Blackrock is replacing human fund mangers in some of its actively managed fund with technology-driven strategies. "Its traditional active funds have struggled and it recognizes that it is difficult for traditional stock selectors to consistently outperform," said Morning Star’s Alex Bryan. As self-driving cars threatens to hurt taxi drivers and truckers, automation "just hit asset management people who make a half of million dollars a year," said Hearts & Wallets’ Laura Varas. "What BlackRock is doing is huge and there will be more to come. [Financial services firms need to] re-invent what role humans should play."


Car purchasers are finding that the value of their existing car is lower than the value of their loan. Lenders are taking the risk on their balance sheet by wrapping the customer's negative equity into the his loan balance of their new car purchase and extending the loan term.  “In a five year period, we running scenarios of used values by being off by as much as 50%," said Morgan Stanley’s Adam Jonas. “There are implications across the capital stack and across the sector stack on obsolesce.”


U.S. homeownership rates have fallen to lowest level in more than 50 years.


“Should money go to roadways, airports, water systems, broadband networks, or rail?” asks Visual Capitalist’s Jeff Desjardins. “The biggest challenge facing America’s infrastructure problem is where to get the biggest ROI from infrastructure investments. …One viewpoint on this again comes from the American Society of Civil Engineers: they figure that by 2020, the U.S. needs to put $1.7 trillion towards roads, bridges and transit, $736 billion to electricity and power grids, $391 billion towards schools, $134 billion to airports, and $131 billion to waterways and related projects.”


“It is clear that the negative rate experiment is neither sustainable nor helpful to economic growth,” wrote Nick Kararan. “It only inflates bubbles while widening the wealth gap in Swedish society. A once prudent and financially conservative people are now getting drunk on debt, wrecking their futures. The very premise of Swedish society is under attack. Nevertheless, it does not appear that this policy will abate anytime soon. There seems to be one lever in the Central Banker’s control room: interest rates. If anything, they may get more aggressive with it.”


“…[F]ederal departments and agencies issue well over 3,000 regulations of varying significance,” wrote Clyde Wayne Crews Jr. “…[B]eyond those rules, Congress lacks a clear grasp of the amount and cost of the thousands of executive branch and federal agency proclamations and issuances, including guidance documents, memoranda, bulletins, circulars, and letters that carry practical (if not always technically legally) binding regulatory effect. There are hundreds of 'significant' agency guidance documents now in effect, plus many thousands of other such documents that are subject to little scrutiny or democratic accountability.”


"People, and politicians, are beginning to accept that ridesharing services are here to stay—precisely because they provide substantial benefits to consumers that exceed the cost of those services. …[T]hese remarkable innovations represent the tip of the iceberg as, for example, society moves to the brave new world of autonomous vehicles where many travelers could forego owning a vehicle and exclusively use ridesharing services. The challenge in moving to this world is not to impede the revolutionary innovation while taking appropriate measures to ensure safety."


Autonomous cars could reduce new-vehicle sales by 40% worldwide, triggering a dramatic consolidation of the auto industry, according to Barclays’ long-time auto equity analyst Brian Johnson. “Mass market OEMs would need to shrink dramatically,” wrote Johnson. GM and Ford would have to reduce North American manufacturing capacity by 68% and 58%, respectively, according to Johnson’s estimates. Auto manufacturers, like GM, are experimenting with car-sharing and access subscription programs to provide customers on-demand access to autos.  


“The total stock of non-performing loans (NPL) in the EU is estimated at over €1 trillion, or 5.4% of total loans, a ratio three times higher than in other major regions of the world,” wrote Wolf Street’s Don Quijones. “Currently 10 (out of 28) EU countries have an ratio above 10%... And among Eurozone countries, where the ECB’s monetary policies have direct impact, there are these NPL stalwarts: Ireland: 15.8%; Italy: 16.6%; Portugal: 19.2%; Slovenia: 19.7%; Greece: 46.6% and Cyprus: 49%.”



“There is a greater risk that an independent agency headed by a single person will engage in extreme departures from the president’s executive policy,” wrote the Department of Justice. 


"I want a system that allows for failure without brining the entire system down--so you don't have these huge bailouts," said FDIC Vice Chair Thomas Hoenig.


“At present, I see monetary policy as accommodative,” said Fed Chair Janet Yellen. “The current level of the federal funds rate is below that neutral rate, but not very far below of that neutral rate. “


"Interesting innovation around blockchain and real estate is ...government partnering with financial institutions... or fintechs," wrote Finovate's David Penn. "The Eastern European republic of Georgia announced was introducing a blockchain-based platform to better store real estate documents. ...Sweden also announced a similar blockchain-oriented land registry system that will begin testing this month. ...Also ...the Bank of China and HSBC are building a blockchain for sharing mortgage valuation information".



“The Federal Reserve is widely expected to raise interest rates again at their meeting next week,” wrote Alhambra Partners’ Joseph Calhoun. “They obviously view the recent cyclical upturn as being durable and the inflation data as pointing to the need for higher rates. Our market based indicators agree somewhat but nominal and real interest rates are still below their mid-December peaks so I don’t think a lot has changed. More interesting will be how the markets react after the Fed does what everyone expects it to do. I suspect we will soon be hearing—again—about the conundrum of long term interest rates.”


“Firstly, you have to be able to think about your customer in a profound way,” said former Barclays CEO Antony Jenkins. “You have to be able to reimagine the customer experience. You need a deep understanding of the technology—not only where it is today, but where it’s going. The most important thing you have to have, whether you are coming from a Fintech or an existing bank or company like ours, is you have to have a radical mindset, because the future is not going to be the same as the past. It’s going to be non-linear, and you have to be able to think about the world that way.”


“In 2017, the global economy has created more credit relative to GDP than that at the beginning of 2008's disaster," wrote Janus Capital's Bill Gross.


Central bank governance and oversight is contentious with conflicting public attitudes and heated debates in Congress about proposed legislation to constrain the Fed's actions and interventions. Successful monetary policy and financial regulation require a careful balance between Fed independence, guidance by statutes limiting and governing the Fed's behavior, and oversight by elected officials.  How should we balance the central bank's authority and independence with needed accountability and constraints? 


“…Buyers 36 years and younger (Millennials/Gen Yers) is the largest share of home buyers at 34 percent,” according to the National Association of Realtors. “46 percent of buyers 36 years and younger that had debt reported having student loan debt with a median loan balance of $25,000. While only 27 percent of buyers 37 to 51 have student loan debt, they have the highest median balance of debt at $30,000.”


“In 2018, we may have a Fed where only four of twelve voters will be veterans,” wrote Cumberland Advisors’ David Kotok. “Seven other regional Federal Reserve Bank presidents will be FOMC members but nonvoting in 2018 due to the Fed’s voting rotation rules. The perennial questions for market agents are ‘Who will make monetary policy at the Fed’ and then ‘What will it look like?’ The 'who' can help define the 'what.' ...Political talk about the Fed is now a critical item to watch. We believe that a “turning” may be at hand."


  • "Renewal of the Amerian Spirit"
  • "Above all else we will keep our promises to the American People"
  • "The time for small thinking is over"
"Believe in yourselves. Believe in your future. And believe, once more, in America."
"Thank you, God bless you, and God Bless these United States."

President Donald J. Trump
Address to Congress
February 28, 2016

"Europe's challenges show no sign of abating," wrote the European Commission. "Our economy is recovering from the global financial crisis but this is still not felt evenly enough. Parts of our neighborhood are destabilized, resulting in the largest refugee crisis since the Second World War. Terrorist attacks have struck at the heart of our cities. New global powers are emerging as old ones face new realities. And last year, one of our Member States voted to leave the Union....Too often, the discussion on Europe's future has been boiled down to a binary choice between more or less Europe."


“The ongoing evaluation of existing laws, treaties, regulations, guidance, and reporting and recordkeeping requirements is significant both for financial services firms...,” wrote Mayer Brown's staff. “The outcome of the process is likely to shape priorities for the administration in the financial services arena... For this reason, institutions, on their own or through intermediaries such as trade associations, should seize this opportunity to make their views known to the Treasury secretary, relevant regulators and lawmakers before the early June deadline.”



"Our economic agenda—the number one issue—is growth and the first, most important thing that will impact growth is a tax plan," said Treasury Secretary Steven Mnuchin. “So, we are committed to pass tax reform. It will be very significant. It’s going to be focused on middle income tax cuts, simplification and making the business tax competitive with the rest of the world, which has been a big problem... That’s really our focus. We want to get this done by the August recess. We’ve been working closely with the leadership in the House and the Senate and we’re working on a combined plan.”


"Housing supply shapes housing prices and the size of metropolitan areas. When supply is highly regulated, prices are higher and population growth is smaller relative to the level of demand. The regulation of America’s most productive places seems to have led labor to locate in places where wages and prices are lower, reducing America’s overall economic output in the process. The older, richer buyers in America’s most regulated areas have experienced significant increases in housing equity. The rest of America has experienced little growth in housing wealth over the past 30 years."


“What should be the nature and purpose of administrative agencies in the twenty-first century?”


Mises Institute’s Scott Powell wrote:  “…[T]he core lessons of the modern regulatory leviathan are: (1) that it can’t keep up with complexity; (2) that solutions are not only tenuous, but invariably come with unintended consequences; and (3) that it’s unlikely to work because it is driven by politicians who are driven to raise money and solicit votes—promising to “fix” problems by taking actions that “help” some constituents at the expense of others and that generally interfere with the self-correcting nature of a free market system.”


"Disrupt yourself or be disrupted."


“Delphi and Mobileye say they’ll have self-driving systems available to the car manufacturers by 2019,” said Andreessen analyst Frank Chen. “… 2020 GM says that’s when it will have its cars. Ford says 2021 they’ll have Level 5 cars available to fleet makers. BMW ships the iNEXT in 2021. Tesla who’s arguably out ahead of this right now says 2023. Uber says that its entire fleet will be autonomous by 2030. …So you see quite a range of predictions on when this glorious future happens... [I]t’s going to happen in our lifetime, which is probably not something I would have predicted ten years ago."


“Do we create a concern about the overruling of state consumer protections in the course of establishing this national charter [for fintechs]?” asked Senator Merkley. “And these concerns … are shared by 50 state banking regulators, including D.C... More than 250 organizations have raised similar concernsp—[including] the Independent Community Bankers, the Consumer Bankers Association, Americans for Financial Reform, Center for Responsible Lending, National Consumer Law Center..."




“Improving the country’s infrastructure will likely be high on the agenda of the incoming administration and Congress,” wrote Manhattan Institute’s Aaron Renn. “To accomplish this goal, federal spending should strongly favor repairing and maintaining existing roads, highways and bridges, not building new ones. That’s because as much as 20% of the nation’s major roads are in poor condition, and tens of thousands of the country’s bridges are structurally deficient. Fixing them will yield the best return for the taxpayer dollar.”


“We’ve become a nation of haves and have-nots thanks to Fed policies that benefit the wealthiest investors, punish the savers and the retired, and put the nation’s balance sheet at risk,” wrote Danielle DiMartino Booth, author of Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America. “…[W]e must demand that the Fed stop offering excuse after excuse for its failures. …No more excuses. The Fed’s mandate isn’t to have a perfect world. That only exists in fairy tales, dreams, and the Fed’s econometric models.”


"The nature of funding is just as runnable as it was in the 1920s…” added Federal Reserve Governor Daniel Tarullo.


"We need a well thought out thoughtfully done industrial policy--it's not about protectionism."


“The Fed of today is not going to be the Fed of tomorrow,” said Mark Grant, Hilltop Securities chief strategist. “I think that what the Fed says at this point for all practical purposes irrelevant because [President] Trump is going to be able to appoint three members to the Fed. I think they’re going to be business people and the days of an academic economist Fed are going to be over.”


Less than a decade ago, Water Valley, MS was a forgotten small town: there were 18 empty storefronts lining it’s four-block Main Street and plenty of decaying homes for sale. Located only twenty miles from the University of Mississippi and the pricey town of Oxford (also former home to William Faulkner), it was well-placed for revival. In 2002, Mickey Howley and his wife Annette Trefzer were early pioneers in the effort to rehabilitate the old 19th Century railroad town—turning their former drugstore into the Bozarts art gallery, but it took the formation of a community to create real change.


“For some time now the Fed’s balance sheet had basically been hiding in plain sight, no mean feat considering how large that balance sheet is,” wrote Regents’ economists Richard Moody and Greg McAtee. “Recent weeks, ...have seen the Fed’s balance sheet gently pushed out of the shadows, even if it remains some distance from center stage in the FOMC’s policy framework. To be sure, when it comes to monetary policy, the Fed funds rate remains the main focus of the FOMC as well as market participants, but that many FOMC officials are now openly discussing the balance sheet means it’s time for the rest of us to start paying attention.”


“There is an open question about whether or who should supervise fintech lenders in the United States, made all the more complicated by the interplay between our state and federal regulatory frameworks,” said Patrick Harker, president of the Philadelphia Fed. “Most personal finance companies, for example, are licensed and regulated at the state level. Uncertainty about the boundaries between these two competing spheres of authority can be seen in some states’ reactions to the OCC’s proposal.”


The government’s net operating cost increased $533.2 billion to $1.0 trillion in FY2016.


“Markets are global no,” said Grant Williams. “…People forget, particularly central bankers, that every now and again, the markets tend to punch central bankers in the face.”


“[T]o control volatility and keep a floor under asset prices, central bankers may be trapped in a QE-forever cycle, (in order to keep the global system functioning),” wrote Janus Funds’ Bill Gross. “Withdrawal of stimulus... seemingly must be replaced by an increased flow of asset purchases (bonds and stocks) from other central banks... A client asked me recently when the Fed or other central banks would ...sell their assets back into the market. My answer was "NEVER". A $12 trillion global central bank balance sheet is PERMANENT—and growing at over $1 trillion a year, thanks to the ECB and the BOJ.”




“Mayors defending their sanctuary city status by refusing to comply with federal law are essentially imposing a defiance tax on local residents,” said Adam Andrzejewski, CEO of Open The Books. “On average, this tax amounts to $500 per man, woman and child. Major cities like Washington, D.C., New York and Chicago have the most to lose, and nearly $27 billion is at stake across the country.” In FY2016, $26.741 billion in annual federal grants and direct payments flowed into America’s 106 sanctuary cities, according to Open The Books.


In a January 31st letter to Federal Reserve Chairwoman Janet Yellen, Patrick Henry, Vice Chair of the Financial Services Committee, told the central bank chair that "despite the clear message delivered by President Donald Trump in prioritizing America's interest in international negotiations, it appears that the Federal Reserve continues negotiating international regulatory standards for financial institutions among global bureaucrats in foreign lands without transparency, accountability, or the authority to do so. This is unacceptable."



"The European Union is increasingly burdened with fixed costs and unproductive spending, putting stumbling blocks to the economy in favor of more white elephants and bureaucracy. Inflation by decree is not going to change it. It will extend it."


Deutsche Bank’s fourth quarter loss of €1.9 billion was "very weak" even as there were "strong liquidity metrics," and there is evidence of franchise damage, according to Goldman Sachs. For the full year, Deutsch Bank reported a net loss of €1.4 billion, its second year of losses. In the fourth quarter, the bank took €1.59 billion of litigation charges in the fourth quarter, more than the €1.28 billion analysts’ expectations. While 2015 and 2016 were “peak years for litigation,” this year will continue to be “burdened by resolving legacy matters,” said Deutsche Bank


"We particularly worry the the reflexive upward movement of Treasury yields following the November election may not be an accurate indicator of future inflation," wrote KBRA's Chris Whalen.


“Our current forecast for mortgage origination volume is ...about $1.56 trillion in 2017, ...down from nearly $1.9 trillion in 2016,” said MBA’s Lynn Fisher. “We expect that to flatten out a little bit in 2018 and come in at about $1.58 trillion.”


The inauguration of Donald J. Trump as the 45th president of the United States marks a new paradigm for our nation. While the pundits will parse every word of his 16-minute speech, most will miss the embedded meaning of federalism, patriotism, hope, and freedom expressed in the voice of a successful businessman.

…Trump’s prose is not the poetry of Lincoln, but it contains the soaring rhetoric of our founders’ philosophical intent. The president stated that he intends to return power to the people. This desire to return power to localities is the essential fourth branch of government, restricting abusive power that makes our republic uniquely federal. Both Athens and Rome, city-states of ancient times, ruled their empires without consideration of this issue. This omission led to dictatorial takeover. Two thousand years later, our founders recognized that the states were sovereign and determined to prevent this occurrence. They further put this in the Tenth Amendment, often ignored.

…After eight years in the wilderness, our search for the America our founders created has resumed. Ronald Reagan talked of a shining city on the hill from the Bible. He slowed the growth of federal domestic power but left us with a $1-trillion debt. Obama has left us withalmost $20 trillion in debt, making the job that much harder. Trump understands that American exceptionalism cannot flourish during bankruptcy.

…Trump seeks to shrink the government’s influence over our lives. This is the new paradigm that Reagan could not complete. If Trump succeeds, he will be the constitutionalist we need. For we are the people of these United States.


Howard J. Warner,

American Thinker

January 23, 2016



“Cities’ debt levels are near all-time highs, and the risk of municipal insolvency is greater than at any time since the Great Depression,” wrote Urban Policy’s Daniel DiSalvo and Stephen Eide. “...[W]hen local officials manage the process, they often fail to propose the changes necessary to stabilize their city’s future finances.” Federal bankruptcy and state intervention, which are often posed as alternative approaches, should be combined. “Crucially, state governments… should intervene at the outset and appoint a receiver before allowing a city or other local government entity to petition for bankruptcy in federal court.”




We need a new tax code that is fair and simple for everyone.


“House Financial Services Committee Chairman Jeb Hensarling (R-TX) …views the CHOICE Act as a “blueprint” for financial regulatory reform in a Trump administration and indicated that financial regulatory reform is “going to happen in the first year” of the Trump administration.” 


...[W]e’re going to see a very stimulative environment, if Trump is successful in his endeavors, which is going to be very positive... for the U.S. and slightly negative for the


"Growth in revenues is projected to be eventually outpaced by rapid growth in spending for major programs that benefit older people and for interest on the federal debt."


“In the grand scheme of things, [the Trump election] shouldn’t change [our] job at all,” said CFPB Director Richard Cordray. “Congress created us as an independent financial agency. That’s been the nature of all the financial agencies at the federal level… in our case protecting consumers and protecting consumers. Therefore, they set us up with a term as they did with Chair Yellen …that extends beyond one administration into the next and so we’re expected to work with different administrations with different points of view.”


“Trillion-dollar deficits will return by Fiscal Year (FY) 2023, with deficits growing from $587 billion (3.2 percent of GDP) in 2016 to $1.4 trillion (5.0 percent of GDP) by 2027.”



"[I]n a 2014 survey by the National Association of Manufacturers, 88% of respondents felt that regulations were affecting their business, by far the #1 concern in the survey," wrote  JPM's Michael Cembalest. "...While most administrations add to new regulations, the regulatory pace of the last 8 years substantially exceeds its two predecessors....[W]hile regulatory costs amount to $20,000 for all US firms on average, they crush small business by about $30,000 per worker, making new business creation, and employee retention, virtually impossible."


An hour after taking the oath of office, President Donald Trump issued Mortgagee Letter 2017-07, which indefinitely suspends a scheduled 25-basis point reduction in FHA’s annual premium. On January 9, HUD Secretary Julian Castro announced the premium cut that was scheduled to go into effect on January 27. “Playing politics with the FHA through cynical, surprise 11th hour rule changes is irresponsible and endangers the integrity and success of the FHA,” said House Financial Services Chairman Jeb Hensarling (R-TX)


“Trump wants to move a nation and he wants to communicate to the world.”


“Archbishop Carroll’s prayer …recognizes that true wisdom, real freedom and lasting peace come not from individuals or governments or armies or technology, but from God alone.”




“A little over six months ago, the British people voted for change. …And they did so with their eyes open: accepting that the road ahead will be uncertain at times, but believing that it leads towards a brighter future for their children—and their grandchildren too.”


America is at war, but most of its citizens don’t know it, according to Washington Times’ national security columnist Bill Gertz. Covert information warfare, being waged by world powers, rogue states and even terrorist groups, has been designed to defeat and ultimately destroy the United States. This new type of warfare has come to dominate our lives. In his new book iWar, Gertz describes how technology has completely revolutionized modern warfare, how the Obama administration failed to meet this challenge, and what we can and must do to catch up and triumph over this timely and important struggle.


“In light of the U.S. economy’s momentum coming into 2017 and the likely shift in policy mix, we have moderately raised our two-year projections for U.S. growth,” said IMF Chief Economist Maurice Obstfeld. “However, the specifics of future fiscal legislation remain unclear, as do the degree of net increase in government spending and the resulting impacts on aggregate demand, potential output, the Federal deficit, and the dollar.” The IMF projects the U.S. economy will expand by 2.3% in 2017 and 2.5%—an increase of 0.1% and 0.4%, respectively, from the IMF’s earlier projection.  


“I actually find it senseless to provide a forecast for the entire year ahead at this time,” Gluskin Sheff’s David Rosenberg. “We are not in normal, more stable time periods” 


“[T]he prevalence of, and resources sunk in, zombie firms have risen since the mid­ 2000s, which is significant given that recessions typically provide opportunities for restructuring and productivity enhancing allocation, “ wrote OECD economists. “A higher share of industry capital sunk in zombie firms tend to crowd out the growth ...of the type of non-zombie firms. …[T]he employment growth of young non­zombie firms is particularly sensitive to zombie congestion. Thus zombie congestion not only discourages entry but also constrains the ability of those particularly productive young firms to upscale post­ entry.”


“I’m worried about the Eurozone…. I’m in favor of perfecting the [EU]—I think going backwards is really really hard.”



President-Elect Trump’s selection of the Fed chair “will matter a lot,” according to Standish chief economist Vincent Reinhart.


Senators Ben Sasse (R-NE) and Mike Lee (R-UT) are urging the incoming administration to fire CFPB Director Richard Cordray. "It's time to fire King Richard” said Sasse. "Underneath the CFPB's Orwellian acronym is an attack on the American idea that the people who write laws are accountable to the American people. ...Trump has the authority to remove Mr. Cordray and that's exactly what the American people deserve." Lee added, “Considering the damage CFPB has done to credit unions and community banks, President Trump should act quickly to remove the director."


“National sovereignty is the big political idea of the year just ended,” wrote Texas A&M’s Ben Peterson. “The events of the last 12 months should inspire a serious debate on the extent and implications of national sovereignty in the 21st century. As Samuel Huntington believed, and as Prime Minister May has recently reinforced, we must begin in earnest a deeper discussion of the proper objects of political loyalty and the meaning of citizenship—perhaps the most fundamental political idea of all.”


"In digital payments, the spark is from Millennials and mass affluents."


“With the Trump inauguration just over 10 days away, attention has now shifted to what Trump will do the moment he steps foot in the White House,” according to ZeroHedge. Judging by his campaign promises, Donald Trump will be a busy man on his first day in the Oval Office. "Trump has pledged to take sweeping, unilateral actions on Jan. 20 to roll back President Obama’s policies and set the course for his administration. Many of Obama’s policies he can reverse with the simple stroke of a pen," wrote The Hill.



By year-end 2016, more than 80 of the 100 largest software enterprise companies (based on revenues) will have integrated cognitive technologies into their products, a 25% increase from 2015. 


“Two weeks after the election basically did [for rates] what the Fed couldn’t do in four or five years—couldn’t change [market] sentiment. “



Smart Money VCs including Lightspeed Venture Partners, Redpoint Ventures, Andreessen Horowitz, and others have placed bets in the mortgage tech space.


“How will this [repeal and replace of Obamacare] effect the fiscal situation, the economic saturation and therefore the well being of American households?” 


On March 15, ...the debt ceiling will snap back into place at the level of debt outstanding on that date. The U.S. Treasury will likely utilize “extraordinary measures” to keep the federal government liquid until late spring or early summer, which raises the likelihood that the debt ceiling will be lumped together with the FY 2017 funding debate. 


Ford cancels plans for Mexico plant and will creat 700 U.S. jobs in "vote of confidence" in Trump. 


“In terms of net domestic migration (population change excluding births, deaths and international immigration), the states experiencing the largest exodus of people to other states from 2015 to 2016 were New York (-191,367), Illinois (-114,144), California (-109,023), New Jersey (-66,791), and Pennsylvania (-45,565), wrote Ray Keating on Real Clear Markets. As for the states attracting people over the past year, Florida came in best (+207,155), followed by Texas (+125,703), Washington (+67,751), North Carolina (+59,584), and Colorado (+50,216)."


The year of living dangerously.


“The U.S. Government confirms that two different RIS actors participated in the intrusion into a U.S. political party.”


“…[O]n a longer term basis, we’re not getting a lot of inflation that’s going to cause the Fed to really raise the Fed Funds rate a significant amount.”


 During FY2015, a selection of 21 executive agency major rules delivered benefits of up to $47.8 billion annually, while costing $5.5 billion to $6.9 billion annually, according to OMB.


"…[T]he Volcker rule has a deleterious effect on corporate bond liquidity and dealers subject to the rule become less willing to provide liquidity during stress times,” according to a Dec. 22nd Fed staff paper. “…[W]e find that the net effect is a less liquid corporate bond market." Compass Point’s Issac Boltansky wrote, “...[T]his paper will provide political cover for President-Elect Trump's nominees to de-emphasize enforcement of the Volcker rule in the near term and could ultimately serve as cannon fodder in the impending battle over legislatively repealing the rule."



Over the past 26 years, Canada’s household debt has trended up and shows no signs of slowing down.



“The CFPB’s complaint database contained grievances against almost every financial business. Enforcement targeted the companies with the most revenue—what it called the ‘chokepoints’... Enforcement’s internal procedures restricted the contents of investigation files, about the only thing the CFPB had to turn over to defendants before administrative trials. One of the procedures’ drafters told me that withholding exculpatory evidence from targets was ethical because the bureau was like any civil litigant—it did everything it could within the law to win.”


"Terrorists, who hope to break our resolve with bloody atrocities will not succeed. We will choose new and brave leaders, we will de-islamize, we will win!"



“Does the Fed drive the boat of all we’re talking about next year? Is the Fed the catalyst for every other conversation?”


“The CFPB’s complaint database contained grievances against almost every financial business. Enforcement targeted the companies with the most revenue—what it called the “chokepoints”—rather than those with the most complaints. Enforcement’s internal procedures restricted the contents of investigation files, about the only thing the CFPB had to turn over to defendants before administrative trials. One of the procedures’ drafters told me that withholding exculpatory evidence from targets was ethical because the bureau was like any civil litigant — it did everything it could within the law to win.” Targets were almost certain to write a check, especially if they were accused of subjective ‘unfair, deceptive, or abusive acts or practices.’”


President Obama is poised to unleash another set of “midnight regulations” before he leaves office that will cost Americans $6 billion, according to American Action Forum.



“We are entering a new era of innovation that will reshape consumers’ relationships with their banks,” according to an MIT study. “...[B]anking activity is mostly technological and mathematical in nature. Hence, it is well suited to be digitized, yet the prevalence of legacy systems and legacy culture inhibits banks from embracing innovation as much as they should in order to survive and thrive in the digital economy of the 21 century. …Thanks to new developments in data technology and in mobile telecommunications adoption, we see the potential rise of a third wave of innovation in banking.”


All eyes are on Monte Paschi to determine if Italy's banking crisis is "fixed," if only for the near future…


“The 2017 Scorecard will guide Fannie Mae, Freddie Mac and Common Securitization Solutions build on the progress that has been made over the years in meeting the goals set forth in our Conservatorship Strategic Plan,” said FHFA Director Mel Watt. “The goals and initiatives contemplated in the Scorecard strike what we believe is an appropriate balance between ensuring that these entities operate in a safe and sound manner while continuing to ensure that the housing finance market remains liquid and supports housing access for homeowners and renters.”


“It’s not simply the legislation or regulation that will be pulled back—it’s the mindset of regulators,” said Yale Law School’s Greg Fleming. “…The heightened regulation that came out of the crisis and continued to increase over a seven year period—the pendulum went pretty far out this way and it’s clearly coming back for institutions of all sizes. …You may have some of it fine-tuned. And part of it is not just the regulation itself, but the way the regulation has been implemented by regulators and the perspective of regulators. The incoming Trump administration is very focused on changing that attitude on the part of regulators.”


“Two things that I’m going to watch very closely is further strength in the dollar … and secondarily oil broke down… If it breaks below $50, it will change the charts and it may prove that this whole cut back in production is a fraud—and we will have major problems from there.”


“The thing that keeps me up the most at night is actually the [home] supply situation,” said Urban Institute's Laurie Goodman. 


The Federal Housing Finance Agency has unveiled its final “Duty to Serve” rule, which stipulates that the GSEs must “provide leadership” to facilitate a secondary mortgage market for three underserved markets—manufactured housing, affordable housing preservation and rural housing. While not requiring the GSEs to engage in specific activities, the rule requires the enterprises to consider ways to better serve families in the three underserved markets and submit a three-year “Underserved Markets Plan” to FHFA, effective January 2018.


“[A Gallup] shows that the economy has undergone a profound and wrenching change since the late 1990s,” wrote Investors Business Daily in a December 9 editorial. “Following Y2K and the '90s tech boom, investment fell, job creation went into a decline, productivity plunged and incomes stagnated. It's been that way ever since. Per capita GDP growth last year was a pathetic 0.5%—down from more than 2% in the 1990s. …There's no simple answer to these problems, but it's clear that poor government policies have made these negative social and economic trends worse, not better, by slowing productivity and economic growth sharply.”


“The Great Recession may be over, but America is dangerously running on empty.”


“...[T]he Fed right now is probably shaking in their shoes, because they’ve already gotten that one rate hike right out of the gate with the election,” said economist Danielle DiMartino Booth. “We’ve had quite a bit of tightening in a 48-, 72- hour window... So the question is what’s next? Last December, they hiked; they were concerned about credibility--they’re probably more concerned about creditability this year than they were last year at this time. However, there are so many different moving pieces with this unexpected Trump victory—that I’m not sure what they do next.”


The EMPELO Act, proposed by Senator Marco Rubio (R-FL), could revive the island’s beleaguered labor market.


"I think its potential is unlimited because data keeps growing every day. It doubles every year. The more data it's fed, the learnings engines continue to work on this and as it interacts with humans, it gets even smarter and it never forgets."


In a wide-ranging interview, House Speaker Paul Ryan, (R-Wis.), talks about helping President-elect Trump push through his agenda when he gets into office.


“I am pleased to announce the release of the 2016 Ways and Means Green Book,” said House Ways and Means Committee Chairman Kevin Brady (R-TX). “This publication provides timely data to policymakers, researchers, and the public. This edition also provides information on changes to Trade Adjustment Assistance and other critical programs under the Committee’s jurisdiction. I would like to thank all of the hardworking individuals at the Congressional Research Service who contributed to this latest version of the Green Book.” 


Troubles spread in Europe; cointegration has become disintegration; and politics reveal the pressure.  The experiment of a common currency with an uncommon and dysfunctional body politic is unsustainable.


