When You Take Moral Hazard Out of The Equation .....

[From Ashes To Glory 2]

Banks Warm to Mortgage Bonds That Burned Them in 2008
Citigroup, Goldman Sachs and Wells Fargo are getting back into the business

By
Ben Eisen and
Telis Demos
Sept. 16, 2019 5:30 am ET

Banks are getting back into the business of building mortgage bonds, laying the groundwork for a market that stands to grow as the Trump administration tries to reduce the government’s role in housing finance.

Citigroup Inc., Goldman Sachs Group Inc., Wells Fargo & Co., and JPMorgan Chase & Co. over the past year have restarted or expanded the business of spinning fresh pools of mortgages into securities.

https://www.wsj.com/articles/banks-warm-to-mortgage-bonds-that-burned-them-in-2008-11568626202

 

[big_country90]

I think all banks should always service every single loan that they do, whether they keep the actual loan on the books or not. That will keep a lot of banks more honest when it comes to doing riskier loans.

 

[raleighherdfan]

tries to reduce the government’s role in housing finance.

Considering GOVT was at the center of the last mortgage meltdown, this is the least of the bond world problems.

The next crisis? Local and State pension funds which rely on "bond income" (investments) to fund their retiree payouts.

 

[From Ashes To Glory 2]

Considering GOVT was at the center of the last mortgage meltdown, this is the least of the bond world problems.

The next crisis? Local and State pension funds which rely on "bond income" (investments) to fund their retiree payouts.

Converting/bundling mortgage portfolios into easily traded securities absolutely exacerbated problems leading up to the Great Recession by burning a lot of financial institutions.

 

[raleighherdfan]

Converting/bundling mortgage portfolios into easily traded securities absolutely exacerbated problems leading up to the Great Recession by burning a lot of financial institutions.

Those bundled mortgages would never have been as attractive had the govt not underwritten or financed many of those mortgages (via Fannie Mae)

 

[From Ashes To Glory 2]

Those bundled mortgages would never have been as attractive had the govt not underwritten or financed many of those mortgages (via Fannie Mae)

True .... but private financial institutions now quickly embracing it again does not bode well for the housing market. Markets with minimal government regulation/intervention are also quite capable of collapsing as well (the euphemism being "creative destruction"). There have certainly been many real estate crashes throughout our nations history predating the creation of Fannie Mae.

 

[raleighherdfan]

True .... but private financial institutions now quickly embracing it again does not bode well for the housing market. Markets with minimal government regulation/intervention are also quite capable of collapsing as well (the euphemism being "creative destruction"). There have certainly been many real estate crashes throughout our nations history predating the creation of Fannie Mae.

I understand fully the concept and practice of fractional reserve banking, along with the history of market "panics"/crashes.

In this last case, "bundling" was not a cause for the crash. Banks selling bundles of MBS did not cause the crash. The poor quality of the borrowers underwritten by Fannie fueled the bubble, followed by a cooling economy ultimately was the root cause that led to the crash.

IMO bundling as a concept does not bring risk to the housing market. The real risk of bundling was/is the overall lack of transparency in the quality of mortgage being bundled, and the rating agencies willingly turning a blind eye on the quality of the assets within those bundles. There is nothing wrong with an investment bank selling a poorly rated/junk grade bond investment, as long as the buyer of the investment knows that risk.

 

[From Ashes To Glory 2]

I understand fully the concept and practice of fractional reserve banking, along with the history of market "panics"/crashes.

In this last case, "bundling" was not a cause for the crash. Banks selling bundles of MBS did not cause the crash. The poor quality of the borrowers underwritten by Fannie fueled the bubble, followed by a cooling economy ultimately was the root cause that led to the crash.

IMO bundling as a concept does not bring risk to the housing market. The real risk of bundling was/is the overall lack of transparency in the quality of mortgage being bundled, and the rating agencies willingly turning a blind eye on the quality of the assets within those bundles. There is nothing wrong with an investment bank selling a poorly rated/junk grade bond investment, as long as the buyer of the investment knows that risk.

Well of course some of the real risks in bundling is in the context of human nature. Many a time people will push the envelope and believe rating agencies will turn a blind eye regarding the quality of what these financial institutions may bundle. Other times, they will toe the line in making their securities as opaque as possible without running afoul of the letter of the law (that many of these financial institutions heavily lobby lawmakers to rescind), and then respond "caveat emptor" to the bag holder.

