Asset-Backed Securities

January FOMC Statement - Hoenig Dissents To "No Change" Vote

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period...To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter.

Stop the Presses! Deep Thoughts From Jeremy Grantham

Everyone in Congress, and anywhere else for that matter, knows prop desk trading (banks trading their own capital like a hedge fund) is a conflict of interest. They may or may not think it important or that it caused this or that problem, but they know it’s a real conflict.  Congressmen, since when wasn’t conflict of interest and poor ethical standards reason enough to change the law? But since we bring it up, of course prop trading was indeed the rot at the heart of our financial problems (see last quarter’s Letter). Watching traders take home their $28 million bonus sent a powerful message to lowly salesmen and packagers of asset-backed securities, for example, to get out there and really take some risk. This rot spread to the very top, and pretty soon chairmen of boards were exhorting CEOs to leverage up and look more like some much more profitable rival that resembled a hedge fund rather than an investment bank. Thus encouraged – or intimidated – some CEOs just kept on dancing right off the cliff. Let’s
learn from our near disaster. Viva Volcker!

Cursive Geithner To Hell

The latest AIG fiasco may well be the straw that breaks Geithner's "public service" back. The question of Tim's involvement in the purposeful cover up has now attained epic proportions as even the White House claims the Treasury Secretary and former NY Fed governor had recused himself and was not involved in the discussions of the biggest bailout in US history. By doing so, the White House has transferred an ever greater amount of political risk to itself by continuing to back Geithner at increasing costs to its popularity. Whether or not Geithner was intimately involved procedurally seems irrelevant: he certainly was aware of the broad strokes and was thus complicit by implication. Nonetheless, one of the allegations that is circulating the blogosphere is that the handwriting on the "smoking gun" cover up memo belongs to Timmy. While we do not have a certified graphologist in our ranks, this assumption appears to be patently false.

Origins of an American Kleptocracy

Some days ago we wondered aloud after the blank check extended to Fannie and Freddie along with the suspiciously convenient timing of those announcements on Christmas Day.  Back then we wondered if we had been told the entire story. Recent news not only tells us that we had not, but points astute observers to what might well be one of the largest financial frauds in the history of... well, ever.

FOMC Statement: "Exceptionally" And "Extended", Liquidity Swap Arrangements Coming To An End On February 1, 2010

To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve is in the process of purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt. In order to promote a smooth transition in markets, the Committee is gradually slowing the pace of these purchases, and it anticipates that these transactions will be executed by the end of the first quarter of 2010. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.

TCW Gundlach Update: 30% of MBS Team Has Resigned

"Over the weekend, key MetWest professionals assumed portfolio management responsibilities for all of TCW’s high-grade fixed income client accounts. This transition has been orderly and seamless, a testament to the professionalism and enthusiasm of both MetWest and TCW employees.

Attached please find a complete list of our high-grade fixed income products and the respective portfolio managers, effective today. We expect you will notice a more collaborative, team-based approach to portfolio management. We believe this culture of cooperation will facilitate a quick, effective integration of our fixed income teams into a single unit.

We anticipated possible resignations as a result of this announcement. However, as of today, we have retained 70% of our mortgage-backed securities team." - TCW

Extension Of TARP Now Official: TARP Maturity To Suspiciously Coincide With Mid-Term Elections

"I am hereby extending [TARP per] the authority provided under the Act to October 3, 2010. This extension is necessary to assist American families and stabilize financial markets because it will, among other things, enable us to continue to implement programs that address housing markets and the needs of small businesses, and to maintain the capacity to respond to unforeseen threats, as described above." Tim Geithner

Threat #1 - landslide change in the political landscape in 12 months

Reggie Middleton's picture

Yesterday, I commented on Goldman's CMBS offering through the government's leverage program known as TALF. I was very nice and diplomatic, yet despite that I still received what I would consider, inappropriate feedback. Okay, let's take the politically correct gloves off - they never fit me anyway. This deal probably flew because Goldman Sachs underwrote it. Goldman thrives off of brand name value primarily. Contrary to mainstream media inspired belief, they are not better than everybody else at everything. I posit, they are probably not better than anybody else at anything other than marketing and lobbying.

Reggie Middleton's picture

The world's most handsome and charismatic blogger stands outside his beloved friends at Goldman Sachs headquarters at 85 Broad (see pic) to congratulate them on the outstanding CMBS offering made through TALF government leveraging for Developers Diversified Realty (notice the funny looks that I am getting from the women in the background, haven't they seen a handsome and charismatic blogger before???). A few questions still linger, though...

Full Ben Bernanke Speech Before Economic Club of New York

The foreign exchange value of the dollar has moved over a wide range during the past year or so. When financial stresses were most pronounced, a flight to the deepest and most liquid capital markets resulted in a marked increase in the dollar. More recently, as financial market functioning has improved and global economic activity has stabilized, these safe haven flows have abated, and the dollar has accordingly retraced its gains. The Federal Reserve will continue to monitor these developments closely. We are attentive to the implications of changes in the value of the dollar and will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability. Our commitment to our dual objectives, together with the underlying strengths of the U.S. economy, will help ensure that the dollar is strong and a source of global financial stability.

No mention of Gold