Tom Lindmark

Regulatory Reform: The New Geithner Plan

Not bad advice. I agree with a lot of your points.


On Sep 05 04:29 PM Stimpy wrote:

> We are on a path towards a utility model of banking. Banks will emerge
> (as credit is re-privatised) as the central intermediary structure
> in our economy, replacing the non-bank securitizing model.
>
> Banks will continue to use securitization (more of a covered bond
> model with clear, formal reps and warranties) as a balance-sheet
> optimization tool.
>
> We will see a (Fed and Treasury sanctioned) evolution towards 5-10
> large banks with virtually total market share.
>
> These banks will be almost beyond profitable--in a very low risk
> sense.
>
> The economies of scale they will enjoy will allow spread lending
> to sustain profits WITHOUT excessive leverage.
>
> Credit velocity in the general economy will suffer (relative to the
> 2006 orgy-years) as a result, making equities of all kinds a less
> favorable asset class.
>
> Banks will be the one exception; in a sense they will be taxing the
> rest of the economy for many years to come.
>
> These regulations make much of this both clear and inevitable.<br/>
>
> Buy the biggest banks and avoid all other stocks over tyhe medium
> to long term.

Do We Want the Government Backing Fannie and Freddie Forever?

I thought of the FDIC angle when I wrote the post and I agree it has parallells. I tend not to be so concerned about the exposure to loss as I do think the proposal can insulate the taxpayer if adhered to as I am the concept of further subsidizing housing. As it is, it receives the largest federal subsidy of all, the tax deductability of mortgage interest.

We've probably relied too much on housing as a driver of the economy for well nigh on 40 years and perhaps it's time to let it stand a bit more on its own two feet and see if investment gets channeled into other sectors.


On Sep 02 08:22 PM Alan Young wrote:

> From my reading of your excerpt, it seems that the mortgage lenders
> would finance the insurance pool, making it no different from the
> FDIC in function. So, yes, I'd say you are overreacting.
>
> Of course there were plenty of people who thought the FDIC was a
> Socialist plot when it got started, too. I wonder how many people
> still think that, and whether they all self-insure their bank accounts?

Conor Clark: Surprising Data on Federal Wages

Thanks for stating the other side of the argument. You make some very valid points. It isn't as simple as it looks and you're comments about those at the top of the pyramid raking in an excess amount of the pie resonates.


On Sep 02 12:32 AM Carolina wrote:

> Comments from a City Employee (Municipal vs State or Federal noted
> here- none the less, a government staffer if you will)
> I have spent the last 18 years, earning less than the average wage
> in my field of expertise, and though I hold the valid degree, and
> necessary experience, (often much more than others in the private
> sector) I have over the years made much, much less in both salary
> and benefits..Granted, could be because I am not in the higher levels
> of management- or those favored within any government system to recieve
> a higher salary than their real worth to the job produced on the
> market. Therefore, I am a somewhat maddened to see what is obvious
> to us on the gov side- and that is...during the flush years - most
> people I know (all walks of industry..made a fortune, in both salary
> and bennies...gov employees are on a wage sheet, and benefits creep
> up slowly, many of us are Y rated after a few years in salary, not
> gaining a penny more in salary...unless, we get promoted, and often,
> there are few job promotions, or any merit plans. Most work ot, don't
> get the car allowances, phone allowances, cars, or any other perks
> allotted in private industry. And as said here, work in expensive
> communities, and must do the commute, not allowed to telecommute,
> have laptops etc.....
> The bottom line for me at least is that I accepted the lame conditions,
> for the future hopefully locked in benefits of a retirement salary-
> still just a pittance, when compared to others in private sector
> who took 6 figures for years, and the combined living perks (so fewer
> cash expenses as well) again bottom line- often spent their $$$ over
> the last 10 years along with the American gluttony- vacations, cool
> cars etc, while we watched on, only hoping that at least, during
> retirement,, could make our wages as promised.....so my comment after
> this diatribe, is "now that the cash cow of the dot com, and realty
> bust is real, and now that the $$ hogs at the top of the private
> industry have taken it and continue to rake it , all the general
> employees will lose the work, and are now reviewing just who has
> $$$ which is not them- standing in unemployement lines and dealing
> with the anitiquated systems that we gov employees have had to deal
> with, since few vote in extra money for our gov systems to be upgraded,
> or add $ to help out when systems fail...bottom line, these folks
> look to who has the work now, love to point the fingers at gov.
> I don't think overall it is the average gov employee ripping them
> off- look within- it is the hierarchy of the large company bosses-
> that lost in the recession, and wadded their pockets, and let their
> employees go...luckily gov still has employee assoc- to help us out,
> but in anyevent, look around, it is not the ave gov employee who
> is in the Caribean or driving that sports car- bet your prviate bosses
> still have the cash...so I ask all of you reading this to review
> how many gov jobs are really above your wages over the long haul
> and if so, who it is that is raking it in on both sides of this issue
> - the exec.managers....not the frontline people who make any business
> work.
> Orange County , California