The potentially explosive combination of the D.C. Circuit’s October decision in PHH v. CFPB and the outcome of the presidential election has spurred a host of questions about how the PHH litigation may proceed and about the future of the Consumer Financial Protection Bureau (CFPB) under the leadership of CFPB Director Richard Cordray.  After providing some background, this alert will discuss some of the most pressing of those questions.


“On an aggregated basis, the Italian banking system has less than 50% of the capital it would require to cover the bad debts. Estimates are that Italian banks may need €40 billion just to remain solvent.” 



“…[T]he environment remains uncertain with a number of potentially frosty developments,”wrote Deutsche Bank CEO John Cryan. “The result of the constitutional referendum in Italy is a harbinger of renewed turbulence that could spill over from the political arena to the economy—with Europe particularly endangered. And we still need to conclude our negotiations with the US Department of Justice. Please understand that I can´t give you details on how this is progressing. We’re now hitting the home stretch of a challenging year.”


"Europe as a construct right now is failing."


"This paper summarizes that work, describes the OCC’s legal authority to grant a special purpose charter,  and articulates what the OCC considers to be necessary conditions if the OCC is to exercise that authority."


This wasn't an election.  It was a revoltion.

"Everthing is about to change".


“Our most important priority is sustained economic growth,” said Steve Mnuchin, President-Elect Trump’s nominee for Treasury Secretary. “And I think we can absolute get to sustained 3% to 4% GDP. And that’s is absolutely critical for the country. …And to get there, our number one priority is tax reform. This will be the largest tax change since [President] Reagan. …We’re going to cut corporate taxes, which will bring huge amounts of jobs back to the United States. We’re going to get to 15% and we’re going to bring a lot of cash back in the U.S.”  


"I will be holding a major news conference in New York City with my children on December 15 to discuss the fact that I will be leaving my ...great business in total in order to fully focus on running the country in order to MAKE AMERICA GREAT AGAIN! While I am not mandated to ....Hence, legal documents are being crafted which take me completely out of business operations. The Presidency is a far more important task!"


Out of the 118 million occupied single-family housing units, roughly 1 in 8 is a single-family rental. 


 “The Federal Housing Finance Agency's decision to raise conforming loan limits for the first time in a decade is being met with enthusiasm from the mortgage industry,” wrote KBRA’s Chris Whalen. “Kroll Bond Rating Agency (KBRA) disagrees with the consensus view that this modest move by [FHFA] will prove to be a meaningfully positive factor for future residential mortgage loan origination volumes. Indeed, while 2016 has been an excellent year for the U.S. mortgage industry with almost $2 trillion in new loan originations, we believe that this year is also likely to be the peak in terms of lending volumes for years to come.”


How Castro’s death might affect U.S.-Cuban relations—especially with Trump coming into office?



…Planet Trump is going to be the biggest wild card in 2017. And obviously what he does will influence not just what happens in America but around the world. 


At 10:00, Kellyanne Conway, Trump transition team senior advisor, discusses the President-Elect's transition process. 


Citi and JPMorgan Chase were named the two most globally important banks in the world for 2016 by the Financial Stability Board. 


An estimated 20 billion barrels of oil with a value of $900 billion has been discovered in the Wolfcamp shale formation in West Texas, according to the U.S. Geological Survey. “[This discovery] could have such energy independence for so long,” said former Shell Oil President John Hofmeister. “If we were allowed to produce what we want to produce, …we could get out of OPEC’s hair. …OPEC is only going to get worse over time.”


“If the people who are suppose to be ruling America in 10 and 20 and 30 years don’t understand what America is—if they don’t’ understand the idea of America— then freedom will slip away.”


“If the people who are suppose to be ruling America in 10 and 20 and 30 years don’t understand what America is—if they don’t’ understand the idea of America— then freedom will slip away.”



"First is dealing with the Dodd Frank excesses—secondly dealing with Fannie and Freddie [will be Congress' priorities]," said Senator Bob Corker (R-TN). "From my standpoint, we have to do away with the model of public sector losses and private gains. And I think to have two entities that are in essence continually guaranteed by the federal government and yet we have stockholder ownership is a model that doesn't work. ...Maybe, maybe there's a way to get to a place that is not the system that we have today. The model that we have had is totally, utterly ridiculous."


70% of banks' IT spending is for compliance. 


“Trump has promised to reduce the regulatory burden on [U.S. shale producers] and open up more federal land to drilling, two moves that in theory could make the coming shale rebound even more powerful.”



"The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation."


"I'd love to see Dodd Frank disappear."


"We're moving into the very early stages of inflation excelleration," said former Fed Chair Alan Greenspan.


“Housing subsidies that distort individual decisions also affect the biggest investment market in the world: the American housing market is worth $27.5 trillion—more than a tenth of the world’s $250 trillion in total wealth,” wrote City Journal’s Nicole Gelinos. “The government, not capitalism, has determined the value of this market, which, in turn, helps determine the value of other markets: money that goes into this 11 percent of the global asset market can’t go into the other 89 percent. Home values also affect consumer spending. Someone whose home value is rising will feel freer to take on credit-card debt, debt, for example.”

"32% of Millennials and 27% of mass affluents use their mobile phones for peer-to-peer (P2P) payments, compared to an 18% average."

“[S]ignificant AI-related advances …are largely due to the growth and analysis of large data sets enabled by the Internet, advances in sensory technologies and, more recently, applications of ‘deep learning.’…While encouraging innovation, policies and processes should address ethical, privacy, and security implications, and should work to ensure that the benefits of AI technologies will be spread broadly and fairly. Doing so will be critical if Artificial Intelligence research and its applications are to exert a positive influence on North American urban life in 2030 and beyond.”


“Higher LTV ratios and lower guarantee fees help make [RHS] mortgages more affordable. However, these features also may elevate financial risks to the federal government from increased loan defaults and less revenue to cover unanticipated costs.”




“This will go to the Supreme Court and we won’t know for sure [if a parliamentary vote is required]… until the middle of January.”


"The [FOMC] judges that the case for an increase in the federal funds rate has continued to strengthen, but decided, for the time being, to wait for some further evidence of continued progress toward its objectives."



“The flow of funds out of Asian nations with low or no population growth is an economic boon for the U.S. and promises to keep interest rates low for the foreseeable future,” wrote KRBA’s Chris Whalen. “…[R]egardless of which party wins the White House and the Congress next week, and regardless of who sits on the Federal Open Market Committee (FOMC), interest rates are likely to remain low for years to come. Indeed, even if the FOMC does raise benchmark interest rates this year and next, we anticipate that the yield curve and spread relationships will continue to be effected by strong capital inflows.”


“The social fabric is in upheaval,” said Saxo Bank’s economist Steen Jakobsen. “We have a renegotiation of the contract between the rulers and the ruled in sort of a historical perspective.”



“An effective policy on infrastructure spending will focus only on projects with a clear economic growth impact and a significant benefit-cost ratio," wrote American Action Forum's Curtis Arndt. "It will place a priority on successful public-private partnership models, and fund only targeted efforts that either significantly benefit economic activity or have a clear federal role.  A more detailed guideline on the selection process for plans is necessary for proper evaluation, and to understand how an infrastructure bank proposal is not ultimately a new version of big government, tax and spend politics.”


The federal government has made no meaningful progress on the critical policy steps to restore U.S. competitiveness in the last decade or more.



By the end of 2016, the national debt will total about $14.3 trillion--nearly double in the space of just eight years.


“Does debt to GDP mean anything?” asks Cumberland Advisor’s David Kotok. “The answer is maybe. And perhaps the second part of that answer is that it means a huge economic burden if there is intent to pay the debt back. Mostly, governments never pay back. They continually refinance (roll over maturities) and add to their debt until some type of market forces impair their market access. Nonpayment usually means a default, lack of more market access and then a period of negotiation that may take years before it leads to a settlement.”


Super human performance in domain after domain

“All of these science fiction technologies—drones, self-driving cars, machine learning, artificial intelligence—these are going to become part of our daily lives.”



“[T]he widening gap between the cost of dollar funding in the U.S. and EU primarily reflects the continued political uncertainty regarding the EU project…”


"...[W]e all are aware that the mortgage market has undergone dramatic change in the past decade." said CFPB Director Richard Cordray. "It has traveled a long and winding road from the irresponsible spree that sabotaged the world’s largest economy through a highly restrictive market that excluded many creditworthy applicants from qualifying for reasonable and responsible loans. Under our new rules, what is now emerging is a mortgage market in a steady recovery. Home values are on the rise in many areas, and millions of homes are resurfacing from their previously underwater status."


"Our policy debate should not be about the desire of realtors or homebuilders or lenders to maximize the number of profitable transactions," wrote Milken Institute's Ed DeMarco. "Nor should it be about how to maximize the homeownership rate, regardless of the consequences. It should be about building a sturdier structure all around, with a policy and legal framework that strengthens family finances and enhances the capacity of capital markets to lend willingly to creditworthy borrowers."


[T]he proposal is actually dangerous because the paper accounting that shows them accumulating capital reserves will feed the narrative that it is safe to simply turn them lose from government conservatorship.*


“Managing the Guaranteed Retirement Accounts in a pooled fashion would let them leverage that scale to pay lower fees …[and have] access to [the] highest quality managers…”


“[T]he PHH decision makes clear that the Constitution requires that the CFPB be treated as an executive agency and …that Executive Orders applicable to executive agencies apply in full to the CFPB.”



In The Effects of Increasing Fannie Mae’s and Freddie Mac’s Capital, CBO provides the “illustrative solution” of allowing the GSEs to retain $5 billion of profits annually over 10 years to rebuild the enterprises’ capital. The report also analyzes the “policy option,” based upon proposed housing reform bills, which would have a budgetary cost of roughly $85 billion over 10 years, according to CBO.   


“The technology will be ready in a couple of years, but we’re really talking about 5, 6, 7 …years before all the regulations come in. We have a lot of competing interests …to get these vehicles on the road.” 


“The notion of having to have a double digit return—that being your cost of capital is a little bit odd,” said Lloyd Blankfein, Goldman Sachs chairman and CEO. “…[T]he expectation of the market for a 10% return as the cost of capital was there when the risk-free rate of interest was 5.0%. And today, when the risk-free rate of interest is zero, it’s the same 10%—when we have more than double the capital and so consequently much less risky. And on the revenue side, this hasn’t been exactly the strongest tail wind… We’re still living in a relatively low growth market.”


In 2016. 50% of today’s home buyers are under the age of 36, and 47% are first-time buyers, according to Zillow 


​The dawn of cognitive computing

Digital is the wires, but digital intelligence, or artificial intelligence as some people call it, is about much more than that. This next decade is about how you combine those and become a cognitive business. It’s the dawnof a new era.

Ginni Rometty IBM’s chairman, president and CEO October 13, 201


Federal and local officials have joined the 80 by 50 Pledge, a commitment to cut carbon-dixoide emissions by 80% by 2050. To achieve this goal, additional energy infrastructure of over 287,700 square miles--roughly the size of Texas and West Virginia combined--must be installed, according to Manhattan Instiute. In addition, the U.S. would have to install about 1,900 gigawatts of wind capacity--26 times the America's current capacity and four ties the global wind capacity--to meet the goal of cutting greenhouse gas emissions by 80%. 


More than 41 million Americans collectively owe nearly $1.3 trillion on student loans and more than 1 million borrowers default on these loans annually.


“When we think about world growth, especially in the advanced economies, we have to think about that in the context of  …very high government debt levels,” said “James McCormack, global head of sovereigns at Fitch Ratings. “There has been fiscal space created in recent years in the advanced economies with lower interest rates—and that’s really central banks doing their part to try to stimulate things. But that fiscal space has largely been used up—in the sense that if there is a downturn or if growth does starts to weaken, is there capacity to is take on additional fiscal stimulus? Well, not really.”   



“In the case of C&I lending, the credit bust in the energy sector and slowdown in areas such as leveraged lending has certainly reduced the credit appetite of large banks when it comes to these exposures.”


This week, we speak with Arun Sundararajan, professor at NYU’s Stern School of Business.


"No one saw the reputational hit coming..."


PHH Corporation v. CFPB  “…addressed the unconstitutionality of the Bureau’s structure and its retroactive application of a new RESPA interpretation, and imposed RESPA’s three-year statute of limitations on the Bureau.” 


"[Government] policies clearly have some unintended consequences that are likely holding back the housing market."


"Global growth and trade has really slowed down."


*20 to 30 percent of the working-age population in the United States and the EU-15, or up to 162 million individuals, engage in independent work.*


“Since the [financial] crisis, enhanced regulation and oversight have strengthened banks’ capital and liquidity buffers, making them safer,” wrote the IMF in the Global Financial Stability Report. “However, this new era of low growth and low rates threatens to undermine these gains.” The IMF recommends “bold structural reform program” to address legacy issues of high nonperforming loans, corporate insolvencies and the “weak tail” of European banks. Some weak banks “will have to exit and banking systems will have to shrink,” wrote the IMF.


“…[D]ebt is simply everywhere, at least to the extent we can see and measure it,” wrote economist DiMartino Booth. “Corporate and sovereign debt, of both the developed world and emerging market varieties, are at record levels. China’s debts certainly add to that record but who really knows to what extent? It’s the ultimate black box of leverage on Planet Earth. ….. Central bankers’ collective and growing fears of those debts …have given way to a perverted gentlemen’s agreement of sorts. …The operating assumption is …that the debt has literally disappeared, been retired, expired, matured, monetized, vanished into thin air.”


“Our financial markets have become a Vegas/Macau/Monte Carlo casino, wagering that an unlimited supply of credit generated by central banks can successfully reflate global economies and reinvigorate nominal GDP growth…”


"The end of U.S. dollar dominance may be unfolding in front of our eyes," wrote Merk Investment's Alex Merk. 


Two amazing announcements came out of key central banks recently. The Federal Reserv came closer than it has for a while to a slight hike in interest rates, with a 6-3 vote for no change. The fact remains, however, that last December’s token quarter-point rise in rates, intended to be the first in a regular sequence, still stands alone. And much commentary will come out of the regional Federal Reserve bankers offering direction. One thing is clear though—the policy stance remains far from normal.

Even more interesting was the Bank of Japan’s announcement. It had already adopted negative interest rates and expanded QE at a faster rate than any other major economy—all in an effort to shake the economy out of its listlessness. Not having succeeded, it offered a twist—an effort to manage the yield curve, with a commitment to continue with its new program until Japan’s inflation rate is both positive and above 2%.

It will keep pumping, in other words, until deflation has been comfortably eliminated. Good luck!  Abnormally low interest rates (together with quantitative easing) seem to have succeededwith ever-diminishing effectiveness. At the same time, however, these everlasting stimulus efforts have artificially distorted normal patterns of risk-taking in financial and other asset markets. How do we get back to solid ground?


Abraham Gulkowitz

The PunchLine

September 2016


“With most nation’s states unwilling or unable to use fiscal expansion to stroke short-term demand, global central banks acting alone have been asked to somehow address the burdens of global over-capacity, excessive debt, rising unemployment and slack,” said Kroll Bond Rating Agency’s Chris Whalen. “…Nobody wants to confront the basic issue—which is many European banks are undercapitalized. They need some sort of assistance to get the party. …You have to get the party started—mark these assets to some kind of market because the international accounting rules are totally the opposite of the U.S. They hide the problems.”


When you're leveraged 25:1, any small hit to that portfolio can have a big hit on your capital and earnings.


The CFPB's 900-page final Mortgage Servicing Rule "adds significant new requirements and complexities to residential mortgage servicers’ compliance obligations," according to Mayer Brown. 


I expect that more than one-third of all men between 25 and 54 will be out work at mid-century, wrote economist Larry Summers.


“I think monetary policy has passed the expired date because I can’t see this kind of negative effects coming out from the QE policies,” said Robert Bergqvist, chief economist at SEB. “[Central banks] have to adopt to this declining real interest rate. …It reflects structural changes in the global economy—high propensity to safe, low propensity that means that global interest rates are declining. Central banks must just adjust their nominal policy rates to this declining real interest rates.”


[G]lobal central banks acting alone have been asked to somehow address the burdens of global over-capacity, excessive debt, rising unemployment and slack consumer demand.


China’s level of non-performing loans may be ten times larger than government officials are reporting, according to Fitch Ratings. “The longer debt grows, the greater the risk of asset quality and liquidity shocks to the banking system,” warned Fitch. “Defaults in China could lead to mutual credit guarantees in the background pulling other firms into distress. A large increase in real defaults risks triggering a chain of bankruptcies that magnifies the potential for financial instability.”


“There really isn’t a substitute for China [in the global economy],” said Ken Rogoff, former chief economist for the IMF. 


Uber’s self-driving car is controlled by 20 cameras, seven lasers and 360-degree radar coverage. 


“While every asset price cycle is different, they all end the same way: in tears,” wrote TCW’s Tad Rivelle. 


“The bottom line is you had two primary regulators [supervising Wells Fargo]—the CFPB and the OCC,” said Representative Jeb Hensarling, chairman of the House Financial Services Committee. “They had various teams to examine Wells Fargo. They had agents that were embedded at Wells Fargo. And so the question is why did it take a newspaper to break the story and the LA City Attorney to really investigate it. …So far the CFPB, in particular, has been stonewalling our investigation and we don’t know why. So that suggests more questions than answers.”


More than 25 million Americans' economic lives have crashed since 2008, accoirding to Gallup. 


“…[T]he case for an increase in the federal funds rate has strengthened but [the FOMC] decided …to wait for further evidence of continued progress toward its objectives."


“We’ve been saying that this is most likely an institutional problem—that’s our biggest concern that it is more an institutional banking problem than it is a Wells' problem,” said FBR Capital Markets’ Paul Miller. “After today, this story is going to have some more legs to it. ...What I’m really concerned about—not just Wells—but the industry as a whole, is now there’s another leg of regulatory concern, another level of regulatory cost that’s going to flow through the system. “


.......the Obama Administration will “blow the doors” of all previous records for Midnight Regulations in January.



“The Bank for International Settlements warned in its quarterly report that China’s ‘credit to GDP gap’ has reached 30.1, the highest to date and in a different league altogether from any other major country tracked by the institution,” wrote Telegraph’s Ambrose Evans-Pritchard. “It is also significantly higher than the scores in East Asia’s speculative boom on 1997 or in the US subprime bubble before the Lehman crisis.”


CAPTURED:  Suspect Ahmad Khan Rahami 


On Friday, a lawsuit was filed in the U.S. District Court of Utah, seeking class-action status on behalf of Wells Fargo customers to sue the bank for "abusive and fraudulent tactics."  


“Since the onset of the Great Recession, the total number of businesses with fewer than 500 employees has declined by more than 5 percent, unprecedented since data became available in 1977.”



The Department of Justice has proposed that Deutsche Bank pay $14 billion to settle the agency’s on-going MBS probes, according to the Wall Street Journal. The proposed fine is roughly equal to the Bank’s entire market cap, according to “Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited,” said the Bank. “The negotiations are only just beginning. The Bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts.”


“As the third quarter ends, KBRA believes that the major point of vulnerability for banks generally will come from unanticipated events that lead to increased market volatility,” wrote Kroll Bond Rating Agency’s Chris Whalen. “The prospect of another interest rate hike by the FOMC, the November election in the U.S., and continued uncertainty regarding the global economy provide precisely the conditions for another widening in credit spreads, which almost directly translates into less activity in the capital markets, lower earnings, and asset write-downs for large-cap banks and a flight to quality by investors.”


“There is a double standard of regulatory enforcement,” said Camden Fine, Independent Community Bankers of America president and CEO. 


“If the Fed were to push and run a September rate hike, it would be like an atomic bomb,” said UBS’ Art Cashin. “The market has not really priced it in. It would reverberate—I wouldn’t call it a Lehman-like moment. It would catch many markets off guard and would be highly disruptive.” Former Treasury Secretary Tim Geithner said, "It’s like a world where people say it’s a world of diminished expectations—slow growth, low return… and an erosion in the Keynesian arsenal.”



"I think there's a serious issue on reducing the regulatory burden on the economy," said JPMorgan Chase’s Jamie Dimon.



“[T]he next President must turn the page and focus on developing a national housing policy that addresses a number of unhealthy imbalances in today’s housing market,” wrote MBA’s Dave Stevens. “And a key part of making that work will be creating a position in his or her Administration for a point person responsible for coordinating and executing on that policy. …The complexity of the [housing] issues, the inter-regulatory aspect of the challenge, and the need to work across private and public sectors to reduce unnecessary barriers and create appropriate incentives will require a newly created Housing Policy Director.” 



Between 2011 and July 2015, Wells Fargo’s employees opened 1.5 million fraudulent deposit accounts and 565,000 fraudulent credit card accounts that generated $2.4 million of fees for the bank.  Wells Fargo reached a $185 million settlement with regulators and fired 5,300 employees, or 1% of its workforce, for engaging in “improper sales practices.” Pursuant to the settlement, Wells will pay the CFPB $100 million, the City and County of Los Angeles $50 million, $35 million to the OCC and $5 million to affected customers.



“I never shy away from remembering the worst day of my life. To do so would be an unforgivable dishonor to the 2,759 victims who gave their lives on that painfully beautifully September morning.”


Four major forces of disruption are occurring in the auto sector--(1) electrification of cars; (2) connectivity; (3) driver assisted systems; and (4) mobility.  


“Struggles with TRID compliance can be directly associated with this recent rise in defects,” said Armco’s Phil McCall.



“In the crazy Syrian war, US-backed and armed groups are fighting other US-backed rebel groups,” wrote Eric Margolis on Strategic Culture Foundation. “How can this be? …Turkey, a key American ally, is now battling CIA-backed Kurdish groups in Syria. Eighty percent of Turks believe the recent failed coup in Turkey was mounted by the US—not the White House, but by the Pentagon which has always been joined at the hip to Turkey’s military.”


“[I]f the Fed were to hold primarily assets that are safe and of limited duration…, a permanently large balance sheet need not imply excessive fiscal risks.”



“When we look at Japan, we see the same game plan [for the EU]—a lot of QE but no loan growth,” said Kian Abouhossein, JP Morgan’s managing director and head of the European banks equity research. “In Europe, it’s almost ten years and the loan growth has been zero. QE reduces lending rates to negative and we can expect negative lending rates until 2021. As long as that’s the case, margins will not improve—60% of revenues are net interest income. And as long as that’s the case, earnings will not improve. So the return on equity is very low—it’s only 9% in Europe by 2018."

"[T]he court’s opinion raises critical issues about the extent to which its analysis applies to the more common 'bank partnership model' of marketplace lending."

151,000 jobs added in August, below market expectations of 180,000.


“We [are] ….being ordered to retroactively pay additional taxes to a government that says we don’t owe them any more than we’ve already paid,” said Apple's Tim Cook


‘The odds are 60%,” said Allianz chief economic advisor Mohamed El-Erian. “Why? Because while domestic conditions are flashing green, international conditions are flashing yellow. So, it is the international picture that is holding back the Fed. What makes that probably go a lot higher? A Friday [jobs] report that has three things: (1) job creation in excess of 180,000, (2) wage growth going up and (3) no significant move in the participation rate that pushes the unemployment rate up. If you get these three conditions, then the odds go up from 60% to 80%."


"The great unraveling"


There are a lot of things that we thought we knew that haven’t turned out quite as we expected. The economy and financial markets are not as stable as we previously assumed.

Ed Rosengren,   Federal Reserve Bank of Boston President

August 26, 2016


On balance, real output growth, the unemployment rate, and inflation may be at or near mean values that could be sustained over the forecast horizon provided there are no major shocks to the economy. We seek to describe this situation in the new narrative we are adopting. The new narrative views medium- and longer-term macroeconomic outcomes in terms of a set of possible regimes that the economy may visit instead of a single, unique steady state. By doing this, we are backing off the idea that we have dogmatic certainty about where the U.S. economy is headed in the medium and longer run. We are trying to replace that certainty with a manageable expression of the uncertainty surrounding medium- and longer-run outcomes.

James Bullard, Federal Reserve Bank of St. Louis President The St. Louis Fed

New Characterization of the Outlook for the U.S Economy

June 17, 2016


“Borrowing with both eyes open.”


Negative rates seem to work to a certain point but them become counterproductive, according to Federal Reserve's Vice Chair Stanley Fisher.


BNY Mellon, Duetsche Bank, ICPA and Santander are working with UBS and Clearmatics to test pilot Utility Settlement Coin (USC), an asset-backed digital cash instrument implemented on distributed ledger technology for use within global institutional financial markets. USC aims to allow financial institutions to pay for securities in real time without waiting for traditional money transfers to be completed. Using digital coins, transactions would be directly convertible to cash, cutting the time and cost of post trade settlement and clearing.  


“[M]onetary policy is now running counter to the aims of strengthening the economy and making the European banking system safer," wrote Deutsche Bank CEO John Cryan. “[T]he ECB’s policy is squeezing the margins of Europe’s struggling banks, making it harder for insurers to find profitable investments and dangerously distorting financial market prices." Cryan warned of fatal consequences" for savers and pension plans while “companies refrain from investments due to ongoing uncertainty and demand less loans.”


"Capital flows from regions of the world with slow growth and negative rates will continue to exert downward pressure on the term structure of the U.S. interest rates." 

“…[O]ur best estimates find that the Seattle Minimum Wage Ordinance appears to have lowered employment rates of low-wage workers. This negative unintended consequence …is concerning..., because the long-run effects are likely to be greater as businesses and workers have more time to adapt to the ordinance. The effects of disemployment appear to be roughly offsetting the gain in hourly wage rates, leaving the earnings for the average low-wage worker unchanged. Of course, we are talking about the average result.”


When the U.S. economy slides into the next sharp recession, no less than $4 trillion in QE will be needed to stabilize the economy, bringing the Fed's total holdings of government bonds to well over 30%.


"At some point, it will be the Fed that will have to lead the market," said Mohamed El-Erian.


In the United States, the automotive sector generated $2 trillion of annual revenue in 2014, 11.5% of US GDP.



Hailed by its architects as the vehicle that brings Europe together and promotes prosperity, the Euro has done the opposite, according to economist Joseph Stiglitz. The financial crisis revealed the shortcomings of the Euro. The Euro was flawed at birth with economic integration outpacing political integration. Europe’s resulting stagnation and bleak outlook are a direct result of the fundamental challenges that a diverse group of countries share in having a common currency.



Blockchain's tipping point.

…[T]he blockchain …is the biggest innovation in computer science—the idea of a distributed database where trust is established through mass collaboration and clever code rather than through a powerful institution that does the authentication and the settlement. … The financialservices industry is up for serious disruption…


Don Tapscott,

Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World

May 2016


The cost of servicing a nonperforming loan has increased from 8x the cost of a performing loan in 2008 to 13x in 2015, according to MBA. 


Google, Apple, Facebook, and Amazon (GAFA) are setting customer experience standards that banks must meet.  


“You need underlying growth," said Aspen Institute CEO Walter Isaacson. “You need to have more profits. We haven’t had great earnings report. You have gotten to the point where the U.S. economy is close to full employment, but you’re not seeing any inflation. …You need productivity, but you also need innovation. …We’re maybe on the verge of some great new innovation—whether it’s driverless cars, artificial intelligence, data mining, healthcare…”  


“There is nothing uglier than the financial sector,” said Larry Glazer, Mayflower Advisors.



“I think there’s an accumulation of evidence that monetary is pretty ineffective,” said economist Paul Krugman. “We came into this thinking monetary policy at zero rates was ineffective. Then along came QE, then along came negative rates, which I have to admit, I didn’t think was possible. …But it’s not actually doing very much. …We may in some ways be going back to square one. ...The only thing you can do is to credibly promise higher inflation in the longer run.”


“We’ve now gotten far enough past the housing crisis, and I would suggest respectfully that the efforts since the housing crisis have been Band-Aids," said NAHB president Jerry Howard. "And now we really need to look at the root of the problems and how to correct them. You need legislation that simplifies the home buying process while protecting the homebuyer. …I’m hopeful cutting red tape means cutting the problems that business people have in complying with regulations due to the slowness of bureaucracy to react.”


“With a hostile Russia to the east, a dangerously troubled Turkey to the southeast, and chaos and civil war in much of the neighboring Arab world, Europe now faces the most serious set of problems in the history of the EU.”



“[O]ne of the most hotly contested proposals is FHA’s plan to cap the lifetime interest rate increases on adjustable-rate HECMs to 5%.”



Really, our branches have evolved into advice centers," said JPMorgan Chase's Barry Sommers.


“The CCAR 2016 approach resulted in total capital shortfalls of 123 billion euros for all 51 banks.” 


"Fitch expects the Fed to raise rates only once in 2016 and twice in 2017 compared with our previous forecast in May for two rates hikes in 2016 and three in 2017,” said Brian Coulton, the rating agency’s chief economist. “In the eurozone, the ECB is increasingly likely to extend its asset purchase program beyond March 2017 but may need to revisit the program's eligibility criteria in order to do so. Both the Bank of England and Bank of Japan will likely cut rates soon."


Regulatory burden in the U.S. is a whopping $4 trillion.



“The market for the first time is starting to question the effectiveness of further monetary easing because all monetary easing is doing is driving down yields and weakening the banks."


“We’ve spent the last eight years with an administration that dealt with a recession…” said MBA president David Stevens. “Their focus was the housing crisis… For this administration, it was very focused on regulation and enforcement. We have an opportunity to pivot here. This next administration, regardless of which party takes the White House, is coming in with a blank slate. …Making housing policy a priority of each candidate is something we view as extremely important as we move forward.”


"The HUD rule challenge - now at the sumary judgement stage - is likely to have a far-reaching effect on the housing industry and affilated sectors of the economy."


“I look at it as possibly being one more restraint on the Fed,” said UBS’ Art Cashin. “…Since Carney went all in, he must really be worried....”


"The time is ripe for financial innovation: new technologies are helping end users skip past gatekeepers and intermediaries to customize their use of financial products,” wrote Visual Capitalist’s Jeff Desjardins. "...Payments, personal finance, P2P lending, insurance, digital banking, equity crowdfunding, smart contracts, and digital currencies are just some of the areas that are of interest in the Fintech landscape."


"To deliver banking customer experiences that provide new value, retail banks must do things differently—and do different things."


"Unfortunately, that could be one of the fat-tail outcomes of Brexit. It may take more than five years, but may very well happen."


Treasury, HUD, and FHFA released a white paper on the future of foreclosure prevention, which the agencies believe were essential to the success of the government’s programs and should provide a foundation for any future loss mitigation programs. These principles include (i) accessibility; (ii) affordability; (iii)  sustainability; (iv) transparency; and accountability. 


GAO reommends that the CFPB “complete a plan to identify the outcomes [it] will examinemeasure the effects of the [mortgage servicing] regulations, including the specific metrics, baselines, and analytical methods to be used.”


“[I]f the EU does not bend and allow one of the loopholes in its rules to be used, the Boys in Brussels could set a doomsday machine into motion.”



