appears, but, “As a rule of thumb, the data gives a one-year advance signal on economic growth, and a two-year signal on future inflation.”
The chart is a rolling 3 month average of the annual rate, and the rate for May-July is 2.1%, indicating a contraction of the M3 money supply in real terms, which would suggest downward pressure in housing and financial markets.
We also have the Reuters/Jefferies CRB Index of commodities making the biggest weekly jump in over 30 years and oil up by 6 bucks, along with the dollar falling which seems to indicate that the past few weeks might just have been profit taking…a breather before an ascent to the summit, though
gasoline is down over a dollar today.
Ratings Agencies Begin to Upgrade Government Bonds
For years, corporate debt has been rated higher than equivalent government debt, and once the monoliner insurers started to implode, municipalities realized how much of a racket it was, with the ratings agencies using a stricter standard, so that the government debt had to use insurers where the rater’s brother-in-law worked.
Took long enough, and I’m sure that the fact that various Attorneys General were looking into this, and that there was a bill in congress, had nothing to do with the change.
Friends Don’t Let Friends Read Amity Shlaes
Seriously, this analysis of the housing crisis is hacktacularly incoherent.
I’m just saying.
Amity Schlaes: Missing the forest for the tapioca pudding since 1982.
Cuomo Hints that Brokers are in Crosshairs of Auction-Rate Investigation
Now New York State Attorney General Andrew Cuomo is strongly implying that he will be going after brokerages, in addition to his already having gone after investment banks, on misleading investors as to the nature, and risk, of auction rate securities.
It’s depressing that when scandals break out in the financial system, that the Federal government seems to be completely uninvolved, and that state authorities have to enforce the law.
Penny Pritzker Needs to STFU
Ms. Pritzker, Barack Obama’s campaign finance chairwoman was, as I’ve noted earlier, chairman of the board for Superior Bank of Chicago, the bank that pioneered the subprime and predatory loans as a business model, that collapsed in 2001.
It’s likely that at some point this will become an issue, but to the degree that she invites reporters to cover her, as she clearly does here, she makes it even more likely.
The article is innocuous enough, it really is quite favorable, but it raises her public profile, which makes her a more likely target.
Given the current state of affairs in banking and housing, I cannot imagine anyone, in any campaign, who would not use her background against any campaign with which she was associated.
She needs to keep her head down.
Economics Update
As it always is in times of crisis, we are seeing a flight to government bonds. Everything else appears too dicey, with mortgage applications at a nearly 8 year low, estimated food inflation for this year may be at a 28 year high, and home prices in high priced areas falling like a stone, even if volume is up a bit.
In energy and currency, the dollar is up a bit, as is oil, though neither are up significantly, and gasoline is down for the 34th straight day, and it’s now down about 10% from the peak.