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More Pitchforks?
February 06, 2010
When the mortgage crisis first started unfolding, I remember reading in a number of articles how Goldman Sachs had been more clever than other firms in avoiding heavy exposures to subprime mortgage bonds. In fact, at least one article pointed out that Goldman had been betting against the subprime securities market for its own accounts, even while still trading the bonds for customers.
When Goldman’s counterparty AIG faltered, the U.S. Government stepped in to back up its insurance contracts on bonds. The firm itself had traded directly on the parent company’s legendary AAA status. But it turned out they did not have nearly enough capital to cover all the bets they’d made. Like a bookie who’s taken the wrong side of too many “sure things,” AIG was busted and American taxpayers ended up having to bail them out. Among the biggest winners in this game? Goldman Sachs, who received an estimated $12 billion in taxpayer money funnelled through AIG to make good on their contracts.
Today’s New York Times extends the debate about Goldman’s role in the market’s unraveling, outlining in a lengthy article how Goldman resisted AIG’s attempts to pay less than full value on the contracts, arguing that the securities they’d guaranteed were worth more than Goldman claimed.
Perhaps the commission headed by former California Treasurer Philip Angelides will get to the bottom of who did what to whom. For now, it seems safe to say that the behavior that seemed so smart two years ago may prove to have been too smart by half when re-examined in the wake of the worst financial crisis in more than 70 years.
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Zombies In The House
February 03, 2010
Just when you thought it was starting to be safe again outside, analysts are beginning to tote up the costs facing banks and others from buy-back demands from insurers and Fannie Mae and Freddie Mac.
With losses still mounting from failing home loans, more and more scrutiny is being applied to the underlying loans and their documentation and underwriting. When Fannie or Freddie securitize or buy a loan, they require sellers to warrant that they have followed all the guidelines required by the companies. When bond insurers or mortgage insurers write policies on mortgages or bonds backed by them, they do the same.
With billions at stake, it’s not surprising that these lenders are going over files with a fine-toothed comb, looking for any opportunity to force the originator to make good on their promise to buy back faulty loans. A recent Housing Wire article calls this a “$10 billion problem.” Best quote is from Chris Whelan, Managing Director at Institutional Risk Analytics:
“The wave of loan repurchase demands on securitization sponsors is the next area of fun in the zombie dance party, namely the part where different zombies start to eat each other.”
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Fannie Mae Sales: 3.5 Percent Back
February 01, 2010
Fannie Mae on January 28, 2010 announced a new program through which owner occupant buyers of any of its owned real estate (REO) will receive a 3.5 percent rebate on the final sales price. The rebate can be used either for closing costs or as a credit for purchase of appliances. The offer is available for any purchase of one of Fannie Mae’s HomePath properties until May 1, 2010. These properties are listed on Fannie Mae’s HomePath website.
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Show Me the Money?
January 28, 2010
Jon Stewart absolutely nails it in this clip about bankers after their fall.
| The Daily Show With Jon Stewart | Mon - Thurs 11p / 10c | |||
| Obama Takes On Bankers | ||||
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