Monthly Archives: February 2011

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Asian crisis of 1997-98 similar to 2007-08

The Asian financial crisis of 1997-98 was similar to the crisis of 2007-08, and the fixes proposed a decade ago sound familiar, but they did not prevent the later panic because the developed world saw itself as more sophisticated and … Continue reading

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Geithner supports mega-banks

Simon Johnson, Massachusetts Institute of Technology economist and author of “13 Bankers,” fears Treasury Secretary Timothy Geithner will let U.S. mega-banks grow as large as they want, in hopes they can capture much of the new financial business abroad, and ignore the potential for risk to … Continue reading

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Stern: Regulators need to name names

Prominent economists at the Stern School of Business, New York University, today criticized Treasury Secretary Timothy Geithner and the new Financial Stability Oversight Council for failing to identify systemically risky firms, which the economists claim is the most important task … Continue reading

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Much bank business is with other banks

A big part of bank business these days is just banks doing repo, derivative, hedging and trading deals with each other. This is a point reporter David Reilly makes in the Wall Street Journal’s Heard on The Street column today, … Continue reading

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Did Dodd-Frank end too-big-to-fail?

The New York finance attorney who blogs at Economics of Contempt argues that critics who claim the Dodd-Frank Act didn’t end the era of too-big-to-fail financial institutions are premature in their assessment. The Act establishes a resolution authority, to unwind … Continue reading

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Admati: Banks need much more capital

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Stanford professor Anat R. Admati argues in a Bloomberg column today for much higher capital requirements for banks and urges regulators to disregard “empty” threats from bankers that higher capital requirements will restrict credit and hurt the recovery. She notes … Continue reading

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Can trusts be trusted?

In the repo world, the most serious allegations against mortgage servicers may be that during the housing boom servicers did not correctly transfer mortgage documents to the trusts that created the mortgage-backed securities that became collateral for repurchase loans. This … Continue reading

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Did Citigroup improperly value repo collateral?

Revelations today by Bloomberg columnist Jonathan Weil raise important questions about operations in the repurchase market during the financial crisis of 2007 and 2008. Weil reports that Citigroup Inc. executives knew in February 2008 that the giant bank’s internal controls … Continue reading

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Credit agencies disagree on Redwood Trust securities

Credit rating agencies disagreed over the ratings for the second issue of securities backed by jumbo home loans that Redwood Trust Inc. of Mill Valley, Calif., has brought to market in 10 months, according to a report today in the … Continue reading

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The crisis fix needs to be fixed

Adair Turner, chairman of the Financial Services Authority which regulates financial services in the UK, does not believe new laws and regulations passed since the financial crisis of 2007 and 2008 will prevent the next blow-up. Financial institutions need a lot … Continue reading

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Moody’s optimistic about tri-party repo reform

Moody’s analysts believe reform of the U.S. tri-party repurchase market now underway should substantially reduce a repeat of the bank runs that triggered the financial crisis of 2007 and 2008, according to a Financial Times report on a Feb. 22 teleconference by credit … Continue reading

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Bernanke emphasizes run on repo and too big to fail

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The biggest threat to the financial system during the crisis was the run on the repurchase market, especially the tri-party operation, Federal Reserve Chairman Ben Bernanke told the Financial Crisis Inquiry Commission in Nov. 17, 2009, testimony just released by … Continue reading

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Obama housing options silent on repos

The Obama Administration’s proposals to fix housing finance do not mention the repurchase market, would not improve its stability and could make it worse. The proposals, released Thursday, call for completely phasing out Fannie Mae and Freddie Mac and offer … Continue reading

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Bank panic called key to understanding crisis

Understanding what happened in September and October 2008, when the repurchase and other credit markets were overcome with panic, is the “indispensable beginning” to understanding the new form that financial markets have taken in recent decades – what some call … Continue reading

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Securitized banking vs. FDIC-insured banking

Discover Financial Services, a Chicago-based bank and credit card company, will buy about $1.1 billion in deposits from Allstate Corp., which is getting out of the banking business, Bloomberg News reported Tuesday. Discover has been “trying to reduce their reliance … Continue reading

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Quality of securitizations questioned

The quality of commercial mortgages being packaged into bonds is declining as sales in that market soar, according to a Standard & Poor’s analyst quoted in a Bloomberg News report Monday. “There’s some crap getting done,” David Jacob, an executive managing … Continue reading

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J.P. Morgan to accept gold as repo collateral

J.P. Morgan Chase will accept physical gold as collateral for tri-party repurchase transactions, the banking giant said Monday. It will also let traders use gold as collateral in securities lending transactions. Bonds and stocks have traditionally been the collateral used … Continue reading

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FASB proposal to report more repo detail

Reporting on repurchase agreements could get more accurate under a proposal from U.S. and European accounting boards that would require more detailed disclosure. Currently U.S. companies can net repo borrowing with repo lending and report only the difference, when the … Continue reading

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Regulators seek repo data

The repurchase market could get more sunlight under a new proposal announced Jan. 25 by the Securities and Exchange Commission and the Commodity Futures Trading Commission. Under the proposal, hedge funds, private equity funds and unregistered money market funds will have … Continue reading

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Johnson: Mega-banks can’t move offshore

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Ignore threats from mega-banks that they will move to another country if regulation in the U.S. gets too harsh, says economist Simon Johnson, professor at MIT, blogger at BaselineScenario.com  and co-author of “13 Bankers.” They can’t move, he says, because … Continue reading