Wednesday, October 20, 2010

Today's Best Reads

1--The Securitization Market Is Seizing Up, CNBC

Excerpt: So have the wheels of the credit market come off the rails?

... All the securitizations are getting bogged down. This is not an issue of banks not wanting to lend. They want to make sure on the front end they have all the appropriate information on the back end ready. The smaller companies are in better position because they are not directly securitizing loans. And when they sell a loan, they don't own it. Its a simpler process....

The real question is we don't know for sure that how much of the lending that's happening out there is being securitized. Now one could say you have had some stats that 80-90 percent of all the mortgages that are being originated are being put to Fannie, Freddie and FHA. They're not being sold but being put to them for insurance purposes.

Now that's a big number right? I don't think we fully understand what kind of impact this can have on the securitization market yet because we haven't heard from Fannie, Freddie and FHA. Once they decide what they need to do, we'll get a better sense of what is going on.

2--PBOC’s ‘Vicious Cycle’ Worsened by Fed, Yu Says: China Credit, Bloomberg Businessweek

Excerpt: Moves by the U.S. Federal Reserve to print cash would spur capital flows into China, hampering the Asian nation’s efforts to damp inflation and counter yuan gains, said Yu Yongding, a former central bank adviser.

Cash is pouring into China to profit from economic growth that’s averaged more than 10 percent for the past five years and accelerating yuan gains following the end in June of a two-year peg. The nation’s foreign-exchange reserves jumped by $100 billion in September to a record $2.65 trillion, the biggest increase since Bloomberg began tracking the data in 1995, and the inflation rate hit a 22-month high of 3.5 percent in August.

3--Spending Review 2010: Ed Miliband calls cuts 'irresponsible gamble, Telegraph

Excerpt: Late yesterday it was accidentally disclosed that 500,000 public sector workers are to lose their jobs as a result of the review of government spending.

Danny Alexander, the Chief Secretary to the Treasury, unwittingly disclosed the full scale of the expected redundancies when he was photographed reading confidential briefing papers.

The documents showed that the independent Office for Budget Responsibility is likely to forecast that half a million public sector workers will lose their jobs because of the cuts, the biggest in public spending since the Second World War.

Public sector workers will also have a two-year pay freeze and be told that they face increased pension contributions from next year.

4-- This isn't just about pensions, presseurope

Excerpt: What with service stations out of petrol, protesters setting cars on fire, schools closed, the mass demonstrations against the pension reform are plunging France into chaos. But it’s not just about pensions: the people are up in arms about what many consider an unjust system.

72 per cent of the French surveyed say they sympathize with the protesters and are in favour of striking indefinitely, if need be, to prevent passage of the amendment. It is certainly unfair that, should the statutory retirement age be raised as planned from 60 to 62, those who start working right after high school will have to slog away for 44 years till they draw a pension, whereas executives can mop up full benefits after only 41.5 years on the job. But it’s hard to believe two-thirds of the population advocate bringing the country to a standstill for that reason alone.
No, these protests are also about the principle of the matter. What is driving millions into the streets is not only a partly unjust pension reform, but injustice per se. Nicolas Sarkozy’s presidency has added abundant fuel to the fire of a deep-seated suspicion: that “those at the top” expect the people to make sacrifices while they themselves are living off the fat of the land.

5--N.Y. Fed Backing Boosts Pimco Push For Mortgage Buybacks, Bloomberg

Excerpt: The Federal Reserve Bank of New York joined with the biggest bond investors in the U.S. in seeking to force Bank of America Corp. to buy back bad home loans packaged into securities, as the battle over who will bear mortgage losses intensifies.

The regulator joined a group including Pacific Investment Management Co. and BlackRock Inc. in a letter to the lender and to Bank of New York Mellon Corp., the trustee for $47 billion of mortgage-backed bonds sold by Bank of America’s Countrywide Financial Corp. unit, people familiar with the matter said. Countrywide failed to service loans properly, law firm Gibbs & Bruns LLP said in a statement that didn’t name the firms.
“Individual investors have been trying for years to get these big banks to buy back loans at par, and haven’t had a lot of luck,” said Buchta, head of investment strategy for the New York-based securities firm. The New York Fed “in your corner, that adds weight and might give you a better chance for success.”

