Comments on Gary Greenberg's articles RSS Syndication from SeekingAlpha.com http://seekingalpha.com/author/gary-greenberg/articles http://seekingalpha.com/article/179504-fdic-blows-it-on-transparency?source=feed#comment-818679 818679 Wed, 23 Dec 2009 10:19:52 -0500
Ultimate answer is longer term financing against longer term assets. Costs go up for industry and banking profits go down.]]> http://seekingalpha.com/article/179504-fdic-blows-it-on-transparency?source=feed#comment-818394 818394 Wed, 23 Dec 2009 06:23:25 -0500 http://seekingalpha.com/article/179504-fdic-blows-it-on-transparency?source=feed#comment-818389 818389 Wed, 23 Dec 2009 06:14:08 -0500 http://seekingalpha.com/article/172547-systemic-risk-regulation-requires-greater-transparency?source=feed#comment-754982 754982 Wed, 11 Nov 2009 05:41:42 -0500 economics.arawakci...]]> http://seekingalpha.com/article/170456-policy-makers-miss-the-mark?source=feed#comment-739940 739940 Mon, 02 Nov 2009 05:28:28 -0500 www.economics.arawakci...]]> http://seekingalpha.com/article/170456-policy-makers-miss-the-mark?source=feed#comment-739930 739930 Mon, 02 Nov 2009 05:00:29 -0500 http://seekingalpha.com/article/162177-we-need-a-new-organization-to-handle-systemic-risk?source=feed#comment-682616 682616 Fri, 18 Sep 2009 12:24:15 -0400 http://seekingalpha.com/article/148347-the-case-of-the-missing-exit-strategy?source=feed#comment-585870 585870 Mon, 13 Jul 2009 12:04:40 -0400 http://seekingalpha.com/article/145012-why-securitization-is-necessary?source=feed#comment-561387 561387 Wed, 24 Jun 2009 23:08:05 -0400
Can't we say, enough is enough. Do we really need to start playing with numbers in the quadrillions when it comes to derivatives? Isn't trillions enough?]]> http://seekingalpha.com/article/145020-the-campaign-against-transparency-a-rebuttal?source=feed#comment-561338 561338 Wed, 24 Jun 2009 21:34:11 -0400
Given the losses suffered around the world from securitised, dubioulsy rated junk, I doubt that a buy side will return for a pool of mysterious mortgages yielding 5%.]]> http://seekingalpha.com/article/145012-why-securitization-is-necessary?source=feed#comment-560607 560607 Wed, 24 Jun 2009 12:47:11 -0400 http://seekingalpha.com/article/145012-why-securitization-is-necessary?source=feed#comment-560298 560298 Wed, 24 Jun 2009 09:29:33 -0400
The reason securitization became so widespread is that it is cheaper than on-balance-sheet bank lending. Traditional lending requires banks to recoup their cost of equity and FDIC insurance premiums; for assets that can be packaged, securitization is more attractive.

From a policy perspective, securitization broadens (1) access to credit (2) relieves banks from having to continually raise equity to support expanded lending and (3) keeps already too big to fail banks from becoming yet larger.

The present debate is how to prevent banks from selling dross and the Geithner proposals call for issuers to have skin in the game by retaining 5% of what is issued and eliminating the gain on sale accounting treatment. The first is geared towards addressing quality while the latter is designed to reinforce the notion that sale of securities should be viewed and manged as a long term business.

There is no silver bullet and the correct policy response will be that which best balances the cost of securitizing with insuring that banks do not sell junk. Since costs to banks will increase, and there is no free lunch, it is unlikley securitization will approach previous levels.


]]> http://seekingalpha.com/article/145020-the-campaign-against-transparency-a-rebuttal?source=feed#comment-560015 560015 Wed, 24 Jun 2009 04:36:14 -0400
Sadly, no matter how much they protest the sell side will never be able to give them what they need which is buy side analysts.

The end result is not too bad. The elaborate and broken securitization market is shrinking and the derivatives market along with it. Although this can put us all the way back into depression, at least we will walk out of there without financial weapons of mass destruction hung around our necks.

