Felix Salmon

Why banks are self-defeating on housing

Why are banks so bad at short sales, even when such things are clearly in the banks’ interest? Cynic has a spectacularly good comment which is worth elevating to a blog entry of its own:

Investing in loopholes, MLP ETF edition

Remember the Master Limited Partnership tax loophole? Well it turns out that a lot of investment companies seem to be trying to take full advantage of it. Tadas Viskanta notes that everybody and their mother seems to be trying to roll out stock-market-traded funds structured as MLPs, some with valuations north of $1 billion. Essentially, if you list a pipeline corporation directly, there’s much more tax to be paid than if you set it up as an MLP and then list the MLP in ETF form.

Cassano comes out swinging

AIG FP’s Joe Cassano is coming out swinging in his testimony to the FCIC:

Often repeated are my words during an earnings call in August 2007 that I did not expect any realized, economic losses (as opposed to unrealized accounting losses) on this portfolio. I meant exactly what I said in August 2007. The underlying loans in the CDOs were diversified, and we insured only the super-senior tranche, which always had a AAA layer of loans below it. I did not expect actual, economic losses on the portfolio…

The inexplicable AIG waiver

Louise Story and Gretchen Morgenson have another huge AIG/Goldman story today, which centers on one new and interesting piece of information: when AIG paid off its bank creditors in full, with the help of that monster government bailout, it also signed a waiver forfeiting its right to sue those banks, including Goldman.

Short-sale datapoint of the day

How long does it take to complete a short sale? If you have a prime loan from GMAC, it takes a full six months: painful. But what’s much worse is that GMAC is by far the fastest mortgage servicer of the lot: prime loans from Countrywide take, on average, 13 months. Subprime loans from Morgan Stanley’s Saxon unit are even worse, at 17 months. And then there’s the subprime loans from Equicredit and Ocwen, which take a mind-boggling 29 months to go through, on average.

Finding the Journolist archive

There are non-trivial technical problems which would need to be overcome were anybody tempted to take Andrew Breitbart up on his offer to buy the Journolist archives for $100,000. Juli Weiner writes:

Will fiduciary responsibility be weakened?

One of the best pieces of news to come out of the financial regulatory reform bill (assuming it goes through) is that stockbrokers will finally have a fiduciary duty to their clients. It’s long overdue — but already, before the bill is even passed, brokers are trying to find ways to weaken it. Joe Giannone spoke to brokerage executive John Taft:

Financial regulatory reform: Not over yet

It seems that financial regulatory reform is not a done deal after all: Paul Kanjorski says that the reconciliation negotiations might be reopened, Chris Dodd is looking to possibly beef up the FDIC enormously, and Democrats are wondering whether they need to remove $19 billion in new bank taxes in order to pass Republican procedural hurdles in the Senate.

U.S. banks still very involved in money laundering

In the olden days, drug smugglers would launder their money the old-fashioned way: by starting up a bank. Today, it seems, they have no need to do so: they just use Wachovia and Bank of America instead. Michael Smith has the story, which includes the tale of money launderer Pedro Alatorre: