Calculated Risk Tue 2009-09-22 09:30 EDT

Inspector General: FDIC saw risks at IndyMac in 2002

CalculatedRisk

From the Inspector General Report: Between 2001 and 2003, [Division of Insurance and Research] DIR risk assessments and quarterly banking profiles identified concerns about a number of issues, including:*** consumers' ever-increasing debt load, the expansion of adjustable rate mortgages, and a potential housing bubble; *** subprime and high loan-to-value (HLTV) lending as a risk in the event that the United States economy suffered a significant recession; and *** pricing and modeling charge-off risk with respect to the originate-to-sell model of the mortgage business.

2002; Calculated Risk; FDIC saw risks; IndyMac; Inspector generally.

Mish's Global Economic Trend Analysis Sun 2009-09-20 11:23 EDT

Yellen Calls For "U" Shaped Recession and Another Jobless Recovery

Michael Shedlock

...excerpts from Janet Yellen's Outlook for Recovery in the U.S. Economy: ...the complex topic of inflation. In my career, I have never witnessed a situation like the one that exists now, when views about inflation risks have coalesced into two diametrically opposed camps. On the one hand, one group worries about the long-term inflationary implications of a seemingly endless procession of massive federal budget deficits. At the same time, others fear that economic slack and downward wage pressure are pushing inflation below rates that are considered consistent with price stability and even raising the specter of outright deflation... My personal belief is that the more significant threat to price stability over the next several years stems from the disinflationary forces unleashed by the enormous slack in the economy.

Jobless Recovery; Mish's Global Economic Trend Analysis; Shaped Recession; U; Yellen called.

naked capitalism Sun 2009-09-20 10:17 EDT

Guest Post: Ambrose Evans-Pritchard & the City's hard EU choices

Swedish Lex

The City's political clout in Brussels is waning as the UK's financial industry model has gone from being the envy of the European peers to being a liability. Meanwhile, the EU will in the future probably be proposing new banking and financial services legislation that may be superficially marketed by decision-makers as striving to provide a clear cut with the existing Anglo-Saxon casino model. This guest post will discuss some of the fundamental choices that the City is facing, the most significant being whether or not to be advocating a UK withdrawal from the EU altogether.

Ambrose Evans Pritchard; City's hard EU choices; Guest Post; naked capitalism.

Thu 2009-09-17 10:08 EDT

The Next Financial Crisis

Peter Boone, Simon Johnson

Our banks have gotten into the habit of needing to be rescued through repeated bailouts. During this crisis, Bernanke--while saving the financial system in the short term--has done nothing to break this long-term pattern; worse, he exacerbated it. As a result, unless real reform happens soon, we face the prospect of another bubble-bust-bailout cycle that will be even more dangerous than the one we've just been through. ...We have seen this spectacle--the Fed saving us from one crisis only to instigate another--many times before. And, over the past few decades, the problem has become significantly more dire. The fault, to be sure, doesn't lie entirely with the Fed. Bernanke is a prisoner of a financial system with serious built-in flaws. The decisions he made during the recent crisis weren't necessarily the wrong decisions; indeed, they were, in many respects, the decisions he had to make. But these decisions, however necessary in the moment, are almost guaranteed to hurt our economy in the long run--which, in turn, means that more necessary but harmful measures will be needed in the future. It is a debilitating, vicious cycle. And at the center of this cycle is the Fed.

Financial Crisis.

Jesse's Café Américain Sun 2009-09-13 12:21 EDT

Signs of an Approaching Decline in US Equities That Could Be Quite Impressive

Jesse

There is a strong correlation between this US equity rally and the Fed monetization of debt, which indicates a 'hot money' flow into US stocks but with thin volumes from a significant market bottom. This points to 'technical price trading' by the financial sector, also known was price manipulation, or trading stocks like commodities. Continued heavy insider selling from those with the best forward view of the real economy is a clear sign of a top. No one can trust what the Fed or the Administration are saying about an economic recovery, as much now as ever. Obama's administration is no reform government ...We will not be surprised if there is a significant decline, first to a pullback of about 7 to 10 percent. Then we will see if the market can rally on renewed dollar devaluation and if not, then another major slide to test lower levels.

Approaching Decline; Equities; impressive; Jesse's Café Américain; signed.

Jesse's Café Américain Sun 2009-09-13 10:37 EDT

China Admonishes US Monetization, Sees a Hard Fall for the Dollar Over Time

Ambrose Evans-Pritchard via Jesse

The US Federal Reserve's policy of printing money to buy Treasury debt threatens to set off a serious decline of the dollar and compel China to redesign its foreign reserve policy, according to Cheng Siwei, a top member of the Communist hierarchy...The blowback on the US dollar will be significant. Dollar losing reserve currency status.

China admonished; Dollar; Hard Fall; Jesse's Café Américain; monetize; see; Time.