After the first nuclear bombs were released people were smart enough not to use them again. I wonder if we will be able to say the same about the toxic financial weapondry that have been peddled around this economic cycle? Until we can say definatively yes, we should not encorage a resumption of mass unregulated securitization.]]> http://seekingalpha.com/article/144497-why-solving-the-credit-crunch-is-key?source=feed#comment-558377 558377 Mon, 22 Jun 2009 23:04:27 -0400 http://seekingalpha.com/article/144497-why-solving-the-credit-crunch-is-key?source=feed#comment-557567 557567 There is no solution IMHO to the Credit Crunch in a deficit-based > paradigm. The only solution lies in a new approach to Equity, though > thye creation of new asset classes which "unitise" land and property > rentals, and while retaining a return (and being redeemable against > actual property occupation), dispense with the debt obligation.]]> Mon, 22 Jun 2009 12:24:24 -0400

On Jun 22 08:44 AM ChrisJCook wrote:

> There is no solution IMHO to the Credit Crunch in a deficit-based
> paradigm. The only solution lies in a new approach to Equity, though
> thye creation of new asset classes which "unitise" land and property
> rentals, and while retaining a return (and being redeemable against
> actual property occupation), dispense with the debt obligation.]]> http://seekingalpha.com/article/144497-why-solving-the-credit-crunch-is-key?source=feed#comment-557464 557464 > "The solution is to restart the securitization process" >> NO NO NO WAY !! Having worked with debtors unable to service their debt I understand the process that occurs when one passes the tipping point. A decade plus of cheap, easy, unlimited credit built debt to unsustainable levels. The idea that all we have to do is increase the carrying capacity of the securitization industry is laughable when one realizes that currently personal incomes and corporate earnings are insufficient to service existing debt. No solution is possible until and unless we understand the concept of unsustainability. Clearly, our "leaders" don't. This mess can ONLY be resolved by reducing debt to sustainable levels. All the other tinkering, bailing, TARPing, and easing is just like rearranging the chairs on the deck of the Titanic.]]> Mon, 22 Jun 2009 11:44:44 -0400 > "The solution is to restart the securitization process" >> NO NO NO WAY !!

Having worked with debtors unable to service their debt I understand the process that occurs when one passes the tipping point. A decade plus of cheap, easy, unlimited credit built debt to unsustainable levels. The idea that all we have to do is increase the carrying capacity of the securitization industry is laughable when one realizes that currently personal incomes and corporate earnings are insufficient to service existing debt.

No solution is possible until and unless we understand the concept of unsustainability. Clearly, our "leaders" don't.

This mess can ONLY be resolved by reducing debt to sustainable levels. All the other tinkering, bailing, TARPing, and easing is just like rearranging the chairs on the deck of the Titanic.]]> http://seekingalpha.com/article/144497-why-solving-the-credit-crunch-is-key?source=feed#comment-557375 557375 ...Don't we need to hunt that down and cage it with some form of constraint... Yes -- and the cage is the transparency data base Mr. Greenberg suggests. Just as the U.S. GAAP taxonomy empowered investors to identify public company security risk factors in the 1900s, an XBRL taxonomy could empower investors to identify asset security risk factors in the 2000s. The more transparency that came to public company markets, the more difficult it was for Wall Street insiders to extract economic rents, driving the search for less transparent securities, such as ABS. Mr. Butter's article at http://seekingalpha.com/article/144476-geithner-s-plan-doesn-t-get-it-securitization-is-the-solution-not-the-problem and his prior posts are worthwhile reading with this one. Since the XBRL taxonomy exists now, the only reason to wait 10 years seems to be a lack of enlightened leadership.]]> Mon, 22 Jun 2009 10:44:12 -0400
>...Don't we need to hunt that down and cage it with some form of constraint...

