Here’s what you may have missed on the Finance Addict this week. Also check out our GIF of the Week after the jump!
- Risky repos rear their head and threaten us all. Looks like there’s a storm brewing in the U.S. repo markets.
- Why Dodd-Frank has already failed. Here’s why Dodd-Frank is irredeemably flawed and won’t do enough to protect our economy from troubled financial institutions.
- The Super Bowl & general ad spend: bullish indicator? Super Bowl commercials, and ad spending in general, are great economic indicators since ad budgets are usually the first to go in a downturn.
- The saga of Maiden Lane II. Nothing better captures the bailout dilemma than the saga of Maiden Lane II.
- Fannie Mae and Freddie Mac to really leave the stage? Can we realistically abolish Fannie Mae and Freddie Mac’s central role in the housing market? What are the implications?
- Of fallen angels and demons restored. Alan Greenspan is a fallen angel. Who else do you think will go from hero to zero, and vice versa, when we look back again?
Inquiring minds should consider the following.
Together Fannie Mae and Freddie Mac stand behind 70% of all new mortgages in the United States. Since the two were placed under conservatorship in 2008, U.S. taxpayers are the ultimate guarantors for the $5 trillion in debt issued or guaranteed by the two. The plan, according to the Obama Administration, is to eventually get rid of Fannie and Freddie altogether, in the hope/dream/crackpipe-induced fantasy that private sector banks will step up and assume this role.
That seems like quite a big ask, no? Continue Reading
Nothing better captures the bailout dilemma than the saga of Maiden Lane II.
In 2008 Tim Geithner and his New York Federal Reserve Bank saved AIG’s hide. It did so in part by creating a special purpose vehicle and lending it $19.5 billion so that it could buy AIG’s subprime-mortgage backed bonds — bonds of which a very frightened market wanted no part. Continue Reading
Justin Fox’s take in the Harvard Business Review is spot on:
Relying on regulators or central bankers doesn’t always work because during good times they have a habit of getting caught up in the same idiocy as the financiers do.
A case in point is the atmosphere of self-congratulation that infused the last days of the Greenspan Fed. The recently released transcripts from the 2006 FOMC meetings make this clear, with plaudits like the following from then-San Francisco Fed President Janet Yellen: Continue Reading
Looks like there’s a storm brewing in the U.S. repo markets.
It figures: profit-center banks have every motivation to stay one step ahead of the regs and the pols. Since the gamekeepers have now gotten around to looking at proprietary trading and bringing derivatives onto exchanges, you can almost bet your first-born that the next crisis will be in neither one of these areas but someplace else entirely different. Continue Reading