Jesse's Café Américain Fri 2009-09-04 18:58 EDT

Stiglitz on the Financial Crisis

Jesse

Joe Stiglitz describes the current financial crisis and prospective recovery quite well, and the conclusions he draws are remarkably similar to our own which is gratifying. It's good to hear these things from a distinguished Nobel laureate, and not just from your humble Propriétaire, while puttering over his daily bread. Bloomberg Stiglitz Says U.S. Economic Recovery May Not Be `Sustainable' By Michael McKee Sept. 4 (Bloomberg) -- The U.S. economy faces a ``significant chance'' of contracting again after emerging from its worst recession since the 1930s, Nobel Prize-winning economist Joseph Stiglitz said. ``It's not clear that the U.S. is recovering in a sustainable way,'' Stiglitz, a Columbia University professor, told reporters yesterday in New York.

Financial Crisis; Jesse's Café Américain; Stiglitz.

Bruce Krasting Fri 2009-09-04 18:30 EDT

Open Letter to FHFA's New Director Edward DeMarco - A Proposal for the Agency REO/Preferred Shares

Bruce Krasting

Let me welcome you to your new responsibilities. You have a very important job. There are a significant number of people in the financial world who lie awake at night worrying about the mortgage lenders you are responsible for. Fannie Mae, Freddie Mac and the FHLBs hold or guaranty $6.3 Trillion in residential mortgages. It is simply not possible for the US to get out of the mess we are in unless these Agencies are stabilized. Should those Agencies fail, all that has been done to heal the US financial sector will have been wasted. In a significant manner, your success or failure will determine the medium term course of the US economy.

Agency REO/Preferred Shares; Bruce Krasting; FHFA's New Director Edward DeMarco; Open Letter; proposed.

The IRA Analyst Tue 2009-06-16 00:00 EDT

The Institutional Risk Analyst: Zombie Update; Pento on Bernanke's Permanently Expanded Balance Sheet

``This zombie dance party ain't over. No sir.'' Michael Pento: ``Bernanke will be hard-pressed to substantially raise rates to combat inflation once consumer and wholesale prices begin to significantly increase.''

Bernanke's Permanently Expanded Balance Sheet; Institutional Risk Analyst; IRA Analyst; Pento; Zombie Update.

Tue 2009-06-16 00:00 EDT

Jesse's Café Américain: China Admits to Significantly Building Its Gold Reserves

Jesse's Café Américain: China Admits to Significantly Building Its Gold Reserves

China admits; gold reserves; Jesse's Café Américain; significant buildings.

Fri 2008-12-12 00:00 EST

Jesse's Café Américain: Money Supply, Paul Krugman, and the Great Depression

Jesse's Café Américain: Money Supply, Paul Krugman, and the Great Depression; ``Fed made a significant policy error in raising the discount rate in early 1931''; ``we can imagine an outcome in which misbegotten monetary policy results in an oligopoly of corporate interests and an economy that is permanently frozen in a series of de facto monopolies based on central planning, not all that dissimilar to the experience of the Soviet Union prior to its dissolution and some countries in which a hundred or so powerful families control the government and its economy in a state of permanent corruption and malaise.''

Great Depression; Jesse's Café Américain; money supply; Paul Krugman.

Fri 2008-11-07 00:00 EST

Jesse's Café Américain: DTCC Report Omits A Significant Amount of Credit Default Swap Exposure

Jesse's Café Américain: DTCC Report Omits A Significant Amount of Credit Default Swap Exposure

Credit Default Swaps Exposure; DTCC Report Omits; Jesse's Café Américain; significant amount.

Tue 2008-09-23 00:00 EDT

Jesse's Café Américain: Dollar Musings and the Potential for a Significant Stock Market Decline

Jesse's Café Américain: Dollar Musings and the Potential for a Significant Stock Market Decline; dollar rally

Dollar Musings; Jesse's Café Américain; Potential; Significant Stock Market Decline.

Tue 2008-08-26 00:00 EDT

The End of the Beginning -- Developments in the Credit Crisis

The End of the Beginning - Developments in the Credit Crisis, by Satyajit Das (Prudent Bear); 2008-05-27; ``limited recognition of the massive de-leveraging of the global financial system that is under way.'' ``The banking systems ability to supply credit is significantly impaired and will remain so for the foreseeable future.'' ``Changes in financial markets will have a significant impact on many companies that now rely on financial engineering rather than real engineering'' Das proposes: ``holdings and values of risky assets held by banks and investment banks must be accurately determined...Risky assets must be valued on a hold-to-maturity basis...Mark-to-market accounting should be suspended...Capital levels should be set on a bank-by-bank basis by regulators...Capital requirements should be eased...government [should] guarantee of all major bank liabilities''

Begins; credit crisis; develop; ending.

Wed 2008-06-11 00:00 EDT

Mish's Global Economic Trend Analysis: Credibility Issues Haunt Lehman

dodgy commercial real estate holdings getting significant writedowns

Credibility Issues Haunt Lehman; Mish's Global Economic Trend Analysis.

Tue 2008-05-13 00:00 EDT

The Big Picture | Fannie Mae's Home Prices Ex-Foreclosures

"FNM significantly understates home price declines"

Big Picture; Fannie Mae's Home Prices Ex-Foreclosures.