Category Archives: Securitization

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Money market funds, top repo lenders, may need more reform

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 Three years after the financial crisis, officials are still trying to figure out how to fix money market funds. The Securities and Exchange Commission conducted a round table in Washington, D.C., on “Money Market Funds and Systemic Risk” May 10, to see … Continue reading

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Securitized banking in Europe still stressed

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Securitized banking continues to be under stress in Europe, as can be seen in two unrelated news reports from Financial News on May 6 that show it is getting harder for some financial institutions to raise cash in Europe. In … Continue reading

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The underbelly of securitized banking is emerging

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The underbelly of securitized banking is showing, as investors and traders fight over the scraps left after the financial crisis of 2007-2008. One battle that has gotten media attention is a class action against JP Morgan Chase, where pension funds that were clients … Continue reading

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Repo fraud “happens all the time,” says convicted Farkas

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Securitized banking has its first 21st century crook. Lee B. Farkas, chairman of one of the largest privately owned mortgage lending companies in the U.S. when it collapsed in 2009, was convicted by a jury April 19 of a $2.9 … Continue reading

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Securitized banking fueled by myths

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Four myths made securitized banking seem safe before the financial crisis, Eric S Rosengren, president of the Federal Reserve Bank of Boston, said in a speech at Boston University February 28. Securitized banking is securitization financed mainly with repo loans. This is … Continue reading

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WSJ: Securitized banking making a comeback with REITs

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Borrowing on the repurchase market to invest in residential mortgage-backed securities, which was the main systemic risk that caused the crisis in banking in 2007-2008, is making a comeback with REITs, according to the Wall Street Journal April 13. From … Continue reading

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WSJ: ‘Investors’ hot for riskier mortgage securities

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Investors are “climbing over each other” to invest in higher-yielding mortgage securities like those issued by PennyMac, which RepoWatch wrote about December 9, according to the Wall Street Journal April 11. These securities pay a higher return because they are … Continue reading

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NYT: FDIC to meet Tuesday on ‘skin in the game’

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The board of the Federal Deposit Insurance Corporation will meet Tuesday to discuss when trusts that sell asset-backed securities will have to retain some of the risk themselves, according to a March 27 column by Gretchen Morgenson in The New York … Continue reading

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Covered bonds could be the next U.S. repo collateral

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Covered bonds appear to be a candidate to replace asset-backed securities and asset-backed commercial paper as collateral for repo loans on the U.S. repurchase market, because they may be more acceptable to post-crisis investors. But covered bonds will not prevent … Continue reading

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Admati: Banks will be stronger with more equity

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  Expanding on an August 27 study that urged regulators to require banks to fund themselves with much more equity and less debt, four economists said today that in the real world banks have both equity and debt, and moving to … Continue reading

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Redwood Trust sells new round of mortgage-backed securities

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Redwood Trust, a loan securitizer in Mill Valley, Calif., sold $290 milllion in securities backed by prime jumbo residential mortgage loans to institutional investors in a public offering March 1 that was handled by underwriters Credit Suisse Securities (USA) LLC, … Continue reading

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Fannie and Freddie limit systemic risk

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The paradox of government guarantees, like those provided by Fannie Mae and Freddie Mac in housing, is that they encourage lenders to take on too much risk – knowing that the risk will fall to the taxpayer, not the lender … Continue reading

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Government needs to enforce transparency in housing securitization

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In discussions of what to do about Fannie Mae and Freddie Mac, some people are recommending that government get out of housing finance entirely. That would be a mistake, say economists Adam Levintin and Susan Wachter writing in The New … Continue reading

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RepoWatch roundup of securitization data

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RepoWatch’s quarterly roundup of securitization data shows no sign that securitization – and the credit it provides businesses and consumers – is reviving. RepoWatch tracks securitization because it was the combination of repos and securitization, which Yale professor Gary Gorton … 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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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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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