 Perpetual bonds “mean forever—unless they’re retired or called back”


"...[N]ominal GDP has only grown by 3.0% and real growth is below 2% and that is not normal. So something must be wrong."


Sixteen years later, it’s an Altered State of being with low interest rates driving rampant rental inflation, even as median incomes remain 1.5-percent below their 2000 levels.


With PBGC’s liabilities ($164 billion) nearly twice its assets ($88 billion), there is no way it can honor all of its obligations. Who will pay?


Seasonally adjusted home prices are flat and have been weaking now for a few years, according to Yale University's Robert Shiller.



“Unfortunately the politics does not allow this transition [from an unbalanced policy mix]…to something more comprehensive,” said Mohamed El-Erian, chief economic adviser. “So, we’re going to continue to rely on central banks. We’re going to continue to create this massive gap. And, we’re going to continue to have what I call “jump” conditions, where things become nonlinear. We saw it with Brexit. We saw it with Turkey. We’re seeing with 30% of government debt in negative nominal yield territory. So this is going to be an interesting time going forward…”


“5G is much more than a G. It is much more transformative, …ushering in the commodification of information and intelligence.”



“Two important countries in our neighborhood are melting down; dealing with that is likely to take much more of the next President’s time than most people now think.”




12% of all households rent single-family homes today.


Negative economic and political socks could destabilize the credit market, triggering a “crexit,” warns S&P. 


“Fannie Mae officials stated that the proposed [flood reform] legislation (H.R. 2901…) would weaken its risk-management practices to the extent that it would impair Fannie Mae from maintaining or taking prudent actions to protect homeowners and collateral,” wrote GAO. “Furthermore, ...Freddie Mac officials ...have concerns that the proposed legislation could shift the risk of flood loss to Freddie Mac; they have been addressing these concerns with the Federal Housing Finance Agency.”


“It should be remembered that Turkey has become the critical country in its greater region. It is the key to any suppression of IS in Syria and even in Iraq,” wrote Geopolitical Futures' George Friedman. “It is the pivot point of Europe’s migrant policy. It is challenging Russia in the Black Sea. The United States needs Turkey, as it has since World War II; and Russia can’t afford a confrontation with it. Neither country likes Erdogan, but it is not clear that either country has options. …The coup appears over, but the repercussions of follow-on actions are not.”


On average, 65% to 70% of households in advanced economies were in income segments whose incomes in 2014 were flat or down compared with 2005.


“I have a huge preference for policy and I would hope that between now and Election Day there’s a rigorous discussion on policy,” said Hoover Institution’s Kevin Warsh. “If we continue policies that we’ve been pursuing over the course of the post crisis period, we will lucky to be growing at the rate of 2.1%, which was the growth rate in the economy from the middle of 2009 to the middle of 2015. The bad news is we’ve been growing at a lower rate. So we do need a regime shift in policy… The American people are not comfortable being Japan. …They want to fight back…”


On July 11, FHFA launched its interactive online map, highlighting where potentialliy eligible borrwers live in the top 10 states.


Central bankers "have sailed us off the map, into places that financial markets have never been, and should never be."


“[E]conomic freedom has declined,” wrote Professor Ryan Murphy. “…[A]cross the world, the fundamental institutions of capitalism and trade are under attack and have been under attack since 2000. …[T]he declines in the scores of deep variables concerning property and trade are what underlie the measured decline in freedom. Until these characteristics of the United States improve, we should not expect growth rates to return to where they once were.”


"[I]t is time for an open-minded look at the housing finance system and what role, if any, today’s government-sponsored enterprises might play in the future."


Former FDIC Chairman Sheila Bair discusses the impact she expects Brexit will have on U.S. banks.


Drifting along—global growth is set to hold at 2% to 3%.


"You have sovereign states with their own crisis and that demand measures separate and distinct from other members," wrote Martin Armstrong. "This is how the euro system will break. ...By the time this mess comes unraveled, we will see the world completely change. We are probably looking at a major world monetary reform come as early as 2018. The speed with which this is unfolding is rather incredible."


"[The] status quo political and economic institutions – particularly Central Banks – have failed to protect incomes and have pushed income and wealth inequality past a political breaking point."


“Maybe you can even reverse Brexit.... as long as you have the right people in the room.”  


"There is no rationality in the market, it's all very emotional. People are starting to withdraw from the market and to go to very liquid and safe assets."


If only Fed Governors and Presidents understood a little bit more about Monopoly, and a tad less about outdated historical models..., then our economy and its future prospects might be a little better off


“In Italy, 17% of banks’ loans are sour …nearly 10 times the level in the U.S.” wrote Wall Street Journal’s Giovanni Legorano. 


“Dodd-Frank has failed. It has contributed to the slowest, smallest, weakest and worst economic recovery of our lifetimes."


“What worries us most is that a lack of meaningful supervision by Congress creates a dynamic in which the players do not act with the good of the broader ecosystem in mind. It is not difficult to envision people fighting to protect their turf, allowing egos to drive decisions, and making speeches designed to provide political cover in the event of a capital shortfall rather than doing the hard work to structurally redirect risk away from the Treasury Department’s backstop. All of this is corrosive to not only the functioning of the markets but to Congress’ ability to monitor the functioning of our economy.” Why Housing Reform Matters, Michael Bright & Ed DeMarco


Think of the EU, in its current malstructured form, as a kind of Ponzi scheme, and Britain as the  guy who just asked for his money back.

John P. Hussman, June 23, 2016


What happened last Thursday was a remarkable result. It was indeed a seismic result—not just for British politics, for European politics, but perhaps even for global politics too. Because what the little people did—what the ordinary people did—what the people who’ve been oppressed over the last few years and seen their living standards go down. They rejected the multinationals,  they rejected the merchant banks, they rejected big politics.

And they said, “Actually, we want our country back. We want our fishing waters back. We want our borders back. We want to be an independent, self-governing normal nation. And that is what we have done and that is what must happen.”

And in doing so, we now offer a beacon of hope to Democrats across the rest of the European continent. I’ll make one prediction this morning: The United Kingdom will not be the last member state to leave the European Union.


Nigel Farage

Address to the European Parliament

June 28, 2016



We can’t expect anything other than a period of uncertainty between now and September.


"Why rule anything out?" asked former Labour Prime Minister Tony Blair.


Brexit triggers a “severe diminishment of what the EU actually means, its footprint globally, its common values and its ability to continue to integrate." 


Richard N. Haass, President of the Council on Foreign Relations

Sebastian Mallaby, Paul A. Volcker Senior Fellow for International Economics, Council on Foreign Relations

Anya Schmemann, Washington Director, Global Communications and Media Relations, Council on Foreign Relations


Some mortgage servicers continue to use failed technology that has already harmed consumers, putting the company in violation of the CFPB’s new servicing rules, according to the agency. “Mortgage servicers can’t hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules,” said CFPB Director Richard Cordray. “Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.”


“…Obstacles continue to hamper the housing recovery—[including] the lingering pressures on homeownership, the eroding affordability of rental housing, and the growing concentration of poverty.”



“Technology, competition, and regulatory changes are continuously reshaping the financial system and bringing about innovations in products, services, and business practices, which benefit investors and consumers. Since the financial crisis, the changing financial system landscape has fostered many innovations,” wrote the Financial Stability Oversight Committee. “One challenge for regulators is the need to monitor new products or services in light of existing standards and regulations. Another challenge is the migration of activities to less regulated or unregulated institutions.”


Fannie Mae and Freddie Mac are double-charging consumers for risk that is already being assumed by existing g-fees.


[Fed Chair Yellen] looks like one of those multi-armed goddesses that Kipling wrote about."


Citi traders wear Microsoft’s HoloLens to see a three-tiered system of dynamically updated and interactive information.



On June 17, the Bank of England [BoE] launched a FinTech Accelerator to work in partnership with FinTech firms on challenges that central banks uniquely face. “The Accelerator will work with new technology firms to help us harness FinTech innovations for central banking,” wrote the BoE. “In return, it will offer firms the chance to demonstrate their solutions for real issues facing us as policymakers, together with the valuable ‘first client’ reference that comes with it. With time, the Accelerator will build a network of firms working in this space for the benefit of us and them alike.”


"Fourth Turnings are crisis periods, and we are barely halfway through this one," wrote John Mauldin.


More than half of the people coming to Europe come from countries where you can assume then have no reason whatsoever to ask for refugee status… more than half—60%,” said Frans Timmermans, European Commission VP.


In “When Everything Is a Crime,” civil liberties attorney Harry Silverglate, co-founder of FIRE, describes the two of the biggest threats to liberty in America today. “There are two allied concepts,” said Silverglate. “Too many things have been made into crimes. But then there is a kind of a vicious relative, and that is statutes that are so vague that no normal human being can figure out what it is you can’t do. ...Federally, there are hundreds of thousands of regulations under each of the federal criminal statutes. If so there are 30,000 federal statutes there are at least ten times that many regulations..." 



"Are we better off with QE? ...Is it 'mission accomplished' or are we facing a 'ticking time bomb'?"


“We are about to make the biggest political decision of our lives. …Vote Leave, and we will reassert our sovereignty—embracing a future as a self-governing, powerful nation envied by all. ...The Sun has campaigned relentlessly against the ever-expanding superstate. But the EU cannot reform. ...This is our chance to make Britain even greater, to recapture our democracy, to preserve the values and culture we are rightly proud of. A VOTE FOR LEAVE IS A VOTE FOR A BETTER BRITAIN." The Sun, 06/13/16


“We will continue to look forward in this investigation, and backward. We will leave no stone unturned. And we will work all day and all night to understand the path to that terrible night.”



“The American idea is that we want all of our people to be thriving, and independent, and free—that’s the vision we need to sell.”


FHFA and the GSEs are considering a last minute addition to the new URLA, in the form of a question that will ask borrowers to indicate their language preference.


The distributed ledger is becoming the “scaffolding or the rails” of a risk platform for financial companies.


The World Bank downgraded its 2016 global growth forecast to 2.4% from the 2.9% pace projected in January.


Imagine an insurance company with $88 billion of assets, liabilities of $164 billion, a negative net worth of $76 billion and capital-to-0bligations ratio of -46%. 


“We remain stuck in the slowest and weakest economic recovery in our history," said Representative Jeb Hensarling (R-TX), chairman of the Financial Services Committee. "Last quarter’s pathetic GDP growth of less than 1 percent merely punctuates the point. …Why is this happening? One of the principal reasons is the Dodd-Frank Act, a grave mistake Washington foisted upon the American people nearly 6 years ago. Simply put, Dodd-Frank has failed. It’s time for a new legislative paradigm in banking and capital markets. It’s time to offer all Americans opportunities to raise their standards of living and achieve financial independence.”


Fed Chair Yellen used the term "uncertainty" in her June 6th speech 15 times. 


[Dodd Frank] It is a modern day Tower of Babel: 2,300-plus pages; 400 new regulations, spawning tens of thousands of pages of red tape.


The jobs report not only does it take the hikes off the table—it may take them off the table indefinitely. 


“America’s entrepreneurial economy is generating all manner of interesting and valuable new technologies—from sharing economy platforms to drones to driverless cars,” wrote AEI’s James Pethokoukis. “But these innovations seem to be more and more colliding with government. And when I talk to Silicon Valley founders and venture capitalists, their biggest complaint about government is too much regulation.” Pethokoukis discussed the impact of government regulation on innovation with George Mason’s Eli Dourado, director of its Technology Policy Program,  on Ricohet.


We are at the dawn of an extraordinary technological revolution, and it is transforming every part of the U.S. economy.



“Reliance on monetary policy alone cannot deliver satisfactory growth and inflation." 


JPMorgan Chase CEO Jamie Dimon discusses how technology is changing the banking industry.


…[T]he administrative state exists to marginalize politics — to achieve Henri de Saint-Simon’goal of “replacing the government of persons by the administration of things.”


George Will

Washington Post

May 27, 2016


“We have a global problem of a shortage in productivity growth, and it is not only the [U.S.], but it is pretty much around the world,” said former Federal chair Alan Greenspan. “Populations everywhere in the western world …are aging and we're not committing enough of our resources to fund that. Entitlements are crowding out savings and hence, capital investment. …We're running at the end of this period to a state of disaster unless we turn it around."


The struggle for limited government must contend with an entrenched foe: the ruling class, which carries with it an agenda for larger government.


“American administrative law, according to Philip Hamburger, is not law at all, but rather an elaborate evasion of law—of our foundation law, the Constitution, which specifies that laws are to be written by Congress and which intended thereby to prevent lawmaking by executive prerogative,” wrote Hoover Institute’s Christopher DeMuth. “…[I]t has come to operate as a sort of shadow constitution, … [that is] seriously imposing on private rights and freedoms and impeding the vitality of our government and political, legal, and economic systems.”


The federal regulatory cost reached $1.885 trillion in 2015, representing 11% of GDP.


"The big discussion of the moment is the politics of adapting to... a populist uprising."


Political risk “pose[s] a challenge to fiscal and structural reform implementation and, by extension, public debt sustainability,” wrote the ECB in Financial Stability Review. “These rising political risks at both the national and supranational levels, as well as the increasing support for political forces which seem to be less reform orientated, may potentially lead to the delay of much needed fiscal and structural reforms. This, in turn, may cause renewed pressure on more vulnerable sovereigns [state issuers of debt] and potentially contribute to contagion and re-fragmentation in the euro area.”


“…[I]t is critical that the public has the right, through full transparency, to review the 12,000 remaining documents on which “privilege” has been asserted.”




“I think the economy is slogging along,” said Jim Grant, editor of Grant’s Instant Rate Observer. “…It seems to me that we are more or less sleepwalking—there’s nothing like the …dynamism that is so often associated with America’s economy. I expect that the Federal Reserve will not act [to raise rates]. I think the Fed wants to—I think it would love to normalize things, but I think it has missed its chance—as they say on Wall Street, it’s missed its market.”   


“The market no longer determines what is adequate capital for the banking industry.”




"Well, I think [the Volcker Rule has] had its basic effect," said Paul Volker. "…[I]t’s a lot more complicated… Maybe it had to be, I don’t know. That’s the trouble with all regulation in the United States: we’ve got all these lawyers and bankers and regulators to some extent that want every conceivable possibility nailed down in particular language in the regulation or the law, and not much reliance upon judgment or authority of the supervisor." 


Charlie Rose interviews John Watson, chairman and CEO of Chevron. 


The Obama administration has 3,260 new regulations in the pipeline that are projected to cost at least $100 million annually


"Risks from global, economic and financial developments [have] substantially and virtually entirely dissipated...” said Richmond Fed President Jeffrey Lacker  


“The economic and social challenges facing America are serious and won’t go away by wishful thinking,” wrote Manhattan Institute’s Aaron Renn. “Mainstream politicians …must acknowledge that the status quo has created a lot of losers. We need some serious policy proposals for how to start changing that. Failure to implement some new ideas will only perpetuate further social upheavals, and they might even get uglier than what we’re seeing today.”


In California, it will take up to ten years to go from raw land to getting the houses constructed. 


"Extinction is the mother of invention." 


From 2010 to 2015, Chinese buyers invested more than $17 billion into commercial real estate and $93 billion into residential homes in the U.S. Globally, the Chinese have invested more than $110 billion over this 5-year period, according to a study from the Asia Society and Rosen Consulting Group. Despite Beijing’s recent clampdown on capital outflows, Chinese investors are expected to double their investments in foreign real estate to $218 billion, according to the study.


“…[I]f major structural changes in the banking system are necessary to avoid another crisis …then we should all be for making the changes.”



F.H. Buckley


“Hyperloop is real," said Shervin Pishevar, co-founder and chairman of Hyperloop Technologies. “The engineering is already done and we know that it works. What we’re driving towards is our Kitty Hawk moment when the people will actually see it and the world will see it. …Hyperloop will be operational, somewhere in the world, by 2020. We will move people and cargo at 700 miles per hour. That changes the way the global economy works." 


"What you’re seeing is the destabilization of the European society."


“The median income of households in all three economic tiers—lower, middle and upper—decreased substantially from 1999 to 2014,” wrote Pew Research Center analysts. “Nationally, the median income of all households combined fell from $67,673 in 1999 to $62,462 in 2014, or by 8%. Among middle-class households, the median income shrank from $77,898 in 1999 to $72,919 in 2014, a reduction of 6%. The median incomes of lower-income and upper-income households fell by 10% and 7%, respectively.”


“Last year, we added $1.9 trillion of new debt [but] we only had $0.5 trillion of GDP,” said Hoisington Investment Management’s Lacy Hunt. “So debt was growing 3.5 times faster. The evidence is overwhelming. We not only have too much debt—we have too much of the wrong type of debt. From the early 1950s to 1999, it took $1.70 of new debt to generate $1.00 in GDP. Since then, it’s taken $3.30 of new debt to generate $1.00 in GDP. We’re on the wrong track there.”


Did a perfect storm just occur in the marketplace lending industry?

"It will be critical to monitor how online marketplace lenders test and adapt models if and when credit conditions become weaker," wrote Treasury. 

We would just as soon let a jury of our peers to determine what the outcome [of this lawsuit] will ultimately be. 


An entrepreneurs vision for the future.


If the UK votes to leave the EU, it could take up to nine years to completely exit the bloc, according to a report by the British parliament. “This is complex stuff—you are talking about rights to residence, to healthcare and to schooling, about maintenance payments and access to children, about research projects and contracts that cross borders," said Timothy Boswell, chairman of the House of Lords’ EU Committee. "...[S]orting all this out would be a daunting task. Extricating ourselves from the EU would also involve untangling a Gordian Knot of EU laws. You can’t just cut through them."



Inflation in the main four categories (rent, food, energy, and medical care) has been running at roughly 3% since 1995, significantly more than the 2.2% the BLS data yields—especially when you think about the compounding effect.


"Turning your head to virtual reality for real estate is like turning to Zillow, StreetEasy and when they first became big,” said Ryan Serhant, of Nest Seekers International. "This is the future of technology and soon buyers will be able to look at properties in New York, while they're sitting at dinner in France.” Virtual technology is also being used to stage empty homes at a modest cost of $99 a room—a fraction of the cost of traditional staging.


"One of the key issues raised in [CFPB's case against] PHH the question of whether a statute of limitations applies to the matter."


“Virtually every industry in existence is likely to become less labor-intensive in future years as new technology is assimilated into existing business models,” wrote Janus Capital Group’s Bill Gross. “…[E]xisting government policies have ‘built a whole social infrastructure based on the concept of a job, and that concept does not work anymore.’ In other words, if income goes to technological robots whatever the form, instead of human beings, our culture will change and if so policies must adapt to those changes.” 


"One of the key issues raised in [CFPB's case against] PHH the question of whether a statute of limitations applies to the matter."


Inflation in the main four categories (e.g.,rent, food, energy, and medical care) has been running at roughly 3% since 1995, significantly more than the 2.2% the BLS data yields--especially when you think about the compounding effect.


“Rather than tolerate further the use of mechanisms such as negative interest rates and overt debt monetization by central banks, …our political leaders should direct Mr. Draghi and his counterparts on the [FOMC] to return to more conventional policies,” wrote KBRA. “…Europe and the U.S. must be willing to engage on some difficult issues, including debt reduction and recapitalization of banks in Europe, as well as other policy changes to stimulate private sector credit creation and thus ...growth and jobs.”






“We’re struck in an eight-year banking depression in Europe.”


“Welcome to the age of robotics,” wrote Accenture. “From the simple automation tools to complex machines able to learn as they go, robotics are making headline news in financial services. Many industry observers share the view that robotics’ growing capabilities will trigger a fundamental shift in operating models in banks.  In an Accenture study surveying more than 240 leading banks, we found that more than three-fourths believe that the new workforce will be comprised of employees as well as intelligent machines, and collaboration between the two will be critical and training essential.”


“Although paved with good intentions, [Dodd Frank] is the road to greater instabili­ty and the danger of further financial breakdowns.”


The aging of the world’s population is already having profound effects on the global economy, and it is only getting started.

… It is important to understand the profound shift in demographics that is going to cause sweeping changes over the next few decades. Those changes will broaden the scope of our study of economics and investing; they will alter our understanding of sociology; and they will radically affect politics and governments. Precisely what these changes will be is difficult to discern and predicting them requires some guesswork, but the one thing we don’t have to guess about is the demographic shift itself. Everyone who will be over 20 years old in 2035 has already been born. Moreover, birth rate trends don’t tend to change radically but evolve slowly.

We’ll begin with the big picture. Experts think global human population first hit 1 billion around the year 1800. The next billion took another 120 years, arriving in 1920. It took only 40 years to add a third billion, by 1960.



Economic growth in the U.S. has, on average, been slowed by 0.8% per year since 1980 because of the cumulative effects of regulation, according to a study by the Mercatus Center at George Mason University. If regulation had been held constant at 1980 levels, the U.S. economy would have been about 25% larger (e.g., $4 trillion larger) than it actually was as of 2012, amounting to a loss of approximately $13,000 per capita.


“…[M]onetary policy leading to a distortion in the way monies are distributed and asset are allocated, inflating the price of securities or anything that trades...,” said former Dallas Fed president Richard Fisher. “And then you are very hesitant to try to take that away for fear of volatility or for fear of a downside slope which could affect the economy. …[T]he Fed has the markets on Ritalin, trying to keep the mood very smooth, keep volatility down as much as possible. As soon as they hint they might remove that, they create the problems that they're afraid of. So they've boxed themselves into a corner…”


By 2050, almost two-thirds of the world’s older people will live in Asia.


The FinTech revolution in the banking industry can actually be bigger than the ...first 20 years of the Internet revolution. 


Saudi Arabia addresses its transition to the post-hydrocarbon era.


Blockchain holds the promise that we may have the “visibility” of  counterparty credit exposure. 




Consumption comprises about 69% of the U.S. GDP, followed by (17%), government spending (17%), and net exports (-3%).


“[T]he biggest risk right now …is just that we are running out of time,” said Mineappolis Fed president Neel Kashkari. “If we don't act while we still remember how bad the crisis was, I'm afraid we're going to turn the chapter on this. …And in 20, 30, 50 years from now, we may face another terrible crisis like we did in 2008. As you know, societies tend to forget. Everybody moves on. We need to deal with the crisis once and for all. Deal with the too big to fail issue so that 20 or 50 years from now so we're not back in the same situation.”



"It is close to a decade since the start of the global financial crisis that raised many critical questions …[such as] how the international monetary system monitors, regulates, and manages the volatility of global liquidity and the consequent risks for international financial stability,” wrote Anoop Singh on Brookings' Future Development Blog. “The [IMF] is also now discussing a road map for strengthening the international monetary system and better managing liquidity shocks."


Federal agencies escape accountability through use of regulatory “dark matter.”

The governance options for Fannie and Freddie.  

"...[B]ailouts create tax distortions, subsidy distortions and debt-size externalities. "

Loan dollars in this segment have increased with FinTech leading the pack. 


“I think negative interest rates are causing a slowdown in the world,” said BlackRock CEO Larry Fink. “…We have become too dependent on the central bankers. We have not seen government reacting to it. When you think about quantitative easing, it was supposed to be a temporary healing process. I don’t call seven or eight years temporary any more. …I don’t believe we have that narrative—…what negative and low interest rates are doing to savers. We think this going to become the biggest crisis globally.”






“As of June 2015, about a quarter of the $9.9 trillion in outstanding home mortgages in the United States were serviced by nonbank servicers,”  wrote the GAO.


“[M]ultilateralism—that ability to move around, to draw on and leverage the diversity of the world—is a very, very precious good that we have to cherish, secure, and maintain,” said IMF’s Lagarde in a Bloomberg Markets interview.


“The Yen is telling us that the [BoJ] has gotten to the point wheret its experimental policies are not just ineffective—but they're counterproductive.”


“Under government auspices and with federal government urging, Fannie and Freddie became the largest, most leveraged and most speculative vehicles that the world had ever seen,” wrote JPMorgan’s Jamie Dimon. “And when they finally collapsed, they cost the U.S. government $189 billion. Their actions were a critical part of the failure of the mortgage market, which was at the heart of the Great Recession. Many people spent time trying to figure out who was to blame more – the banks and mortgage brokers involved or Fannie and Freddie. Here is a better course – each should have acknowledged its mistakes and determined what could have been done better.”


“The primary goal of any secondary mortgage market system should be to ensure that, in adverse economic environments, it can provide liquidity to the primary market in support of borrowers,” wrote Joshua Rosner with Graham Fisher. “If a proposed system results in increased government exposure, or an inability to fund itself in bad economic environments, then the proposal has failed to meet its most basic purpose and should be dismissed. Such a proposal [A More Promising Road to GSE Reform] is that put forth by Parrott, Ranieri, Sperling, Zandi and Zigas.”


"Central banks are protected from insolvency due to their ability to create money and can therefore operate with negative equity."


R Street Institute’s Alex Pollocks suggests seven steps to reform American housing finance: (1) turn Fannie and Freddie into SIFIs at the “10% Moment”; (2) enforce the law on Fannie and Freddie’s guarantee fees; (3) encourage skin in the game from mortgage originators; (4) form a new joint FHLB mortgage subsidiary; (5) create countercyclical LTVs; (6) reconsider local mutual self-help mortgage lenders; and (7) liquidate the Fed’s MBS portfolio.


As long as the low interest rate environment remains, insurance companies are at greater risk of being brought down by economic shocks and may be unable to fulfill their role as risk transfer mechanisms, according to the IMF. 


The first victim of the Panama Papers is Iceland Prime Mininster Sigmunder David Gunlaugsson, who has resigned after disclosure of his tax-avoidance arrangements.


The U.S. District Court’s order granted, in part, MetLife’s cross motion for summary judgment with regard to three counts (Counts IV, VI (in part) and VII), but denied all of MetLife’s other counts.”


Despite the challenges facing the housing market, we expect this to be the best year for housing in a decade,” wrote Freddie Mac. “Home sales, housing starts, and house prices will reach their highest level since 2006 according to our latest forecast. Low mortgage rates and an improving labor market—including modest income gains—will help drive housing markets higher. Challenges remain, with low housing supply and declining affordability being a key concern in many markets, but on balance, the housing markets in the U.S. are poised for the best year since 2006.”


“The [U.S. Chamber's] CCMC believes that clear rules of the road given prospectively are important for both businesses and their customers.”

It’s obviously not over—it will get appealed… Much of the ruling is sealed.”



“We are now entering a whole new world and we don’t have the tools to deal with it,” said Walter Isaacson, Aspen Institute CEO. “NATO is not equipped to for this--the disorder of this world and so you need some new [global] alliance that would be an international anti-terrorist organization… I don’t think that Europe is going to hold together partly because immigration and nationalism have risen. It makes the security story even harder. The fact that the Europeans are not sharing intelligence well is a frightening thing because if there’s one thing the European Union should have been able to do in this [is security].”


ISIL and Al Qaeda are both contemporary, unapologetic, genocidal imperialist powers. Islam’s successful 7th century imperialism, the expansion of Muslim power from Spain to Persia, is their model. Al Qaeda recruited on its radical message and then its initial imperial “success” of 9/11. ISIL’s May-June 2014 offensive (the one that seized Mosul and took truck-borne ISIL fighters to the outskirts of Baghdad) was an imperialist offensive that also served as a recruiting tool. First Al Qaeda and now ISIL want the “green map” of Muslim authority andSharia Law to cover the entirety of Planet Earth.

Austin Bay

Adjunct Professor, University of Texas-Austin

March 23, 2016


“Congress should consider whether changes to the financial regulatory structure are needed to reduce or better manage fragmentation and overlap,” wrote the GAO.




“[T]here are three main swing factors for the global and economic market outlook this year: China, commodities and central bank policies.”


“With all things Europe, there’s going to be a little bit of muddling through,” said Fred Kempe, CEO of The Atlantic Council. “But if European leaders don’t step up this time, I think the crisis is serious enough that you just can’t muddle through any more because you also have a Russian crisis to the east, you have the immigrant crisis as well, and now you have terrorism on top of that and you have the rise of right wing parties. Europe has to introduce more common border controls, common spy agency, common customs, controls and protections—or you’re going to lose Europe.”


“Europe might be dying,” said French philosopher Bernard-Henri Levy.  


“The Islamic State threat, along with the migrant issue, will compound the EU’s existential crisis.” 


The emergence of new threats and game- changing technologies requires constant adaptation from America’s intelligence services. As the former head of the NSA and CIA, General Michael Hayden spent his career focused on keeping U.S. intelligence capabilities ahead of the curve. In Playing to the Edge: American Intelligence in the Age of Terror, General Hayden relives his efforts to shepherd the NSA and CIA through periods of profound change and navigate the post-9/11 threat environment. General Hayden discusses the past, present, and future of US intelligence and national security policy.



"The Iranian defendants intended for New York to be the epicenter of harm," said  U.S. Attorney Preet Bharara, after formally charging seven Iranian hackers for cyber attacking at least 46 U.S. banks and the Bowman Avenue Dam in Westchester County from 2011 to 2013. Through two companies, sponsored by Iran’s Islamic Revolutionary Guard Corps, the men “conducted a coordinated campaign of distributed denial of service attacks … and collectively cost the banks tens of millions of dollars in remediation costs as they worked to neutralize and mitigate the attacks on their servers,” according to Bharara. 


In Q1 2016, 9% of U.S. county housing markets were less affordable, up from 2% markets a year ago, according to RealtyTrac. 


“Given the wide threats that America faces, one needs to be careful that in dealing with this threat over here, we don’t make it more difficult to deal with that threat over here,” said former NSA and CIA director Michael Hayden. “And so I think we need to be careful what the government’s asking Apple to do, because if you believe Apple,  … you have opened up greater possibilities of degrading what would otherwise be almost unbreakable end-to-end encryption. …And the metaphor [is] this key isn’t just to my house, this key is to every house.”

“Our nation deserves a housing finance system that ensures broad access to lenders and borrowers alike".....

"...a "win-win" principal reduction strategy or  ...will take principal reduction off the table entirely,” said FHFA Director Mel Watt."



"We are still dealing with home-grown cells."


Text for landing page:  "The $16.5B National Community Benefits plan underscores KeyBank's approach to responsible banking and citizenship," said Beth Mooney, KeyCorp Chairman and CEO. 


What will be the fate of the 30 global SIFIs? What is an acceptable return for banks' shareholders?


“Domino’s first robotic delivery vehicle, DRU, is leading us into the future.”

Approximately 16.7% of the U.S. population live in a house with at least two adult generations, or a grandparent with at least one other generation, according to Pew Research. 

"Entitlements are the third rail of American politics," said former Fed chairman Alan Greenspan. 


Reinventing the local economy and remaking small communities through public/private partnerships.


“Capitalism and a finance-base economy can not function well when savers pay banks to hold their money or earn next to nothing on high quality bonds and risk assets,” said Bill Gross.  


As a nation, we can to decide to accept the current levels of mediocrity and inequality or we can decide to address the skills challenge head on. The choices we make will provide a vivid reflection of what our nation values.



“The U.S. monetary policy is vitally important from a global perspective.” Rob Carnell, ING’s chief international economist.


Technology is moving faster than the laws that are on the books. 