Thankfully you understand the concept and practice of fractional reserve banking. To pad those profit margins in the short term, there are many a thing bankers will do and have done that have come back to haunt them (such as cooking the books or lobbying lawmakers to lower those reserve requirements if any). Of course, when rubber meets the road, most of those bankers and others who proclaim the virtues of Anthem and The Fountainhead, will become (again) some of the biggest socialists you'll ever see.

 

[raleighherdfan]

most of those bankers and others who proclaim the virtues of Anthem and The Fountainhead, will become (again) some of the biggest socialists you'll ever see.

The only people usually making the claim that "most of those bankers" are NOT already "socialist" democrats are guys like you and dtard. Wall St. banking has been and still is, largely a liberal democrat bastion. Anyone suggesting otherwise really doesn't know much about the street.

 

[19MU88]

I think all banks should always service every single loan that they do, whether they keep the actual loan on the books or not. That will keep a lot of banks more honest when it comes to doing riskier loans.

Never work

 

[From Ashes To Glory 2]

The only people usually making the claim that "most of those bankers" are NOT already "socialist" democrats are guys like you and dtard. Wall St. banking has been and still is, largely a liberal democrat bastion. Anyone suggesting otherwise really doesn't know much about the street.

Whatever you say .....

Cramer: Wall Street executives are saying Elizabeth Warren’s 2020 bid has ‘got to be stopped’

PUBLISHED TUE, SEP 10 2019 11:06 AM EDT UPDATED WED, SEP 11 2019 10:05 AM EDT

Leaders in the financial industry are really worried about the possibility of Sen. Elizabeth Warren becoming president, CNBC’s Jim Cramer said Tuesday.

“When you get off the desk and talk to executives, they’re more fearful of her winning,” Cramer said on “Squawk on the Street.” Cramer said he’s hearing a “she’s got to be stopped” mantra bubbling up among executives on Wall Street and elsewhere.

Warren, a champion of the left wing for her bank-bashing and wealth-taxing proposals, has been doing better at the polls in the crowded field of candidates vying for the 2020 Democratic presidential nomination.

[...]

https://www.cnbc.com/2019/09/10/jim-cramer-wall-street-saying-elizabeth-warren-must-be-stopped.html

 

[From Ashes To Glory 2]

America's Biggest Banks Are Rehabilitating The Mortgage Bonds That Crashed The Economy In 2008

[...]

The timing is certainly interesting. Earlier this month, President Trump proposed privatizing Fannie Mae and Freddie Mac (it's not too difficult to imagine some of these banks buying up chunks of the GSEs' business). And even if the government can't put together a plan to privatize the mortgage-origination giants, the White House will at least shrink them, creating more room in the market for private label.

With trillions of dollars of global bonds yielding less than zero, and the 10-year Treasury struggling to retake the 2% level, investors remain "starved" for yield. Since there's no implicit government guarantee on private label bonds, investors will likely demand a higher yield than the MBS being packaged by Fannie and Freddie.

Still, there some obvious risks remain. While experts maintain that the banking system is in much better shape today than it was during the run-up to the crisis, many of the mortgages that will be used to package into these securities will be made by non-banks, which are more lightly regulated, and often thinly capitalized. Citigroup recently bought a pool of 932 mortgages from a nonbank lender called Impac Mortgage Holdings and used them to back more than $350 million in bonds in a deal that closed last month.
This risks a return to the pre-crisis days, when banks would bid on mortgages, incentivizing lenders to relax their standards to meet growing demand.

As we noted a few months back, JPM recently revived another relic from the pre-crisis days:
The synthetic CDO. And it's struggling to convince more clients to trade these products. The largest US bank by assets also recently did a private-label MBS deal recently with a bundle of mortgages that "didn't qualify" to be bought by Fannie and Freddie. Goldman has done three deals since March and Wells Fargo introduced its first post-crisis offerings last October.

With home prices already at such unaffordable levels, and with millennials putting off decisions like buying a home, we're curious: Where are these banks going to get all of these mortgages? Can they do it without seriously 'relaxing' lending standards?

https://www.zerohedge.com/markets/a...ilitating-mortgage-bonds-crashed-economy-2008

 

[raleighherdfan]

Whatever you say .....

Cramer: Wall Street executives are saying Elizabeth Warren’s 2020 bid has ‘got to be stopped’

PUBLISHED TUE, SEP 10 2019 11:06 AM EDT UPDATED WED, SEP 11 2019 10:05 AM EDT

Leaders in the financial industry are really worried about the possibility of Sen. Elizabeth Warren becoming president, CNBC’s Jim Cramer said Tuesday.

