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HomeFROM THE ARCHIVES: The Wall Street Model Is Broken…and Won’t Soon Be Fixed!!
Posted by Larry Doyle on March 5th, 2009 6:37 PM |
Some of my favorite movies are The Sting, Rocky, and Papillon. I could watch those films a few times a year and appreciate the plot, character development, and climax.
In that same vein, for newer readers here at Sense on Cents, I want to highlight a piece I wrote on November 12, 2008. I believe this piece is as clear cut an historical explanation as I have seen to highlight the background of the debacle on Wall Street which precipitated this economic disaster. I also find it interesting as to my comments about potential market reaction to an aggressive tax/spend program under President Obama and a Democratic Congress.
I hope you find this article informative and enlightening: (more…)
Tags: AIG, asset-backed market, Bank of America, Bear Stearns, Bernanke, capital, CDS, Centex, China, collateralized mortgage obligation, Countrywide, Fannie Mae, financial quants, Freddie Mac, Hedge Funds, JP Morgan, Lehman Bros, Merrill LYnch, National City Bank, originate to distribute, Paulson, Pulte Homes, rating agencies, Ryland, SEC, Sheila Bair, walll Street
Posted in American Consumers, Auto Industry, Bad Bank, Bailout, Bank of America, Banking Institutions, Barack Obama, Barney Frank, Ben Bernanke, Business, China, Christopher Dodd, Commerce, Congress, Wall Street | 5 Comments »
Did ex-Fannie CEO Franklin Raines Commit Perjury?
Posted by Larry Doyle on March 5th, 2009 5:50 AM |
I always maintained that Fannie Mae’s risk management was horrendous. Having engaged this organization in business for many years, it was obvious that their risk was managing them rather than vice versa. While the organization mismanaged risk, their former CEO, Franklin Raines, obviously knew it was prudent to keep expenses down. Franklin Raines, however, knows how to play politics with the best of them and has never let his reputation get in the way of developing marketable relationships.
I wrote about Mr. Raines specifically and Freddie Mac and Fannie Mae in general in a piece last October. I followed that up with a review of Mr. Raines Returns to Washington in mid-December. (more…)
Tags: Angelo Mozilo, Congress, Countrywide, Fannie Mae, Franklin Raines, Freddie Mac, Risk, Wall Street Journal, Washington D.C.
Posted in American Consumers, Barack Obama, Christopher Dodd, Congress, Economy, Fannie Mae, Freddie Mac, Mortgages, Wall Street | 2 Comments »
Things You May Have Missed
Posted by Larry Doyle on February 20th, 2009 5:20 PM |
While there is tremendous volatility in the markets and commensurate anxiety as a result, there were some major stories and developments that got less play but deserved more.
Allow me to expound. Robert Shiller, a highly distinguished Economics Professor at Yale Univeristy and co-designer of the Case-Shiller Home Price Index spoke this morning on Bloomberg News. Shiller is the preeminent expert on trends and developments in housing. He made the following assessments:
1. Glad to see that Obama is making an effort to support housing but has serious concerns about the effort.
2. $75 billion allocated for loan modification is not nearly enough to make a truly meaningful impact. (remember there is another $200 billion allocated for Freddie and Fannie to refinance mortgages).
3. No plan or proposal for those holding Jumbo mortgages leaves a large part of the market without benefits. Those homes will likely hang over the market.
(more…)
Tags: Bloomberg News, Case-Shiller Index, Robert Shiller
Posted in American Consumers, Australia, Bad Bank, Bank Nationalization, Bank of America, Banking Institutions, Barack Obama, Christopher Dodd, Citigroup, Economic Stimulus, Fannie Mae, Freddie Mac, General, Housing Crisis, Mortgage Crisis, Mortgages, Nouril Roubini, Stimulus Plan, Tim Geithner | No Comments »
Let’s Really Question Ms. Schapiro….
Posted by Larry Doyle on January 16th, 2009 2:54 PM |
In light of the disaster that is Wall Street, I do not know if I am simply dumbfounded or merely dismayed by the softball questioning of prospective SEC chairwoman Mary Schapiro yesterday.
With the dissolution of the investment banking model, the massive injections of government capital, and potential indictments of major Wall Street icons in the offing, I looked forward to some very juicy testimony. The results were beyond disappointing. The public deserves so much better.
Mary Schapiro may end up being the best SEC commissioner ever, but let’s make her earn a few stripes before anointing her. It’s not as if there isn’t enough material. Let me provide a little background before I propose my line of questioning for Ms. Schapiro.
FINRA, the Financial Industry Regulatory Authority, was formed as a result of the merger between the regulatory arms of the NYSE and NASD. While there is another securities industry watchdog, SIFMA (Securities Industry and Financial Markets Association), that body is more a trade association or good cop.