“In some ways, this is the beginning of the unraveling of the whole European project,” said Richard Haass, president of the Council on Foreign Relations. 


"Apple is not some distant, disconnected third party unexpectedly and arbitrarily dragooned into helping solve a problem for which it bears no responsibility," wrote the DOJ.



 "[The migrant crisis] is impacting Europe politically, economically and socially. ...[T]hey’ve seen nothing like this since World War II."


"This rise of the populist, anti-establishment, far-right party taking place in Germany. ...It's a political revolution."


“In terms of economic impact, …13% of UK GDP is exported to the European Union—that’s both goods and services in equal measure…”


"In the last few years, the global economy has evolved in ways once deemed highly unlikely, if not unthinkable. It is a phenomenon that continues today and will intensify in the period ahead.”




The European Central Bank lowered it three main interest rates and expanded its quantitative easing plan.


"Even if an urban setting is where [Millennials] would like to buy their first home, the need for more space at an affordable price ...[is] pushing their search further out."


"We are today in a phase [with blockchain] that is analogous to the early phase of the evolution of the Internet."


Nancy Reagan spent the last 15 years of her life protecting her husband's legacy. 


"If you consider a marketplace lender as one of your options when shopping for a loan, keep in mind that marketplace lending is a young industry and does not have the same history of government supervision and oversight as banks or credit unions," wrote the CFPB. 

“The fostering of innovation is a not a promising avenue for government innovation, as the American innovation machine operates healthily on its own.”


“If negative interest rates fail to generate acceptable nominal growth, then …helicopter money may be employed,” wrote Janus Capital’s Bill Gross. “How that could equitably be distributed nationally or worldwide I have no idea, but the opinion columns are mentioning it more and more often, and on Twitter, the ‘Likes’ are increasing in numbers. Can any/all of these policy alternatives save the ‘system’?"


William (Bill) Rhodes, Citigroup’s former senior international officer and senior vice chairman of Citigroup and Citibank.


On March 2, Moody’s downgraded China’s Aa3 government bond rating from stable to negative and affirmed the Aa3 rating. The key drivers of Moody’s outlook revision were based upon (i) the weakening of fiscal metrics; (ii) the falling reserve buffers due to capital outflows; and (iii) the uncertainties about China’s capacity to implement reforms. China's reserve buffers remain sizeable, giving Chinese authorities time to implement some reforms and gradually address imbalances in the economy.  


"TBTF is the critical issue back then and now. There's nothing in Dodd Frank ... which actually addresses this issue."


By 2030, China and India are projected to comprise 43% of the global GDP, while the U.S.’s percentage will decline from 22% to 20%.



“What is unique in this cycle is the difficult relationship between business and government, the worst I have ever seen,” wrote GE CEO Immelt. “Technology, productivity and globalization have been the driving forces during my business career. In business, if you don’t lead these changes, you get fired; in politics, if you don’t fight them, you can’t get elected. …We now live in a world where the most promising growth policy is ‘negative interest rates.’ In the U.S., 2015 was the 10th consecutive year when GDP growth failed to reach 3%, a rate that used to be considered our entitlement.”


“…[M]any Americans now believe that their children will not live as well as they themselves do,” wrote Warren Buffet in his Letter to Shareholders. “That view is dead wrong: The babies being born in America today are the luckiest crop in history. American GDP per capita is now about $56,000…— six times the amount in 1930… For 240 years it’s been a terrible mistake to bet against America... America’s golden goose of commerce and innovation will continue to lay more and larger eggs. America’s social security promises will be honored... And, yes, America’s kids will live far better than their parents did.”



The next few months will be critical to determining Puerto Rico’s future with large debt service payments due in May and July and Congressional action unlikely. 


“Policymakers must prepare for a new 'New Normal' in which policy becomes more uncomfortable, more unconventional or both,” wrote Financial Times’ Martin Wolf.


In 2015, the consumer financial services industry continued to face increasing pressure, from regulators and government enforcement activity, and ever-more creative litigation tactics.


“The [European] banks have a rising level of nonperforming loans, their overall profitability is under pressure ...and there’s no loan growth,” said  Ken Buckfire, president of Miller Buckfire. “So they have no profitability drivers on the loan side and they’re under increasing pressure because their basic assets are declining. …The central banks, especially the domestic central banks, will find a way to recapitalize those banks through the kind of bailouts that we saw in the United States, like AIG for example. …The banks and the financial system will survive, which is the [central banks'] mission..."


“The currently low share of new and young firms in the economy is a combination of a 30-year secular decline and a particularly strong cyclical downturn following the Great Recession …[which] have implications for the aggregate economy and …employment in years to come.” 


“We are near an inflection point with regard to globalization and monetary policy,” wrote Alhambra's Joe Calhoun. “The desire to gain a competitive trade advantage through currency devaluation will persist but its effectiveness ...will not. …[A]ll countries [will] continue to rely on monetary policy as their primary economic growth policy. ...This shift in the impact of monetary policy will also have political implications. …Add in anti-trade and anti-immigrant policies and you have a recipe for about as toxic an economic stew... [V]oters are angry and voting with their hearts not their minds. The inflection point is near.”


Chapman University Press, 2015.


The national delinquency rate for mortgages was up 6.6%, driving the 30-day delinquency rate to 5.09% in January, according to Black Knight Financial Services. Concurrently, the mortgage prepayment rate fell 29% percent to its lowest level since February 2014, while foreclosure sales (completions) were up nearly 16% following holiday moratoriums. Active foreclosure inventory continued to decline, down 26%, according to Black Knight.


“A vote to Remain [in the EU] will be taken in Brussels as a green light for more federalism, and for the erosion of democracy.”



“The migrant crisis and pending UK referendum are weakening EU integration,” wrote Fitch Ratings’ James McCormack. “Europe is facing a confluence of serious political challenges that put at risk the region’s continued integration as envisaged in the various treaties that govern the EU. Although many of the challenges of the economic crisis are still evident, a clear—and understandable—shift in policy priorities has taken place. Political and security matters that have come to the fore are proving at least as challenging as the fiscal and economic issues that preceded them.”


On February 18, the California Supreme Court held in Yvanova v. New Century Mortgage Corp, that borrowers have standing to challenge an allegedly void assignment of a note and deed of trust in an action for wrongful foreclosure.



“Most likely, as risk premiums increase, central banks will increasingly ease via more negative interest rates and more QE, and these moves will have a beneficial effect,” wrote Bridgewater's Ray Dalio.


“[I believe]…some of the challenges and risks we are managing are escalating and will continue to do so the longer the Enterprises remain in conservatorship,” said FHFA Director Watt. 


“This big brother atmosphere isn’t great…”


Approximately 175 oil companies with more than $150 billion in debt are most at risk of bankruptcy, according to a Deloitte report. 



"The bottom line is that whatever stimuli the lower prices of gasoline are giving us are getting swallowed by darker forces."


“The biggest banks are still too big to fail and continue to pose a significant risk to our economy,” said Neel Kashkari, president of the Minneapolis Federal Reserve. “Now is the right time for Congress to consider going further than Dodd-Frank with bold, transformational solutions to solve this problem once and for all.” He likened the banking sector to a nuclear reactor meltdown. “The cost to society of letting a reactor melt down is astronomical. Given that cost, governments will do whatever they can to stabilize the reactor before they lose control.”


Investors have already labeled this period “The Great Reset.” Why?

1. There wasn’t a single IPO in January for the first time since September 2011.

2. As the public market has slashed the value of tech companies like LinkedIn and Tableau almost in half, their private counterparts look oversize.

3. The industry is facing death (or at least pain) by a thousand cuts. Startups everywhere are laying off people, jettisoning businesses, and firing CEOs. Some of its biggest innovators have admitted breaking the rules, and suddenly things aren’t looking too rosy.

Biz Carson

Business Insider

February 13, 2016


Venture capitalist Jim Breyer says there is “blood in the water,” and we are entering a 90-10 situation for the unicorn class of startups with billion-dollar valuations in which 90% of the startups will be repriced or die and 10% will make it.


Jay Yarow

Business Insider

January 21, 2016


Historically in [Silicon] Valley, the mantra has been: Grow at any cost. Get bigger, get bigger, get bigger. The mantra has gone to: Cash flow, let’s be profitable, let’s make sure we are earning money and we’ve got a very sustainable business model. And it’s actually a positive thing. I think what this is going to do is it’s going to force companies to think more and more about bottom line and revenue creation and profitability than growth, growth, growth.

Gary Cohn

Goldman Sachs Chief Operating Officer

February 10, 2016


Negative rates are becoming the "new abnormal" in a shaky world economy. 


How long can China's capital outflows continue?


“Is American manufacturing dead?” asked SAP’s Bernd Leukert. “Has the good ‘ol US of A become a land full of paper shufflers and burger-flippers? These questions continue to haunt many different industries and businesses in this age of outsourcing.”

Companies like Harley-Davidson illustrate how to cling to old school manufacturing values, while using a state-of-the art manufacturing process that’s highly flexible and efficient. This is what America can do.


A utility-like model could be implemented largely through powers already granted in HERA. 


China is a $34 trillion ticking time bomb, which could trigger losses more than four times that suffered by the U.S. in the financial crisis.


"We should move quickly to a cashless economy so we could introduce negative rates well below 1%," said a policymaker at Davos.


K&L GATES....Peer to Peer/Online Lending.


"It appears that NIRP is becoming the main policy tool for a number of major central banks as they battle falling inflation, rising currencies and economic weakness," wrote Charles Schwab’s Jeffrey Kleintop. "The effectiveness of slightly negative interest rates is far from assured, and increasingly negative interest rates may not just weigh more heavily on the stock market, but on drivers of economic growth as well." Action Economics’ Kim Rupert added, “Things would have to get truly desperate to go to negative rates. …Jeopardizing the money markets would be too dramatic an effect for the Fed to consider going in that direction."


A combination of forces is driving the shift to a modular industry. Distribution will become dominated by digital “platforms” that can steer demand to any supplier, allowing new product providers to proliferate.



The CFPB has defined its sweeping authority to prohibit unfair, deceptive, and abusive acts or practices (UDAAP) primarily through enforcement actions, along with a few agency-issued supervisory findings and guidance bulletins, according to Morrison & Foerster, LLP. In 2015, almost 80% of the CFPB’s enforcement actions included at least one UDAAP claim, a slight increase over the prior year (72%).  Of the 70 individual unfair, deceptive or abusive claims alleged by the Bureau in 2015, more than half of them were “deceptive” claims, while eight were “abusive” claims.  


“Following our current path, we can expect our society—particularly in deep blue states—to move ever more towards a kind of feudalism where only a few own property while everyone else devolves into rent serfs.”


“Newly uncovered internal memos reveal the Obama administration knowingly exaggerated charges of racial discrimination in probes of Ally Bank and other defendants in the $900 billion car-lending business as part of a ‘racial justice’ campaign that’s looking more like a massive government extortion and shakedown operation,” wrote Paul Sperry in the New York Post. “So far, Obama’s [CFPB] has reached more than $220 million in settlements with several auto lenders since the agency launched its anti-discrimination crusade against the industry in 2013. Several other banks are under active investigation.”


“A vote for the UK to exit from the EU is an event that would increase uncertainty, weigh on the UK outlook and raise concerns of foreign investors – potentially interrupting the flow of capital to the UK, sending the pound much lower,” wrote Goldman Sachs analysts. “We argue that, if the UK voted to leave the EU, the UK’s current account deficit would still be a source of vulnerability despite some recent improvement. An abrupt and total interruption to incoming capital flows in response to a ‘Brexit’ could see the pound decline by as much as 15-20%.”



“The next stop? That would be negative interest rates according to the dangerous theorists running the world economy.”


“…[O]ur finance-based global economy is transitioning due to the impotence of monetary policy which has always, and is now increasingly focused on the elixir of low/negative interest rates.” 


“These policies are cosmetically clever—substantively they are poison.”


“The link between growth in money supply and nominal GDP is unambiguous and overwhelming.”


“State capitalism—a model in which governments pick winners and use capitalist tools such as listing [state-owned enterprises] on stock markets—is on the rise,” wrote Cato Institute Senior Fellow Steve Hanke. “With state capitalism, the visible hand of the State replaces Adam Smith’s invisible hand of the markets. State capitalism runs the gamut from public-private partnerships to SOEs, and highlights the relevance of the Big Player problem. …[T]he Big Player problem lurks everywhere.”


“The world is an uncertain place ....all monetary policy makers can really be sure of is what will happen is often different from what [is expected]"


“[P]unishment for breaking the law is little more than a cost of doing business.”



“The U.S. fiscal imbalance… is large and growing,” wrote Jeffrey Miron. “And with politicians proposing large new expenditures, little is being done to rectify the country’s fiscal health. Although some policymakers argue that fiscal meltdowns have never happened in U.S. history and that therefore ‘this time is no different,’ the reality is that the nation’s fiscal situation has been deteriorating since the mid-1960s, is far worse than ever before, and could lead to a fiscal crisis if no major spending adjustments occur in the next few decades.”


"The world is on fire" 

"...[T]he Federal Reserve is no longer in control of its own destiny. Ask Fed officials would they have liked to move the Dow by over 300 points after a statement is issued in which they do nohting at all.  The answer is no and yet they did, becuase they are not able to communicate and maintain a clear policy message because they've become hostage to the rest of the world.

It's not thier fault.  They've been pushed into a role that they don't really want.  But think of it htis way - a month earlier, they had told us that they expect four [rate] hikes - now, we get one or two.  A month earlier, they had told us there is a certain balance of risk in the economy.  Now, they're telling us they can't even comment on the balance of risk.  I think the Fed is as confused as anybody else because we're living on the midst of massive changes in liquidity, in volatility, and the gobal economy."


Mohammed El-Erian

Allianz Chief Economic Advisor

January 28, 2016









With oil prices tumbling, stock prices falling and bonds rising, the word recession is getting tossed around quite a bit.


Our current economic path is coming to an end. 



It’s too soon to tell whether marketplace lending is the next Uber or just another flash in the pan. 


“The government of Puerto Rico is broke,” wrote AEI’s Alex Pollock. “…[I]t has accumulated about $71 billion in debt which cannot be paid as agreed ...[and has] an estimated $44 billion of virtually unfunded public employee pension liability, giving a total debt problem of at least $115 billion. This dwarfs in size the bankruptcy of the City of Detroit... What to do? The …first required step is very clear: Congress should promptly create an Emergency Financial Control Board to assume oversight and control of the financial operations of the government of Puerto Rico.”



“...[W]e are at the beginning of a Fourth Industrial Revolution. Developments in genetics, artificial intelligence, robotics, nanotechnology, 3D printing and biotechnology, to name just a few, are all building on and amplifying one another,” wrote World Economic Forum’s Klaus Schwab and Richard Samans. “This will lay the foundation for a revolution more comprehensive and all-encompassing than anything we have ever seen. …While the impending change holds great promise, the patterns of consumption, production and employment created by it also pose major challenges requiring proactive adaptation by corporations, governments and individuals.”


Maybe we can square the circle,” said Jean Claude Trichet, former ECB president.  

“[Plowz & Mowz] is truly the only on-demand snow plowing app on the market today,” said founder Willis Mahoney.  

World Economic Forum 


"The 30-year mortgage rate dropped 11 basis points to 3.81%, the lowest rate in three months," said Freddie Mac's Sean Becketti.


“QE has saved the world from deflation—from the Great Depression,” said George Soros. 


Harvard University Professor Kenneth Rogoff discusses the idea of negative interest rates used by central banks and the ability to fight inflation.


Monetary policy is “pushing on a string.”


In 2016, the federal budget deficit will increase, relative to the size of the economy, for the first time since 2009, according to the CBO estimates. 


The digital revolution’s “analog complements—the regulations that promote entry and competition, the skills to enable workers to access and then leverage the new economy, and the institutions that are accountable ot citizens—have not kept pace.”



“…[W]e can clearly see that no companies are able to cover all cash outflows at current oil prices,” wrote National Bank Financial’s analysts.


We’ve had a fundamental shift in the operating regime for oil production. 


“[J]unk yields just surpassed the all time highs set just after the Lehman bankruptcy.”


“The CFPB has issued what it calls a “fact sheet” regarding the disclosure of construction-to-permanent loans under the TILA/RESPA Integrated Disclosure (TRID) rule…,” wrote Ballard Sphar’s Richard Andreano. “The fact sheet falls far short of the detailed guidance sought by the mortgage industry. …The failure of the CFPB to provide written guidance on other aspects of the TRID rule has significantly contributed to the confusion and uncertainty in the industry regarding TRID rule requirements.” 



Quicken’s Rocket Loan qualifies a loan in less than 10 minutes.



“I believe those who look back on the events of our day will find that we are living through historic times, the magnitude and consequences of which we cannot even begin to appreciate,” said Representative Mac Thornberry (R-TX), chairman of the House Committee on Armed Services. “…[T]he stakes involved are enormously high. No one can take the place of the United States of America as the primary force for good in the world, yet history also teaches us that no power has prevented its eventual, sometimes sudden, decline.”


"This is a capital-preservation market, not a money-making environment. I think we're going to take out the September low of the S&P500."


"This is a capital-preservation market, not a money-making environment", said DoubleLine's Jeffrey Gundlach. "I think we're going to take out the September low of the S&P500."


Crude oil is trading at a 12-year low as Morgan Stanley predicts Brent may tumble to $20 a barrel.



Keep your eye on crude and WTI. If it breaks $32, hold on to your hat.


Ther rise of state-directed capitalism through regulation is reshaing the industry and dictating business models.


The big banks are government-sponsored entites," said Kroll Bond Rating Agency's Strategist Chris Whalen. 


Yale University Senior Fellow Stephen Roach discusses the turmoil in the Middle East.


"Given our views on credit contraction in Asia, and in China in particular, let's say they are going to go through a banking loss cycle like we went through during the Great Financial Crisis, there's one thing that is going to happen: China is going to have to dramatically devalue its currency,” said hedge fund manager Kyle Bass. “…If [their] labor arbitrage is gone, and the banking system has expanded 400% in 7 years without a nonperforming loan cycle, my view is we are going to see a non-performing loan cycle."


"The Fed ...front-loaded an enormous rally market rally in order to create a wealth effect... and an uncomfortable digestive period is likely now."


In the Territories of the U.S., Congress has the entire dominion and sovereignty, national and local, Federal and state, and has full legislative power over all subjects...


Sweden's Riksbank will "instantly intervene on the foreign exchange market if necessary …to safeguard the rise in inflation."



“Could negative interest rates be a policy response ...the Federal Reserve could ...employ in a future crisis?” asked Fed Vice Chair Stanley Fischer. “One possible concern the potential for destabilizing effects in money markets… Another concern is whether the complex and interconnected infrastructure supporting securities transactions in the U.S. financial system could readily adapt to a world of negative interest rates. …[T]hese... transitional problems ...might be sufficient to make a move to negative rates difficult to implement on short notice.”


CSpan interview with Lawrence Yun, National Association's Chief Economist and Senior Vice President



We see an extension of the business cycle as crucial for further gains in risk assets. With valuations no longer cheap and corporate profit margins under pressure in many markets, economic growth is needed to boost revenues. We expect little or no price appreciation in fixed income and only muted gains for most equity markets in 2016.

China’s economic deceleration and shift to a consumer-driven economy are putting the brakes on the global business cycle. Both are part of a natural evolution but pose structural challenges to emerging markets (EMs) and commodity producers. We expect China to muddle through. Risks, including a yuan devaluation, are rising — but we do not see them coming to a head in 2016.

The knock-on effects of movements in oil prices and the U.S. dollar are critical. Falling oil prices have dragged down long-term inflation expectations. This is puzzling and brings into question the credibility of central bank inflation targets. The dollar’s rise has led to some tighteningin financial conditions. Further gains would intensify pressure on U.S. profits, commodity prices and EM currencies.


Fed Governor Daniel Tarullo discusses bank regulation.


We’ll see a pretty big housing boom in the next five years because of the huge lag we had from 2007 to 2013. 


“We recognize that the mortgage industry needs to make significant systems and operation changes to adjust to the new requirements...,” wrote the CFPB. “…As with any change of this scale, despite the best efforts, there inevitable will be inadvertent errors in the early days. ...[T]he Bureau and the other regulators have made clear that [our] initial examination for compliance with the new rule will be sensitive to the progress industry has made. …All of the regulators have indicated that their examinations for compliance in the first few months of implementing the new rule will be corrective... rather than punitive.


Everything you need to know about TRID compliance, according to JPMorgan Chase. 


On January 4, Puerto Rico must pay about $1 billion to creditors, including $332 million in general obligation bonds. "It will be very, very hard, very difficult to find a way to do that payment," said Puerto Rico governor Alejandro Garcia Padilla. "We're out of cash." Experts say Puerto Rico will likely miss a payment on its general obligation debt at some point in the near future. "It's hard to say whether that happens January 1 or July 1 [of 2016], we definitely see that on the horizon," said Moody’s analyst Ted Hampton.


“There is an element of a cartel, which is no longer working—which is putting a good deal of pressure with any producer anywhere in the world…”


"We find that the CFPB as a regulatory policy conflicts with other government regulatory policies designed to encourage home ownership and access to financial products among the poor," wrote Robert E. Krainer, finance professor at the University of Wisconsin-Madison. "One possible solution to this contradiction in conflicting government policies is to carry out the social goal of housing for the poor within a government-sponsored enterprise much like the Federal Farm Credit System."


“[W]e cannot ignore the reality of a poor global growth trajectory, dogged by crashing commodity prices, a slowdown in China and new traumas in the speculative high-yield and emerging markets.”


Please join us in celebrating veterans home with a smooth transition to everyday life. Veterans need the best available assistance and resources we can provide. Go to to see how DAV, Disabled American Veterans, provides a lifetime of support for veterans and learn how you can support their homecoming, too. Thank you!


                               ...If only in my dreams.


David Kelly, J.P. Morgan Funds, and David Blitzer, S&P Dow Jones Indices, share their economic outlook for 2016


“The banking industry is not built for near-zero interest rates and so …is especially a steeper yield curve,” said Thomas Michaud, KBW President & CEO. 


“[The Fed’s reverse repo] worked as hoped for—as planned,” said former Dallas Fed president Richard Fisher. “…As you know, the total cap has been expanded capped at $2 trillion. Your number of $4 trillion of liquidity in the system—I actually personally believe that number is almost twice that, but we’ll see.  …This first day was a very important thing. …Now we’ll see how it goes forward.”



Silicon Valley is coming.

By 2020, there will be 80 billion connected devices worldwide. Imagine what more devices and more access will do for businesses and lives, closing the gap for the developing world and opening up new markets to new people. We’ll become even more dependent on them as our context-rich, vital virtual assistants, performing tasks we never could.

Uber and AirBnB are old-news disruptors, soon to be usurped by Apple’s ad blocking tools, 3D printing democratizing manufacturing (think microfactories), Hololens’ augmented reality device, collaborative work tools like Slack, and of course Amazon’s drone delivery. Key to making all of this work are our devices, they make IoT and Big Data possible.



"[U]nder the [Administrative State] system that is now emerging, the public is growing more and more frustrated," said Senator Sasse (R-NE). “They think that most of us [in Congress] will be reelected no matter what, and they think that the executive agencies that daily substitute rulemaking for legislating will promulgate whatever rules they want, no matter what, and that the people have no control.”


On June 30, 1.9 million modifications were active with 71.2% current, 23.6% delinquent and 5.2% on process of foreclosure.


  Timothy Mayopoulos, Fannie Mae CEO, 



Boots on the ground are necessary and rebuilding trust in the Middle East is key, according to Army Chief of Staff Ray Odierno.



“Things aren’t that great and the economy isn’t booming by any means,” said Jack Welch. “There were lots of excesses [with free money]. ...What happened with these low rates?  People either built capacity – China did in crazy fashion—or they bought back stock… And so you have these excesses. …So you have all this free money, people didn’t know what to do with it… and there’s not enough growth. …People are trying to keep cutting costs--that’s the only way they’re getting EPS up. …All this free money put money into the system, put behavior into the system. You asked if this forebodes a difficult time—I wouldn’t bet against it, I wouldn’t be against it." 


The U.S. economy lumbers along, …expand­ing in the growth channel centered around 2%—its home since 2010.



“What we’re seeing right now is the consequence of the Dodd Frank legislation and all the macro prudential policy, which is restricting the ability of the banks and the brokers to take on these [market] positions,” said Scott Minerd, Guggenheim Partners’ Chief Information Officer. “And so when you go to try to sell something, …it’s hard to find a bid.”



“It’s a general illiquidity moment, where the mutual funds and ETFs are looking forward to the next seven to fourteen days as we approach year end and building liquidity even in high quality assets.” 





EPRS | European Parliamentary Research Service

Author: Beatrix Immenkamp
Members' Research Service
PE 572.806 


From 2004 to 2013, an average of 83.4% of illicit financial outflows were due to the fraudulent misinvoicing of trade, a form of trade-based money laundering. 


"People expect somewhere in the vicinity of $50 trillion to be spent over the course of the next 30, 40 years [on clean, renewalbe energy],” said Secretary of State John Kerry. “That is going to be an enormous transformation of our economy and all to the better because it will reduce our dependency on foreign fuel, it will increase our security, it will provide for our environment, cleaner air, healthier, healthier people. They're just all kinds of pluses. And in the end it's going to be a job creator."


“There is hope,” wrote Investor Business Daily’s Andrew Malcolm. “There is [Senator] Ben Sasse. …He's a 43-year-old freshman GOP senator from Nebraska, a historian and father of three home-schooled children. …Watch Ben Sasse in the video [here]. He's not running for anything. He voices precisely what so many of us have been thinking and fearing and, occasionally, hoping. Many in Washington will not like what he says. Good! He's a fellow American, simply laying out in clear, unvarnished candor the facts of where we as a nation are. In danger, serious long-term danger.” 


"We had a 50-50 [rate rise] setup at the short-end [of the bond market] a few weeks ago, and now it's up to around 70%, which I think is right on the knife's edge."


“The CFPB purports to provide a basis for overturning this longstanding consensus support for arbitration,” wrote Mercatus Center’s Jason Johnston and Todd Zywicki. “Contrary to Bureau Director Richard Cordray's assessment, however, the CFPB's work is not ‘the most rigorous and comprehensive study of consumer finance arbitration ever undertaken.’ The [CFPB’s] study is riddled with methodological flaws and does not provide evidence supporting a ban on mandatory arbitration. Instead, the study shows that arbitration works for consumers." 




The federal government owns 640 million acres—33% of the United States’ 2.27 billion acres. 


ISIS is a “far more serious” threat than al Qaeda, according to former CIA Acting Director John McLaughlin. ISIS has five things that al Qaeda doesn’t have, including (i) territory that allows them to claim a caliphate; (iii) financial resources totaling an estimated $500 million to $1 billion; (iii) access to 4,500 western fighters, who move freely throughout the world; (iv) a powerful caliphate narrative; and (v) social media reach—“the engine on which they ride.”


ISIS will also continue to use its global network to inspire and possibly resource terror attacks in other Western countries, including the United States.



“…[T]he tentacles of ISIS now are not only in Europe but also in the United States of America,” said Rep. Michael McCaul (R-TX), chairman of the House Homeland Security Committee. “…I wanted to tell the truth to the American people about what the threat really is and what the threat itself is, and that's radical Islamist terrorism.  It does exist in the United States. We didn't see this one coming. There were no warning signs or flags. And we need to do a better job identifying the signs of radicalization from within the United States.”


"If we're in a technologically driven deflationary market, I think you'll see it last longer than people think. And that's why I think you'll see rates stay low for a long period of time,"


The Mortgage Bankers Association urges FHFA to require Fannie and Freddie "to move a meaningful extent of their mortgage credit risk to up-front transactions." 


“…[T]he Puerto Rico Government Development Bank …made a $355 million Dec. 1 debt service payment from money that it did not have on its balance sheet,” wrote Cumberland Advisors’ analysts. “The governor, by executive order, authorized the clawback of revenues from other issuing entities to meet certain Commonwealth-guaranteed debt-service obligations. This starts a moral equivalency argument over who should get the funds that are available to make payments to this or that issuing entity within the Commonwealth.”


By 2017, the balance sheet of EBC could reach 14% of the global Eurozone GPD.

The IG's audit report found "nine material weaknesses, eight significant deficiencies in internal controls, and six instances of noncompliance with applicable laws and regulations."

“France’s economic growth remains anemic, the unemployed and many Muslims are disaffected, and [the] far-right National Front is likely to do well in the upcoming regional elections,” wrote economist Nouriel Roubini. “In Brussels, which [is] semi-deserted and in lockdown, owing to the risk of terrorist attacks, the [EU] institutions have yet to devise a unified strategy to manage the influx of migrants and refugees, much less address the instability and violence in the EU’s immediate neighborhood. …[I]n London, there is concern about negative financial and economic spillover effects from the monetary union."


The Amazon Drone has a 15 mile range and uses "sense and avoid" technology to detect and avoid obstacles on the ground and in the air.


Quicken empowers homebuyers and homeowners to control and customize entire mortgage process, from application to closing, all online at unprecedented speed 


“Despite significant changes in the regulation of [CDS], …there remain a number of defects in the market structure of OTC credit derivatives, flaws which arguably intensified the impact of the 2008 financial crisis and disadvantage both borrowers and investors,” wrote Kroll Bond Rating Agency's Chris Whalen. “These defects in market structure limit competition, make it difficult for investors to understand the risks taken by large universal banks, create the potential for the manipulation of borrower credit spreads, and even affect the recognition of when default events occur under CDS contracts.”


While the payments industry is expected to keep growing at a healthy rate, powerful disruptive forces will begin to reshape the global landscape


Excerpts from the Real Time with Bill Maher 


We urge the Obama Administration to recapitalize Fannie Mae and Freddie Mac, institute a capital restoration plan, and end their conservatorship during their remaining months in office. 



"This has gone on too long now,” said Senator Dianne Feinstein (D-CA) on CBS' Face the Nation. “And it has not gotten better. It's gotten worse. There may be some land held by ISIL in Iraq and Syria that's been taken back. But for all of that there's much more they have gained in other countries. …I don't think the [administration’s] approach is sufficient to do the job…I'm concerned that we don't have the time—and we don't have years. We need to be aggressive now. …And we're not crying wolf. There's good reason for this. And people are dying all over the world.”



“At the heart of this report is the role of race in Baltimore ….[where] majority black neighborhoods are consistently excluded from lending activity.”


“Some [FOMC] participants thought that the conditions for beginning the policy normalization process had already been met,” according to the Committee minutes. “Most participants anticipated that ...conditions could well be met by the time of the next meeting. Nonetheless, they emphasized that the actual decision would depend on the implications for the medium-term economic outlook of the data received over the upcoming intermeeting period." The participants largely agreed that the pace of rate increases would be gradual.


 Ultimately, QE did little good and likely sowed the seeds for future economic problems. 


“What happened in Paris is pure evil. …It’s clear that this was an act of war, and that the world needs American leadership.”


More than 250 individuals from the U.S.have joined or attempted to fight with extremists in the conflict zone.



