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Posted by Larry Doyle on December 16th, 2009 6:09 PM |
Comment formatting buttons have returned to Sense on Cents!
Many readers had been asking “Where are those buttons?” Well, we missed them, too!! An upgrade to our blog software several weeks ago caused a compatability issue with the comment formatting plugin, but the issue has now been resolved.
We aim to please here at Sense on Cents, so visit and comment often. Oh, and use the new formatting buttons when needed!
LD
Failed Deals on Wall Street
Posted by Larry Doyle on December 16th, 2009 12:38 PM |
Just how healthy are our markets? With the major market equity averages up 20% on the year and 50% off the March lows, clearly the rebound has been extraordinary. Are we in the early stages of a new bull market? Are the fundamentals of our economy truly recovering? What about the housing market? Are the issues embedded in that sector of our economy fully reflected in market levels? Will the market accept deals that do not have the implicit or explicit backing of Uncle Sam?
I appreciate that a number of my questions are challenging. I also appreciate that our economy has significant hurdles. However I ask these questions to bring attention to the fact that our markets remain far from healthy. Why do I make this assessment.
Let’s review a recent story from American Banker, Ellington Mortgage Bond Pool’s IPO Fails:
Ellington Financial LLC, run by Michael Vranos’ $2.5 billion hedge fund firm, shelved its $208 million initial public offering as investors refused to finance its plan to buy mortgage-backed bonds without a government guarantee.
Ellington Financial’s retreat brought to six the total of share offerings for funds established to buy real estate assets that have been shelved since Oct. 29.
The fund, which has returned 42% this year, was asking investors to pay 6.1% more than the value of its net assets, based on the midpoint IPO price of $26.
What is Ellington? Perhaps the most highly regarded mortgage hedge fund on Wall Street. Who is Mike Vranos? Aside from running Ellington, Vranos is widely regarded as the top mortgage hedge fund manager in the industry.
Why did this deal fail to attract interest? Just as six other deals failed, investors have little appetite to purchase mortgage-related assets that do not have the backing of Uncle Sam.
If that is not a statement on what investors think about our domestic housing market and the equity market’s pricing of non-governmental supported deals, then I do not know what is. I view these failed transactions as a precursor to what may occur in our markets as the Fed withdraws stimulus and support for housing specifically and the markets in general in 2010.
As much as we may think the markets are adjusting and the economy is rebounding, these failed deals are a clear indication that investors have become addicted to Uncle Sam’s support. For those who cherish free markets and true capitalism, we remain a very long way from home.
LD
Lessons from Charlie Doyle, An Honest Politician
Posted by Larry Doyle on December 16th, 2009 6:37 AM |
Charles Robert Doyle
“The true test of a man’s character is what he does when nobody is looking.”
Charles Robert Doyle, my uncle and a true champion of the people, passed away this past Saturday evening. When thinking back on the life of Uncle Charles, the above quote quickly comes to mind. Is it mere coincidence or the power of providence that in sourcing that quote, I see it attributed to another true champion and an individual recently highlighted here at Sense on Cents, the great John Wooden. I was thrilled to write “Lessons From Coach Wooden”:
The measure of real value is whether something can stand the test of time. While certain individuals, products, or principles appreciate over time, others dim as time passes. Society also has a funny way of embracing new and valued concepts in an attempt to market and materialize definitions of happiness.
In the midst of the noise and volatility of our current financial market and economic landscape, I treasure those principles which are often overlooked and under-appreciated. These principles include: discipline, simplicity, selflessness, loyalty, drive, humility, relationships, integrity, love. While without being judgmental it is not difficult to identify individuals or situations lacking these timeless traits, how often are we able to identify individuals or situations embracing these characteristics?
This morning, I witnessed just such an individual. Who might that be? My favorite coach of all-time, John Wooden.
In the same spirit, Charles Robert Doyle also embodied the true greatness and essence of these aforementioned principles.
Charlie, a long time state representative, dedicated himself to serving others, especially the youth and elderly of his district in Boston. Over and above serving his constituents, Charlie also dedicated his life to protecting the unborn. Pandering? Self-dealing? Political gamesmanship? Sacrificing principle? All common traits amongst too many of our current politicians, but foreign concepts to Charlie.
What do they say of this giant? Let’s take a look and you can read the stuff of legends. The Boston Globe reports Charles Robert Doyle, 84; Represented West Roxbury in Massachusetts House:
Arthur Lewis, who served Jamaica Plain as a state representative and as a state senator, said Mr. Doyle was “a very honest politician’’ who was a good debater and well-liked in the Legislature.
“There were some guys that talked the talk; he walked the walk,’’ said Joseph F. Timilty, who was a state senator from 1972 to 1984. “He did his homework every day. He was very much misjudged as a one-issue guy because of his position on right to life. That was not the whole Charlie Doyle.’’