The Face of Employment: Permanently Changed?

One of the best comments I have ever received on any post. I particularly like your last sentence.


On Aug 27 05:39 PM Pat C wrote:

> I bet we will be seeing a large shift in society's views on employment
> and working in general. I, like you, disagree with Mr. Ferrell's
> conclusions on savings and microenterprises at least for the short
> to medium term. There just isn't enough savings and profitable microenterpises
> to go around. Let's face it, labor has been commoditized with the
> opening up of 3+ billion people in China, India and the Soviet Bloc
> competing for work. Tehnology and modern business processes encourage
> the transfer of labor. We simply have not made the social changes
> to adapt to this phenomena. Business and finance is operating in
> an international arena but our government and social structures are
> national or local. We have a tax based government and consumer economy
> that is dependent on taxable and disposable wages - right?! We have
> had our heads in the sand for the last 20+ years. It is absolutely
> astounding how long human beings can look the other way, delude ourselves
> into thinking that we were only outsourcing the unpopular stuff in
> the middle, etc. etc.
> How long will US and Western European societies put up with it?
> I just don't know. If this current healthcare debate has showed us
> anything, it is that our ability for intelligent dialogue is severely
> hampered by outrageous demagoguery and media hype. Reasoned change
> is frought with unreasonable special interests. Will we hit a tipping
> point of revolutionary change? I have accepted it, but I honestly
> don't know when it will hit everyone else to get to the revolutionary
> scale to tip things over.
> You know what's really scary? I'm a reasonable person and I just
> typed and published this.

France's Bank Bonus Rules: What Were They Thinking?

Thanks for the comment. I reread some of the material and I have to agree with you. A trader would apparently not be held liable for others failures. I interpreted a couple of provisions incorrectly. I apologize for the error.


On Aug 27 01:43 PM Paul Hodgson wrote:

> From what I can tell, M. Sarkozy didn't say that bonuses would be
> forfeited if a trader's department lost money, though you would certainly
> get that impression from the English translation of his comments.
> But when he was speaking in French, he only ever referred to the
> singular. In other words, if in the two years following the award
> the trader loses money, then the bonus will be clawed back or forfeited.
> Here is what M. Sarkozy said in French: “attendre trois ans pour
> toucher l'intégralité du bonus et si dans les deux années qui suivent
> son activité perd de l'argent, il ne touchera pas son bonus. Pas
> de bonus sans malus, ce n'est pas à tous les coups on gagne. “ Which
> roughly translates as: “wait three years to get the whole of the
> bonus and if in the two years following his activity loses money,
> he won’t get his bonus. No bonus with malus, it’s not heads I win,
> tails I win.” Not their activity, but his activity. With this in
> mind it seems more reasonable, at least to me, though I can't be
> said to be a fan of government interference in this process. But
> no one else seems keen on making the jump except the Swiss banks.
>
> Paul Hodgson

Thoughts on New Home Sales and Durable Goods Data

Actually, the new homes sales data is based on contracts signed not escrows closed. There are always some cancellations and during the worst of the crisis there were many. The figure isn't absolute but it's useful for period to period comparisons and now that things are settling down, the cancellation rate is trending towards the norm.

