Receiving Wide Coverage ...
Housing's Tepid Bloom: The housing market recovery is looking a little soft these days. New home sales hit an eight-month low in March, according to Reuters, while applications for home loans also fell last week. This after the National Association of Realtors on Tuesday announced a drop in existing home sales. The latest numbers call into question the theory that the housing market was only hibernating during a tough winter, according to the Wall Street Journal's "Heard on the Street." Climbing home prices, stagnant wages and lending standards that some would-be borrowers still can't meet have more to do with the slowdown than any snowpocalypse, according to the Journal. Financial blogger and "reformed broker" Joshua Brown suggests another possible cause on Twitter: "Private equity buyers of single family homes have exited the housing market at a faster rate than young families have stepped in." But there may be hope yet for banks that reported dips in mortgage income during the first quarter, according to the Journal. The Midwest and Northeast markets are looking fairly sturdy and may be ready for a comeback.
Wall Street Journal
Credit-rating agencies have been frequently accused of helping bring about the financial crisis by overestimating the quality of mortgage-backed securities. Now the agencies, Standard & Poor's, Moody's Investors Service and Fitch Ratings, are all doing just fine, thanks for asking. While a surge in global bond deals has boosted the firms' profits, rating agencies have faced few obstacles to growth. Their much-criticized business modelin which they evaluate the securities of the companies that hire and pay themhasn't changed. Meanwhile, reforms that were proposed a few years ago have yet to take effect. This news would come as no surprise to former Federal Reserve Vice Chairman Alan Blinder, who railed against the current ratings system in a speech at the Museum of American Finance in March.
Ben Bernanke knows how to call 'em. The former Federal Reserve chairman and current Brookings Institution scholar was one a group of economists thatpredicted back in the 1990s the domino effect that would lead to financial crisis. The "financial accelerator" theory, created to explain the Great Depression, played out much as Bernanke and the fellow economists who developed the concept had foretold. If only they'd extended their soothsaying abilities to create a theory on averting the crisis in the first place.
Barclays' first-quarter problems mirror those of Wall Street banks across the pond. The United Kingdom lender announced a decline in earnings driven by lower revenue from its fixed-income trading business. The same issue plagued Citigroup, JPMorgan, Bank of America, Goldman Sachs and Morgan Stanley this quarter. Collectively, the five American banks had their worst first quarter in bond trading since 2008. Basel III capital requirements and the Volcker Rule have contributed to the decline in fixed-income revenue, as have risk-averse clients. Meanwhile, Barclays' chairman Sir David Walker spent much of the annual shareholder meeting defending his decision to hike bonuses despite the downturn in profits.
Deutsche Bank is making changes to its U.S. division in anticipation of the Federal Reserve's higher capital requirements for foreign lenders. The bank will cut back on repurchase agreements and convert some of the "tens of billions of debt" that its U.S. division owes the holding company into instruments that are eligible to be included in Tier 1 capital.