"I have never been more concerned. I read the intelligence faithfully. ISIL is not contained. ISIL is expanding. They've just put out a video saying it is their intent to attack this country."


The United States supported the IMF staff’s recommendation to bestow reserve-currency status on China’s yuan (or renminbi) by adding the currency to the SDR basket. "We intend to support the renminbi's inclusion in the Special Drawing Rights basket provided the currency meets the International Monetary Fund's existing criteria," said the U.S.Treasury Department. "We will review the IMF's paper in that light." The IMF board is expected to approve the IMF staff's  recommendation at its November 30 meeting.


ISIS is a much bigger threat than we’ve ever faced from Al Qaeda. 


DealBook Conferecne 2015.


A closer look at America's Economic Output


“We’re back to this divergence theme,” said  BlackRock's Jeff Rosenberg  “…Clearly Europe is moving in the opposite to the Fed,  that’s pushing additional pressure upwards on the dollar.”


In memory of those who made the ultimate sacrifice...

"We WILL always remember. We will always be proud. We will always be prepared, so we may always be free." 

President Ronald Reagan
June 6, 1984




“The growth of the administrative state, the fourth branch of government, is increasingly hollowing out the Article I branch, the legislature — and many in Congress have been complicit in this hollowing out of our own powers,” said Senator Ben Sasse (R-NE). “So would anything really be lost if we doubled-down on Woodrow Wilson’s impulses and inclinations toward administrative efficiency by removing much of the clunky-ness of legislative process?”


“Your guidepost stands out like a tenfold beacon in the night: Duty, Honor, Country.”

General Douglas MacArthur
May 12, 1962


"The 2008 financial crisis didn't come from nowhere. It came, in my opinion, from the socialization of credit risk and from the manipulation of prices."



“When our modern financial system can no longer find profitable outlets for the credit it creates, it ... slow[s] and begin[s] to inhibit economic and profit growth in the overall economy."



ZIPR creates "a misallocation of resources,” said Stanley Druckenmiller"The chickens will come home to roost.”


“When our modern financial system can no longer find profitable outlets for the credit it creates, it has a tendency to slow and begin to inhibit economic and profit growth in the overall economy,” wrote Janus Capital’s Bill Gross.


 JPMorgan Chase, Bank of America and Citigroup are among eight large U.S. banks.


Five years ago, we did not have a mobile offering,” said Wells Fargo’s John Stumpf. “Today, over half of our customers are mobile and—not only are they mobile—it’s the number one predominate channel. If we weren’t in the mobile business, we would be out of business. So that happened in five years. Our industry hasn’t changed that much in the last 500 years. Today, we have to be real time, digitized, using data, mobile and have to provide intelligent solutions to people on the go. It [has] changed so rapidly.”


We are heading toward the T-junction.  The road we are on is going to end. We cannot rely on central banks.


Chase Pay app, created in a new partnership between JPMorgan Chase and MCX, will be available by mid-2016 for use for in-store, online and in-app purchases. 



“NASDAQ can now clear and settle trades on the exchange in ten minutes or less,” wrote Chris Skinner on Financial Services Club Blog. “Most exchanges clear and settle in days. How can NASDAQ do this in minutes? On the blockchain of course. Working with Chain, ...NASDAQ has created a clearing and settlement system that can process private market trades in ten minutes. What does this mean for the DTCC, Euroclear, TARGET2 and the other CCP and CSD systems? …[T]he DTCC might survive for a while but, long-term, blockchain will fundamentally alter financial structures."


Between 1950 and 2000, the U.S. economy grew at an average annual rate of 3.7%. It was a growth rate strong enough to build and sustain the world’s largest middle class. By 2000,median household income in America stood at $57,730 in 2014 dollars—an all-time high. But starting in 2001, U.S. economic growth shrank to an average annual rate of 1.9%. In only two of the last 14 years has growth exceeded 3% and not once since 2005. This is the longest period of prolonged slow growth in at least a century. By 2014, median household income stood at $53,900—a 5.9% decline from the peak.


Ebrahim Rahbari, Citigroup global markets economist, discusses the outlook for global economic growth. 


“[I]n order to ensure the best path forward for increasing homeownership in the communities we represent, we believe it is vital to initiate serious discussions about unwinding the conservatorship and allowing Fannie and Freddie to begin rebuilding their capital,” wrote the The Leadership Conference on Civil and Human Rights. “Both agencies have become profitable, and could remain so while still giving the taxpayers a large return on the government’s investment. ...Fannie and Freddie can be fixed; discarding them in entirety would be a colossal mistake."



“The Fed is definitely not helping [the market’s anxiety],” said Louis Crandall, Wrightson Iap chief economist. “The key point here is that the amount of anxiety that they’re inducing about this is wholly disproportionate to the economic impact of a quarter point move. That in fact, getting that quarter point move out of the way—and the first move really is important, because it reaffirms to the market that the Fed can move someday. It takes out the tail notion that you’ll never get a Fed move.”


A Virtual Town Meeting wth HUD Secretary, Julian Castro


“Low oil prices have kept inflation down, allowing the Fed to continue stalling on a normalization of U.S. interest rates,” wrote EurPacific Capital’s John Browne. “A rise in oil prices likely would result in increased inflation [and] would remove a crucial public excuse, enabling the Fed to justify zero interest rates. …A higher oil price leading to inflation may provide such pressure if not to the Fed directly, then to international bond markets. A market-triggered interest rate increase likely would do damage to the credibility of the Fed, the international monetary system and to the current [inflated] prices of financial assets…”


“[E]conomists across the ideological spectrum have paid little attention to the links between household family structure and the macroeconomic outcomes of nations, states, and societies,” according to a new AEI Report. “This is a major oversight because, as this report shows, shifts in marriage and family structure are important factors in states’ economic performance, including their economic growth, economic mobility, child poverty, and median family income.”


“[A]mong the 25 new [HMDA] data requirements are the (1) applicant/borrower’s age; (2) total loan costs or total points and fees; (3) origination charges; (4) discount points; (5) interest rate; (6) prepayment penalty term; (7) applicant/borrower’s debt-to-income ratio; (8) loan-to-value ratio; (9) introductory rate period; (10) non-amortizing features; (11) applicant/borrower’s credit score; (12) property value; (13) application channel; (14) NMLSR ID of the originator; and (15) name and result of the automated underwriting system used,” wrote Morrison & Foerster LLP. “...[T]he final rule ...modifies the collection of data related to the ethnicity and race of the ...applicant.”


“Some form” of artificial intelligence will power the next revolution in computing.


“We’re in the bottom of the first, …so there’s a lot we don’t know.”



"[T]he language of the new Framework is ambiguous enough that one may have to rely on the GSEs’ apparent spirit of good intentions rather than the precision of their language to take total comfort in the changes." 


The European Commission announced that the European Program for Employment and Social Innovation and six microfinance institutions are signing guarantee agreements.  The European Commission will contribute €17 million to the guarantees, which is expected to result in microloans worth €237 million through 2020.



Mario Draghi, the president of the European Central Bank, signaled he is prepared to cut interest rates and step up quantitative easing to stave off the risk of a renewed economic slump in the Eurozone. “They think [Draghi] is committed, said UBS Art Cashin. “If he’s committed, it’s going to be much harder for the Fed to move [rates up]. So all in all, everyone is feeling pretty good about things …For now, there is joy in Mudville, Mr. Draghi brought it in today.”


"We punish the whole for the actions of a few with these rules and disenfranchise self-employed borrowers."


"The economy is economically strong, but it’s regional. The biggest risk to the U.S. economy is what’s happening outside the U.S."




"The 2012 amendment to the GSEs’ conservatorship financing, which sweeps all the GSEs’ income to Treasury, has only increased the risks to the GSEs, to affordable housing and to the probability they will again require Treasury support," wrote Graham Fisher's Josh Rosner. "By building capital they would avoid future draws against Treasury -- that is the purpose of retaining capital. If Treasury truly has concerns about the prospects of the GSEs drawing on the Treasury lines then they should amend the terms to calculate the “sweep” on an annual rather than quarterly basis."




“Returns have been pushed down… because we have been systematically subsidizing borrowers at the expense of savers,” said Wilbur Ross. 


This is a very detailed Roadmap that tracks all of the legislative initiatives that are pending in the U.S. Congress.

As you will see, there is shortage of ideas to both reform the new consumer protection agency, as well alter the laws that it administers.

This is a Working Document, so it will be updated from time-to-time as additional legislation is introduced and considered.

Since this is a lengthy document, the cover page has instructions on how to navigate this Roadmap.  There is also a Table of Contents that we hope will be useful to you, as well.




“There are structural drivers of deflation—not just in Europe but everywhere."


"As part of our next steps, we want to refine and further standardize the Enterprises' debt, reinsurance and upfront offerings," said Federal Housing Finance Agency Director Mel Watt. "This will help broaden liquidity. We will continue to work with the Enterprises on other innovative transaction types, such as credit-linked notes. We will also aggressively continue our work to analyze, assess, and define upfront credit risk transfers. We are committed to engaging stakeholders as part of this process."



"Silicon Valley is coming." Jamie Dimon,Letter to JP Morgan Chase shareholders April 8, 2015.





“Blockchain technology is presenting a very rare opportunity to address current payment constraints,” wrote BNY Mellon. "And were the challenges of making blockchain technology a tangible concept overcome, banks and fintech companies could radically transform global payments. …[B]y leveraging such technology to make cross-border payments immediate, cost-effective, completely transparent and risk free from a regulatory perspective, payments will become truly revolutionized. Blockchain technology has the potential to unleash this new payments world…”


“As things continue to globalize, which they will, and as emerging markets continue to grow, which they will, that business is going to remain strong and growing …for the foreseeable future,” said former Citigroup Chairman Richard Parsons. “But the real issue is the convention banking. It’s very tough to be in that business in a zero interest rate environment. …It’s tough when you can’t get a fixed margin—what you lend at in terms of what you’re taking in—in a zero environment.”


“The concern here is not so much that we’ve slipped into a recession, but that this recovery—this takeoff—is still around stall speed,” said UBS’s Art Cashin. “We haven’t gotten a trajectory to take us up. So people are concerned that you get the wrong bump in the road and you might accidently slip back toward a recession. …The Fed pretty much has painted itself into a corner. It’s missed its opportunity [to raise rates]. …I think [the FOMC is] beginning to lose out on the hope of doing anything this year.” 


Short-term good habits are not translating to long term stability.


“The world’s just so doggone different today than it was 10, 15, or 20 years ago,” said GE’s Jeff Immelt. “I would say no matter what you’re running, you control fewer things. And so you need to be more resilient. Jack [Welch] was a great CEO, but he really controlled his world. It was a centralized kind of command-and-control company. Those days are over. I’m in the risk-management business. Governments are more active. The world is more difficult. You’re not in the control business today, you’re in the risk-reward business.”


 “To stay here [ZIPR] would a mistake of historical proportions.”


The emission scandal may pose “an existence-threatening crisis for the company,” said VW AG’s designated chairman Hans Dieter Poetsch. 


This is the October 11, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The Small Business Lending Fund released its October 2015 quarterly report showing that as of June 30, 2015, participants had increased their small business lending by $14.8 billion over a $30.0 billion baseline, a $625 million decrease over the prior quarter, largely due to participants leaving the program.





Crude to climb to $70?




“It’s going be awhile [before GSE reform is passed]—it’s not going to happen in the next year and four months,” said Senator Bob Corker (R-TN)


“I think as a nation—particularly as it relates to housing—we’re going through a pretty serious change in the definition of what’s appropriate and what works,” said Sam Zell, chairman of Equity Group Investments. “I would call it a de-suburbanization of America. …Today, particularly with the deferral of marriage, the demographics are changing [and] the cities are becoming much more urbanized. Here we are in the eighth year of the recovery, we’re still building only 50% of the houses that we’ve built on average for the last 50 years.”


Richard Fisher, Former Dallas Fed CEO and Barry Sternlicht, Starwood Capital CEO weigh-in.


Global real GDP grew 3.4% in 2014 and is forecast to grow only 3.1% this year, according to the IMF. Growth is expected to rebound to 3.6% in 2016. “Despite considerable differences in country-specific outlooks, the new forecasts mark down expected near-term growth marginally but nearly across the board,” said Maurice Obstfeld, the IMF Economic Counsellor and Director of the Research Department.. “Moreover, downside risks to the world economy appear more pronounced than they did just a few months ago.”



“We’re looking at the QE infinity scenario, where central bankers are going to own more and more of capital markets.

Should somebody have gone to jail? "Yeah, I think so," said Ben Bernanke.

"The low homeownership rate among Millennials is still something of a puzzle—it cannot be explained solely by the increase in student loan debt,” said Sean Becketti, Freddie Mac’s chief economist. “However student debt plays a role—higher balances are associated with a lower probability of homeownership at every level of college and graduate education. ...[R]ecent data has confirmed that not all student debt is created equal. …Moreover, a change just this month in [FHA] policy will make it more difficult for some student loan borrowers to qualify for a mortgage."


This is the October 4, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • On September 29, 2015, Treasury, the Education Department, and the CFPB announced joint student loan servicing principles.  They call for: 
    • Consistent requirements for timely service, payment processing, servicing transfers, information requests, error resolution, and disclosure of borrower repayment options and benefits.
    • Information servicers provide should be accurate and actionable.

o   Servicers should be accountable.

o   Private and federal loan servicing information should be public regarding loan origination, loan terms and conditions, borrower characteristics, portfolio composition, delinquency and default, payment plan enrollment, utilization of forbearance and deferment, the administration of borrower benefits and protections, and the handling borrower complaints. 

  • OCC released its Mortgage Metrics report for the second quarter of 2015, showing:
    • 93.8% of mortgages included in the report were current and performing at the end of the quarter, compared with 92.9% a year earlier. The percentage of mortgages that were 30 to 59 days past due was 2.2% of the portfolio, a 7.9% decrease from a year earlier. Seriously delinquent mortgages—60 or more days past due or held by bankrupt borrowers whose payments are 30 days or more past due—made up 2.6% of the portfolio—a 16.0% decrease from a year earlier.  Mortgage performance declined slightly from the previous quarter, consistent with observed seasonal trends.
    • Foreclosure activity among the reporting servicers also declined from a year ago.  The number of mortgages in the process of foreclosure at the end of the second quarter of 2015 was 299,500, a decrease of 23.5% from a year earlier. The percentage of mortgages within this portfolio that were in the process of foreclosure at the end of the second quarter of 2015 was 1.4%.  Servicers initiated 70,728 new foreclosures during the quarter, a decrease of 11.3% from a year earlier.  The number of completed foreclosures decreased 23.4% from a year earlier to 37,275.  Improved economic conditions and foreclosure prevention assistance contributed to the decline in foreclosure activity.
    • Servicers implemented 179,382 home retention actions during the quarter—including modifications, trial-period plans, and shorter-term payment plans.  More than 86% of modifications made during the second quarter of 2015 reduced monthly principal and interest payments; 52.0% of modifications reduced payments by 20% or more.  Modifications reduced payments by $245 per month on average.
    • Servicers implemented 3,747,455 modifications from January 1, 2008, through March 31, 2015.  Of these modifications, 52% were active at the end of the second quarter of 2015, and 48% had exited the portfolio through payment in full, involuntary liquidation, or transfer to a non-reporting servicer.  Of the 1,943,467 active modifications at the end of the second quarter of 2015, 71.7% were current and performing, 22.8% were delinquent, and 5.4% were in the process of foreclosure.
  • FHFA released its Foreclosure Prevention report for the second quarter of 2015, showing:
    • The GSEs helped 3.541 million troubled homeowners helped during the GSE conservatorships.
    • The REO inventory of Fannie Mae and Freddie Mac declined 14% during the second quarter to 86,515, marking the first time REO inventory has been below 100,000 since 2009.
    • The number of 60+ day delinquent loans declined another 6% during the quarter.
    • Approximately 31% of all permanent loan modifications in the second quarter helped to reduce homeowners’ monthly payments by over 30%.
    • The serious delinquency rate of Fannie Mae and Freddie Mac loans fell to 1.6% at the end of the second quarter.


  • The SSBCI released a report for the quarter ending June 30, 2015. Congress enacted this program in 2010. The report shows:
    • Through June 30, 2015, states drew $1,175,906,190.  Of this total, $1,081,082,235 was from original SSBCI allocations and $94,823,955 was from recycled SSBCI funds.  Recycled funds are funds from program income, interest earned, or principal repayments.
    • As of June 30, 2015, $1,261,421,194 out of $1,456,685,731 or 87% of total allocated funds was disbursed to the states.
    • SSBCI will sunset in 2017.  The President’s 2016 budget proposes to extend the program with $1.5 billion in funding.
  • On September 30, 2015, the European Commission proposed securitization legislation to require 5% risk retention, institutional investor due diligence, and originator disclosure requirements.





The banking industry is less than a week away from compliance deadlines for rules that completely change all residential mortgage origination disclosures and the systems which generate and track them.


The banking industry is less than a week away from compliance deadlines for rules that completely change all residential mortgage origination disclosures and the systems which generate and track them.


"I think the world economy is bearing the brunt of the third wave of deflation in a decade. The first wave of deflation was the U.S. financial crisis of ’08’-09. The second wave of deflation was the Eurozone crisis of ’11-’12. This is the third wave, and its very much-centered around emerging markets. And, we’re seeing both a price shock, in terms of commodities, and we are also seeing a volume shock. I think the volume shocks are coming thru in the PMIs. We are probably quite close to a manufacturing recession in the world. And, we're seeing it work through cyclical components of the stock market. The one thing I’m not worried about is inflation."

Dominic Rossi

Global CIO of Fidelity Worldwide Investment

September 22, 2015


Developing Asia is expected to continue to be the largest contributing region to global growth despite the moderation, but there are a number of headwinds in play such as currency pressures, and worries about capital outflows. In order to be resilient to international interest rate fluctuations and other financial shocks, it is important to implement macro prudential regulations that, for some countries, may entail some capital flow management such as limiting reliance on foreign currency borrowing.

Shang-Jin Wei

ADB Chief Economist

September 22, 2015


In my view the global EM FX storm is not over. As we are just in the eye of the storm some market participants might have falsely thought that some days of lower volatility and EM relief are leading us “to a sustained EM FX rally”. But the storm is not over yet and will reintensify over the next couple of weeks with significant volatility and major declines for high yielding EM FX. The Brazilian Real, Chilean Peso, South African Rand and Turkish Lira will suffer most in this environment.

Bernd Berg

Societe Generale Strategist

September 22, 2015


"As you move from 1,000 devices when Cisco was founded to 14 billion today to 500 billion in 15 years, this will transform every company," said John Chambers, Cisco's executive chairman. "More than 40% of the companies that you deal with and follow in the market won't exist in a meaningful way in 10 years. The CEOs know that. Every company is going to go digital. ...As every company goes digital, it means you will become a technology company first..."


In a 15-minute video, billionaire investor activist Carl Icahn outlines his concerns about U.S. Federal Reserve, warning about the unintended consequences of ultra low interest rates on the economy and financial markets. Icahn discusses the dangers of low rates causing asset bubbles, herding behavior in the stock market, the unintended consequences of financial engineering, fake earnings reported by companies, too high corporate taxes and lack of leadership in Washington. "God knows where this is going,he said. “It's very dangerous and could be disastrous."


The Final Framework includes a definition of “Virtual Currency,” a general policy statement, a statement of covered and excluded activities, and a set of nine regulatory requirements. 


“That future should begin with a decision to break the [Postal Service] into two separate entities,” wrote Brookings’ Elaine Kamarck. “One organization should be a public sector organization with the sole mission of delivering on the universal mandate… The other organization should be privatized... This new organization should be allowed to compete with similar organizations in the private sector if and only if the subsidy issue can be worked out so that the new competitor does not have an enormous and distorting market advantage and if it is managed by people with private sector experience."


TechRepublic, Steve Ranger


Prepared by forensic accounting professor Dr. G. Stevenson Smith, Adam Spittler and Mike Ciklin


Attached please find an updated Roadmap to the Dodd-Frank Act Rulemakings, Studies, and Reports.

  • The CFPB announced it released a Settlement Cost Booklet in Spanish.
  • The CFPB finalized an amendment to its definitions of small creditor and rural and underserved areas, for purposes of exemptions from mortgage rules.
  • The CFTC proposed to amend its definition of “material terms” for purposes of swap portfolio reconciliation.
  • The SEC finalized a rule to remove credit rating references from its rule 2a-7, the principal rule that governs money market funds.



Canfield Press



“The fragility [of the global balance sheet] is just that we’ve come through a horrific crisis and we’re still stuck to a large extent with the debt that was piled on both before and after the crisis,” said Yale University Senior Lecturer Stephen Roach. “The world has yet to come to terms with this debt one way or another. Central banks are finessing that problem by subsidizing the cost of that debt servicing costs through zero interest rates.”


"They are in a monetary roach hotel, and they will never be able to raise rates back up."


“The FOMC gets too much attention,” said Robert Schiller. “This idea of whether they raise now or in December was over [reported]. …We should thank [the central banks] for averting a depression in 2008. On the other hand, we’re still suffering. I think some kind of fiscal stimulus would be appropriate. We’re in this funny situation of a weak economy and high asset prices. …There’s an old idea...called the Public Works, [that was used] to plan ahead for the next recession. The problem is it’s hard to do physical stimulus because you can’t start these projects instantly. You have to have a plan for it. One name for it is an Infrastructure Bank.”


“Housing is local, but credit is national,” said Johnathan Miller, president and CEO of Miller Samuel. “…It really is creating this disconnect between what the consumer needs and what actually can be built. [Policy can change this] only if it targeted for economic fundamentals like better employment, wage growth and household formation. Aside from that, we really are seeing the results of policy that has been set—the low rate policy that has created the distorting in the housing market.”


Attached please find the September 21, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

o   From 2012 through mid-2015, the GSEs invested $146 million in CSS.  The company currently relies on GSE resources, including employees.  CSS plans to convert the employees to CSS employees and to stand up its own corporate functions, in the first half of 2016.  CSS will continue to purchase certain services from the GSEs.

  • The CSP has five modules:
    • Module 1:  Data Acceptance.  Upon receipt of a securitization request, the Data Acceptance module will endeavor to validate it.  The GSE will have an opportunity to correct any errors.
    • Module 2:  Issuance Support.  After validation, the Issuance Support module will send data on the security to the NY Fed or DTCC, who will register the security in its system and broadcast summary information to market participants, typically two days before the security will be issued.
    • Module 3:  Master Servicing Operations.  Completion of Module 3 and decisions on its use have been deferred until after the GSEs begin issuing Single Securities.  The GSEs will continue to validate all loan-level data submitted by servicers, and sending validated loan-level data to CSS for the use of the Bond Administration module.  Deferring the implementation of the Master Servicing Operations module reduces the scope of the CSP initiative in the near term so that CSS and the GSEs can focus on preparing for the issuance of Single Securities.  The GSEs and FHFA will later determine if and when the module will be used.
    • Module 4:  Bond Administration.  This module will calculate pool factors for first-level securities and bond factors for second- and third-level securities and release the factors to the market.  For third-level securities, the module will use industry-standard software to track and forecast multi-class payments.  Each quarter and each year the module will perform appropriate tax reporting to investors and the IRS.
    • Module 5:  Disclosure.  The Disclosure Module will produce loan- and security-level disclosures before the issuance of a security, and monthly throughout the life of the security.  Data files will be released for use by data vendors.
  • FHFA anticipates a 2016 announcement of initial use of Release 1, by which Freddie Mac will use the Data Acceptance, Issuance Support, and Bond Administration modules to perform activities related to its current single-class, fixed-rate PCs and Giant PCs.  Release 1 will require the CSP to support data processing for approximately nine million mortgage loans, 500,000 pools, and 250,000 securities.  Release 2 will allow both GSEs to use those same modules to perform activities related their current fixed-rate securities, both single- and multi-class; to issue Single Securities, including commingled re-securitizations; and to perform activities related to the underlying loans.  Release 2 will also allow Fannie Mae to use the CSP to issue and administer mortgage securities backed by ARM loans.
  • Today, neither GSE can issue second- or third- level mortgage securities backed by commingled first-, second-, or third-level securities issued by both GSEs.  That capability is critical to achieving the Single Security initiative’s objective of enhancing the liquidity of the secondary mortgage market.  A first-level mortgage security is collateralized by a single pool of mortgage loans with one class of investors.  A second-level security is collateralized by previously issued first- or second-class securities, with one class of investors.  A third-level mortgage security is a multi-class security collateralized by a group of previously issued first-, second-, or third-level securities.
  • The software design principles include:
    • Open architecture, so the GSEs and CSP users will be able to integrate their IT platforms and exchange data with the CSP using MISMO and other industry data standards.  
    • Functional modularity, so that modules can be modified, configured, or replaced, or that new functionality can be added to a module, with reduced impact on any of the other modules or on the CSP as a whole.
    • Scalability, so the CSP will be capable of performing well at steadily increasing volumes.
    • Data transparency to allow changes in the data on individual loans and securities to be traced throughout the securitization lifecycle.
    • Event automation and straight-through processing, by which defined events trigger further data processing by a separate part of the software that can be called upon when needed.
  • In a second quarter MHA Report, Treasury projects step increases for HAMP modifications:
    • 83% of HAMP Tier 1 homeowners will experience an interest rate increase after five years.
    • The first interest rate increase went into effect in Q3 2014 for the earliest group of HAMP modifications, who will begin to experience their second interest rate step-ups beginning in Q3 2015.
    • Through June 2015, approximately 200,000 homeowners have experienced an interest rate step-up.  Based on early results, the rate increase does not appear to have an impact on the performance of these modifications.  The percentage of modifications disqualifying in the month following the reset remains consistent with the months leading up to the reset, at less than or equal to 1%.
    • The majority of HAMP homeowners will experience two to three interest rate increases.
    • Homeowners who received a modification in 2009-2011 are more likely to experience three to four increases than homeowners who received a modification in 2012-2013, most of whom will experience two increases.
    • The median amount of the first monthly payment increase is $94, and the median monthly payment increase after the final interest rate increase is $210.



Canfield Press




: “America has the best hand ever dealt right now—ever…” 


"Cultural battles are the power battles of the Information Age,” wrote Manuel Castells. “They are primarily fought in and by the media, but the media are not the power-holders. Power, as the capacity to impose behavior, lies in the networks of information exchange and symbol manipulation, which relate social actors, institutions, and cultural movements, through icons, spokespersons, and intellectual and cultural amplifiers. …Culture as the source of power, and power as the source of capital, underlie the new social hierarchy of the Information Age."


“I don’t care whether they raise 25 basis points,” said Ray Dalio, founder of Bridgewater Associates. “What scares me, or what worries me, is what the next downturn in the economy looks like, with asset prices where they are and a lesser ability of central banks to ease monetary policy." Dalio predicts that returns across asset classes will range from 3% to 4% over the next decade, making it much harder for central banks’ asset purchases to have a big effect on the market. 


Attached please find an updated Roadmap to the Dodd-Frank Act Rulemakings, Studies, and Reports.

  • The CFTC proposed clarifying amendments to its rules on swap data recordkeeping and reporting requirements for cleared swaps.
  • The SEC proposed a rule requiring security-based swap data repositories to make data available to certain regulators and other authorities, and would set forth a conditional exemption from the statutory indemnification requirement associated with that regulatory access provision.
  • The SEC released its final pay ratio disclosure rule.
  • The SEC proposed a rule by which a security-based swap entity can apply to the SEC for an order permitting an associated person who is subject to a statutory disqualification to effect or be involved in effecting security-based swaps on behalf of the entity.


Canfield Press



Columbia Global Reports.  


“We’re gratified that CSBS wants to take an apple-to-apples approach when it comes to digital currency companies and traditional money transmitters,” wrote Coin Center’s Peter Van Valkenburgh. “We’re happy they do not intend for states to regulate the oranges of this highly innovative space… But, and this is a large and unfortunate but, we are disappointed that the specific language of the model framework...—while broadly promising to follow the sensible approach for which we’ve advocated—contradicts its own stated intentions.


CoreLogic's outlook for U.S. economic growth in September 2015.


Wild market volatility and capital outflows from China are warning signs that the massive build-up in credit is coming back to haunt, according to BIS chief economist Claudio Borio. “This is also a world in which interest rates have been extraordinarily low for exceptionally long and in which financial markets have worryingly come to depend on central banks’ every word and deed, in turn complicating the needed policy normalization,” said Borlo. “It is unrealistic and dangerous to expect that monetary policy can cure all the global economy’s ills.”





Mohamed El-Erian, Allianz Chief Economic Adviser.



“[T]he U.S. home buyer has become quite diversified, including a rising number of foreign born and far more DINK (double income, no kids) and single female home buyers than ever before,” wrote John Burns, president of John Burns Real Estate Consulting. “Urban homes and homes closer to work have appreciated much faster... High-LTV programs have played a huge role in the housing recovery.” 


Kroll Bond Rating Agency.


“I am ...determined vigorously enforce the Fair Housing Act with every tool at my disposal—including challenges based on unfair and unacceptable discriminatory effects, particularly now that the Supreme Court has vindicated our position that the Fair Housing Act encompasses disparate impact claims,” said AG Lynch. “...I am proud to support the HUD’s new rule on Affirmatively Furthering Fair Housing, which is a crucial step toward ending historic patterns of segregation and removing disparities based on race, color, religion, sex, familial status...”


In fact, any emerging market trying to defend its currency (admittedly not a lot of those right now) must do the same. 


“The market’s fixation with the FOMC and what it will or will not do with interest rates has been a distraction from the central issues of excessive debt and flat to no income growth, the enduring legacy from the 2008 crisis,” wrote Chris Whalen, Senior Managing Director for Kroll Bond Rating Agency. “We believe that weak growth and excessive debt levels will continue to cause volatility in credit markets that are operating under a number of structural constraints, many of them the result of new regulations and capital requirements.” 




This is the September 6, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • GAO released a report on Treasury implementation of GAO’s TARP recommendations. The report states that Treasury has implemented most of the recommendations, but needs to take more action on four partially implemented recommendations related to the Making Home Affordable (MHA) program. The recommendations call for Treasury to issue guidance and monitor servicer compliance on working with borrowers with limited English proficiency.  Treasury issued applicable guidance and obtained the policies of the larger MHA servicers, but has not assessed the implementation of those policies at the servicers.  Treasury has not taken steps to implement three recommendations, including one directed at CPP and two at MHA.  For example, in July 2015, GAO recommended that Treasury establish a standard process to better ensure that changes to TARP-funded MHA programs are based on comprehensive benefit-cost analyses.  Treasury told GAO they would consider these recommendations at the time the recommendations were made.


  • The Federal Reserve and OCC announced their approval for Bank of America to begin using the advanced approaches capital framework starting in the fourth quarter of 2015.  Approval requires a bank to conduct a satisfactory trial run of the framework and comply for at least four consecutive quarters.  Banking organization who use the advanced approaches framework must meet the minimum risk-based capital ratios under both the advanced approaches and the generally applicable risk-based capital frameworks.