As for the spec homes that you point to as seeing a decline in sales, most are guessing that the bulk of new home buyers have been first time buyers who are opting for stripped down smaller houses. The existing inventory tends to be bigger homes with lots of upgrades, thus out of the price range for fist time buyers.


On Aug 26 08:03 PM qqq fox wrote:

> I am surprised no one has dug into today's new home sales report.
> If anyone bothers to get to page 4, they would find that sales of
> new homes that are finished and ready for occupancy were actually
> down 6%. The category showing the biggest gain, 33%, was for homes
> that haven't even been started yet. In other words, they are merely
> sales contracts that are entered into without any mortgage financing
> being lined up. Desperate builders will sign these no money down
> contracts with the understanding that nothing will happen until the
> buyer comes in with a downpayment and mortgage financing. That these
> sham deals are allowed to be counted at all shows the political clout
> of the NAHB. Very misleading to say the least !!!

Smaller Banks Not Immune to Securities Losses After All

Agreed, but it can make the difference if the bank is on the edge of the cliff.


On Aug 21 08:25 PM Big Al45 wrote:

> A bad investment portfolio is usually not enough to bring down a
> bank. Most of the failures also made a lot of poorly underwritten
> loans - particularly AD&amp;C loans.

What Strong Homes Sales Numbers Mean

It's a good question and I don't have a good answer. I think you can assume a lot. Since most of the buying is at the low end it's reasonable to assume that many were first time home buyers. Take out the investor purchases and you can probably come up with a decent estimate. If I see the answer I will post it.


On Aug 21 07:20 PM Jiang Nan wrote:

> Any data on how many of the buyer receives the US$8000 tax credit?

Europe Is Recovering More Quickly than U.S. - Why?

Good question and I'm still trying to reason it all out. I think that the UK problems with real estate may have something to do with the fact that they are lagging. In fact, when you look further than Germany or France, you find that real estate played some part in their problems.

Though I have tended to be a critic of large social safety nets, I am changing my opinion. I think they may act very quickly as counter cyclical stabilisers and may be one of the reasons that Europe or at least some European countries are pulling out quickly.

Check my blog tomorrow for some more thoughts.
On Aug 14 10:12 PM Joel87 wrote:

> Well seeing as the U.S was "ground zero" for the explosion of the
> subprime debt bubble, the fact that it would take a little longer
> to "clear the rubble" does make sense, the UK was up to it's neck
> in U.S and its own subprime mess also.
>
> Now if your arguement, or Blodget's, is the social saftey net Europe
> provides for it's citizens helped the economies of France and Germany
> see growth in the last quater. Why hasn't other members of the EU
> bounced back als including Great Britain?

What to Do with Fannie and Freddie?

It's humorous but like the zoo, you don't want to feed the animals. I made the mistake of replying to him.


On Aug 07 09:00 PM Bruce Vanderveen wrote:

> It is a pity slobs like Fre-Freddie exist. Seems they can't come
> up with anything rational so they degenerate into a name calling
> diatribe.
>
> Good Article!

What to Do with Fannie and Freddie?

Actually, no I don't feel like an idiot. I did notice that Freddie said they were still totally reliant on the Federal Government to stay afloat.


On Aug 07 05:22 PM Fre Freddie and Fannie wrote:

> Do you feel like an IDIOT now or what!!!
>
> Maybe we should put your wiriting in the same box and dig it down
> 10 feet as well.
>
> Here is another writer without a finanical degree pretending to know
> something.
>
> Freddie made money

Paying for News: Let's Get On with It

After you get by the FT, NYT and WSJ there aren't a lot of sources that are doing anything aside from grabbing stuff off AP. I pay for the WSJ and FT and would pay for the NYT if it goes that way. The analysis, editorial opinion and access the three have to inside sources is worth the price.

Having said that, if they want this model to succeed then they need to beef up their content. Probably something along the lines of the FT type of in-depth coverage.

Personally, I hope it works. As a blogger, I'm tired of giving away my work. A lot of sites have come to me and asked to republish my work. I agreed for a long time in order to get more exposure but decided recently that giving away my content for free was relatively stupid.