Ray Flynn, the former Boston mayor who also served for a time in the state Legislature, remembered Mr. Doyle for his religious faith and for his love of sports.
“Charlie was a very devout Catholic who was very loyal to his faith and his values,’’ Flynn said last night. “Charlie was a very committed, very strong national prolife leader. I don’t think there has been anyone else like him in this country.’’
Charlie fought tirelessly in defense of his principles. He fought no harder battle than defending the life of the unborn.
Regardless of your political viewpoints, my admiration for Charlie and men of his ilk is that they never sacrifice principle for personal gain. How many of our current politicians can make that statement?
I was unaware of all the particulars of Charlie’s fight for the unborn, but a smile crossed my face this morning as I could picture him in the legislative arena. The Globe highlights:
During a debate on the bill in September 1977, according to a report in the Globe, Mr. Doyle likened then-Governor Michael S. Dukakis, who was opposed to the measure, to a modern King Herod of Judea, who ordered that infants under age 2 killed in an attempt to eliminate the threat of Jesus becoming the king of the Jews.
Charlie, thanks for the memories and the inspiration. You walked with giants and cast a very long shadow. We are all better for having known and loved you.
Rest in peace.
LD
Kanjorski and Ackerman Undress the SEC and SIPC
Posted by Larry Doyle on December 15th, 2009 2:47 PM |
Having written about the massive regulatory failures on Wall Street for the better part of 2009, I am heartened by the House Finance Sub-Committee on Capital Markets hearing last week. The bell that tolled in this hearing deserves to ring loud, long, and clear across our great land. The regulatory and insurance failures on Wall Street deserve to be exposed far beyond Sense on Cents.
Rackets operate best in the dark. Well, let’s get that flashlight out again!
For those unaware, SIPC (the Securities Investor Protection Corporation) is an insurance fund in which member firms pay premiums to cover losses. From SIPC’s own website, we learn:
What SIPC Covers . . . What it Does Not
The cash and securities – such as stocks and bonds – held by a customer at a financially troubled brokerage firm are protected by SIPC.
Among the investments that are ineligible for SIPC protection are commodity futures contracts and currency, as well as investment contracts (such as limited partnerships) and fixed annuity contracts that are not registered with the U.S. Securities and Exchange Commission under the Securities Act of 1933.
It is important to recognize that SIPC does not work the same way as the Federal Deposit Insurance Corporation in terms of blanket protection of losses.
For this insurance coverage, SIPC charged its member firms an annual premium of $150 from 1996 until April 2009. That is no joke. Wall Street firms paid a token $150 a year to promote the idea that your investments were protected. While SIPC did have a $1 billion reserve fund, that was woefully insufficient to cover the losses incurred in the Madoff scam. Make no mistake, though, the SIPC annual premium of $150 should also be looked upon as a scam.
Think of it. Individuals pay far more for auto insurance than Goldman Sachs paid for investor insurance for over 12 years.
Are you getting increasingly pissed off? America should be extremely pissed off. The SIPC coverage has been a critical part of the Wall Street racket. (more…)
Will Wall Street Banks be Compelled to Compensate Madoff Investors?
Posted by Larry Doyle on December 15th, 2009 11:46 AM |
Will Congress hit the Wall Street banks with a one-time assessment in order to compensate Madoff investors? Why might that happen? Very simply because SIPC (Securities Investor Protection Corporation) was woefully underfunded given the fact that SIPC member-firms, including all the large Wall Street banks, paid a token $150 (yes, that is not a misprint, a token $150) annual premium from 1996 until April 2009 for SIPC coverage.
Each and every investor in America should be livid at the insurance scam perpetrated by SIPC and its member firms, but especially by the largest firms taking the greatest risks!
I will address this insurance scam in a post later today, but for now I want to highlight an engagement between Rep. Paul Kanjorski (D-PA) and Stephen Harbeck, the head of SIPC that occurred last week during a hearing on securities investor protection reform.
This interaction should have received massive coverage by the mainstream media. Regrettably, but not surprisingly, it did not. Why? If it received the appropriate coverage, it would shine a laser beam on the incestuous nature of the relationship between Wall Street firms and its regulators (SEC and FINRA) and insurer (SIPC).
From the transcript of the hearing last week: (more…)
Helen Davis Chaitman Provides Congress with Sense on Cents
Posted by Larry Doyle on December 15th, 2009 6:53 AM |
Helen Davis Chaitman, esteemed and distinguished attorney with Phillips Nizer in New York City, was my guest on No Quarter Radio’s Sense on Cents with Larry Doyle on November 5th. We addressed the gross inequity embedded in the business practices of SIPC (Securities Investor Protection Corporation). How gross? What inequity? The fact that SIPC member firms (i.e. every broker dealer and bank on Wall Street) paid a “whopping” $150 annual assessment from 1996-2009 in order to promote and accord protection for their investors.
