Fed Data Shows Foreign Banks Huge Beneficiaries of Emergency Lending Programs, Hedge Funds, McDonald’s, Harley-Davidson and Others Also Bailed Out – Under orders from Congress pursuant to the Dodd-Frank financial legislation, the Fed has finally released details of its emergency lending starting in 2007. As Bloomberg notes: Bank of America Corp. and Wells Fargo & Co. were among the top borrowers from the Term Auction Facility [TAF]… Bank of America had three loans for $15 billion each , while Wells Fargo had three loans for $15 billion each …Bloomberg notes that foreign banks borrowed heavily from TAF as well: Banks with headquarters outside the U.S. were among the first to begin using the facility in December 2007 and were also among its heaviest borrowers. These included the U.S. affiliates of banks such as Manama, Bahrain-based Arab Banking Corp., Madrid-based Banco Santander SA, and Paris-based Societe Generale SA. Beginning on June 18, 2009, Barclays Bank Plc had two loans totaling $23.45 billion outstanding.  In a second article, Bloomberg points out that despite Goldman’s statements that it would have survived even without help from the Fed, Goldman was a big borrower as well:

Dallas Fed’s Fisher Defends Emergency Actions – Dallas Federal Reserve President Richard Fisher defended the Fed’s actions amid the financial crisis, saying the central bank “stepped into the breach” in its role as a lender of last resort. “That’s what we are paid to do,” he said. “We took an enormous amount of risk with the people’s money,” he acknowledged. But the crisis lending programs are now all closed, he said, “and we didn’t lose a dime and in fact we made money on every one of them.” In posting the data on its website, the Fed was complying with the Dodd-Frank financial regulation law passed in July which, among other things, aims to boost transparency at the U.S. central bank. Fed officials said it’s the biggest release of crisis lending data that a central bank has ever done.
U.S. Light Vehicle Sales 12.26 million SAAR in November – Based on an estimate from Autodata Corp, light vehicle sales were at a 12.26 million SAAR in November. That is up 13.2% from November 2009, and up slightly from the October 2010 sales rate. This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for November (red, light vehicle sales of 12.26 million SAAR from Autodata Corp). This is the highest sales rate since September 2008, excluding Cash-for-clunkers in August 2009. The second graph shows light vehicle sales since the BEA started keeping data in 1967. Note: dashed line is current estimated sales rate. The current sales rate is still near the bottom of the ’90/’91 recession – when there were fewer registered drivers and a smaller population.

Imminent Eurozone Default: How Likely? – By Simon Johnson –

The big question of the week in Europe is deceptively simple – will any countries that share the euro as their currency default on their government or bank debts in the foreseeable future?  The answer to this question determines how you regard bonds from countries such as Portugal, Spain, Italy, and Belgium. Answering this question is not as simple as it seems, however, because it involves taking a view on three intricate issues: What exactly is the eurozone policy now on bailouts, can big eurozone countries really be bailed out if needed, and what happens to the politics of these countries and of the eurozone has a whole as pressure from the financial markets mounts? The prevailing consensus – and definite official spin – is that over the weekend European leaders backed away from the German proposal to impose losses on creditors as a condition of future bailouts, i.e., from 2013.  But a close reading of the Eurogroup ministers’ statement from Sunday suggests quite a different interpretation.  It’s a straightforward text, just 2 ½ pages long, but it has potentially momentous consequences – as it envisages dividing future eurozone crises into two kinds.


The Obama Deficit Panel’s Tax Reform Version 2.0 -The chairs of President Obama’s fiscal commission have refined—in some key ways—their broad-based tax reform plan. Erskine Bowles and Alan Simpson didn’t change their basic framework from what they unveiled last month. However, the plan they released this morning—due to be voted on by panel members on Friday– is both more specific and more realistic than their initial plan.  Their first draft suggested three different reform options. And one of those—a plan that started with the radical concept of wiping out all deductions, exemptions, and exclusions—itself included multiple alternatives that would have preserved many of the $1 trillion in tax expenditures that now litter the revenue code.  By contrast, the plan released today narrows the playing field quite a lot, although it remains more of a concept than a proposal. It retains the original’s defining principle—a 1986-like reform that would preserve the income tax structure but dramatically broaden the tax base and lower the rates. While a competing reform plan from the independent Bipartisan Policy Center’s deficit commission chaired by Pete Domenici and Alice Rivlin proposed a Value-Added Tax to help reduce the deficit, Bowles and Simpson passed up the opportunity to propose a broad-based consumption tax.