6--Chicago sheriff says no to enforcing foreclosures, Reuters

Excerpt: Two of the largest U.S. mortgage servicers have said they will resume home foreclosures, but a big-city sheriff has news for them: he won't enforce their foreclosure evictions.

The sheriff for Cook County, Illinois, which includes the city of Chicago, said on Tuesday he will not enforce foreclosure evictions for Bank of America Corp, JPMorgan Chase and Co. and GMAC Mortgage/Ally Financial until they prove those foreclosures were handled "properly and legally."

The announcement by Cook County Sheriff Thomas Dart comes after weeks of damaging accusations of shoddy paperwork that may have caused some people to be illegally evicted from their homes.

"I can't possibly be expected to evict people from their homes when the banks themselves can't say for sure everything was done properly," Dart said in the statement. "I need some kind of assurance that we aren't evicting families based on fraudulent behavior by the banks. Until that happens, I can't in good conscience keep carrying out evictions involving these banks," he added

7—Morgan Stanley's Stephen Roach Warns The Fed's Failed Policies Guarantee Another Crisis, zero hedge

Excerpt: Contrary to the view of many, the Great Crisis didn’t have to happen. I reject the excuse offered by many of the apologists that it was a once-in-a-century tsunami that would have occurred in any case – that policy makers could have done little to forestall the outcome. Yet nothing could be further from the truth. Defensive and steeped in denial, policy makers are ducking responsibility.

The recent crisis is a painfully visible manifestation of the greatest failure of central banking since the 1930s. Out of basis points, relying on dubious quantitative easing strategies, and still agnostic when it comes to coping with asset and credit bubbles, monetary policy has  become the weak link in the daisy chain. Yet in the rush to re-regulate, central banks have largely been let off the hook. Nor are ever-profligate fiscal authorities exactly a beacon of hope in this crisis battered world.

Out of the darkness of the 1930s, a new approach to fiscal and monetary policy was borne. That renaissance is now over. The Great Crisis of 2008-09 demands a rethinking of the strategy and tactics of orthodox stabilization policies. Glaring shortcomings in our policy  architecture must be addressed if the world is ever to learn the most important Lessons of Japan. As day follows night, a failure to learn these lessons almost guarantees another crisis in the not-so-distant future.

8--Task force probing whether banks broke federal laws during home seizures, Washington Post

Excerpt: Federal investigators are exploring whether banks and other financial firms broke U.S. law when using fraudulent court documents to foreclose on people's homes, according to sources familiar with the effort.

The criminal investigation, still in its early days, is focused on whether companies misled federal housing agencies that now insure a large share of U.S. home loans, and whether the firms committed wire or mail fraud in filing false paperwork.

Although prosecutors across the country previously opened a patchwork of inquiries, a broader federal effort targeting companies that improperly evicted people from their homes is only now taking shape. This comes at the same time that investors have begun to hold firms accountable for selling securities composed of mortgages that were improperly serviced.

As part of this reckoning, the Federal Reserve Bank of New York has joined with some of the country's largest investors in seeking to force Bank of America to buy back about $47 billion worth of troubled home loans packaged into bonds by Countrywide Financial, which is owned by the bank. Along with its partners, the New York Fed, which invested in some of these bonds during the rescue of the financial system, is raising the prospect that Bank of America could be sued unless losses are recouped.

9--Sculpture Of Comatose Leader Stirs Israeli Emotion, NPR

Excerpt: A lifelike sculpture of former Prime Minister Ariel Sharon is stirring high emotions among Israelis.

Sharon, the tough army general turned politician who led Israel during the trying years of the second Palestinian uprising and uprooted Israeli settlers from Gaza in 2005, suffered a devastating stroke on Jan. 4, 2006, that has left him comatose for nearly five years.

An art exhibit opening this week in Tel Aviv, which features a wax figure-like sculpture of Sharon in his hospital bed, has enraged his political supporters.

Braslavsky said the comatose statue, whose chest moves up and down to depict Sharon's dependence on a breathing machine, represents Israel's inertia on improving the country's political situation.

The artwork portrays Sharon's eyes open, "but they don't see. It's reminiscent of the state of our government," Braslavsky said. (Creepy)

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