Subscribe: RSS Feed | Twitter | Facebook | Email
Home | Contact Us

Posts Tagged ‘consumer finance’

Consumer Financial Protection or Wall Street Beats Main Street?

Posted by Larry Doyle on March 3rd, 2010 9:49 AM |

News that a newly proposed Consumer Financial Protection Agency will be housed within the Federal Reserve is another shot across the bow in terms of Wall Street owning Washington and beating Main Street.

Am I surprised by these results? Not at all. The power of the Wall Street lobby is enormous and ultimately the crowd in Washington needs the money from Wall Street in order to pretend they represent the interests of Main Street. All the press conferences and politicking on the topic of consumer financial protection truly amount to nothing more than pure bluster. The bottom line of Wall Street banks feeds the bottom line of many politicians in Washington on both sides of the aisle. (more…)

No Place for Sy Syms on Wall Street

Posted by Larry Doyle on June 30th, 2009 12:09 PM |

Sy Syms, a retail maven in the New York market, is known far and wide for coining the slogan, “An Educated Consumer Is Our Best Customer.” Well, that may have worked for Sy in retail but there would be no place for Sy on Wall Street. Why?

An educated customer, whether institutional or retail, is able to more fully understand products, risk, and pricing. In the process, profit margins get squeezed. The Wall Street Journal highlights this point in reporting Plain-Vanilla Financing Could Melt Bank Profits:

The Obama administration’s plan to protect consumers from bad deals on mortgages, credit cards and other financial products is an attempt to take the industry back in time and could put a dent in bank profits.

The plain-vanilla guidelines are part of an ambitious effort by the Obama administration to force banks to offer mortgages and credit cards with simpler standard terms.

“That was a market that used to be pretty strongly anchored on plain-vanilla products,” said Michael Barr, the Treasury Department’s assistant secretary for financial institutions.

The coming guidelines, part of a broader proposed overhaul of the financial-services sector, are likely to start with mortgages and eventually cover credit cards, car loans, payday loans and bank-overdraft programs.

A plain-vanilla credit card, for example, isn’t likely to have a lower introductory “teaser” rate. Card issuers wouldn’t be allowed to “change the rules of the game” on consumers, as in cases where a 0% rate is applied to only part of their balances.

The complex loans of recent years didn’t just confuse consumers. The bankers themselves ultimately misjudged whether customers would repay them. And the resulting credit crunch has forced lenders to drop many of their most risky products.

Fairly self-explanatory why Wall Street has little interest in going down that path. In fact, rest assured that the Wall Street lobbying machine is hard at work right now to water down the Consumer Financial Literacy Program.

If there is no seat for Sy Syms on Wall Street, rest assured they’d roll out the red carpet for George Hull and David Hannum . Who are George and David, you ask? They perpetrated a hoax, known as the The Cardiff Giant, back in the mid 1800s.  This hoax led to the coining of a phrase commonly associated with P.T. Barnum, and openly embraced on Wall Street, that is “there’s a sucker born every minute.”

For those interested in this piece of history: P.T. Barnum Never Did Say, “There’s a Sucker Born Every Minute.”

For those interested in increasing financial literacy while navigating the economic landscape, keep reading Sense on Cents.


Updated News 1:30pm 6-30-09
Obama Unveils Consumer Protection Agency Legislation

Housing Index Revisited

Posted by Larry Doyle on March 18th, 2009 1:11 PM |

A week or so ago, I introduced two indexes that track the outlook for housing in our country. The S&P/Case-Shiller Index is released on a monthly basis. The ABX is an index that can be traded daily by institutional money managers and thus allows them to reflect their opinions on the outlook for housing. The ABX is a very broadly defined index that tracks housing by the underlying year of origination of the mortgage.

Yesterday, the monthly housing starts number surprisingly jumped 22%. The government program TALF (Term Asset-Backed Lending Facility) to restart the consumer finance markets is set to launch next week.  Hopefully that program will bring added liquidity to our consumer finance markets and support housing as well. The mortgage modification program to support housing is underway. (more…)

Sallie Mae . . . Sallie Mae Not

Posted by Larry Doyle on March 6th, 2009 5:36 PM |

In reading a fair amount of market analysis and listening to a number of policy wonks, it strikes me that more and more people feel the Obama administration is neither focused nor properly staffed. In Treasury, Secretary Geithner is largely working on his own!! What happens in situations like that?  Not surprisingly, Obama himself and his secretaries are not fully informed and say and do things haphazardly.

For those who are wondering what I am doing writing about politics while I navigate the economic landscape, well, risk comes in many shapes and sizes. The risk of an unfocused and thinly staffed administration is a huge risk. Let’s review one specific company that was literally blindsided by the administration. 

The Student Loan Marketing Association was the largest provider of student loans in the country. This company, like every consumer finance company, has been very negatively effected by the shutdown of the asset-backed securitization market. That said, what the Obama administration’s budget proposal did to current SLMA shareholders and bondholders is nothing short of devastating. (more…)

A Virtual Smorgasbord

Posted by Larry Doyle on March 2nd, 2009 4:24 PM |

On the heels of the news about AIG, Berkshire, and HSBC, the equity markets have found no support today and are down 4%. While the malaise of the markets has much of the focus, let’s review a few other items that I see on today’s menu:

1. In regard to AIG, current CEO Edward Liddy and former CEO Hank Greenberg have started some public feuding over the nature of AIG’s problems. Greenberg is trying to make the case that the risks underwritten at AIG occurred after his departure. Liddy responded that the culture, the compensation system, and the division housing the bulk of AIG’s risk all developed under Greenberg.  Wow!! When our country is screaming for leadership, we have senior executives playing the blame game and pointing fingers. How pathetic!! (more…)

Recent Posts