Yes -- and the cage is the transparency data base Mr. Greenberg suggests. Just as the U.S. GAAP taxonomy empowered investors to identify public company security risk factors in the 1900s, an XBRL taxonomy could empower investors to identify asset security risk factors in the 2000s. The more transparency that came to public company markets, the more difficult it was for Wall Street insiders to extract economic rents, driving the search for less transparent securities, such as ABS. Mr. Butter's article at seekingalpha.com/artic... and his prior posts are worthwhile reading with this one. Since the XBRL taxonomy exists now, the only reason to wait 10 years seems to be a lack of enlightened leadership.]]> http://seekingalpha.com/article/144497-why-solving-the-credit-crunch-is-key?source=feed#comment-557152 557152 Mon, 22 Jun 2009 08:56:17 -0400
Instead we are doing the opposite in current government policy. The tax cut part of it would be a huge help in the credit markets and might just help the consumer a bit get out from underneath some of their debt.]]> http://seekingalpha.com/article/144497-why-solving-the-credit-crunch-is-key?source=feed#comment-557140 557140 Mon, 22 Jun 2009 08:44:49 -0400 http://seekingalpha.com/article/144497-why-solving-the-credit-crunch-is-key?source=feed#comment-557102 557102 Mon, 22 Jun 2009 08:15:12 -0400 More creit is the last thing we need. it is what got us into this mess. We created a false economy based on over spending and are now paying the price by cutting back to what is probably more in line with real needs.
Massive stimulus does nothing but try and "soften" the blow, but the amounts of money being spent by the government will create a debt load that will handcuff this country for far too many years.
Much like GM, why throw in 50 Billion and then go broke? Why spend so much stimulus money if the result will be a protracted downturn anyways? I think the government needed to spend money, I just didn't think it needed to commit to so much spending.]]> http://seekingalpha.com/article/144497-why-solving-the-credit-crunch-is-key?source=feed#comment-557035 557035 Mon, 22 Jun 2009 05:49:10 -0400
After all, why should they care if they loose money. Fannie Mae and Freddie Mac have already become an entitlement program which will eventually dwarf Medicare and Medicaide. To call them a private company is an assault on rational people's senses and is only being done to keep their massive program off of the government's books lest the Chinese and the rest of Treasury Bond holders get a whiff of the foul carcass rotting there.

More securitization is the last thing America needs.]]> http://seekingalpha.com/article/143915-will-the-sec-give-the-buy-side-what-it-needs?source=feed#comment-553861 553861 Paul, > > Re: Your comment - > > "What it left out was the need to disclose the detail and subsequent > data in a format that can be easily analyzed by potential buyers. > That format, for which a list of data tags already exists, is XBRL. > All that is needed is the leadership to force the sell side to disclose > instead of muck around in opacity that's further confused by potential > and actual taxpayer subsidies." > > The solution is a "mother of all databases." See my blog entry: http://rwbeerdiet.blogspot.com/2009/03/its-database.html > > > The concept proposed by TYI, LLC of Needham, MA is for a centralized, > database administered by an independent third party that would collect > the relevant data on a daily basis, standardize it, verify and report > it the next-day, delivering it to the desktops of investors and regulators > around the world so that they could use the analytics of their choice > to value and price the securities. > > Getting the loan-level information is an issue, as you've stated. > A crowbar, hammer or similar instrument of persuasion will likely > be necessary. Barring that, legislation or regulation will have to > suffice. > ]]> Fri, 19 Jun 2009 11:19:27 -0400
On Jun 19 07:43 AM Gary Greenberg wrote:

> Paul,
>
> Re: Your comment -
>
> "What it left out was the need to disclose the detail and subsequent
> data in a format that can be easily analyzed by potential buyers.
> That format, for which a list of data tags already exists, is XBRL.
> All that is needed is the leadership to force the sell side to disclose
> instead of muck around in opacity that's further confused by potential
> and actual taxpayer subsidies."
>
> The solution is a "mother of all databases." See my blog entry: rwbeerdiet.blogspot.co...
>
>
> The concept proposed by TYI, LLC of Needham, MA is for a centralized,
> database administered by an independent third party that would collect
> the relevant data on a daily basis, standardize it, verify and report
> it the next-day, delivering it to the desktops of investors and regulators
> around the world so that they could use the analytics of their choice
> to value and price the securities.
>
> Getting the loan-level information is an issue, as you've stated.
> A crowbar, hammer or similar instrument of persuasion will likely
> be necessary. Barring that, legislation or regulation will have to
> suffice.
> ]]> http://seekingalpha.com/article/143915-will-the-sec-give-the-buy-side-what-it-needs?source=feed#comment-553441 553441 Actually, since they were getting gov't help after Lehman (note the > AIG conduit to Goldman Sachs et al.) and it was not at all certain > that full transparency would result in better prices, the more risk-averse > position was to hold and recapitalize and wait rather than go for > full transparency. Andrew Butter's article from Tuesday, and its > comments, have it right: http://seekingalpha.com/article/143444-is-the-u-s-style-securitization-model-dead > > > Mr. Greenberg is also exactly right: > > "Essentially, what would cause the buy side to return to the market > and allow credit to flow through securitization again would be giving > them more granular data on a more timely basis so that they could > perform their own due diligence and have more trust in the ratings > agencies methodologies." > > See the comments to the Butter article for links to ways to produce > that more granular data. The Treasury plan yesterday at least called > for disclosure of loan level detail. What it left out was the need > to disclose the detail and subsequent data in a format that can be > easily analyzed by potential buyers. That format, for which a list > of data tags already exists, is XBRL. All that is needed is the leadership > to force the sell side to disclose instead of muck around in opacity > that's further confused by potential and actual taxpayer subsidies. > > > Bear Stearns tried to offer some of its junk to the public in 2007 > but nixed the deal, presumably when they found out that the transparency > required wouldn't get them the price they wanted. Here's a quote > from the FT at the time: > > "Jack McCleary, head of asset-backed securities syndication at UBS > said: 'The market does good job of sniffing out leverage. Dealers > will look at funds with similar positions to ensure valuations are > appropriate.'" -- http://www.ft.com/cms/s/0/f7b13cda-2046-11dc-9eb1-000b5df10621.html > > > Alas, Mr. McCleary was all too prescient about the ability of the > market. Too bad there wasn't more transparency sooner to help it > move faster, before opacity exacerbated the bubble.]]> Fri, 19 Jun 2009 07:43:11 -0400
Re: Your comment -