The Lunacy of Cash for Clunkers

Very good. You should start a blog. Thanks for the ideas.


On Aug 04 09:47 PM Painesright wrote:

> Come to think of it, why stop with cars??
>
> Instead of giving our slightly used clothes to Goodwill, the Red
> Cross or the Salvation Army, let's cut them up and throw them away
> (cutting them up insures that some enterprising person can't salvage
> them from the trash and attempt to sell them for a profit... can't
> have that!).
>
> Then, the gov't can send out lots and lots of Cash for Clothes checks!
>
>
> That should stimulate all sorts of jobs in the otherwise defunct
> U.S. garment industry (money can only be spent on clothes that are
> made in the U.S. of course, good luck finding those!).
>
> Moving on, let's open every can of food in our pantries and grind-up
> the food in the disposal!
>
> No need to donate to a soup kitchen or food bank!
>
> The gov't can send out Cash for Cans (cans of food that is).
>
> That should really help the farmers (and fisherman if you include
> tuna and sardines!!). Presto, agriculture is back!
>
> And of course, the next step would be houses. Instead of letting
> someone buy a foreclosed house for a low price that they can afford,
> let's bulldoze every vacant house in America!
>
> Then, the gov't can send out Cash for Condos!
>
> Imagine the construction jobs we'll "create"!! (btw, they are already
> doing that with the $8K tax credit)
>
> Wait, there's more! How about tearing up all of the perfectly good
> roads!?! Rebuilding those could keep people employed for the next
> couple of decades!!
>
> Wow, this is easy! Just destroy, destroy, destroy and pay for brand
> new stuff with other people's money (or borrow more $$ from our friends
> in China).
>
> So glad that someone as smart as Obama, Schumer, Pelosi and Reid
> (and Frank, don't forget Frank) finally figured out how to fix our
> economy.
>
> We are in SUCH good hands.
>
> Not.

The BofA SEC Flap: Small Potatoes

I agree with a lot of your points, particularly the one about rules changing when you contract with the government.


On Aug 03 11:57 PM truthteller wrote:

> I am no fan of Ken Lewis, however I feel the man has gotten a terrible
> wrap. I suspect history will show the man was greedy, gullible and
> very wreckless with the trust so many placed in him. Also, history
> will probably show he fell victim to a government scam and a misplaced
> sense of patriotism. We won't know the entire story until Ken Lewis
> leaves Bank of America and frankly we may never receive a full accounting
> because lawyers are very good at crafting confidential agreements.
> However, I would like to engage in pure speculation. What if the
> Treasury began shopping Merrill, knowing full well the company was
> iinsolvent? How could you get someone to take on this enormous amount
> of risk willingly?
>
> First, I guess you would have to pick a relatively strong financial
> institution, with some political baggage like the acquisition of
> Countrywide mortgage. Otherwise, a strong company could put up a
> heck of a fight and blow the whole deal. Second, you need to convince
> the CEO that a bidding war was going to erupt over Merrill, but they
> could pre-empt this by acting quickly. Third, you need to put them
> in a position to commit without a good look at the company's books.
> The only way you can accomplish this is by appealing to the person's
> greed, stroking their ego, sense of patriotism and making verbal
> assurances not bound by a written contract. The final ingredient
> needed is: Once they find out the deal was bad, losses are mounting
> and any reasonable CEO would invoke a MACC (Material Adverse Condition
> Clause); then threaten to remove the CEO and Board of Directors.
> Lewis thought he could make a bundle of money and be a good patriot
> at the same time. However, he soon found out, just how quickly the
> rulles change, when you make deals with politicians and climb into
> bed with Uncle Sam.

Housing: How Big Is the Shadow Inventory?

There are several categories that contribute to real estate shadow inventory. I chose to focus on the pent up supply represented by owners who have been deferring the sale of their house. The Bloomberg article referenced does include a short discussion of foreclosures that might not yet have hit the market.

Frankly, I've read a number of articles about the banks withholding foreclosures from the market. I keep seeing conflicting data, so I don't know to what extent this shadow inventory actually exists. It might be significant or it might be the stuff of urban legends. I can't get a handle on it.