FINRA is supposed to be the real watchdog or the bad cop. (more…)
Tags: Auction Rate Securities, FINRA, Mary Schapiro, SEC
Posted in Christopher Dodd, Current Affairs, Economy, FINRA, Mary Schapiro, SEC | 4 Comments »
“Mr. Raines Returns to Washington….”
Posted by Larry Doyle on December 12th, 2008 1:35 PM |
In the midst of the economic turmoil, the Obama transition, the “rescue” of the domestic auto industry, and the Blagojevich fiasco, the biggest story of all in terms of “$$$” is getting limited coverage in the media, but not here at NQ!!
The core of the global economic meltdown is centered on our domestic housing market and the core of that market is centered on Freddie Mac and Fannie Mae.
It is a shame that the Congressional hearing of the four senior executives (Richard Syron and Leland Brendsel of Freddie Mac and Daniel Mudd and Franklin Raines of Fannie Mae) is not front and center on every media outlet in our country.
It is also a shame that the respective heads of the Congressional Banking Committees are not heavily involved in these hearings. Those individuals, Barney Frank and Chris Dodd, along with their colleague, Chuck Schumer should not only be compelled to question these executives, but they themselves should be compelled to be questioned by their colleagues.
Read here as to how “Fannie, Freddie Executives Knew of Risks….” The fact that the executives “generally dodged demands by committee members that they accept blame for those problems” is the height of shamelessness and hypocrisy.
How I wish that we had real statesmen in Washington who had the courage to question these individuals on the following points, which were highlighted here on October 16 in a piece entitled “A Wall St. Insider’s View of Freddie/Fannie.” (more…)
Tags: Franklin Raines of Fannie Mae, Mudd and Raines of Fannie Mae testify to Congress, problems at Freddie and Fannie, Syron and Brendsel testify to Congress
Posted in Barney Frank, Christopher Dodd, Chuck Schumer, Congress, Current Affairs, Economy, Fannie Mae, Franklin Raines, Freddie Mac | 1 Comment »
A Wall St. Insider’s View of Freddie/Fannie
Posted by Larry Doyle on October 16th, 2008 6:00 AM |
I am happy to provide you with a full accounting of what occurred from the late ’90s to the present.
–The repeal of Glass-Stegall (GLBA) is a total non-event in the midst of the current economic turmoil. What this repeal did was allow commercial banks to get more deeply involved with investment banking activities. Thus, JP Morgan, Citigroup, Bank of America were able to utilize their significant balance sheets and capital bases to become a force on Wall Street. Fast forward ten years and it is those institutions that are now thankfully supporting and bailing out our system.
–Throughout the 90s and into the early part of this century, Freddie Mac and Fannie Mae were utilizing their significant lobbying power to gain an ever increasing portion of the overall U.S. mortgage market. They had the enormous advantage of being able to borrow at just marginally over U.S, government rates given the “implied” but not explicit backing of Uncle Sam. I mean, come on. That worst case scenario could never come to pass!!
While Freddie and Fannie were designed to provide liquidity to the market in the form of bundling mortgages into securities, charging a guarantee fee for return of principal to the investors in these MBS, and then selling the MBS into the private market, they decided to “grow their business”. Just how did they grow? Given their ability to borrow at very cheap rates they decided to effectively grow their own internal portfolios. This business model was nothing more than a massively levered hedge fund under the guise of “helping the homowner”. (more…)
Tags: advantages of Freddie Mac and Fannie Mae business model, collapse of Freddie Mac and Fannie Mae, costs and benefits of Freddie Mac and Fannie Mae, did Freddie Mac and Fannie Mae benefit homeowners?, Dodd, Fannie Mae and Ginnie Mae?, FM Watch, Frank support for Freddie Mac and Fannie Mae, Franklin Raines, Freddie Mac and Fannie Mae accounting problems, Freddie Mac and Fannie Mae difference from Ginnie Mae, Freddie Mac and Fannie Mae's downfall and decline, growth of Freddie Mac and Fannie Mae, how did freddie Mac and fannie Mae get so large, Jim Johnson of Fannie Mae, Leland Brendsel of Freddie Mac, private profit and social loss at freddie Mac and Fannie Maen, Schumer, Senator Richard Baker (R-LA), systemic risks with Freddie Mac and Fannie Mae, Tim Howard, Wall Street insider's view of Freddie and Fannie, what happened at Freddie Mac and Fannie Mae?, who challenged Freddie Mac and Fannie Maemc
Posted in American Consumers, Bank of America, Christopher Dodd, Current Affairs, Economy, Fannie Mae, Freddie Mac, Ginnie mae, Home Loan, Housing Crisis, JP Morgan | 3 Comments »
