MUST READ — Souring mortgages, weak market put FHA on tightrope (Timiraos, WSJ) Good article, though Timiraos doesn’t address the absurd circularity perpetuated by FHA Chief David Stevens when Stevens says, on the one hand, that more gov’t lending protects the housing market from further declines, while simultaneously arguing that such lending isn’t sustainable. That said, Timiraos has worked lots of interesting stuff into this piece, especially towards the end. For instance, in late ’07 investors were refinancing at-risk borrowers into FHA loans in order to shift risk to taxpayers. Barney Frank defends permanently raising FHA maximum loans for certain geographies to $729k. Also lots of data about how badly FHA loans are performing.
No shortage of news this morning….
Dubai gets bailout from Abu Dhabi (Reuters)
Exxon to buy XTO for $41 billion (Reuters) $41 billion is the enterprise valuation. It’s incomplete to say the Exxon is only paying $31 billion for the stock when it is also assuming $10 billion of debt.
Objective observers mostly agree that it doesn’t make sense for banks to be in the securities business, not if they’re explicitly insured by the government. Wall Streeters invent rationalizations to support the current structure because a large chunk of their profits come from trading.