BankThink

Receiving Wide Coverage ...Refis, for Real? President Obama unveiled the details of the new refinancing plan for underwater borrowers he mentioned in the State of the Union address last month. (Or rather, the new new refi plan, since it’s only been three months since HARP 2.0 came out.) Close to 15 million homeowners would be eligible for the latest initiative. To qualify, one would need a credit score of at least 580 and have missed no more than one mortgage payment over the last six months. The new loans would be insured by the FHA, whose loan limits (which range from $271,050 to $729,750, depending on the region) would apply. Interestingly — and barely mentioned in the coverage we’ve read — the plan would encourage people to refinance into mortgages with a 20-year term instead of the customary 30 years, so they can rebuild equity faster. As an incentive, the government would cover closing costs for those who choose the 20-year option “with monthly payments roughly equal to those they make under their current loan.” Of course, this means the borrower’s cash flow wouldn’t improve off the bat, which doesn’t sound like much of a Keynesian spending stimulus to us, but it’s a nice contrast to the heady days when people were seriously talking about 50-year amortization schedules to make mortgages more “affordable.” The administration reiterated that the cost of the new refi program (estimated at $5 billion to $10 billion) would be paid for by a “financial crisis responsibility fee,” assessed on “the largest financial institutions.” It’s still unclear how many of “the largest” ones would have to pay the tab, but the fee would be based on a company’s size and “the riskiness of their activities.” (By what measure? VaR?) Back to reality: We’ve been careful to use the conditional “would,” because all this requires legislation, and Congressional Republicans are having none of it. Here’s House Speaker John Boehner, talking to reporters: “One more time? One more time? How many times have we done this?” (Hey, that could make a catchy song!) This reaction probably explains why a lot of the news coverage is focused on Machiavellian political analysis — the Journal suggests the President is “setting up a contrast with Republicans over government's role in helping Americans who, in Mr. Obama's words, ‘play by the rules.’” You know, it’s an election year and all that. But isn’t it a lot more interesting to think about the socioeconomic implications of 20-year mortgages than listen to another Washington horse-race narrative? No? Anyone? Wall Street Journal, New York Times, Washington Post

Spurred by the financial crisis and its impact on their constituents, state attorneys general appear to be carving out a new role as de facto bank regulators. This trend, an unexpected fall out of the financial crisis and the passage of Dodd-Frank, may not as yet be fully appreciated. However, it seems increasingly clear that state AGs will be important arbiters of the way banks do business on a going forward basis.

With all the twists and backroom turns, government officials’ quest for a settlement and restitution from banks and mortgage servicers is starting to resemble a 1960s screwball comedy.

So who exactly made the move on Bank Transfer Day? Was it young, angry hipsters?

The fact of the matter is that banks can manipulate earnings, and consequently capital, through decisions about loss provisioning.

Receiving Wide Coverage ...Volcker Haters: Woe is Paul Volcker, the former Fed boss who came up with the eminently sensible and elegant idea of banning taxpayer-backed banks from acting like Las Vegas card sharks. Enter Washington pols and the Dodd-Frank Act's Volcker Rule has been turned into a multi-hundred page monstrosity that its recently silent namesake almost assuredly hates. So too do most of the world's leading financial policymakers. Their gripe is that as the Volcker Rule's rules take shape, it's beginning to look like it will have a chilling effect on liquidity and market activity. So chilling, in fact, that the U.S. government has been left with only one logical option—exempt its own debt from the Volcker restrictions. That ploy has left foreign government officials hopping mad, as the New York Times reported out of Davos late Monday. This morning the Wall Street Journal reports that the U.K. Chancellor of the Exchequer, George Osborne, has added his voice to the chorus rising up against Volcker. The regulation, "would appear to make it more difficult and costlier" for banks to buy and sell non-U.S. sovereign bonds on behalf of clients, Osborne, said in a recent letter to Federal Reserve Chairman Ben Bernanke. Osborne's critique follows similar objections from the European Commission, Japan and Canada. Under Dodd-Frank, five regulators, including the Fed, the Securities and Exchange Commission and the Commodity Futures Trading Commission, are charged with crafting the rules. With its initial implementation set for July, and with banks having several years to comply, this kerfuffle is likely to be around for a long, long time. New York Times, Wall Street Journal

Caught between Democrats and Republicans, Freddie Mac is guilty of the ultimate sin: owning something it can't easily explain.

Many blame the current banking industry malaise on the economy. Its problems, however, involve deeper structural issues.

Receiving Wide Coverage ...Collections Crackdown: The Federal Trade Commission announced its second-biggest settlement with a debt collection agency. Asset Acceptance agreed to pay $2.5 million to settle allegations that it strong-armed consumers into paying debts that had expired under statutes of limitation. That’s a widespread industry practice, according to the government, and a Justice Department official tells the Journal that “more cases are on the way." Wall Street Journal, New York Times

The blog Deus Ex Macchiato has some fun with the "famous (and unfairly derided) Rumsfeld quote." You know, the one about "known knowns" and "unknown unknows."