"There is simply no provision in the law that requires investment bank holding companies to compute capital measures or to maintain liquidity on a consolidated basis. Nor does the law provide for a consolidated supervisor that is knowledgeable in their core securities business, and that would be recognized for this purpose by international regulators.Ding ding ding ding ding.
At the same time, without waiting for new internationally accepted standards, the Division of Trading and Markets has strengthened the liquidity requirements for CSE firms relative to their unsecured funding needs. They are closely scrutinizing the secured funding activities of each CSE firm, with a view to lengthening the average term of secured and unsecured funding arrangements. And they are currently obtaining funding and liquidity information for all CSEs on a daily basis, and discussing with CSEs the amount of excess secured funding capacity for less-liquid positions. There will also be more disclosure of actual capital and liquidity positions of the CSE firms in terms that the market can readily understand and digest. The CSEs will institute public disclosure of their capital ratios computed under the Basel Standard later this year, and then phase in additional disclosure related to concentration of exposures."
"You're gonna have to tell us what you hold and how you're valuing it, and that is going to be publically disclosed."That this resulted in a two hundred point selloff in the Dow, with every financial stock getting hit in unison when this ditty crossed the wire, says more about our capital markets than anyone can put into print.
There 'ya go, reported by the media - the threat of having to tell the truth resulted in the largest selloff in more than a month.
"Data on capital and liquidity will be required this year 'in terms that the market can readily understand and digest,' Cox said in a speech today before the Securities Traders Association in Washington. The SEC already collects much of this information without giving it to the public, he said.
The five biggest Wall Street firms had their largest share-price declines in at least a month. Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, led the way, losing $2.67, or 5.8 percent, to $43.64 as of $:31 p.m. in New York Stock Exchange trading."
"The initiatives include 1) a new refinancing option for up-to-date but "underwater" borrowers with loans owned by Fannie Mae that will allow for refinancing up to 120 percent of a property's current value."Oh that's rich. Fannie proposes to allow borrowers to instantaneously saddle them with at least a 40% loss should they default? (20% underwater plus another 20% in foreclosure, rehabilitation and marketing expense)
If this is not done - and soon - I see no way for Fannie to avoid cascading losses that will smother its operating and "core capital", ultimately resulting in the firm being rendered insolvent.
"Mortgage financing giants Fannie Mae and Freddie Mac could face further problems if home prices continue to plummet, but a taxpayer bailout is not likely, said the federal regulator charged with overseeing the two firms."
He is prepared to let them go bust? That would be cute.
Thanks for the "short list" James.
Let's move on from larcenous (or just plain stupid) corporations (and their regulators) to even dumber (or is that larcenous) governments.
You want a mortgage in New York? You're gonna have a hell of a time getting one unless you've got 30% down. Yes, 30%. Why? This bill:
"If members of the New York State Assembly have their way, lenders and investors with loans in New York state will soon have to contend with a one-year moratorium on foreclosure activity in the state. Members of the state Assembly passed a legislative package of four housing-related measures Wednesday, one of which would force a one year delay between the moment a notice of default is filed through the foreclosure sale itself."
That will instantaneously devalue all existing mortgage paper written in the state and "adjust" (guess in which direction) the risk premium on new mortgages. Yes, your government at work.
All this in yet another crass attempt (see Fannie's 120% LTV example above) to keep housing prices from adjusting to the maximum sustainable 3x incomes. It not only won't work it will cause an even greater crash because the loss of value in that paper will create an immediate spike in interest rate demands for all new loans in the state.
Nor are they first - Taxachusetts got in front of this one by days. That wasn't a surprise. That New York would attempt to follow them is. Expect lawsuits, by the way, over existing mortgage paper, although the ability to prevent this for new mortgages via court action is unlikely to succeed.
The NY Legislature's new refrain: "If I only had a brain....."
Moving on to the next "Forest Gump" candidate we have...... the American Consumer!
The Fed's G.19 credit release showed that Americans last month not only spent their stimulus checks before they got them, but levered up even more, charging up the plastic at a prodigious rate. Indeed, the annual rate of increase in revolving (credit card) debt was nearly 8% in March, more than double the annualized rate of increase in wages.
"Heh honey, our HELOC got recalled. Think we should cut back?
Naw, get out the plastic - its time for another pair of $600 shoes!"
Indeed, store comps out this morning say that is exactly what happened, with strong increases across the board.
Oh, never mind that our great Congressfolk and Ben Bernanke would never advise Americans to actually pay down debt! Why no! In fact quite the opposite - all the talk out of Washington was to spend spend spend! We have to keep the economy going!
The futures did not respond materially to the news flow - heh, you think Wall Street might have figured out how compound interest works?
Now, after all these years?
This much is certain - there will never be a shortage of stupidity in the universe, as we have an ample supply of it between Congress, The Fed and American households.
Got KaPUTts on Credit Card and auto loan issuers?
Their turn in the wood chipper is coming.
The pure artistry of TickerForum folks is amazing.... I thought I'd share this one with you... I like it a lot..... come on over to the forum at http://tickerforum.org/ and look in "User Presentations" for more.
I didn't create this, but I do like it.... a lot!
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.
NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.
The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.
Looking for "The Best of Market Ticker"? Check out Ticker Classics.
Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.
Market Ticker content may be reproduced or excerpted online provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media.
Submissions may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.
Leads on stories of current economic and political interest are always welcome. Our fax tip line is 850-897-9364; please include contact information with your transmission.