"What it left out was the need to disclose the detail and subsequent data in a format that can be easily analyzed by potential buyers. That format, for which a list of data tags already exists, is XBRL. All that is needed is the leadership to force the sell side to disclose instead of muck around in opacity that's further confused by potential and actual taxpayer subsidies."

The solution is a "mother of all databases." See my blog entry: rwbeerdiet.blogspot.co...

The concept proposed by TYI, LLC of Needham, MA is for a centralized, database administered by an independent third party that would collect the relevant data on a daily basis, standardize it, verify and report it the next-day, delivering it to the desktops of investors and regulators around the world so that they could use the analytics of their choice to value and price the securities.

Getting the loan-level information is an issue, as you've stated. A crowbar, hammer or similar instrument of persuasion will likely be necessary. Barring that, legislation or regulation will have to suffice.



On Jun 18 11:58 PM Paul Wilkinson wrote:

> Actually, since they were getting gov't help after Lehman (note the
> AIG conduit to Goldman Sachs et al.) and it was not at all certain
> that full transparency would result in better prices, the more risk-averse
> position was to hold and recapitalize and wait rather than go for
> full transparency. Andrew Butter's article from Tuesday, and its
> comments, have it right: seekingalpha.com/artic...
>
>
> Mr. Greenberg is also exactly right:
>
> "Essentially, what would cause the buy side to return to the market
> and allow credit to flow through securitization again would be giving
> them more granular data on a more timely basis so that they could
> perform their own due diligence and have more trust in the ratings
> agencies methodologies."
>
> See the comments to the Butter article for links to ways to produce
> that more granular data. The Treasury plan yesterday at least called
> for disclosure of loan level detail. What it left out was the need
> to disclose the detail and subsequent data in a format that can be
> easily analyzed by potential buyers. That format, for which a list
> of data tags already exists, is XBRL. All that is needed is the leadership
> to force the sell side to disclose instead of muck around in opacity
> that's further confused by potential and actual taxpayer subsidies.
>
>
> Bear Stearns tried to offer some of its junk to the public in 2007
> but nixed the deal, presumably when they found out that the transparency
> required wouldn't get them the price they wanted. Here's a quote
> from the FT at the time:
>
> "Jack McCleary, head of asset-backed securities syndication at UBS
> said: 'The market does good job of sniffing out leverage. Dealers
> will look at funds with similar positions to ensure valuations are
> appropriate.'" -- www.ft.com/cms/s/0/f7b...
>
>
> Alas, Mr. McCleary was all too prescient about the ability of the
> market. Too bad there wasn't more transparency sooner to help it
> move faster, before opacity exacerbated the bubble.]]> http://seekingalpha.com/article/143915-will-the-sec-give-the-buy-side-what-it-needs?source=feed#comment-553433 553433 Thanks, Mr. Greenberg, for the helpful note. Much of it I was already > familiar with, but I have a question. Your position is that potential > buyers are unwilling to buy given the current inadequate levels of > transparency. > > "...Essentially, what would cause the buy side to return to the market > and allow credit to flow through securitization again would be giving > them more granular data on a more timely basis so that they could > perform their own due diligence and have more trust in the ratings > agencies methodologies..." > > Why wouldn't the sellers provide increased transparency on their > own in order to get more buyers, better pricing, etc.? Why would > the sellers need the SEC to force them to do something that is clearly > already in their economic interest to do?]]> Fri, 19 Jun 2009 07:27:11 -0400
Your question is essentially the same as asked by Fed economists almost daily. Why would an organization not do something that is in their economic interest?