$150 per year for Goldman Sachs? JP Morgan? Bank of America? Yes, for 13 years SIPC member firms paid annual assessments of only $150. Of all the travesties on Wall Street, this SIPC joke may be the biggest of them all.
Ms. Chaitman, who has worked diligently on behalf of the Madoff Coalition for Investor Protection on a pro bono basis, provided riveting details and dialogue during my interview. This past Wednesday, Ms. Chaitman did the same for the House Finance Sub-Committee on Capital markets chaired by Rep. Paul Kanjorski (D-PA).
I strongly exhort people to realize that the Madoff scam is not merely a fraud strictly impacting Madoff investors. The failure of our financial regulators, the financial regulatory system, and SIPC impacts us all. The regulators, the regulatory system, and SIPC have failed all investors. Why? How?
The lack of confidence in our markets on behalf of investors remains pervasive. Helen Davis Chaitman provides a tremendous public service in highlighting the aformentioned failures. I encourage readers here at Sense on Cents to watch this 9-minute video clip of Ms. Chaitman’s testimony. She speaks for all of us.
LD
Mortgage Modification Applications Decline in November
Posted by Larry Doyle on December 14th, 2009 4:01 PM |
If you don’t buy a ticket, you can’t get into the game.
The Obama administration’s attempt to stabilize the housing market has been an abysmal failure. That fact has been widely broadcast here at Sense on Cents and increasingly at other outlets. While the administration is now attempting to revive this initiative, the fact is the trend in this program is declining. What trend? How is that defined?
Just as a student won’t gain admission to a school without having applied, similarly homeowners will not gain the benefits of a mortgage modification without processing an application. Thank you to our friends at 12th Street Capital for sharing a recent report produced by Bank of America highlighting a number of trends in mortgage modifications, including applications. Let’s navigate. Bank of America reports:
Last month we said that we expected the focus of the HAMP program to shift from outreach and initiation of new trial modifications to completion of modifications and much of this has been confirmed now. The number of trial modifications started over the last month was the lowest yet at about 77k. This represents more than a 50% drop from the prior month. Also, the number of offers given over the last month was at all time lows dropping 30% from the previous month. This month’s report also disclosed permanent modifications for the first time. So far, 31k trial modifications have been successfully converted to permanent modifications. This represents only 4% of started trial modifications. Furthermore, an equal number have failed and are no longer active.
What are the actual figures for mortgage modification applications since this program was launched last spring? BofA reports:
May: 50,130
June: 93,146
July: 110,397
Aug: 133,192
Sept: 100,216
Oct: 163,913
Nov: 77,414,
While Uncle Sam will try to make a go of saving this program, the fact is it’s a pea shooter in the midst of a sandstorm. What would be the heavy artillery? Principal reduction via mortgage cram-downs.
Although Congress has shot down that plan twice, look for a return engagement in 2010.
For those interested in reviewing the Bank of America Mortgage Modification Monitor, click on the image below to access the entire pdf document:
LD
Baltimore Sun, Chicago Tribune and Hartford Courant Also Questioning Mary Schapiro’s Leadership and Integrity
Posted by Larry Doyle on December 14th, 2009 1:06 PM |
Add the Baltimore Sun, Chicago Tribune and Hartford Courant to the growing list of periodicals in our country questioning the leadership and integrity of current SEC chief and former FINRA head, Mary Schapiro.
Recall that Barrons, The New York Times, and Sense on Cents have called for the public release of unredacted documents which directly address the veracity and integrity of Ms. Schapiro and her then FINRA colleagues in the merger of the NASD with NYSE Regulation to form FINRA.
Bloomberg got on board in early November, and subsequently the Washington Examiner picked up on the importance of this story in late November and published an article by Marta Mossburg, A Failure of Leadership at the SEC.
Paul Volcker Tells Wall Street, “Wake Up, Gentlemen”
Posted by Larry Doyle on December 14th, 2009 9:44 AM |
While those on Wall Street and Washington pretend to listen to the needs and concerns of middle America, they have been shown to be ineffective time and time again in developing and implementing sound financial practices and regulations. America is increasingly aware of just how deeply embedded and incestuous the Wall Street-Washington relationship has become. Who within this Wall Street-Washington circle “gets it?” Paul Volcker.
Volcker called out our financial and political operatives a few months back in calling for an effective reinstitution of Glass-Steagall to separate commercial and investment banking activities. I highlighted that call by writing, “Volcker Launches Bombshell on Wall Street and Washington.”
Although Wall Street and Washington may pretend not to hear Volcker’s shots across the bow, they do so at their own peril. Why? America listens and hears Volcker loud and clear. (more…)