The Miliken Institute, September 2015


“HUD’s reform is to provide servicers with more accrued interest if they do not foreclose fast enough, unless, of course, HUD invalidates the whole insurance policy—the loss of both principal and interest—by virtue of HUD’s subjective definition of unreasonable delays,” wrote K&L Gates’ Krista Cooley and Kathryn Baugher. “Few servicers think that is progress.”


The National Labor Relations Board’s ruling on joint employer status could put builders on the hook for everything from labor violations to union negotiations with subcontractors. “This ruling—if it’s applied to small businesses and the home building sector—really shows no understanding of 80% of the marketplace,” said Jerry Howard, President of the National Association of Homebuilders. “It’s just impossible to comply with and use the same business model that has been working successful for 200 years.”


The changes that the FHA has proposed both raise the cost and increase the uncertainty of servicing delinquent FHA loans, and thus may ultimately affect access to credit. 


Remarks by Stanley Fischer, Vice Chairman of Federal Reserve's Board of Governors


"The GSEs, the way they operated pre-conservatorship, created their own failure," said MBA president Dave Stevens. "I ran [Freddie's] single-family business for almost a decade; I saw the special sweetheart deals being done for institutions that could bring large market share into the GSEs. I saw the activities in the portfolio, where they were buying the AAAs on the subprime market, and buying lots of Alt-A product because it was rich. ...And ultimately, that's what really led to the failure of the housing system, and Freddie and Fannie played a very large role in that."


“The last couple of days for me the biggest takeaway is that the Fed still matters,” said David Woo, head of rates and foreign-exchange policy at Bank of America Merrill Lynch. “There’s no question if it hadn’t been for [NY Fed President William] Dudley, I don’t think you would had such a violent bounce back in equities across the board. The market, already besieged by China slow down, simply cannot have the Fed raising rates. So, I think from that point it’s a dramatic relief.”


“...[T] the great “dollar” imbalance is clearly far from settled,” wrote Alhambra Investment Partners’  Jeffrey Snider. “In fact, the greater the volatility the more likely that wholesale supply shrinkage will accelerate, as that monetary math constraint is self-reinforcing absent exogenous interjection. That is the problem with all these perceptions about central banks riding to the rescue, particularly the PBOC this week which is exuding only more desperation, as central banks do not possess the tools for, or even sufficient awareness of, these wholesale dynamics.”


“The impossible trinity is the biggest constraint that China faces right now. Meaning, China can no longer have their cake and eat it too.” 

Julya La Roche
August 25, 2015



“To have that sort of decline at the end [of the day] is really sort of worrisome about the functioning of the market, said Allianz’s Mohamed El-Erian. “The problem is there are no circuit breakers. Why? Because the disruption is coming from elsewhere. The volatility, the economic shock is coming not from Europe and the U.S., where you could have confidence in the ECB and the Fed to act as circuit breakers. But, it’s coming from the emerging world and that means that the market has to regain its own footing. …I’m a little bit worried about what’s ahead after today’s ugly close.”


“The emerging markets and their currency are borderline frightening,” said USB’s Art Cashin, “We look like we did in ‘97 in several cases. I go back to my old argument. The IMF and World Bank told [the Fed] no [don’t raise rates]. If they went ahead and something like this resulted, they would lose creditability. People would say, ‘Hey you were warned. Why did you go ahead and do it anyway. So it’s a scary move for them.” So what do they do if this starts to destabilize the U.S. economy? “QE4,” replied Cashin.


As the end of the day loomed, chatter of QE4 (hope) and PBOC RRR Cut (hope) managed to ramp stocks...


“We’re in a very illiquid environment at the end of August,” said Michael Holland, chairman at Holland & Co. “There’s no doubt that panic begets panic in this market. We had Black Friday and we certainly have Black Monday morning starting for us. It’s a psychological thing. …It’s pervasive …it’s everywhere.” Mohamed El-Erian, chief economic advisor for Allianz, said the selloff will continue. "[Stock prices have] been inflated well beyond fundamentals by central bank policies, so in order to bring people back in you've got to overshoot the fundamentals on the down side to induce people back in," said El-Erian.


This is the August 23, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The European Commission announced it has signed a memorandum of understanding with Greece for a new stability support program involving up to €86 billion in loans to Greece over three years, in exchange for the Greek government’s implementation of reforms.

“There’s a tradeoff between financial stability and inflation targeting,” said Stephen Roach, a senior fellow at Yale. 



“In The Future of Financial Services” the Economic World Forum and Deloitte Consulting LLP identified six basic functions of financial services and eleven clusters of innovation that are exerting pressure on the industry’s traditional business models.



Mike"Ciklin"JD,"MBA,"MRE" " 


“Long-term interest rates in the [U.S.] have been falling since the early 1980s and have reached historically low levels,” wrote CEA’s Maurice Obstfeld and Linda Tesar. “But does this experience indicate that the level of long-term interest rates has shifted to a lower long-run equilibrium? ...While there is no definitive answer to the question, most explanations for currently low long-term interest rates suggest that in the long run, they will remain lower relative to those that prevailed before the financial crisis.”



“Is this a sign that [the Chinese] authorities don’t know how to grow the economy?” asked Steve Forbes. “They’ve piled on a lot of debt — especially since 2008. They had the stock market bubble. They had a property bubble. Now they’re going to adjust the currency. Is it stalling and they don’t know what to do? …Is this regime now going to be able to make real free market reforms, continue to the liberalize the economy…?”



"...[G]overnments all around the world have borrowed too much money and the weight of these debts are choking economic growth. And to make matters worse – these very same governments and their central banks have implemented various plans that have only made matters worse."


“China has crossed a Rubicon in terms of its foreign exchange management, “ said George Magnus, a senior independent economic advisor to UBS Group. “Some of this is about the liberalization program… because of their desire to be admitted to [IMF’s] Special Drawing Rights. A lot of it has to do with policy easing because of what’s going on in the domestic economy. …[China’s] new policy of fixing the currency every day based on the basis of last night’s close—actually potentially—can invite a cycle of depreciation which may not be welcome.”  


“Grab a flotation device—the final decision recently issued by Director Richard Cordray of the Consumer Financial Protection Bureau in the administrative enforcement proceedings against PHH Corp. has rocked the boat for the real estate settlement services industry…”


“The moves that we’ve seen today [in the yuan] are not actually major compared to what most emerging market currencies have seen—so that’s why I think there are probably more on the way.” 


"[Blockchain] technology …has the ability to conduct and verify transactions via an immutable, time-stamped record …[and poses] immense implications for the banking sector," said BBVA Compass chief economist Nathaniel Karp. "We're talking about a massive overhaul of the banking industry's processes and a significant reduction in costs. …The key question is not how, but when the disruption will become far-reaching. Blockchain technology could reshape the financial industry well beyond the payments system; it has the potential to change the face of modern finance."


“The interesting situation in which we are is that employment has been rising pretty fast relative to previous performance and yet inflation is very low,” said Stanley Fischer, vice chairman of the Federal Reserve. “And the concern about the situation is not to move before we see inflation as well as employment returning to more normal levels. …Not everything is rosy and the Fed still has a lot of data to parse over the next five weeks before the next Fed meeting. I don’t think they’ve made up their minds. It is going to be a game-day decision in some sense.”


Alan Greenspan, who served as Fed chairman between 1987 and 2006, told Bloomberg: "I think we have a pending bond market bubble.


Mortgage holders today are carrying more non-mortgage debt than at any point in the past 10 years, with an average of $25,000 per borrower.


“This drop in oil prices [and] drop industrial metal prices not good,” said Stephen Schork, editor of The Schork Report. “It's a canary in the coal mine that something is not right in the global economy." While consumers are saving money at the gas pump, the savings are going to “big government health care,” says Schork. “…People ...think this pullback at the pump is somehow good. No. It's a zero sum game because, yes, those dollars are being spent elsewhere… We're just moving the pieces around on the chessboard. We're not creating economic growth.”


Today, $59.7 trillion of government debt is outstanding, according to the IMF. The U.S., which constitutes 23.3% of the world economy, accounts for 29.1% of world debt, while Japan makes up only 6.18% of total economic production, but 19.99% of global debt. China, the world’s second largest economy accounts for 13.9% of production, has only 6.25% of world debt. The European continent, excluding Russia, holds over 26% of total world debt. Collectively, the debt of the United States, Japan, and Europe accounts for 75% of total global debt.


“Tradition lenders that rely exclusively on a person’s credit history don’t have any way to figure out how risky or not risky a person with a short credit history is,” said Paul Gu, co-founder of Upstart co-founder. “…What we’ve found is that there are signals like your GPA or what your studied that actually tell us whether you’re likely to pay us back—that are not just credit history variables—and so we can lend to more people at lower rates.”


“If you can convert the [EPA]—which is an environmental regulator into a central energy planning authority—that spells bad news for the next few decades,” said WV AG Patrick Morrisey. “It’s really a massive and radical power grab—and I think it’s important for people to focus on that whether you’re in a coal state or not… Even if you’re not in a coal state, it seems to me that the math is clear. If you move more coal fired power plants off-line from base line, you have to build new non-coal-fired power plants. This isn’t fuzzy math. It’s not free and ultimately it’s going to cost American consumers a lot of money.”


 “Fannie and Freddie, by charter, have a legal obligation to serve underserved communities, and the longer they remain vulnerable to dissolution, without a viable alternative, the harder it will be for deserving Americans to [have] the American Dream,” wrote Reverend Al Sharpton. “Yes, we will have to work hard to ensure that past mistakes are not repeated, but this administration has the authority today, and the moral obligation, to take action save homes and provide families a pathway to homeownership. Before the disparities among Americans grow even starker. The time to act is now.”


The Clean Power Plan v. 2.0 includes an incentive program aimed at boosting wind and solar power to 28 percent of the national energy mix by 2030. 


"The federal government borrowed $7.8 trillion over the course of the past seven years and handed most of the proceeds out in the form of various transfer payments (which now make up over 73% of federal spending),” wrote Scott Grannis. During this period, the federal government restructured the health care industry to lower costs; rewrote the rules for the entire financial industry to provide greater consumer protections; and increased taxes to “more fairly" distribute the fruits of progress. “But it didn't work," wrote Grannis. "…[W]e have the weakest recovery in history."


Investors are bracing for Puerto Rico to miss about $58 million in bond payments in coming days, as the U.S. commonwealth attempts to restructure $72 billion of debt.

TurboAppeal simplifies and improves the property tax appeals process, saving consumers as much as $950.

"HAMP has directly helped more than 1.5 million homeowners permanently modify their mortgages and indirectly assisted millions more by setting new standards for the mortgage industry that have led to more affordable and sustainable private modifications," said Treasury’s Mark McArdle.


“[T]he key to managing the return to policy normality lies in effectively managing short-term interest rates via the Fed funds market and perhaps the reverse repo market, especially in the next two or three years.”



This is the July 26, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The Federal Reserve issued a final order that establishes enhanced prudential standards for General Electric Capital Corporation.  Effective January 1, 2016, the company must comply with risk-based and leverage capital requirements, the liquidity coverage ratio rule, and related reporting requirements.  If the company is still designated by the FSOC on January 1, 2018, it would be required to comply with liquidity risk-management, general risk-management, capital-planning, governance, and stress-testing requirements, as well as restrictions on intercompany transactions.  The Federal Reserve may add to or amend the requirements in the future.
  • The Federal Reserve approved a final rule requiring the eight largest U.S. bank holding companies to increase their capital levels, with surcharges from 1.0 to 4.5 percent of each firm’s total risk-weighted assets.  The requirement will phase in between 2016 and 2019.  The rule requires the companies to calculate capital surcharges under two methods and hold the higher of the two surcharges.  The first method is based on the framework agreed to by the Basel Committee on Banking Supervision and considers a firm’s size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity.  The second uses similar inputs, but is calibrated to result in significantly higher surcharges.  The Federal Reserve released a white paper describing how it calibrated the surcharges.
  • The European Commission announced the approval of a package of measures to ensure that the European Fund for Strategic Investments (EFSI) is operational by early autumn 2015.  The EFSI is designed to unlock public and private investments of at least €315 billion from the autumn of 2015 through 2017.  The fund will focus its financing on investments in infrastructure and innovation, as well as finance for small- and medium- size businesses.  The EU will provide initial funding through a €16 billion guarantee and €5 from the European Investment Bank.  England announced it will contribute €8.5 billion to projects benefiting from the fund.  France, Italy, Germany, and Poland will contribute €8 billion each to the investment plan; Spain €1.5 billion; Luxembourg €80 million; Slovakia €400 million; and Bulgaria €100 million.





New York Times Pulitzer Prize-winning journalist John Markoff 


.."significant expansion of our My Starbucks Rewards [MSR] loyalty program."



“It’s ugly out there,” said Dennis Gartman, editor of The Gartman Letter. “We’re going to continue to see weakness in commodity prices. …The overriding fundamental is China—China has difficulty. …The stock market there was down 8% overnight and down 25% or 30% from its highs. …The government is doing everything that it can to try prop up stock prices and thus far it has been utterly unsuccessful in doing so. Usually, government intervention ends badly and this does not look pretty.”


Attached please find the July 26, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The Federal Reserve issued a final order that establishes enhanced prudential standards for General Electric Capital Corporation.  Effective January 1, 2016, the company must comply with risk-based and leverage capital requirements, the liquidity coverage ratio rule, and related reporting requirements.  If the company is still designated by the FSOC on January 1, 2018, it would be required to comply with liquidity risk-management, general risk-management, capital-planning, governance, and stress-testing requirements, as well as restrictions on intercompany transactions.  The Federal Reserve may add to or amend the requirements in the future.


  • The Federal Reserve approved a final rule requiring the eight largest U.S. bank holding companies to increase their capital levels, with surcharges from 1.0 to 4.5 percent of each firm’s total risk-weighted assets.  The requirement will phase in between 2016 and 2019.  The rule requires the companies to calculate capital surcharges under two methods and hold the higher of the two surcharges.  The first method is based on the framework agreed to by the Basel Committee on Banking Supervision and considers a firm’s size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity.  The second uses similar inputs, but is calibrated to result in significantly higher surcharges.  The Federal Reserve released a white paper describing how it calibrated the surcharges.


  • The European Commission announced the approval of a package of measures to ensure that the European Fund for Strategic Investments (EFSI) is operational by early autumn 2015.  The EFSI is designed to unlock public and private investments of at least €315 billion from the autumn of 2015 through 2017.  The fund will focus its financing on investments in infrastructure and innovation, as well as finance for small- and medium- size businesses.  The EU will provide initial funding through a €16 billion guarantee and €5 from the European Investment Bank.  England announced it will contribute €8.5 billion to projects benefiting from the fund.  France, Italy, Germany, and Poland will contribute €8 billion each to the investment plan; Spain €1.5 billion; Luxembourg €80 million; Slovakia €400 million; and Bulgaria €100 million.



Canfield Press



The Consumer Financial Protection Bureau has released its first Monthly Complaint Report (MCR), which provides a “high-level snapshot of trends” in consumer complaints. “The [MCR] uses a three-month rolling average, comparing the current average to the same period in the prior year where appropriate, to account for monthly and seasonal fluctuations,” wrote the Bureau. “In some cases, we use month-to-month comparisons to highlight more immediate trends. For the company-level complaint data, we use a three-month rolling average of complaints sent to companies for response.”


On Dr. Ed’s Blog, Dr. Ed Yardeni, president and chief investment strategist of Yardeni Research, wrote: 


The average financial institution had to devote an additional 1.72 full time employee equivalents at an additional cost of $41,471 to address the new regulatory changes in Q2, bringing the total additional compliance cost burden to $147,000 for the past 4 quarters, according to the Banking Compliance Index, published by the Regulatory Operations Center™ (ROC). The enforcement climate continues to be “hot” with 207 enforcement actions during Q2 2015, the highest level in the past 20 years. “This isn’t a seasonal trend or a blip on the radar,” said ROC’s Pam Perdue. “It’s the new normal.”


WITH a needed twist....


Since January 1, 2008, the Obama administration has finalized 2,929 regulations, which created 486.5 million paperwork hours at a total cost of $771.5 billion, according to American Action Forum’s Regulation Rodeo. Over the past five years, the adminstration has finalized 117 regulations required by the Dodd Frank Act (DFA), which resulted in 61.7 million paperwork hours, according to AAF. The Regulation Rodeo estimates the “finalized cost” of DFA regulations is $24.9 billion.


In an interview with the Wall Street Journal, former Senator Chris Dodd discussed the importance of the Dodd Frank Act.



“The data breach of the Office of Personnel Management could affect more than 20 million Americans,” wrote Charles Allen. “Yet the true magnitude of this breach lies not in the number of individuals affected, but in the seemingly infinite ways it has compromised our national security. …[I]n my view, [the risk of identity theft] pales in comparison to how it has jeopardized our national security workforce… and degraded the integrity of our security clearance system. Quite simply, it is a national security risk unlike any I’ve seen in my 50 years in the intelligence community.”


This is the July 19, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

• Treasury solicited input on a study of the various business models and products offered by online marketplace lenders, the potential for online marketplace lending to expand access to credit to historically underserved borrowers, and how the financial regulatory framework should evolve to support the safe growth of this industry.

• Several agencies issued a joint report analyzing the significant volatility in the U.S. Treasury market on October 15, 2014.  The joint report makes clear that a number of developments help explain the conditions that likely contributed to the volatility.  Specifically, the report finds that in addition to other factors, changes in global risk sentiment and investor positions, a decline in order book depth, and changes in order flow and liquidity provision together provide important insight into the developments that day.  The report also underscores the changing structure of the U.S. Treasury market.  The report recommends continued analysis of U.S. Treasury market structure and functioning, focusing on trading and risk management practices, the availability of public data, and continued efforts to strengthen monitoring and inter-agency coordination related to trading across the U.S. Treasury cash and futures markets.

• The Federal Reserve proposed to modify the timing for several stress testing requirements that have yet to be integrated into the stress testing framework.  Banking organizations subject to the supplementary leverage ratio would begin to incorporate that ratio into their stress testing in the 2017 cycle.  The use of advanced approaches risk-weighted assets in stress testing would be delayed indefinitely, and all banking organizations would continue to use standardized risk-weighted assets.  The proposal would remove the requirement that banking organizations calculate a tier 1 common ratio, which has been supplanted.  




Investor Carl Icahn voiced his growing fears about a bubble in high-yield bonds, noting the dangers posed by exchange-traded funds run by firms such as Larry Fink’s Blackrock. Now that ETFs own so many assets and Wall Street firms have retreated from trading, who will buy if investors sell ETFs during the next market downturn? Icahn called Blackrock “a dangerous company" and warned that Fink and Janet Yellen are "pushing the damn thing off a cliff." Needless to say, Fink does not agree with Icahn's assessment.


“Greece’s public debt has become highly unsustainable,” wrote the IMF. “The financing need through end-2018 is now estimated at Euro 85billion and debt is expected to peak at close to 200 percent of GDP in the next two years, provided that there is an early agreement on a program. Greece’s debt can now only be made sustainable through debt relief measures that go far beyond what Europe has been willing to consider so far. …The dramatic deterioration in debt sustainability points to the need for debt relief on a scale that would need to go well beyond what has been under consideration to date—and what has been proposed by the ESM.”


“The [Greek] fundamentals haven’t really changed,” said Chris Whalen with Kroll Bond Rating Agency. “Mr. Tsipras has gotten a worse deal that he could have gotten a couple of weeks ago. He has the almost byzantine conditionality where we’re going to have foreign observers in Greece trying to get them to do the right thing. It all comes down to whether or not the southern European countries want to live like Germans. …Germany looks at these nations and sees their own bankruptcy, because if they had to pick up the tab …and essentially subsidize their deficits, it would break them.”


“As long as Greece remains a member of the European Union, its taxpayers can walk away, just as Detroit’s did in the decades before its bankruptcy,” wrote Adair Turner, former chairman of the UK’s Financial Services Authority. “If remaining in Greece means living in a country where taxes are always 10% higher than public expenditures, many – especially the young and talented – will do just that. …Adult negotiators have to face two realities: large debt write-offs are inevitable, and punishing Greece further will not put the eurozone on the path to financial discipline.”



"Eighty billion in three-year new-money debt for Greece is a bad deal for lenders, and they know it."   


This is the July 12, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • GAO released a TARP report entitled, Treasury Could More Consistently Analyze Potential Benefits and Costs of Housing Program Changes.  GAO found that from February 2009 to May 2015, Treasury disbursed $16.3 billion of the $37.5 billion in TARP funds allocated to support housing programs.  The number of new HAMP permanent modifications began to decline in late 2013 but has stabilized at between 9,000 and 15,000 additions per month.  Since October 2014, Treasury has expanded incentives in order to draw new entrants into the programs and further assist existing participants.  In making program changes, Treasury took steps to assess their benefits and costs but did not fully meet all of the key elements of federal benefit-cost analysis guidance.  For example, it is unclear whether the recent changes, such as extending performance incentives to borrowers in the sixth year of their HAMP modification (estimated to cost $4-6 billion), will reduce redefaults.  Treasury officials told GAO that borrower surveys confirmed that borrowers responded to performance incentives, but GAO found that Treasury does not have the estimates needed to fully assess the effectiveness of this or other recent changes. Treasury officials said that program benefits and costs depended on unknown factors and macroeconomic trends and that program benefits were difficult to quantify.  OMB guidance and GAO’s past work stress that analyzing benefits and costs can help decision makers choose among alternatives.  Without full and comprehensive analyses, Treasury will be challenged to determine whether program changes are actually achieving desired goals and are an efficient use of taxpayer dollars.  GAO recommends that Treasury develop and implement policies and procedures that establish a standard process to better ensure that TARP-funded housing program changes are based on benefit-cost analyses that meet key elements.
  • The Federal Reserve and FDIC announced that they posted the public portions of annual resolution plans for 12 large financial firms.  The twelve firms are:  Bank of America Corporation, Bank of New York Mellon Corporation, Barclays PLC, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group, JPMorgan Chase & Co., Morgan Stanley, State Street Corporation, UBS AG, and Wells Fargo & Company.
  • The Small Business Lending Fund released its July 2015 quarterly report showing that as of March 31, 2015, participants had increased their small business lending by $15.4 billion over a $31.3 billion baseline, an increase of $280 million over the prior quarter. 
  • Treasury released an annual report on the State Small Business Credit Initiative (“SSBCI”), stating that from 2011 through 2014, states  had expended $864 million in SSBCI funds that supported private sector loans or investments to small businesses totaling $6.4 billion, with $1.9 billion in private sector loans in 2014.  The 2010 Small Business Jobs Act created the SSBCI and funded it with $1.5 billion.  States could apply for federal funds for programs to extend credit to small businesses, and must demonstrate a minimum of $10 in new private lending for every $1 in federal funding.  Applications were due by June 2011.




“[T]he [Greek] referendum might have tipped the balance of how other Eurozone countries weigh the risks of Greece’s continued membership in the common currency area versus its exit,” wrote Fitch Ratings’ James McCormack. “Greece may come to be viewed as a small and uniquely recalcitrant Eurozone member that either can be effectively ring-fenced, or cannot be sufficiently altered to fit the Eurozone mold, or both. It could therefore spend some time on the outer edges of the Eurozone periphery before membership becomes untenable.”


“The U.S. economy is an island of mediocre tranquility in the midst of the stormy sea of the global economy,” wrote Tim Duy. “Tranquil enough to keep the Fed eyeing its first rate hike despite the surrounding storm, but sufficiently mediocre that they feel no reason to rush into that hike. As such, the Fed will remain on the sidelines until the forecast points toward sunnier skies. Uncertainty from Greece and China are likely raising the bar on the domestic conditions that would justify a rate hike.”



“…[I]n the past, the stock market capitalization of Chinese stock markets hovered ...around $1 trillion to $2 trillion,” said Stratfor’s John Minnich. “Now what we saw was the peak of the boom in June 12, China's stock market capitalization ...was something in the area of $10 trillion to $11 trillion. …$6 trillion of new capital that's entered into the stock market—most of it ...personal savings by the 90 million or 100 million so individual investors that are involved in the stock market. …This kind of reiterates or reinforces the point that China still has a long way to go to develop these deep and stable financial markets.”


Open-ended MFs and underlying asset markets could be vulnerable to sudden shifts

in investor sentiment.


“In the end, political models that work by siphoning money from the more productive to buy the votes of the less productive often end up ‘going over the edge’,” wrote First Trust economists. “This system only works when the benefits for the productive of being part of a society exceed the costs and in some cases governments find the right balance. …[W]ill the problems in Greece, Detroit and Puerto Rico be seen as a sign that this era needs to come to an end? Or, will politicians and voters ignore them and stay tied to the failed policies of the past?”


- An investigative report by The Detroit News found that one-in-three homes have been foreclosed in the last decade


"It appears that we're in the eye of the hurricane,” said Janus Funds’ Bill Gross. “I do not believe that this situation really is calm. …[I]f European Central Bank President Mario Draghi doesn't at some point provide additional funds, and if Greece does not pay the $3 billion… euro dollar debt on July 20…, then there is going to be significant problems within the system. [ELA’s] $100 billion [bailout] to Greek banks through the ELA, will have to be declared in default because the ECB cannot lend on defaulted collateral."


~~There is no legal mechanism to kick a member out of the European Union.


“It is a watershed moment,” said William Dartmouth, member of the European Parliament and Trade spokesman for UKIP. “…When you went to the Eurozone, it’s a fixed currency—you’re not meant to leave. ….If [Grexit] happens, it becomes clear that the Eurozone is simply a fixed exchange system, of which we’ve seen many before, which people come in and out of.  And, next problem after Greece is Italy. …Greece and Italy cannot manage to be in the same monetary system as Germany. It doesn’t work.”



This is the July 5, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

• FHFA released its annual g-fee report.  The report tracks adjustments from 2009 through 2014 and shows that guarantee fees have increased over this period.  Overall, the average level of g-fees has increased since 2009.  The g-fees are currently two-and-a-half times their previous level; from 2009 to 2014, average fees increased from 22 basis points to 58 basis points.  From 2013 to 2014, average fees increased from 51 basis points to 58 basis points.  In 2014, primarily because of changes in the models the GSEs use to estimate the capital necessary to support their mortgage guarantee business, gaps on 30-year fixed rate loans were more negative and gaps on 15-year loans were more positive than in 2013.  A gap is the difference between actual g-fees charged and the expected cost of providing the guarantee.  While the gap on 30-year fixed rate loans was negative relative to targeted return on capital, the returns on capital were positive.  The percentage of loans that the GSEs purchased from small lenders grew substantially in 2014, while pricing differences between small sellers and large sellers remained small.

• The FFIEC released a cybersecurity assessment tool to help institutions identify their risks and assess their cybersecurity preparedness.  There are two parts to the assessment: an inherent risk profile and cybersecurity maturity.  The inherent risk profile identifies the amount of risk posed to an institution by the types, volume, and complexity of the institution’s technologies and connections, delivery channels, products and services, organizational characteristics, and external threats, notwithstanding risk-mitigating controls.  The cybersecurity maturity includes domains, assessment factors, components, and individual declarative statements across five maturity levels to identify specific controls and practices that are in place.  While management can determine the institution’s maturity level in each domain, the assessment is not designed to identify an overall cybersecurity maturity level.

• GAO released a cybersecurity report entitled, Bank and Other Depository Regulators Need Better Data Analytics and Depository Institutions Want More Usable Threat Information.  The report states:

o The largest institutions were generally examined by IT experts, while medium and smaller institutions were sometimes reviewed by examiners with little or no IT training.  Each regulator had efforts under way to increase the number of their staff with IT expertise.
o Regulators generally focused on IT systems at individual institutions but most lacked readily available information on deficiencies across the banking system.  Regulators were not routinely collecting IT security incident reports and examination deficiencies and classifying them by category of deficiency.  Bank regulators directly address the risks posed to their regulated institutions from third-party technology service providers, but the NCUA lacks this authority.  Bank regulators routinely conduct examinations of service providers’ information security.
o Depository institutions obtain cyber threat information from multiple sources, including federal entities such as the Treasury.  Representatives from more than 50 financial institutions told GAO that obtaining adequate information on cyber threats from federal sources was challenging.  Treasury has various efforts under way to obtain and confidentially share information with other institutions.
o GAO recommends that Congress consider granting NCUA authority to examine third-party technology service providers, and that regulators explore ways to better collect and analyze data on trends in IT examination findings across institutions.

• The Federal Reserve announced its first determination of the aggregate consolidated liabilities of all financial companies.  Section 622 of the Dodd-Frank Act prohibits any financial company combination if the resulting company's liabilities exceed 10 percent of this amount.  As of December 31, 2014, the amount was $21,632,232,035,000.



"Let the Fourth of July always be a reminder that here in this land, for the first time, it was decided that man is born with certain God-given rights; that government is only a convenience created and managed by the people, with no powers of its own except those voluntarily granted to it by the people." 

President Ronald Reagan (1981)


The Greek referendum is Sunday.


Comptroller of the Currency Thomas J. Curry listed cybersecurity as the OCC’s top priority in recognition of the growing risk to the industry. According to OCC’s Annual Report Fiscal Year 2014, “Attackers are customizing malware to target banks and bank customers, and the methods of attack are evolving in response to banks’ mitigating controls. …Attackers have identified and exploited vulnerabilities in widely used information technology products for all sizes of banks."



Bill Gross, Janus Capital Group Investment Outlook


“Greece’s potential exit from the euro area would represent a stiffer challenge than debt default,” wrote AB Bernstein. “...Greece has been ring-fenced…This suggests that the authorities should be able to contain the spillover to other economies and markets more generally… Still, we are conscious that a Greek exit would represent a step into uncharted territory, with unpredictable consequences. The outlook is therefore highly uncertain—but would be much more so if the ECB weren’t acting as a backstop.”



What we are seeing here is what economists call the sudden stop, when the payment system stops. The banks are closed. The stock market is closed. …The logic of a sudden stop is a massive economic contraction, social unrest and it’s going to make continued membership of the euro zone very difficult for Greece. ...There’s an 85% probability that Greece will be forced to leave the Eurozone not because it wants to do so but because it simply is no longer to stay in the Eurozone.


“Unconventional monetary policies help to finance the public sector’s debt burden,” wrote Swiss Re, a leading wholesale provider of reinsurance, insurance and other insurance-based forms of risk transfer. “…Today’s low interest rate environment is not only driven by macroeconomic factors, but also by policy actions that help governments deal with the high sovereign debt burden. These policies—called “financial repression”—have unintended consequences for both households and long-term investors like insurance companies or pension funds.” 


“[T]he global economy is still struggling to shake off completely the post-crisis malaise,” said BIS’s  Claudio Borio. “The most visible symptom of this predicament is the persistence of ultra-low interest rates. Interest rates have been exceptionally low for an extraordinarily long time, against any benchmark. Moreover, the negative bond yields that have prevailed in some sovereign bond markets are simply unprecedented and have stretched the boundaries of the unthinkable. …The result is too much debt, too little growth and too low interest rates. In short, low rates beget lower rates.”