“When you get off the desk and talk to executives, they’re more fearful of her winning,” Cramer said on “Squawk on the Street.” Cramer said he’s hearing a “she’s got to be stopped” mantra bubbling up among executives on Wall Street and elsewhere.

Warren, a champion of the left wing for her bank-bashing and wealth-taxing proposals, has been doing better at the polls in the crowded field of candidates vying for the 2020 Democratic presidential nomination.

[...]

https://www.cnbc.com/2019/09/10/jim-cramer-wall-street-saying-elizabeth-warren-must-be-stopped.html

Really....this is your evidence??? You think they wont be putting that money into another democrat instead?? Shit, the Clintons owe half their wealth to Wall St insiders.

https://www.nytimes.com/2019/06/16/us/politics/2020-democratic-donors-wall-street.html

Anyway. Thank you for linking us to Cramer....a long time lib Dem, former goldman sachs banker and hedgefund manager, turned TV pundit.

 

[raleighherdfan]

Since there's no implicit government guarantee on private label bonds, investors will likely demand a higher yield than the MBS being packaged by Fannie and Freddie.

And it's struggling to convince more clients to trade these products. The largest US bank by assets also recently did a private-label MBS deal recently with a bundle of mortgages that "didn't qualify" to be bought by Fannie and Freddie.

This is what I was talking about. Fannie and Freddie involvement made the investment more attractive and incentivized the bubble. As long as Fannie and Freddie refuse to create these mortgages (failing to provide the "govt backed" underwriting component) this time around, it's going to be a lot more challenging inflating the MBS balloon that popped before.

 

[From Ashes To Glory 2]

Really....this is your evidence??? You think they wont be putting that money into another democrat instead?? Shit, the Clintons owe half their wealth to Wall St insiders.

https://www.nytimes.com/2019/06/16/us/politics/2020-democratic-donors-wall-street.html

Anyway. Thank you for linking us to Cramer....a long time lib Dem, former goldman sachs banker and hedgefund manager, turned TV pundit.

You think Hillary (whose husband helped repeal Glass Steagall and signed NAFTA) would not be the darling of Wall Street? lol

No problem regarding the link to Cramer. So he's lying regarding Wall Street not wanting Warren to become the next President?

 

[raleighherdfan]

You think Hillary (whose husband helped repeal Glass Steagall and signed NAFTA) would not be the darling of Wall Street?

Of course I'm not saying that. You're reinforcing the point I made about Wall St bankers being the big buddies of lib dems.

No problem regarding the link to Cramer. So he's lying regarding Wall Street not wanting Warren to become the next President?

Are you suggesting that Democrats not wanting a particular democrat to be president, means they aren't a liberal democrats who will contribute and vote democrat? I can point to Repubs who dont want Trump to be president. Does that mean they are not Repubs?

 

[From Ashes To Glory 2]

Of course I'm not saying that. You're reinforcing the point I made about Wall St bankers being the big buddies of lib dems.

Are you suggesting that Democrats not wanting a particular democrat to be president, means they aren't a liberal democrats who will contribute and vote democrat? I can point to Repubs who dont want Trump to be president. Does that mean they are not Repubs?

Ummmm .... Hillary (and Bill) were/are not "lib dems" regarding business interests advocated by Wall Street and by extension the U.S. Chamber of Commerce.

Also, being registered as a democrat sure doesn't mean you are "liberal" in that context.

 

[raleighherdfan]

Ummmm .... Hillary (and Bill) were/are not "lib dems"

 

[From Ashes To Glory 2]

Don't forget the rest of the quote:

" ... regarding business interests advocated by Wall Street and by extension the U.S. Chamber of Commerce." Thank you NAFTA, Glass Steagall, etc.

 

[raleighherdfan]

Don't forget the rest of the quote:

It's not worth remembering. Claiming the Clintons were not liberal (thats all that needed to be read) is as ridiculous as saying bible thumpers aren't Christian.

 

[From Ashes To Glory 2]

It's not worth remembering. Claiming the Clintons were not liberal (thats all that needed to be read) is as ridiculous as saying bible thumpers aren't Christian.

Exactly Raleigh ..... exactly. I'll make sure and take note that deregulation of the banking industry is as liberal as you can get. lol