Free Markets Rule

The Idiocy of Double Secret Probation

Finally a blog of yours that I agree with 100%. thanks

BofA Testing the Legal Limits

I think the author is thinking of cash advance fees being counted as finance charges. I have never seen membership fees counted on my statements as "finance charges". Plus, Bank of America could have raised my rates AND added added a membership fee. So far, they have done neither, unlike some of their competitors, so I have to disagree with the premise here. Sorry.

Were Fannie and Freddie the Real Enablers of the Housing Bubble?

One eyed guide. Have to disagree with what you say. F& F created the momentum and psychology that caused this issue. This is a big ship and does not turn on a dime. The market was already headed into trouble well before 2004. It was just at about that point that some people began to realize it.

Senator Dodd Is Trying to Save Lenders from Themselves

Well put "Mopacman". Kind of tired of Dodd and the others of his ilk talking out of both sides of their mouths. They will say, "stop gouging customers" and put on interest rate limitations that make continued credit availability for lots of consumers impossible. Then, they will turn around and say, "why aren't you loaning out money that we gave you to stimulate the economy?" As an investor, I would rather any bank I invest in not loan out money to those who can't/won't pay it back. Giving away other peoples money is the government's job, not the role of private business.


On Oct 27 04:07 PM mopacman wrote:

> Some very good thoughts raised. We have a healthy and natural tension
> at work here.
>
> Just as the economy needs (sic) a return of liquidity in commercial
> and consumer spending we hit a tight credit cycle.
>
> Banks are losing money on consumer portfolios. So in hindsight, they
> should have charged more and further restricted underwriting. <br/>
>
> Now prudent institutions are doing what they should have done all
> along and are raising rates and fees. They are doing so typically
> in a risk-based fashion, and certainly in concert with higher asset-backed
> costs of funds. They are also being more thoughtful in underwriting.
> It is about time.
>
> But at the same time these institutions are told to shed assets and
> prop up capital and returns by regulators, the politicians are going
> the other way and constraining pricing.
>
> What we keep learning is that the more limitations that are placed
> on institutions, the more likely the "good credits" will have to
> subsidize the "less good credits" and at the same time, the more
> challenging it will be for those with unproven credit to get credit
> at all. But perhaps that sort of thinking doesnt get votes.

Ending the Off-Balance Sheet Charade

Like "Huh??" above, I would be interested in a real life example of these transactions.

But, even assuming your premise true on a scale that matters, so you want to make the banks hold more capital against these (now on the balance sheet) loans. Banks will respond with further tightening. Govt will wonder why banks aren't lending and they are already trying to stimulate like crazy care of their near 0% fed funds target. What will this accomplish in the end?

Mortgage Defaults and Skin-in-the-Game: Why This Correlation Is Wrong

I think you missed something. The people that can't come up with a down payment are the same ones that have no cushion against the 5-Ds you speak of. When you put 20% down, and get divorced or laid off, at least if you have to sell your house, you are likely to have no negative equity. In other words, the sale amount will cover the note. It was the people that financed 100%, or worse yet, 125% that made this situation so much worse. If there was positve equity in the home from a larger dwon payment, when bad things happen (excpet in the worst markets (EG CA, FLand NV) then there was at least some chance for an equity loan to tide you over. The lack of down payment may not be the chief culprit, but I don't think you can dismiss it as a cause.

Beware of Bank Earnings Propaganda - They're Still In Big Trouble

Reggie, I am suspect of your data when it shows a "recovery rate" of 0%. These are mortgages, not unsecured loans. I don't believe that when these loans go bad, the properties become completly worthless. Yes, the banks might have to sit on them awhile to clear inventory, but...

Why Bank Fees Need to Be Regulated

Although I think that credit unions provide a necessary service, I don't like that they recieve tax breaks conventional banks don't if they are basically doing the same things. Along with that, a lot of credit unions are unloading their credit card portfolios to the banks because they have found out by not charging the higher fees or interest that the banks charge *** surprise *** they lose money when the charge-offs are climbing as they are right now. I am pretty much convinced that if the fees ARE regulated, that the banks will just go back to annual fees or stop offering the credit card rewards that have become so popular.

