Wall Street Journal
Federal officials are considering how to instruct lenders to ease up on tight lending standards for mortgages. On the one hand, they don't want to create another housing bubble. But on the other hand, mortgage lending is so slow because lenders have adopted standards that are even tighter than what Fannie Mae and Freddie Mac demand. Underlying all of this are paltry-to-nonexistent wage growth, high levels of student debt and little savings for a down payment all of which combine to make it difficult for many homeowners to qualify for a mortgage.
The Fed may use a reverse-repurchase facility to help raise short-term interest rates when its raises its fed funds rate target (probably sometime next year). But there are worries that the repo facility might "exacerbate flight-to-quality episodes," according to Monday's "Heard on the Street" column.
Citigroup's has whittled down the shortlist on the sale of its Japanese retail banking unit to four bidders. FT names three of the four: Sumitomo Mitsui Banking Corp., Sumitomo Mitsui Trust Holdings and Shinsei Bank. A final decision is expected next year. Citi has already sold off foreign units in Greece and elsewhere. Although Citi is getting out of Japan because it's trying to pare down non-core assets pursuant to Dodd-Frank regulatory pressure, a Celent consultant also makes the observation that Citi's exit would "be fully in keeping with the historical failure of foreign banks to crack the retail banking market in Japan."
New York Times
Gretchen Morgenson's column takes a look at public pension funds falling out of love with hedge funds. Calpers' decision last week to divest its entire $4 billion hedge portfolio is seen as the beginning of the end of the awkward relationship between public pensions and the opaque, lightly regulated hedge fund industry.