The answer is that the organization defines economic interest differently, or in this instance, longer term than a single issue. It may also believe that it does not have to give up something to get the result it eventually wants.

1. Wall Street is built on asymmetrical information as Stiglitz showed in his Nobel prize winning research. Opacity is the gravitas of Wall Street profitability. As he and Ken Rogoff of Harvard have mentioned several times in this crisis, the financial elite will fight transparency with every weapon in their arsenal.

2. Wall Street doesn't want to set a precedent that might affect other, future areas of profitability that will rely upon opacity to generate large profits.

3. The buy side history is one of short memory. To this observer, Wall Street has been hoping for collective amnesia to strike the buy side and have them return to the market. That is unlikely to occur given the depth of the losses, the amount of advantage gained from opacity and the recognition that they were unable to perform adequate due diligence previously. That both the President's Working Group on Financial Markets (March 2008) and the European Union excoriated the buy side for not doing sufficient due diligence on their own and for their reliance on the ratings from the NRSRO industry (which also did not have the data they needed according to Moody's Special Report of Sept 25, 2007), is something that has not been lost on the buy side or their legal advisers.



On Jun 18 11:27 AM Steve in Greensboro wrote:

> Thanks, Mr. Greenberg, for the helpful note. Much of it I was already
> familiar with, but I have a question. Your position is that potential
> buyers are unwilling to buy given the current inadequate levels of
> transparency.
>
> "...Essentially, what would cause the buy side to return to the market
> and allow credit to flow through securitization again would be giving
> them more granular data on a more timely basis so that they could
> perform their own due diligence and have more trust in the ratings
> agencies methodologies..."
>
> Why wouldn't the sellers provide increased transparency on their
> own in order to get more buyers, better pricing, etc.? Why would
> the sellers need the SEC to force them to do something that is clearly
> already in their economic interest to do?]]> http://seekingalpha.com/article/143915-will-the-sec-give-the-buy-side-what-it-needs?source=feed#comment-553288 553288 Thu, 18 Jun 2009 23:58:15 -0400 seekingalpha.com/artic...

Mr. Greenberg is also exactly right:

"Essentially, what would cause the buy side to return to the market and allow credit to flow through securitization again would be giving them more granular data on a more timely basis so that they could perform their own due diligence and have more trust in the ratings agencies methodologies."

See the comments to the Butter article for links to ways to produce that more granular data. The Treasury plan yesterday at least called for disclosure of loan level detail. What it left out was the need to disclose the detail and subsequent data in a format that can be easily analyzed by potential buyers. That format, for which a list of data tags already exists, is XBRL. All that is needed is the leadership to force the sell side to disclose instead of muck around in opacity that's further confused by potential and actual taxpayer subsidies.

Bear Stearns tried to offer some of its junk to the public in 2007 but nixed the deal, presumably when they found out that the transparency required wouldn't get them the price they wanted. Here's a quote from the FT at the time:

"Jack McCleary, head of asset-backed securities syndication at UBS said: 'The market does good job of sniffing out leverage. Dealers will look at funds with similar positions to ensure valuations are appropriate.'" -- www.ft.com/cms/s/0/f7b...

Alas, Mr. McCleary was all too prescient about the ability of the market. Too bad there wasn't more transparency sooner to help it move faster, before opacity exacerbated the bubble.]]> http://seekingalpha.com/article/143915-will-the-sec-give-the-buy-side-what-it-needs?source=feed#comment-552040 552040 Thu, 18 Jun 2009 11:27:43 -0400
"...Essentially, what would cause the buy side to return to the market and allow credit to flow through securitization again would be giving them more granular data on a more timely basis so that they could perform their own due diligence and have more trust in the ratings agencies methodologies..."

Why wouldn't the sellers provide increased transparency on their own in order to get more buyers, better pricing, etc.? Why would the sellers need the SEC to force them to do something that is clearly already in their economic interest to do?]]>