Patrick Harden

The Problem With Capital One Financial

"And when they speak about borrowing from Federal Home Loan Banks are they referring to the Macs- meaning Fannie (FNM) and Freddie (FRE)?"

Absolutely not. The FHLBs are part of the Federal Reserve Bank system and they lend only to banks and thrifts. They are not affiliated with the GSEs Freddie and Fannie. FHLBs require suitable collateral prior to lending.

"They are trying to deal with the problems but their methods are suspect (shifting auto finance to its bank)."

Nothing suspect about shifting the auto finance portfolio underneath the bank umbrella. The bank can fund the portfolio with deposits and FHLB borrowing much more cheaply than using the capital markets at this point in time. The only risk is that mark-to-market adjustments on the auto portfolio could threaten the bank's capital ratios. Gone are the days of securitizing it all and selling off the risk.