This is the June 28, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The European Central bank announced today that it will hold its emergency liquidity assistance to Greek banks at the level of June 26, 2015.  The central bank said it will work closely with Bank of Greece to maintain financial stability.
  • FHFA released its Foreclosure Prevention Report for the first quarter of 2015, showing:
    • The GSEs completed 65,960 foreclosure prevention actions in the quarter of 2015, bringing the total to nearly 3.5 million since the start of the conservatorships.  These measures have helped nearly 2.9 million borrowers stay in their homes, including 1.8 million who received permanent loan modifications.  
    • Approximately 31% of all permanent loan modifications in the quarter helped to reduce homeowners’ monthly payments by over 30%.
    • The number of 60+ day delinquent loans declined 9% during the quarter.
    • The serious delinquency rate of GSE loans fell to 1.8% at the end of the quarter.
    • The GSEs’ REO inventory declined 10% during the quarter to 100,279.
  • The OCC released its Mortgage Metrics Report for the first quarter of 2015, showing:
    • 94.2% of mortgages in the report were current and performing at the end of the quarter, compared with 93.1% a year earlier. 
    • The percentage of mortgages that were 30 to 59 days past due was 1.9% of the portfolio, a 7.0% decrease from a year earlier. 
    • Seriously delinquent mortgages made up 2.6% of the portfolio, a 16.4% decrease from a year earlier.
    • The number of mortgages in the process of foreclosure at the end of the quarter fell to 299,424, or 1.3%, a decrease of 30.8% from a year earlier. 
    • Servicers initiated 83,058 new foreclosures during the quarter, a decrease of 8.6% from a year earlier. 
    • Completed foreclosures decreased 31.5% from a year earlier to 38,509. 
    • Servicers implemented 188,816 home retention actions during the quarter, compared with 47,430 home forfeiture and non-retention actions. 
    • The number of home retention actions decreased 20.6% from a year earlier.
    • More than 89.2% of modifications in the quarter reduced monthly principal and interest payments; 55.6% reduced payments by 20% or more.  Modifications reduced payments by $271 per month on average.
    • Servicers implemented 3,696,929 modifications from January 1, 2008, through December 31, 2014.  Of these, approximately 53% were active at the end of the quarter, and 47% had exited the portfolio through payment in full, involuntary liquidation, or transfer to a non-reporting servicer. 
    • Of the 1,969,431 active modifications at the end of the quarter, 72.2% were current and performing, 22.4% were delinquent, and 5.5% were in the process of foreclosure.
  • GAO released a report entitled, Bank Regulation – Lessons Learned and a Framework for Monitoring Emerging Risks and Regulatory Response.  GAO reports that it has incorporated the regulatory lessons learned into a two-part framework for monitoring regulators’ efforts to identify and respond to emerging risks to the banking system.  First, the framework incorporates quantitative information in the form of financial indicators that can help users of the framework track and analyze emerging risks and qualitative sources of information on emerging risks—such as regulatory reports and industry and academic studies.  Second, the framework monitors regulatory responses to emerging risks, such as agency guidance, with the goal of flagging issues for further review when questions arise about the effectiveness of these responses.  Users—oversight bodies such as inspectors general—can analyze regulatory actions taken to address emerging risks and gain insights into regulators’ ability to take forceful actions to address problematic behavior at banks.  Such ongoing monitoring can provide a starting point for identifying opportunities for more targeted and frequent assessments of these efforts.  GAO plans to implement this framework in its future work.





Consumer Mortgage Coalition


If Congress fails to re-authorize the ExIm Bank, GE will be "left to make choices of our own," said Immelt.


“[T]he next challenge to ‘disparate impact’ theory the Court will undoubtedly be forced to consider may prove to be a far more difficult one,” wrote Cory Andrews with the  Washington Legal Foundation. “As Justice Scalia noted in his concurrence in Ricci v. DeStefano, whether any statute that affirmatively requires race-based actions to remedy ‘disparate impacts’ can be harmonized with the Fourteenth Amendment’s guarantee of equal protection is not an easy question to answer. ... the Court will not be able to avoid [that thorny question] forever.”


According to JCHS’s State of the Nation’s Housing 2015:

  • Homeownership rates are at 20-year lows and continues to fall.
  • The rental market continues to boom, as the share of U.S. households renting their  home reached a 20-year high of 35.5% in 2014.  
  • Costs burdens and affordability continues to be a problem particularly for low-income and minority households.
  • The housing construction recovery continues to lag while household formation growth is expected to continue accelerating. 

In cooperation with PwC and the Mortgage Bankers Association.





“Credit standards for mortgage lending tightened sharply between 2007 and mid-2009, and loosened somewhat since 2012 despite an uptick in 2015Q1,” wrote the New York Fed. “Lending standards remain tight compared to levels in the early 2000s. Nearly 72 million people in the population of adults with credit reports currently have scores below 650; the share of originations to borrowers in this range has fallen from 25% to 10% since the recession.” 



The guessing game for businesses to know if and when they may be penalized has produced the most defensive lending posture in years. This atmosphere of the unknown; this environment of fear and trepidation rather than an environment of constructive engagement and compliance have a steep cost. 


Laurie Goodman, Rolf Pendall, Jun Zhu

Urban Institute


“Currently, Single Family FHA uses 99 different codes to describe defects in loans,” according to the agency’s press release. “The taxonomy, once implemented, will bring this down to nine distinct defects, supported by codes that will identify the source and cause of the defect, and offer some new insight into the significance of a given deficiency... This new approach will give lenders additional information that helps identify where their challenges are in originating FHA loans and allow them to make changes to reduce errors that potentially trigger enforcement actions.” 


This is the June 21, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • FHFA released its annual report to Congress showing:  
    • The GSE conservatorships have three goals:
      • Maintain, in a safe and sound manner, foreclosure prevention activities and credit availability for new and refinanced mortgages to foster liquid, efficient, competitive, and resilient national housing finance markets;
      • Reduce taxpayer risk through increasing the role of private capital in the mortgage market; and
      • Build a new single-family securitization infrastructure for use by the GSEs and adaptable for use by other participants in the secondary market in the future.
    • FHFA and the GSEs have made progress on the representation and warranty framework.  To obtain representation and warranty relief, no more than two delinquent payments are allowed within the first 36 months after loan acquisition.  Additionally, the GSEs eliminated automatic repurchases following rescission of mortgage insurance coverage.  FHFA also started efforts in 2014 to develop an independent dispute resolution program.
    • FHFA and the GSEs revised their foreclosure timeline methodology, which increased timelines in a majority of states and gave servicers a set of tools to help them manage compensatory fees more effectively.  The GSEs provided servicers with enhanced loss mitigation and foreclosure prevention alternatives for severely delinquent loans subject to compensatory fees.
    • The GSEs will permit creditworthy borrowers to have 3% down payments.
    • In the first quarter of 2014 the GSEs issued lender guidance clarifying a number of property and appraisal requirements for small towns and rural areas.
    • FHFA and the GSEs enhanced requirements related to foreclosure alternatives, unemployment forbearance, and rate-reset notifications.
    • FHFA has worked with the GSEs to develop additional guidelines for ongoing sales of nonperforming loans, with a focus on avoiding foreclosure wherever possible, and that require post-sale reporting to track borrower outcomes.
    • The 2014 Conservatorship Scorecard tripled the required amount of risk transfer transactions on single-family loans,
    • As of December 31, Fannie Mae’s retained portfolio was $413 billion and Freddie Mac’s was $408 billion, below the cap of $470 billion required for 2014.
    • FHFA and the GSEs finalized new standards for mortgage insurer master policies that were approved by all state regulators, and took effect in October.
    • To develop a common securitization platform (CSP), FHFA and the GSEs have been developing the technology and operational infrastructure; establishing a software development and testing environment that is independent of the GSEs; and developing the CSP’s security issuance, registration, and settlement capabilities. 
    • FHFA has solicited and reported on input on a single security to be issued by both GSEs.  
  • The OCC announced that it anticipates that approximately $280 million from the independent foreclosure review of OCC-supervised institutions will remain unclaimed at the end of the year after considerable efforts to locate eligible borrowers have been exhausted, and will escheat to the states.  The OCC also terminated foreclosure-related consent orders against three national bank mortgage servicers that have met the consent order requirements.  They are Bank of America, Citibank, and PNC Bank.  The OCC imposed business restrictions on six national banks that have not completed the required corrective actions.  They are EverBank; HSBC Bank USA, JPMorgan Chase Bank, Santander Bank, U.S. Bank, and Wells Fargo Bank.
  • The federal banking agencies finalized revisions to the regulatory capital rules adopted in July 2013.  The final rule applies to large, internationally active banking organizations that determine their regulatory capital ratios under the advanced approaches rule – generally those with at least $250 billion in total consolidated assets or at least $10 billion in total on-balance sheet foreign exposures.  The agencies published changes to the rules affecting these organizations on December 18, 2014, and the final rule adopts these changes substantially as proposed.
  • Treasury announced results of its auction of its preferred shares in five institutions.  
    • Citizens Bank & Trust Company, (Covington, LA), for $1,638,328; Treasury paid $2,400,000;
    • CSRA Bank Corp. (Wrens, GA), for $3,079,816; Treasury paid $2,400,000;
    • Metropolitan Capital Bancorp, Inc. (Chicago, IL), for $3,079,816; Treasury paid $4,388,000;
    • Prairie Star Bancshares, Inc. (Olathe, KS), for $3,514,326; Treasury paid $2,800,000; and
    • SouthFirst Bancshares, Inc. (Sylacauga, AL), for $2,887,668; Treasury paid $2,760,000.




“I think the people [who] are at zero really want to make sure the economy has a full head of steam before we go,” said Michael Feroli, JPMorgan chief U.S. economist. Why—six years later—are we still stuck at zero? "We had negative GDP growth in the first quarter,” said Feroli. “I think it’s kind of hard to hike when you’re staring at that… You had a very strong dollar in the second half of last year …that took almost 2 percentage points growth in the first quarter. …They don’t want the dollar to take off. They’re responding to currencies.” 


"Digital is, in many ways, revolutionizing many of the things we do, from finance to parts of operations to the way client onboarding happens" said Citigroup CEO Michael L. Corbat.



“[President] Obama has the power to release the [enterprises] right now, heading off the inevitable attacks on the GSEs and their affordable housing goals,” wrote Trevor Thompson. “By delaying this decision, he is gambling with the future of affordable housing in America. …President Obama [should] initiate a ‘reformed release’, whereby he re-amends the terms of the bailout loan, and then releases the companies from conservatorship, allowing them to regain the strength they need to ward off partisan attacks.”


The new breed of disruptive companies are the fassted growing in history. Uber, Instacart,Alibaba, Airbnb, Seamless, Tiwtter, WhatsApp, Facebook and Google are indescriobably thin layers that sit on top of vast supply systems (where the costs are) and interface with a huge number of people (where the money is),


“It took a few years for digital banking to take off as slow and limited access to the Internet made it easier to visit a branch,” wrote BBA, the UK’s leading trade group for banks. “The advent of wireless broadband and Internet-enabled smartphones changed all that. Suddenly, millions of us started banking on the move and digital banking exploded into our everyday lives. …Technology is transforming the Way We Bank Now and customers are driving this change.”


Goldman Sachs will soon enter a new business line—the $840 billion consumer loans business. The 146 year old investment bank has hired Harit Talwar, a former top executive at Discover Financial Services, to create an online lending unit to offer consumer loans to customers and small businesses. "The firm has identified digitally led banking services to consumers and small businesses as an area of opportunity for GS Bank," wrote CEO Lloyd Blanfein and president Gary Cohn. 


Bill Gross, Fund Manager, Janus Capital


This is the June 14, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • Treasury announced that it intends to auction all its preferred shares in the following:
    • Citizens Bank & Trust Company, (Covington, LA);
    • CSRA Bank Corp. (Wrens, GA);
    • Metropolitan Capital Bancorp, Inc. (Chicago, IL);
    • Prairie Star Bancshares, Inc. (Olathe, KS); and
    • SouthFirst Bancshares, Inc. (Sylacauga, AL).




Presented by Dan Ciporin, General Partner at Canaan Partners. 


“…[W]e ask that you prioritize work with the Enterprises on transactions designed specifically to push out first loss credit risk to the market, and to encourage transparency for investors and the public so that we can all better judge how these transactions impact returns to the Enterprises, costs to the taxpayer, and effects to the health of the broader housing finance system,” wrote Senators Mark Warner (D-VA), Bob Corker (R-TN), Heidi Heitkamp (D-ND), Mike Crapo (R-ID), Jon Tester (D-MT) and Dean Heller (R-NV).


 "The Obama administration’s plan to forgive the federal loans of Corinthian Colleges students could usher in an unprecedented number of debt forgiveness requests from borrowers at other for-profit schools and cost taxpayers hundreds of millions of dollars,” wrote Washington Post’s Danielle Douglas-Gabriel. 


“Before the end of the Obama Administration, there is a unique opportunity to a lasting legacy of affordable housing,” wrote The Leadership Conference on Civil and Human Rights. “…Treasury …currently owns warrants for 79.9% of the common stock of each of Fannie Mae and Freddie Mac. …If the Administration were to contribute a portion or all of these warrants to affordable housing that would ensure funding of necessary assistance to our communities for a generation.”


“We feel that the potential growth rate of the economy has decreased,” wrote John Silva, chief economist for Wells Fargo. “…We have the federal funds rate coming back to 3.50 percent near the end of the decade. Long-term interest rates are also expected to rise gradually, although there will undoubtedly be a great deal of volatility along the way. Moreover, the yield curve is expected to flatten considerably, as short-term interest rates rise more than long-term rates.”


Lawrence LIndsey, The Lindsey Group CEO.


“Most renters express a preference for homeownership,” wrote the Federal Reserve. “Homeowners are generally optimistic about the trajectory of their home values. However, many renters, and especially lower-income renters, indicate that financial barriers to homeownership prevent them from purchasing a home. The most common reasons renters cite for renting rather than owning a home are a perceived inability to afford the necessary down payment (50%) or a perceived inability to qualify for a mortgage (31%).”



The House passed an amendment to H.R. 2578, the FY2016 Commerce, Justice, and Science Appropriations Act, by a 232-196 vote, which would prohibit the Justice Department from using funds to prosecute and obtain legal settlements from lenders, landlords, and insurers in discrimination suits based on the disparate impact legal theory. This summer, the Supreme Court is expected to rule in Texas Dept. of Housing v. Inclusive Communities Project, which challenges the disparate impact theory in mortgage lending under the Fair Housing Act.


With new home sales up and existing home sales down in April, radio show host Jim Bohannon called it a housing sales roller coaster in a recent interview with Collingwood’s Chairman Tim Rood.


We are the Secretariat… if only…. Richard Fisher


“I trust that many of you are familiar with the story of Peter Pan, in which it says, ‘the moment you doubt whether you can fly, you cease forever to be able to do it,’” said Haruhiko Kuroda, Governor of the Bank of Japan. “Yes, what we need is a positive attitude and conviction. Indeed, each time central banks have been confronted with a wide range of problems, they have overcome the problems by conceiving new solutions. I am sure that we all can share a conviction backed by our collective experience and wisdom.”


“In the real world, banks provide financing through money creation,” wrote the Bank of England.  


The Senate Banking Committee’s reported bill, the Financial Regulatory Improvement Act (“FIRA”), and the Democratic Alternative differ in several significant respects, and share some identical provisions.

  • FIRA is much more comprehensive, and addresses GSE reform, procedures for designating SIFIs, and includes a large number of technical corrections to the Dodd-Frank Act.  
  • Both bills address QM loans, with the Republican bill creating a new type of QM loan that is held in portfolio by any creditor (bank or non-bank) or sold, but not securitized.  The Democratic alternative would create a narrower definition, would terminate QM status upon a transfer of the loan, and would only be available to insured depositories, including insured credit unions, with under $10 billion in assets.  
  • The Democratic bill would give the CFPB authority to administer much of the Servicemembers Civil Relief Act, and would reinstate the Protecting Tenants at Foreclosure Act.
  • Both bills address the SAFE Act restrictions on loan originators who change jobs.  Currently, loan originators must be registered if they work at a depository, and must be licensed if they do not.  Registration and licensure is at the state level, so loan originators who move from a depository to a non-depository institution, or who change states, must be re-credentialed.  The Republican bill would deem a loan originator credentialed for 120 days after being hired by a non-depository, or after moving to a new state, regardless of state law.  The Democratic bill would permit states to provide similar relief.
  • Both bills have identical provisions to remove the requirement for annual GLBA privacy notices, to expand the depositories that would be examined every 18 months instead of 12 months, permit FHLB membership to privately insured credit unions, and set the same registration threshold for bank and thrift holding companies. 


Anne C. Canfield


“After reviewing the new HUD handbook, my overall conclusion is that there were not many changes to the overall requirements other than the word MUST,” wrote Mark Glade, VP of the Arizona Association of Real Estate Appraisers. “The prior handbook was a list of items that should be completed and verified whereas the updated HUD handbook clearly states that the properties MUST meet these items and the appraiser MUST verify the items in question… Just in case you do not have the time to count the word MUST, it appears in the new FHA Handbook 2,669 times.”


Drones.automated vehicles.artificial intelligence.peer 2 peer.


“We are in a new world of banking,” said Kelly King, BB&T chairman & CEO. “Post Dodd Frank, it really is dramatically different. In terms of the infrastructure costs that are involved in complying with the new regulatory requirements—remember Dodd Frank required 393 new rules. They’ve only rolled out 300 and it’s already massive. So it requires huge investments…and therefore scale becomes much more important today than it ever has in our business.  You can grow organically, but this is a relatively slow economy.”  


"…I'm not sure that the current situation is a classic bubble because I'm not certain that most people have extravagant expectations," said Robert Schiller Robert Shiller, professor of economics at Yale University, “In fact, the current environment may be driven more by fear than by a sense of a new era. I detect a tinge of anxiety and insecurity now that is a factor in markets, which is quite different from other market booms historically. In fact, the current environment may be driven more by fear than by a sense of a new era. I detect a tinge of anxiety and insecurity now that is a factor in markets, which is quite different from other market booms historically.”


How will housing finance evolve amid regulatory change and the challenges of achieving large-scale reform legislation?


Michael Schrage, Research Fellow, MIT Sloan Initiative on the Digital Economy


Moderator: Felix Salmon, Senior Editor, Fusion


Invest in financial technology or FinTech is exploding.


"..accounted for almost $9 billion in loans last year.."


The average adult now spends three hours a day–more than half of total Internet usage time–on mobile, compared to less than an hour a day five years ago. 


"I think the Fed is trapped—they’re painted themselves into a corner," said Chris Whalen, managing director at Kroll Bond Rating Agency. "The time to gently raise rates was when Chairman Bernanke was on his way out the door. And now you have a situation where they need to raise rates--we have to restore income to the system. The system is dying from the lack of income. And at the same time, they don’t see the growth that they want to see to validate that change [in rates]."


“…[T]he time has come to fight today's federalism battles over executive federalism and to prepare for tomorrow's — for example, the sure-to-come question of federal bailouts for major cities and entire states,” wrote Michael S, Greve, professor at George Mason University School of Law. “ Could the Federal Reserve recapitalize the state of Illinois? A TARP for states: Would that be constitutional? If so, who would enforce the repayment obligations or promises of fiscal discipline, and how?”



“If the Postal Service offered [more affordable financial] services, they could be extremely popular,” wrote the UPSP Inspector General. “…A logical first step could be to revamp existing services to make them more appealing to consumers, then expand into adjacent products that could be allowable under current law …[before seeking] additional authority to offer new financial products. ...[E]xpanded financial services would benefit the underserved and shore up the strength of the postal network, helping to ensure that the Postal Service [meets] the needs of all citizens in the 21st century.”


Janet Yellen, Chair, Board of Governors of the Federal Reserve System 


President Barak Obama at U.S.Coast Guard Academy


"...the will and moral courage..."  President Ronald Reagan on Memorial Day.  


This is the May 24, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The Federal Reserve proposed adding certain general obligation state and municipal bonds to the range of assets a large banking organization may use to satisfy liquidity requirements.  The proposal would allow investment grade, general obligation U.S. state and municipal bonds to qualify, up to certain levels, if they meet the same liquidity criteria that currently apply to corporate debt securities.  This would apply to:
    • Bank holding companies, certain thrift holding companies, and state member banks with $250 billion or more in assets or $10 billion in on-balance sheet foreign exposure;
    • State member banks with $10 billion in assets that are subsidiaries of the above entities; and
    • Bank holding companies and certain thrift holding companies with $50 billion in assets, to which a less stringent liquidity standard applies.
  • FHFA and the GSEs announced minimum financial eligibility requirements for seller/servicers.  They did not substantively change from the proposed requirements announced in January 2015.
    • Net worth of $2.5 million plus 25 basis points of UPB for single-family loans serviced.
    • Minimum capital ratio (nondepositories only) of Tangible Net Worth/Total Assets ≥ 6%.  Depositories must comply with their regulatory standard.
    • Liquidity (nondepositories only) (depositories must comply with their regulatory standard):
      • 3.5 basis points of total Agency servicing (GSEs and Ginnie Mae) UPB plus
      • Incremental 200 basis points of total non-performing Agency servicing UPB in excess of 6% of the total Agency servicing UPB.  Depositories must comply with their regulatory standard.

The standards are effective December 31, 2015.

  • Treasury announced that it completed an auction to sell its warrant positions in nine financial institutions in private transactions for $50.9 million.
    • BBCN Bancorp, Inc., Los Angeles, California for $1,150,000; 
    • City Holding Company, Cross Lanes, West Virginia for $900,500;
    • CommunityOne Bancorp (FNB United Corp.), Charlotte, North Carolina for $10,677;
    • F.N.B. Corporation, Pittsburgh, Pennsylvania for $10,063,121;
    • Fidelity Southern Corporation, Atlanta, Georgia for $32,401,354;
    • First United Corporation, Oakland, Maryland for $120,786;
    • HMN Financial, Inc., Rochester, Minnesota for $5,700,600;
    • The First Bancorp, Inc., Damariscotta, Maine for $401,111; and
    • Valley National Bancorp, Wayne, New Jersey for $103,677.

Treasury did not sell its warrant positions in M&T Bank Corporation, Synovus Financial Corp., or a second warrant position in BBCN Bancorp, Inc. because it did not receive bids above the minimum price.




“The liberty we prize is not America's gift to the world, it is Almighty God's gift to humanity".


First Lady Michelle Obama at Tuskegee Commencement.


Jason Kilar (Class of ’93), founder of Hulu, delivered the Commencement Address at UNC–Chapel Hill.  




Yesterday, the Senate Banking Committee reported out of Committee the Financial Regulatory Improvement Act of 2015.  Attached please find an updated Roadmap that includes the provisions that were included in Chairman Shelby’s Manager’s Amendment that was passed yesterday in Committee.  

As noted in an e-mail note yesterday, the following is a summary of the Committee proceedings yesterday:

  • The Democratic Substitute failed by on a party-line vote of 10 to 12.
  • Senator Crapo's amendment #19 passed by a vote of 13 to 9, with Senator Donnelly supporting the Republican amendment.   It would prohibit federal banking and credit union regulators from implementing or participating in the Department of Justice's Operation Choke Point Initiative.  Senator Crapo dubbed his amendment the "Tom Cruise" amendment after a brief explanation of/comparison to the movie "Minority Report," which was very amusing.  
  • Senator Toomey offered his Amendments #3, #4, #8, and #11.   He offered and then withdrew three of the four amendments, requesting a recorded vote on Toomey Amendment #8 that would increase from $10 billion to $50 billion, the threshold for direct examination.   Amendment #8 was adopted by a vote of 13 to 9, with Senator Donnelly supporting the Republican amendment. 
  • Senator Vitter offered and withdrew his amendments #14 and #16.   #14 would limit the compensation for nongovernmental directors of the Board of Directors of Securities Investor Protection Corporation.  Ranking Member Brown noted that he would support the goal of the amendment but not vote for it in Committee.  Senator Vitter noted that the Committee will likely hold a hearing on Amendment #14 in the future.     #16 would address equity capital requirements for the “Too Big to Fail” entities.   Again, Senator Vitter offered and withdrew his Amendment #14 and Amendment #16.   He did not offer his two other amendments. 
  • The Financial Regulatory Improvement Act of 2015 passed by a vote of 12 to 10.  

Both sides of the aisle agreed much work is left to be done before the bill makes it to the Senate Floor.



Canfield Press

05.22.15, Carson Bruno


“On May 12, 2015, the Commodity Futures Trading Commission and Securities and Exchange Commission jointly issued the CFTC’s final interpretation clarifying its interpretation concerning forward contracts with embedded volumetric optionality (‘Final Interpretation),” wrote Morrison Foerster’s Julian Hammar.  “The Final Interpretation appears to signal that ...the CFTC will take a more relaxed view of which transactions constitute ‘forward contracts’ that are not subject to regulation as swaps.”


“[MasterCard Send is] a first-of-its-kind, global personal payments platform that’s breaking down network barriers by facilitating secure payment transactions through a single connection,” said  the credit card company in its May 19th rollout. MasterCard Send allows businesses to send funds to their customers typically within seconds, displacing the use of checks or prepaid cards to transfer money.  


This Roadmap compares the Chairman’s mark to the Democratic substitute legislation, scheduled for markup May 20, 2015. It is a working draft that will be updated as the legislation proceeds through the legislative process.

The Chairman’s mark is considerably longer than the Democratic substitute, so a side-by-side comparison would be difficult for a review of much of the Chairman’s mark. For ease of reading, this Roadmap contains a side-by-side of areas of overlap, and a standalone description of the entire Chairman’s mark. More specifically, first there is a side-by-side comparing the Democratic substitute with the comparable provisions in the Chairman’s mark. 

Where both bills are identical, or nearly so, the side-by-side has only one column. The side-by-side includes all provisions in the Democratic substitute even if there is no comparable provision in the Chairman’s mark, but does not contain provisions in the Chairman’s mark for which the Democratic substitute has no comparable provision. Following the side-by-side is a comprehensive description of all of the Chairman’s mark, including its technical corrections to the Dodd-Frank Act.

Also attached is the list of amendments that are expected to be offered at tomorrow’s Senate Banking Committee markup.  If the amendments are adopted, we will include them in an updated Roadmap.

We hope you find this useful. 

Best regards,

Canfield Press


"Regulators ...have been focused on the growth of nonbanks as an area of future risk," wrote KBRA's Chris Whalen. "While nonbanks ...definitely pose risks to the financial system, these entities tend to operate at low levels of leverage compared with depository institutions. Nonbanks engaged in fiduciary or financing activities do not pose the same types of market and credit risks to the financial system, but do pose risks to investors... KBRA believes that investors, regulators and policy makers need to be more aware of the different types of business models [for] the nonbank universe and the ...risks they pose, and fashion public policy accordingly."


“The very weak initial estimate of first-quarter real GDP growth this year surprised many forecasters, in part because it was at odds with other fairly positive data, including solid employment gains over the past six months,” wrote San Francisco Fed analysts. “ [However,] …the published real GDP data still exhibit calendar-based fluctuations—that is, residual seasonality. After we apply a second round of seasonal adjustment directly to the published aggregate data, we estimate much faster real GDP growth [1.8%] in the first quarter of this year[,] ...substantially stronger than reported.”


Bring confidence back. Give us the confidence to provide access to credit to more qualified

borrowers at the lower and middle income levels. Return private capital to the secondary

mortgage market. Reignite the economic engine of the real estate market.


“The CFPB divides consumers with limited credit histories into ‘credit invisibles’ and ‘unscorables,’” wrote Investor Business Daily. “Credit invisibles don't have credit records [26 million individuals or 11% of the adult population]. ‘Unscorables’ have credit records, but the records can't be scored... [including 19.4 million or 8.3% of adults]. ...[M]ore than 45 million—or roughly one in five U.S. adults—have credit histories too sparse to generate a credit score. Imagine the credit crisis the financial sector could face if 45 million deadbeats and undocumented immigrants are mainstreamed into the credit market.”


The third annual Disruptor 50 list, CNBS features private companies in 16 industries.


Funding: $129.5 million
Industries disrupted: Financial services, investing 


Over 10 million of the estimated 26 million credit invisibles are younger than 25. Consumers in this age group also account for a disproportionate share of insufficient-unscored credit records. 


Funding: $590 million
Industry disrupted: Mobile payments 


Funding: $91 million (Source: TransferWise)
Industries disrupted: Money wire-transfer services, financial services, currency exchanges


Funding: $106 million
Industries disrupted: Financial services, e-commerce, investing 


This is the May 17, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • FHFA released an update on its single security initiative.  
    • A single security would have underlying fixed-rate mortgage loans that were purchased either 100 percent by Fannie Mae or 100 percent by Freddie Mac.  Re-securitizations could have underlying legacy securities or single securities issued only by Fannie Mae, only by Freddie Mac, or a combination of single securities issued by both GSEs.  Lenders may pool either seasoned or current loans into a single-lender security but loans that are aged more than 12 months may not be included in multi-lender securities.
    • The key features of the single security will be the same as those of the current Fannie Mae MBS, including an investor remittance delay of 55 days.
    • Each GSE will issue second-level single securities (re-securitizations) backed by first- or second-level securities issued by either GSE.  For a legacy Freddie Mac PC to be re-securitized, the investor would have to first exchange the PC for a single security issued by Freddie Mac, so that the payment date of all of the securities in the collateral pool backing the re-securitization would be the same.
    • Freddie Mac will offer investors the option to exchange legacy PCs for comparable single securities backed by the same loans, and will compensate investors for the cost of the change in the payment delay.  Fannie Mae will not offer an exchange option for legacy MBS because FHFA expects investors to treat them as fungible (interchangeable) with single securities.
    • Maintaining the current high degree of similarity between the prepayment speeds of the GSEs’ securities is an important objective for FHFA.  FHFA will not require standardization of the legal documents that support GSE securitization of single-family mortgage loans.  Doing so would be a large undertaking and is unnecessary to ensure similar prepayment speeds.




"Four trillion is unprecedented, but to shrink it by two-thirds you don't have a comparable period in our history," said former New York Stock Exchange chief Dick Grasso. "…How are you going to do that in the context of everyone else in the world stimulating [and] lowering rates—applying, if you will, the type of stimulus we applied?”


“Federal regulation and intervention cost American consumers and businesses an estimated $1.88 trillion in 2014 in lost economic productivity and higher prices,” wrote Clyde Wayne Crews with the Competitive Enterprise Institute. “If U.S. federal regulation was a country, it would be the world’s 10th largest economy, ranking behind Russia and ahead of India. Economy-wide regulatory costs amount to an average of $14,976 per household—around 29% of an average family budget of $51,100.” 

This product continues to be laden with terms that put consumers at risk," said Susan Weinstock, director of Pew's consumer banking initiative. 

“The Bureau has become aware of ...institutions excluding or refusing to consider income derived from the Section 8 HCV Homeownership Program during mortgage loan application and underwriting...,” wrote the CFPB. “Some institutions have restricted the use of Section 8 HCV Homeownership Program vouchers to only certain home mortgage loan products or delivery channels. ECOA and Regulation B prohibit creditors from discriminating in any aspect of a credit transaction against an applicant ‘because all or part of the applicant’s income derives from any public assistance program.’”