The man with the magic words …turns out to be Trichet, this week, anyway; the bond markets are soothed. Two key comments: We have got a monetary federation. We need quasi-budget federation as well. a statement which ought to have all the Eurosceptics, and many others, chorussing “told ya”; then  Mr Trichet also hinted that the ECB could extend its purchase of government bonds, a controversial move within the ECB governing council, saying he could not discuss the issue “at this stage” but that further decisions on the programme would be taken by the board. The bond markets, which had brushed aside the Irish bailout, and were clobbering not only Greek, Irish and Portuguese debt, but also Spanish, Belgian and even Italian, took a hint that at last there would be a bid somewhere for the less exalted Eurodebt, and backed off. Whether Trichet’s bond purchase programme turns into the EUR2Trillion monster now envisaged by market participants, or not (the ECB has only purchased EUR70Billion of bonds so far, which doesn’t imply great willingness to go down this path), we have at least a pause in what, on Monday and Tuesday, looked ominously like a slide towards panic.

Banks in Talks to End Bond Probe – U.S. securities regulators are in preliminary discussions with several major Wall Street banks aimed at reaching settlements to resolve a broad investigation of their sales of mortgage-bond deals that helped unleash the financial crisis, according to people familiar with the matter. The probe involves complex pools of mortgages and other loans called collateralized debt obligations, or CDOs, slices of which were sold to different investors.  Wall Street has come under intense fire from critics for its sale of the securities, seen as a central factor in the crisis. Settling the allegations would resolve one of the biggest law-enforcement threats hanging over leading banks. The Securities and Exchange Commission, after issuing subpoenas for documents and interviewing officials from nearly every bank that was a major player in creating, selling or trading CDOs, has begun negotiating with the companies, these people said.

BofA’s ‘Sloppy’ Prime Mortgages Add to Pressure for BuybacksBank of America Corp, battling demands for almost $13 billion of refunds from mortgage investors, reported that the fastest-growing group of claims involves loans to people with the best credit scores.  Claims for refunds on prime mortgages surged 150 percent to $3.6 billion in the first nine months of 2010, Claims on subprime loans, made to borrowers deemed more likely to default, were little changed at $579 million. Mortgage investors can demand refunds from a bank if a loan was based on faulty data about the home or borrower.  Overdue prime mortgages set a record this year, opening more loans to scrutiny for defects that could entitle investors to a buyback. The Congressional Oversight Panel said last month that too many repurchases could rattle the financial system, and Bank of America’s stock dropped 27 percent this year through yesterday, partly on concern that $4.4 billion of reserves stockpiled to cover such costs won’t be enough.  “It was just a very sloppy process” that wasn’t confined to subprime loans,  “Overlooking bits and pieces of the underwriting process can come back to hurt you, because investors sold a faulty bill of goods want to recover losses.”

Small Investors Are So Bullish, The Last Time They Held This Little Cash Was March 2000 – March of 2000, of course, was the peak of the internet bubble.

American Securitization Forum Tells Monstrous Whoppers in Senate Testimony on Mortgage Mess – Yves Smith – By way of background, we’ve discussed for some time the bigger implications of problems witnessed in foreclosure battles all over the US. Increasingly, consumer lawyers are recognizing that they can often successfully challenge foreclosures in which the loan was securitized by examining whether the party trying to foreclose really has the standing to do so, which is legal-speak for whether they are the proper party. If the loan was securitized, it is owned by a specific trust, and the trustee for the trust should be the party taking action. The trustee needs not only produce the note, but if questioned, also to demonstrate that it is the right party to enforce the note. The problem is that the pooling and servicing agreements, which governs the formation and operation of securitization trusts, have very specific provisions for how the notes were to be conveyed to the trust. The notes were to be conveyed through multiple entities, which each transfer being a “true sale” before getting to the trust (this was to create “bankruptcy remoteness” so that if the originator failed, its creditors would not be able to take notes back from the trust to satisfy their debts). The PSA called for the note to be endorsed by the intermediary parties (either in blank or specifically to the next party). The notes were also to be conveyed by a specified date, which in nearly all cases was no later than 90 days after the closing of the trust. The trusts were required to be organized under New York law, and New York trust law is unforgiving. Trusts can operate only as specifically prescribed; if the notes were not conveyed to the trust in the manner set forth in the PSA, it cannot deviate from its instructions and somehow make exceptions (it would be deemed a “void act”) .


Global house prices: Clicks and mortar interactive | The Economist – Is housing the most dangerous asset in the world? Any explanation of the recent financial crisis would have the property boom in America as Exhibit A: according to Robert Shiller, an economist and bubble-spotter, house prices were virtually unchanged in real terms between 1890 and the later 1990s, before almost doubling in the ten years between 1997 and 2006. Because buying a house usually involves taking on lots of debt, the bursting of this kind of bubble hits banks disproportionately hard. Research into financial crises in developed and emerging markets shows a consistent link between house-price cycles and banking busts. The Economist has been publishing data on global house prices since 2002. The interactive tool above enables you to compare nominal and real house prices across 20 markets over time. And to get a sense of whether buying a property is becoming more or less affordable, you can also look at the changing relationships between house prices and rents, and between house prices and incomes

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