Banks Curtail Lending as Rising Credit Card Delinquencies Loom

Generally agree with what you have to say in your piece but regarding credit cards, it isn't just rising dellinquencies that are causing banks to raise the rates and fees. It's knowing a year from now, care of the just passed credit card legislation (care of Mssrs Frank & Dodd) that banks will be left with no tools to protect themselves when customers show signs of risk. You can look at it from the standpoint that the banks should be able to predict this and it should be priced in the loan when the loan is made. On the other hand, it's a little hard to predict who is about to A) get divorced, B) lose their job in this economy, or C) have a medical emergency any one of which can change their financial picture. Right now, the first 10% you pay of your credit card rate (if you roll a balance) is going to pay for your neighbor who falls into one of the above three categories.

The BofA / Merrill Mess - A Misguided Mob Goes After the Wrong Guy

What this all boils down to is, do you feel that the G, or quasi G (in this case the Fed and Bernanke) has any right in telling a company president what he should or should not do when the matter at hand falls outside of any regualtions that they are in office to uphold or support.

Tier 1 Capital Ratios of Large U.S. Banks

The reason that the banks mostly seem to be clustered around the 10% mark is that it is inefficient to go much higher than that. Generally, it will lessen long-term performance. Like an individual that decides to put all of his investments in risk-frees. It may be safe, but is it better?


On Jun 21 01:45 PM Fitz919 wrote:

> Who in their right mind would trust a bank to accurately report a
> Tier 1 number? It's pure nonsense, it will never happen. Notice how
> many are clustered around the 10% figure, it's a number they want
> us all to believe.
>
> If a regulator didn't have a clue that 10.5% of IndyMac's loans were
> producing no income, then a bank can hide anything they want to from
> anyone they want to. It was months before B of A knew how bad things
> really were at Merrill Lynch.
>
> What we have right now is the Government requiring banks to report
> numbers which they know are false, in order to maintain confidence
> in their badly broken system.

Duopoly Visa and Mastercard Vs. Retailers - Who Wins in a Free Market?

Also don't forget here, that the banks use the interchange revenue to cover the costs of points and rewards programs. Typically, customers are getting about 1% of purchases back on rewards/cash back cards. That allows the banks to continue offering these programs to the high spend customers who pay off each month and don't pay any interest. So, it would appear from the numbers above, that a little more than half of the interchange is going back to the increasingly popular rewards card customer.

TARP Repayments: Investors Get Screwed Again

I don't think it was the banks that got us into this mess. It was the Govt saying that they would back up the mortgages (the implied support through Fannie & Freddie) to people who couldn't / wouldn't pay them back. If not for that, the banks and the ultimate investors would not have touched them and the flow would have been cut off years ago.


On Jun 03 02:35 AM mkreisel wrote:

> Who should you trust more?
>
> Bankers who got us into this mess, or Bernanke who tries to clean
> up their mess?

Auction the TARP Warrants and Everyone Wins

I don't see anything fair about this. Care of the freedom of information act, we already know that the banks were forced, whether they needed it or not, to take the funds. They were not told what the costs would be up front but were threatened if they turned it down. Now that the true costs have been laid out, no solvent bank wants any part of it. And by the way, the banks are paying a 5% "dividend" which rises to 9% after 5 years if not repaid. That is not a bailout, that is theft by the federal government from the stockholders.... Just like what they are doing to the bondholders at GM and Chrysler but we'll save that for another day. In Bank of America's case, it is already also on record that Hank P. told Ken Lewis he pretty much had to go through with the M/Lynch deal or he and the board could be sacked. If he had not been forced into this, B of A would probably not have needed any additional capital.... certainly not before the thresholds for what "well capitalized" meant were changed. I thought this stuff only happened in Venezuela. Leave business alone! If a company makes bad decisions that cause it to go bust, so be it. Don't bail them out and don't think the government can run a bank when they can't manage their own checking account.