Yesterday the Federal Reserve released a 19-page letter that it and the FDIC had issued to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed. The letter carried frightening passages and large blocks of redacted material in critical areas, instilling in any careful reader a sense of panic about the U.S. financial system. The Federal regulators didn’t say JPMorgan could pose a threat to its shareholders or Wall Street or the markets. It said the potential threat was to “the financial stability of the United States.”
"In September, regulators from the OCC, the Federal Reserve and the Federal Deposit Insurance Corp. met with dozens of energy bankers at Wells Fargo’s office in Houston... Regulators pushed lenders to focus instead on a borrower’s ability to make enough money to repay the loan, according to the person familiar with the discussions."
Termites start low and work their way up. By the time you notice them, it’s often already too late to save the place. All you can do is rebuild, start over. This analogy may be useful in terms of understanding what’s going on in the car business...
"Now, while your borrowing base might be upheld, there will be minimum liquidity requirements before capital can be accessed. It is hitting the OFS sector as well. As one banker put it, "we are looking to save ourselves now," with banks selling company debt for as low as $0.10 on the dollar on companies that only had a 50-75% borrow rates to start."
Broad equity indexes have declined significantly since July 2015, and forward price-to-earnings ratios have fallen to a level closer to their averages of the past three decades. Leverage [among speculative-grade and unrated firms] firms has risen to historical highs, especially among those in the oil industry, a development that points to somewhat elevated risks of distress for some business borrowers.
It is Pedro's "courage to write" what Bernanke conveniently forgot to add in his memoir, that makes this review so much more memorable than the generic sycophantic tripe written by his "access journalism" peers.
In what amounts to evidence that the subprime auto problem is indeed growing, The New York Fed's Quarterly Report on Household Debt and Credit (out today) shows that lenders extended more than $110 billion in auto loans to borrowers with credit scores below 660 over the past six months alone.
Having detailed the "perverted nonsense" that is the collapsing and negative US swap spreads (here, here, here, and here) and noted money manager's concerns that the big question remains whether there is "something bigger brewing under the surface that so far hasn’t been pinpointed yet," it appears Goldman Sachs feels the need to 'explain' the anomaly in what appears an effort to calm fears about the broken money markets. Of course, we don’t have to figure out what the “market” is saying about a negative spread because it isn’t saying anything other than “something” is wrong and even Goldman admits this signals funding and balance sheet strains are worsening since August.
Based on last week’s developments, which included the launch of an investigation into the world’s largest oil company and the rejection of the most politicized energy project to date, the “above ground” problems for the energy industry are growing much worse. That could complicate the future fortunes of oil and gas companies.
Remember Skopos Financial, the US subprime auto lender run by Santander Consumer veterans? Well, in a testament to just how desperate America is to perpetuate the US auto market "renaissance," the company just sold $154 millon worth of paper to investors partially backed by loans to borrowers with no credit score.
In reading various recent regulatory reports, it is clear that almost none of the promises that were made to the public about what was going to happen under Dodd-Frank financial reform is actually happening. Welcome to another day at the casino where the model continues to be — heads they win, tails you lose.