Rolfe Winkler

Gaming CDS (non-)rules continues

March 31, 2010

In Wall Street’s Wild West, it’s OK to rob the stage coach because there’s no sheriff to enforce the law.

Lunchtime Links 3-29

March 28, 2010

ChartSavings rate declines (Culp, Reuters) Consumers appear to be heeding Paul Krugman’s advice: Boosting savings should be done “in the long run,” not now, he recently reiterated. Of course, the long-run never comes. Output is a measure of spending. If savings climb, spending/output falls. That’s a “recession” and is never to be tolerated, according to economists like Krugman, because it leads to higher unemployment. Never mind that “growth” driven by borrowing is unsustainable… (Click link above to enlarge in new window)

Modding mods

March 28, 2010

Friday’s announcement that the administration is overhauling its mortgage modification program to encourage principal forgiveness shows they understand that unless folks have equity in their homes, mortgage defaults will continue in huge numbers. The plan is a decent one, and it appropriately would have lenders absorb the lion’s share of losses. Still, its an all-carrots approach that may be tough to get off the ground. And taxpayers would get even more deeply involved in housing finance.

Bank failure Friday, also 80 is the new 95

March 26, 2010

A bit of news to go with this week’s failures. FDIC said it will cut the amount of losses it absorbs on failed bank assets sold to acquirers. Here’s the Reuters story by Karey Wutkowski. More from Paul Miller at FBR Research:

Report shows strategic defaults increasing

March 26, 2010

How widespread are strategic defaults? Laurie Goodman and her team at Amherst Mortgage Insight yesterday released a report that shows they are indeed on the rise and for reasons we might suspect: negative equity and a more borrower-friendly environment.

Ambac regulator threads CDS needle

March 25, 2010

Cross-posted from today’s NYT.

Wisconsin’s insurance watchdog is requiring holders of credit-default swap contracts written by Ambac Financial, the troubled bond insurer, to take losses. It suggests what might have been done with the American International Group in different circumstances.

How long will negative equity last?

March 25, 2010

First American CoreLogic tries to answer the question for ten housing markets with the following chart (for an enlarged chart, see here):

Afternoon Links 3-25

March 25, 2010

Must-Read: Debunking Michael Lewis subprime short hagiography (NakedCapitalism) Worth reading the whole piece. Lewis, it must be said, is a storyteller first, a journalist second. Witness his habit of hyperbolizing his subject matter. In Moneyball, the Oakland A’s success was attributed to on-base percentage. He mentioned, but completely underplayed, the fact that they had the best pitching staff in the majors. In The Blind Side, his description of Michael Oher’s size made him out to be the second coming of Paul Bunyan. At 309 lbs, he’s not even the biggest guy on the Ravens line. And Healtheon wasn’t exactly The New New Thing after all…

First post-crisis bank IPO could offer play on failure

March 25, 2010

Cross-posted from today’s NYT.

As FDIC’s problem bank list balloons, healthy institutions are gearing up to capitalize on others’ misfortune. Such may be the case of First Interstate BancSystem, the first bank to launch an initial public offering since 2007. Look for the bank to use the proceeds of its offering to pick off failed brethren.

Lunchtime Links 3-24

March 24, 2010

BofA to start reducing mortgage principal (Lawder, Reuters) It’s good news that BofA is looking at principal reduction, but this announcement is limited to only a small portion of ultra-toxic loans extended by Countrywide (now a unit of BofA). And BofA isn’t doing this out of the goodness of its heart, they’re doing it because of a settlement with Massachusetts Attorney General Martha Coakley. Here’s BofA’s press release.

U.S. banks pay lip service to second mortgages

March 24, 2010

Cross-posted from today’s NYT.

JPMorgan this week became the latest in a trickle of big banks willing to modify second mortgages for some struggling U.S. borrowers. While it’s a baby step in the right direction, it won’t do much to fix America’s foreclosure woes.

Lunchtime Links 3-23

March 23, 2010

Existing home sales decline in February (Calculated Risk) NAR used the word “ease” in its headline…

Lunchtime Links 3-22

March 22, 2010

Interest-rate deals sting cities, states (Lucchetti, WSJ) Most of these municipal swaps were structured so that municipalities could lock in low rates. They were borrowing at a floating rate and that meant they carried significant interest-rate risk if rates went up. To lock in their rates, the municipalities “swapped” their floating rate for a fixed one, agreeing to pay a dealer a fixed rate and receive a payment based on a floating rate in return. It was a hedge to avoid higher interest costs if rates went up. But they went down. So now the payment they receive, based on the floating rate, is ultra low, while the fixed rate they locked in is relatively higher.

Bank failure Friday

March 19, 2010

Three more in Georgia….

#37

—Failed bank: State Bank of Aurora, Aurora, MN
—Regulator: Minnesota Department of Commerce
—Acquiring bank: Northern State Bank, Ashland, WI
—Vitals: assets of $28.2 million, deposits $27.8 million
—Transaction: loss share on $21.3 million of assets
—Estimated DIF damage: $4.2 million

Afternoon Links 3-19

March 19, 2010

Fed loses its (first) appeal (Glovin/Van Voris, Bloomberg) Bloomberg is fighting the good fight. But there are many battles yet to wage in this legal war…