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
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Facebook’s Friends: After much speculation and anticipation, the social network filed to go public in what could be one of the biggest IPOs ever. Of particular interest to bankers are which firms got tapped to underwrite the potentially $10 billion offering, and which ones didn’t. “BreakingViews” in the Times says being left out is an “embarrassment” for Credit Suisse and Citi, given the former’s history of underwriting tech stocks and the latter’s ties to Facebook (two Citi alumni are VC investors in the social-media pioneer.)
Revolving Door: Government, er, Goldman Sachs has approached Richard “Jake” Siewert, a former aide to Treasury Secretary Tim Geithner, to replace the investment bank’s long-time chief spokesman Lucas van Praag. “The switch may prove controversial, as it would be the latest in a series of moves between Goldman Sachs and the Treasury,” the FT says. Over at DealBreaker, Bess Levin has written a memorable paean to van Praag. Financial Times, Bloomberg News.
Wall Street Journal
The Financial Stability Oversight Council, created by the Dodd-Frank Act to monitor systemic risks, has notified some clearing and settlement firms that they may be designated “systemically important.” (Which sounds almost like a compliment, but really isn’t.) The council didn’t identify the clearinghouses or say how many got the warning.
European regulators are considering loosening liquidity rules to allow a broader range of assets to count as “liquid” following heavy lobbying by their countries’ bankers. For example, these bankers want mortgage-backed securities to qualify for the required buffers; “banks argue that regulations can be crafted in such a way to make them safe for liquidity purposes.” (Huh?) An unnamed “senior international regulator from outside the EU” quips to the Journal that bankers “want everything down to ‘office furniture’ permitted.”
“HSBC will close its fund-administration business in the U.S. and shift it to Ireland in one of the global bank's latest moves to control costs and refocus its business.”