Norbert J. Michael, CATO Institute 





“The goals of the enforcement arms of government should recognize the need to maintain the stability of the US housing market and access to credit,” wrote Urban Institute’s Laurie Goodman. “Overly aggressive, unnecessary enforcement of the False Claims Act and FIRREA is constraining access to credit. The Department of Justice and HUD’s inspector general could protect consumers and taxpayers by motivating lenders to improve their underwriting, not simply shut it down. We would all be much better served by their enforcement efforts if they did.”


“I think the Fed has done exactly the right thing—100% the right thing,” said Warren Buffett, CEO of Berkshire Hathaway, in a CNBC Squawk Box interview. “And, I think the ECB is doing the right thing, in terms of their situation. But, they still have consequences and it’s hard to envision the consequences. …In theory you have to have deflation to make negative rates to make any sense. It’s a strange situation…” 


“…[China’s reforms] should be welcomed, wrote Cumberland Advisor’s Bill Witherell. "The likely eventual inclusion of the Chinese yuan in the elite rank of “reserve currencies” will not threaten the global leadership position of the US dollar, which currently accounts for over 60% of global currency reserves. The yuan’s position in global reserves is likely to increase at a slow rate over the years following its inclusion. In view of the greenback’s current strength and interest rate advantage, its share in global reserves may well rise in the coming years."


In 2014, the CFPB’s fair lending supervisory and public enforcement actions resulted in $224 million in remediation to approximately 303,000 consumers and 15 referrals to the Justice Department. DOJ declined to open independent investigations in five of the referrals. In 2015, the CFPB will focus on (i) HMDA data integrity and validation, more in-depth analysis of mortgage lending in exams and investigations, and pricing policies and practice; (ii) discretionary dealer markup and compensation policies for auto dealers; and (iii) small business lending data collection rulemaking and supervisory activity in the small business lending market.  


This is the May 3, 2015 updates to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • FHFA announced stress test results for the GSEs. The combined remaining funding commitment under the PSPAs as of September 30, 2014 was $258.1 billion.  Under the severely adverse scenario, incremental Treasury draws range between $68.6 billion and $157.3 billion, depending on the treatment of deferred tax assets.  The remaining funding commitment under the PSPAs ranges between $189.4 billion and $100.8 billion.  The test horizon is September 30, 2014 through December 31, 2016.  The test assumes a deep and protracted recession, with the unemployment rate increasing by 4 percentage points to 10 percent in the middle of 2016.  By the end of 2015, real GDP declines by 4.5 percent and begins to recover in 2016.  Short-term interest rates remain near zero.  The 10-year Treasury falls to 1 percent in the fourth quarter of 2014, and long-term rates then increase slowly.  Spreads on domestic investment-grade bonds widen from 170 basis points to 500 basis points.  Equity prices fall by roughly 60 percent and equity market volatility increases substantially.  Home prices decline by 25 percent over the forecast horizon.  Option-adjusted spreads on MBS widen significantly, and each GSE’s largest counterparty is assumed to fail. 





Wells Fargo CEO John Stumpf.


“As a response to the financial crisis in 2007–2008, the Basel Committee has drafted a third revision of the regulatory framework for banks (Basel III),” according to a Cato Research Brief. “This framework contin­ues to rely on model-based regulation, but further increas­es complexity to address substantial weaknesses of the old framework. …[O]ur results suggest that further increases in complex­ity are unlikely to increase financial stability. …[S]impler and more transparent rules would be more effective in achieving the ultimate goal of financial stability.”


“Now seven years since the 2008 financial crisis, [Knoll Bond Rating Agency] believes that it is clear the FOMC needs to end its extraordinary low interest rate policy and restore function to the private money markets,” wrote senior managing director Chris Whalen. “Just as the Federal Reserve System had to win back its independence from the Treasury at the end of WWII, today the U.S. bond market needs to again become independent of active Fed market manipulation. By ending its low interest rate policy, the Fed can make clear that the next step in the process of recovery must come from Congress...”




“We may be at a defining moment for both banks and commercial banks,” concluded former Fed board governor Randall Kroszner, in a presentation at the Atlanta Fed’s annual conference on financial markets. “Disruptive innovation and dyspeptic regulators will hold the keys to the future. …Evidence suggests banks are still 'special,' but for how long? The future of banks may depend on acting as technology-data analytics firms in financial services rather than financial services firms using technology/“big data." 


“What’s interesting for people like Google and Apple, is they’re not actually really interested in making money out of the banking,” said Edward Firth, head of European banks research at Macquarie. “Initially what Google is interested in is information. …[T]hey want to cross sell their other products, their marketing for their adverting—that’s their initial focus. And with Apple, it’s about selling their phones. And in an sense that’s even more worrying for the bank sector, because if that's their focus, then clearly their margin requirements will be somewhat less.” 


Cindy R. Alexander, Mark A. Cohen, Law and Economics Center, George Mason University.


This is the April 26, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The FDIC released an ANPR seeking comment on whether banks and thrifts with a large number of deposit accounts, such as more that 2 million, should be required to enhance their recordkeeping to ensure access to the deposits in the event of bank failure.  
  • FHFA reaffirmed that it has not consented, and will not consent in the future, to the foreclosure or other extinguishment of any Fannie Mae or Freddie Mac lien or other property interest in connection with homeowners association foreclosures of super-priority liens.  Under the law governing the GSE conservatorships, FHFA’s consent is required for such a foreclosure to be effective.




“One thing is absolutely clear and it's—and we believed this from the beginning, that every bank is going to need to transform itself,” said Richard D. Fairbank, chairman, president and CEO of Capital One during the April 23 Earnings Call. “The digital revolution is changing banking on just about every dimension that you can imagine basically. It's changing what it takes to win in payments, in distribution, in marketing, in brand, foundational infrastructure, experience design, if you will, the way information is used. ...And we're going to need to think more like technology companies and maybe a little less like banks..”


"The brand is no longer what we tell the customer it's what people tell each other it is!"


Susan Wachter, PhD, Penn Wharton, University of Pennsylvania


The Department of Justice filed a lawsuit against Quicken Loans, accusing the  the nation’s largest FHA lender of violating mortgage underwriting rules that resulted in millions of dollars of losses to HUD. The Justice Department accuses Quicken Loans of knowingly submitting claims from September 2007 to December 2011 for hundreds of improperly underwritten government-insured loans. "Those who do business with the United States must act in good faith, including lenders that participate in the FHA mortgage insurance program," said Principal Deputy Assistant AG Benjamin Mizer.


“We …encourage the Basel Committee on Banking Supervision and the Federal Reserve to revisit the rules as they relate to capital requirements for derivatives trading, specifically by reassessing the treatment of client margin in leverage ratios and the requirements for funding,” wrote Pimco analysts. ”Should these rules not change, in our view the cost of transacting in the markets will continue to increase and risks will become more concentrated in the hands of fewer market participants, creating a more interlinked and fragile market system that is more vulnerable to dislocations.”


“The application of ignorantia legis to the current system of regulatory crime creates a situation where a wide variety of conduct is criminal and many people do not know the criminal nature of their action, nor do they suspect it,” wrote federal judicial clerk Michael Anthony Cottone. “When people do not have notice that their action may be criminal …the power of the state can blindside them when they become subject to the enforcement of obscure laws. …Economic analysis of ignorantia legis reveals that the principle ...creates costs that promote perverse incentives and inefficiencies.”


Mohamed El-Erian, Bloomberg View Columnist


Joe Calhoun with Alhambra Partners, April 19, 2015


 Michael Dell, Chairman and CEO, Dell Inc.



Joel Allison, CEO, Baylor Scott & White Health 


Beth E. Mooney, Chairman and CEO, KeyCorp


John G. Russell, President and CEO, CMS Energy Corporation and Consumers Energy Company


Rodney O'Neal, CEO and President, Delphi Automotive Systems LLC



“Within 10 years the fastest growing banks around the world will be technology companies, not banks,” wrote Brett King. “The fastest growing brands in banking will be those that have taken just one single slice of the universal banking model and optimized it, creating a compelling real-time experience—they won’t be businesses that own a charter. Many of these will need to partner with banks who do the boring compliance stuff, but increasingly even the choice of those bank partners will be driven by their technical competency to work with a start-up.”


This is the April 19, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following: 

  •        FHFA and the GSEs announced revised eligibility requirements for PMI companies, effective at year-end for existing approved companies.  PMI companies will be required to use capital stress tests that use macroeconomic assumptions consistent with the Federal Reserve’s Comprehensive Capital Analysis and Review severely adverse scenario, and have contingencies for raising additional capital in anticipation of any projected shortfall.  Approved insurers must have a documented risk diversification policy, must maintain lender and servicer guidelines on their websites, must determine loan eligibility and borrower creditworthiness before insuring a loan, appraisal review procedures, lender review procedures, and limit captive reinsurance contracts. 
  •        FHFA announced that, after reviewing the GSEs’ g-fees, the GSEs will eliminate the adverse market charge put in place in March 2008 and replace its revenue with targeted increases in g-fees to address various risk-based and access-to-credit considerations.  The result is a set of modest changes to upfront g-fees that are roughly revenue neutral and will result in either little or no change for most borrowers, effective September 1, 2015.
  •        The Federal Reserve Board released information about the Large Institution Supervision Coordinating Committee, formed in 2010 to coordinate supervision of domestic bank holding companies and foreign banking organizations that pose elevated risk to U.S. financial stability and other nonbank financial institutions designated as systemically important by FSOC.  

o   The LISCC Operating Committee (OC), in consultation with the LISCC, is responsible for setting priorities for and overseeing the execution of the LISCC supervisory program. 

o   The Supervision Program Management Committee (SPMC) coordinates supervisory program management for the LISCC firms.  

o   The Vetting Committee is a forum to discuss the results of key components of the supervisory program, and to provide feedback and guidance to the dedicated supervisory or LISCC horizontal teams.  

o   The Risk Secretariat identifies risks to LISCC firms’ operations and reviews and evaluates risk management practices across the LISCC portfolio, prioritizes risks for supervisory action, and supports supervisory activities aimed at mitigating key risks.  The Risk Secretariat also makes recommendations to the OC regarding proposed supervisory ratings related to specific risk types or risk management functions. 

o   The Capital and Performance Secretariat (CaPS) supports the identification of emerging risks.

o   The LISCC Data Team is chartered by the OC to support its data needs, to provide transparency into data collections, and to identify gaps in data needs.  

o   The OC oversees the committees that are charged with the execution of three annual horizontal exercises for LISCC firms:  the Comprehensive Capital Analysis and Review (CCAR) for LISCC firms, the Comprehensive Liquidity Analysis and Review (CLAR), and the Supervisory Assessment of Recovery and Resolution Preparedness (SRP).  

o   The LISCC supervisory program also includes the Quantitative Surveillance (QS) group, which uses quantitative methods to monitor the financial system , and the Systemic Risk Integration Forum, which ensures that potential risks to financial stability consistently reflect the insights coming from supervisory activities and analysis.




“What’s needed are smarter and simpler regulations, the kind of regulations that give smaller institutions a fighting chance to meet their compliance obligations without going bankrupt,” said Senator Elizabeth Warren (D-MA). “The goal is to make markets more competitive, and that means a simple, structural solution: break up the biggest banks so that no bank is too big to fail. That would let us cut the tangle of the regulations that are intended to stop a Too Big to Fail bank from taking on too much risk and bringing down the economy.” 


James Bullard, St. Louis Fed President on CNBC.


“Global growth remains moderate, with uneven prospects across the main countries and regions,” wrote the IMF. “It is projected to be 3.5 percent in 2015, in line with forecasts in the January 2015 World Economic Outlook Update. Relative to last year, the outlook for advanced economies is improving, while growth in emerging market and developing economies is projected to be lower, primarily reflecting weaker prospects for some large emerging market economies and oil-exporting countries.”


When a central bank prints money and buys a government bond, it is the same thing as cancelling that bond (so long as the central bank does not sell the bond back to the public), according to Richard Duncan, author & publisher of Macro Watch. Quantitative Easing has only been possible because it has occurred at a time when globalization is driving down the price of labor and industrial goods. The combination of fiat money and globalization creates a unique moment in history where the governments of the developed economies can print money on an aggressive scale without causing inflation.


“I don't see anything the magnitude we dealt with [in 2008] happening in the U.S. anytime soon,” said former Treasury Secretary Hank Paulson. “We have already taken some very, very significant steps. Our banks are much better capitalized… much better managed. We have better regulation…[and] better risk control. We still have plenty of problems we need to correct, and there are plenty of risks in the global economy. Financial crises happen every 8, 10, 12 years. ...[D]o we have the tools necessary to make sure we don't have the sort of crisis we had or it spills over into our economy? I believe we've got the necessary tools.”


Capital Markets Today.


“[The Fed] kept coming up with this term back [in 2003 and 2004], they wanted an insurance policy,” said Stan Druckenmiller. “This we got to ensure this economic recovery keeps going. The only thing they ensured in my mind was the financial crisis. So, to me you're getting the same language again out of policymakers. On a risk-reward basis why not let this thing a little hot? You know, we got to ensure that it gets out. But the problem with this is when you have zero money for so long, the marginal benefits you get through consumption greatly diminish, but there's one thing that doesn't diminish, which is unintended consequences.”


Telefonica Innovation Hub, Jennifer Riggins.  4.10.15


This is the April 12, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The Federal Reserve issued a final rule to expand the applicability of its Small Bank Holding Company Policy Statement and to apply it to certain savings and loan holding companies.  This facilitates the transfer of ownership of small community banks and thrifts by allowing their holding companies to operate with higher levels of debt than would normally be permitted.  While holding companies that qualify for the policy statement are excluded from consolidated capital requirements, their depository institution subsidiaries continue to be subject to minimum capital requirements.  The final rule raises the asset threshold of the policy statement from $500 million to $1 billion.  All firms must still meet certain qualitative requirements, including those pertaining to nonbanking activities, off-balance sheet activities, and publicly-registered debt and equity.  This rulemaking implements Public Law 113-250, which amended Dodd-Frank § 171(b)(5) to add to the exemptions from leverage and risk-based capital requirements.

“What’s happened of fundamental significance for the world is that East Asia has become the third growth pole in the world, or arguably the second, because for the first 200 years of modern economic growth, it was all the North Atlantic,” said Columbia University Professor Jeffrey Sachs. “...[I]t was the US and Europe that defined 90 percent of the technological advance that created the underlying dynamics to which the whole rest of the world would engage in catching up, integration, or falling under imperial rule... My take is that China will be a great and successful country in the 21st century.”


Creative self-disruption

...An industry can be transformed by top-down economic, financial, political, and regulatory changes. But companies like Airbnb, Amazon, Apple, and Uber exemplify a different kind of transformation: agile players invade other, seemingly unrelated industries and brilliantly exploit huge but previously unseen opportunities. Importantly and counter-intuitively, doing so serves their own core competencies, rather than those of the industry that they seek to disrupt. 


Ben Milne, Dwolla CEO wants to eliminate the 2-5 day wait for business transfers.


“The Fed is a tad above neutral with a slight bias towards tightening,” wrote Cumberland Advisors’ David Kotok. “Fed policymakers want to get away from the zero lower bound. They know they have to do it: the zero bound has created distortions. They also know that they must get markets to clear. In order for that to occur, U.S. interest rates must go up, even if only by a small amount. Elsewhere, nearly the entire developed world and a good part of the developing world are lowering interest rates and easing monetary policy. …[F]or the last century there has not been anything like this present environment.”



On March 25, the SEC approved the long-awaited final rules for Title IV of the JOBS Act, commonly referred to as Regulation A+. Pursuant to the 450-pages of final rules, Regulation A+ will permit companies to offer and sell up to $50 million of securities—up from $5 million—to the general public subject to certain eligibility, disclosure and reporting requirements. “These new rules provide an effective, workable path to raising capital...,” said SEC chair Mary Jo White “It is important for the Commission to continue to look for ways that our rules can facilitate capital-raising by smaller companies.”


An additional 1.25 million loans would have been made in 2013 if the cautious standards of 2001, rather than the severe standards of 2013, had been in place, according to Urban Institute. 


“History doesn't repeat itself, but it does rhyme,” wrote Mark Twain. 


On March 31, the CFPB released a new toolkit as part of its “Know Before You Owe” mortgage initiative, preceding the August 1st effective date for the TILA/RESPA integrated mortgage disclosure rule. The Bureau’s new toolkit, designed to “help customers understand the nature and costs of real estate settlement services,” provides a step-by-step guide to obtaining a mortgage. The toolkit, which includes worksheets, checklists, and research tips for consumers, replaces an existing HUD booklet that creditors provide to mortgage applicants.



High student debt, poor job prospects and shifting consumer attitudes have restricted homeownership among Millennials, potentially hindering their accumulation of wealth, according to Federal Reserve governor Lael Brainard. “Young people’s attitudes toward home buying may have changed as a result of witnessing their parents’ experiences during the housing crisis,” said Brainard. “Instead of seeing homeownership as a reliably safe investment, many of today’s young adults may now see some risk that houses could become financial albatrosses due to events beyond their control.”


“China is the only adult in the room.”


“[T]he conservatorships have left the enterprises in a state of suspended animation; neither private nor public entity and yet their business must continue,” wrote Bill Isaac and former Senator Bob Kerrey. “The government’s decision to violate HERA in 2012 by invoking the so-called ‘profit sweep’ has deprived the GSEs of their ability to rebuild capital and has put taxpayers at greater risk. …If private capital can’t count on the rule of law, it won’t participate in the future and taxpayers will have to pick up the pieces of what’s left of the financial system.”


Tight supply is driving up homes prices.


“The Fed has been spoiling financial markets since the depth of the financial crisis,” said Hoover Institution’s Kevin Warsh. “…After the taper tantrum, markets got uncomfortable and the Fed said ‘oh, we’re not going to rush.' Then we’ve had the dollar tantrum. And all of a sudden the Federal Reserve says ‘well, don’t worry, what we said last time isn’t quite true again.’ So markets think they have her number. The market thinks they’re going control these things and let markets go up. This is a very dangerous development.”


The monetary illusion.

As economic growth returns again to Europe and Japan, the prospect of a synchronous global expansion is taking hold.  Or, then again, maybe not. In a recent research piece published by Bank of America Merrill Lynch, global economic growth, as measured in nominal U.S. dollars,is projected to decline in 2015 for the first time since 2009, the height of the financial crisis.

In fact, the prospect of improvement in economic growth is largely a monetary illusion. No one needs to explain how policymakers have made painfully little progress on the structural reforms necessary to increase global productive capacity and stimulate employment and demand. Lacking the political will necessary to address the issues, central bankers have been left to paper over the global malaise with reams of fiat currency.


The National Real Estate Post.


The Fed’s ability to affect real rates of return, especially longer-term real rates, is transitory and limited,” wrote Ben Bernanke. “Except in the short run, real interest rates are determined by a wide range of economic factors, including prospects for economic growth—not by the Fed.”


This is the March 29, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The OCC released its Mortgage Metrics report for the fourth quarter of 2014, showing:
    • At year-end, 93.2% of mortgages included in the report were current, compared with 93.0% at the end of the previous quarter and 91.8% a year earlier. 
    • The percentage of loans 30 to 59 days past due was 2.4%, a 9.4% decrease from a year earlier. 
    • Seriously delinquent mortgages were 3.1% of the portfolio, a 12.2% decrease from a year earlier.
    • Loans in foreclosure at the end of the fourth quarter of 2014 fell to 315,922 or 1.4%, a decrease of 39.7% from a year earlier. 
    • Servicers initiated 75,395 new foreclosures during the quarter, a decrease of 39.4% from a year earlier. 
    • The number of completed foreclosures decreased 35.3% from a year earlier to 39,331. 
    • Servicers implemented 195,577 home retention actions during the quarter compared with 49,749 home forfeiture actions. The number of home retention actions decreased 19.5% from a year earlier. 
    • More than 88% of modifications in the quarter reduced monthly principal and interest payments; 52.2% of modifications reduced payments by 20% or more. 
    • Modifications reduced payments by $243 per month on average, while HAMP modifications reduced monthly payments by an average of $274.
    • Servicers implemented 3,649,010 modifications from January 1, 2008, through September 30, 2014. Of these modifications, more than 55% were active at the end of the fourth quarter of 2014 and 45% had exited the portfolio through payment in full, involuntary liquidation, or transfer to a non-reporting servicer. 
    • Of the 2,012,632 active modifications at the end of the fourth quarter, 68.8% were current, 25.8% were delinquent, and 5.4% were in the process of foreclosure.​
  • FHFA released its Foreclosure Prevention Report for the fourth quarter of 2014, showing:
    • The GSEs completed nearly 65,900 foreclosure prevention actions in the quarter, bringing the total foreclosure prevention actions to more than 3.4 million since the start of the conservatorships.
    • The share of modifications with principal forbearance fell to 20%, while modifications with extend-term only increased to 46% due to improving house prices and declining HAMP eligible population.
    • As of December 31, 2014, approximately 17% of loans modified in the fourth quarter of 2013 had missed two or more payments, one year after modification.
    • Approximately 33% of all permanent loan modifications helped to reduce homeowners' monthly payments by over 30% in the fourth quarter;
    • There were 10,800 short sales and deeds-in-lieu in the fourth quarter, bringing the total to approximately 605,000 since the start of the conservatorships. 
    • The number of 60+ day delinquent loans declined another 3% during the quarter to the lowest level since the start of conservatorships.
    • The serious delinquency rate fell to 1.9 percent at the end of the quarter compared with 6.0% for FHA loans, 3.4% for VA loans, and 4.5% percent for all loans (industry average).
    • Third-party sales and foreclosure sales fell 7% to nearly 36,200 while foreclosure starts decreased slightly to approximately 74,000 in the fourth quarter.
    • REO inventory declined 8% during the quarter to approximately 111,000.
  • The Federal Reserve and FDIC announced that they requested amendments by year-end to the living wills of BNP Paribas, HSBC Holdings, and The Royal Bank of Scotland Group.  The agencies said the plans had shortcomings, including:  unrealistic or inadequately supported assumptions about the likely behavior of customers, counterparties, investors, central clearing facilities, and regulators; and inadequate analysis regarding interconnections within the firms.
  • The Federal Reserve and FDIC announced they adjusted the annual resolution plan filing deadline for AIG, GE Capital, MetLife, and Prudential Financial, from July 1 to December 31 beginning in 2016.




The endgame for the central banks, who have onboarded some 7 years of market risk on their balance sheet. 


Attached please find an updated Roadmap to the Dodd-Frank Act Rulemakings, Studies, and Reports.

  • The CFPB released its policy for publishing consumer complaint narratives and proposes to publish complements.
  • The CFPB solicits comment on the credit card market.
  • The CFTC reopened for public comment the cost benefit analyses of eight regulations in response to a judicial challenge, SIFMA et al. v. CFTC, 13-1916 (D.D.C. Sept. 14, 2014).  The rules are: real-time reporting; SDR reporting; swap entity registration rule; daily trading records, risk management, and chief compliance officer rules; entity definition rule; historical SDR reporting rule; portfolio reconciliation rule; and swap entity registration.
  • The CFTC published a rule to remove the December 31, 2018 automatic termination date for the phased-in compliance schedule for futures commission merchants and to provide assurance that the residual interest deadline will only be revised through a separate rulemaking.
  • The SEC proposes a rule to require issuers to disclose in any proxy or consent solicitation material for an annual meeting whether any employee or board member is permitted to hedge or offset any decrease in the market value of equity securities either granted to the person as compensation or held by the employee or director.
  • The SEC proposed a regulation to require a national securities exchange or security-based swap execution facility to report to a registered security-based swap data repository (SDR) a security-based swap executed on the platform that will be submitted to clearing and to require a registered clearing agency to report to a registered SDR any security-based swap to which it is a counterparty.
  • The SEC finalized two new rules to require security-based swap data repositories to register with the SEC and prescribe reporting and public dissemination requirements for security-based swap transaction data.  The SEC also proposed certain additional rules, rule amendments and guidance related to the reporting and public dissemination of security-based swap transaction data.  Regulation SBSR and SDR registration.



Canfield Press



The Atlanta Fed’s GDPNOW forecast has fallen from 1.2% (March 3) to 0.2% (March 25).  


Although Yemen contributes less than 0.2% of global oil output, (133,000 barrels of oil a day), the small country’s location at the southern end of the Arabian Peninsula puts it near the center of world energy trade. As regional powers began bombing rebel targets (on March 26), global oil prices jumped more than 5%. “While thousands of barrels of oil from Yemen will not be noticed, millions from Saudi Arabia will matter, said John Vautrain, head of Vautrain & Co. “Saudi Arabia has been concerned about unrest spreading from Yemen.”


“It’s now a lose-lose game and the best that can happen is actually muddling through,” said George Soros in a Bloomberg TV interview. “Greece is a long-festering problem that was mishandled from the beginning by all parties. …You can keep on pushing it back indefinitely [making interest payments without writing down debt], but in the meantime there will be no primary surplus because Greece is going down the drain. Right now we are at the cusp [of a Grexit] and I can see both possibilities.” Greece is expected to run out of cash on April 20, unless fresh aid is provided by creditors.



David Stevens, Mortgage Bankers Association President and CEO.


Federal Reserve Bank of New York.


The San Francisco Board of Supervisors unanimously adopted a resolution, supporting the use of an innovative strategy to encourage the owners of at risk-mortgages to sell the loans "at fair market value" to non-profits and CDFIs. National organizations, such as National Community Capital and Hogar Hispano, would leverage unspent TARP funds to reduce loan principals and prevent foreclosure. In San Francisco, there are approximately 3,000 underwater loans at risk of foreclosure, concentrated in four zip codes.


John Tamny, editor of RealClearMarkets and Political Economy Editor for Forbes.



This is the March 22, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • FHFA released a progress report on the initiatives outlined in the 2014 Strategic Plan for the Conservatorships and the 2014 Conservatorship Scorecard.  The report notes important progress in advancing access to credit, continuing and enhancing loss mitigation and foreclosure prevention efforts, increasing the role of private capital in the mortgage market, and furthering the development of the Common Securitization Platform (CSP) and a single security.  
  • FHFA’s IG released a white paper titled, The Continued Profitability of Fannie Mae and Freddie Mac Is Not Assured. The report states that the GSEs profitability in 2013 and 2014 was significantly generated by non-recurring sources.  The paper states, “At present, it appears that Congressional action will be needed to define what role, if any, the Enterprises play in the housing finance system.”
  • The Federal Reserve announced 2015 annual CCAR results.  The Board objected to the capital plans of Deutsche Bank Trust Corporation and Santander Holdings USA, Inc. due to widespread and substantial weaknesses across their capital planning processes, and it issued a conditional non-objection to Bank of America Corporation and is requiring the BHC to correct weaknesses in some elements of its capital planning process and to resubmit a capital plan. 
  • Treasury released its MHA (HAMP and HARP) servicers report for the fourth quarter of 2014, showing that two servicers need minor improvement while five need moderate improvement, the same numbers as from the prior quarter.

“The great wheel of circulation is altogether different from the goods which are circulated by means of it. The revenue of the society consists altogether in those goods, and not in the wheel which circulates them” Adam Smith, 1811, page 202


“The world’s two most prominent reserve currencies are separating themselves by an expanding chasm known as an interest rate spread,” wrote Cumberland Advisors’ David Kotok. “They are doing so through independent policies that are focused domestically. They do not talk about each other’s impacts on their own policies or how the interface between them will play out worldwide. But when you delve into the details, you will find many references to the currency drama that is taking place.”


Facebook Pay with your debit card and friends.


The Center for Housing Policy/National Housing Conference.


“FOMC [is] meeting [this] week, with a subsequent press conference with Fed Chair Janet Yellen,” wrote Tim Duy.  “Remember to clear your calendar for this Wednesday. It is widely expected that the Fed will drop the word ‘patient’ from its statement. Too many FOMC participants want the opportunity to debate a rate hike in June, and thus ‘patient’ needs to go. The Fed will not want this to imply that a rate hike is guaranteed at the June meeting, so look for language emphasizing the data-dependent nature of future policy.”


Cramer is talking to CEO of APPL


The 10-year Treasury yield climbed to 2.16 percent from 1.98 percent this time last month, signaling the expected fed funds rate hike.



“Real estate is highly sensitive to rates—even 25 basis points—can peel 10% off real estate prices,” said Kevin O’Leary. “Watch it happen. It’s coming to a theater near you.” 


“ISIL demonstrates the worst in developments because it has basically been a phenomenon that has snowballed in terms of its appeal,” said CIA Director John Brennan. 


This is the March 15, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The European Parliament voted to cap interchange fees, resulting in an estimated €6 billion reduction annually.  Generally, the regulation will cap the fees at 0.2% of the transaction value for consumer debit cards and at 0.3% for consumer credit cards.  For consumer debit cards, it also gives flexibility to Member States to define lower percentage caps and to impose maximum fee amounts.





Dick Bove, Rafferty Capital 

CNBC's Steve Liesman 




Foreigners have borrowed $9 trillion in U.S. currency outside American jurisdiction—up from $2 billion in 2000, according to a BIS study. The emerging market’s share (mostly Asian) has doubled to $4.5 trillion since 2008. Today, the world credit system is acutely sensitive to shifts in the Federal Reserve’s monetary policy. Asian and Latin American companies are frantically trying to hedge their dollar debts on the derivatives markets, driving the dollar even higher and feeding a vicious cycle, according to Stephen Jen with SLJ Macro Partners. "This is how avalanches start,” said Jen.


~"Central banks around the world have put together a lot of intricate policies," said DoubleLine's Jeff Gundlach. "Ultimately, the tower will not be able to stand."



New and repeat foreclosure starts hit a 12-month high in January, according to Black Knight Financial (BKF). “Repeat foreclosures made up 51 percent of all starts for the month, and increased 11 percent from December,” according to BKF’s MortgageMonitor. “First time foreclosure starts were up just a fraction of a percent (0.33 percent) from the month prior. …Judicial state foreclosure starts jumped about 10 percent from December as compared to just a 1.7 percent increase in non-judicial states.”



"No regulator, as far as I know, has considered the overall regulatory burden on financial services firms when determining whether to impose additional costly regulations," said SEC Commissioner Daniel Gallagher. "We as regulators are, when it comes to the possibility that our rules are causing death by a thousand cuts, the proverbial ostrich—head firmly entrenched in the sand. …The stakes here are considerable: regulatory burdens divert capital away from the real economy—this acts as a barrier to entry for new market participants and further entrenches those institutions that are increasingly 'too big to fail.'"


This is the March 8, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • FHFA announced enhanced requirements for GSE sales of non-performing loans (NPLs), to transfer risk to the private sector. reduce GSE losses, and improve borrower and neighborhood outcomes by providing alternatives to foreclosure wherever possible.  Sales are generally expected to include loans that are severely delinquent, such as more than a year past due.  Future GSE NPL sales will include the following:

o Bidder qualifications:  Bidders will be required to identify their servicing partners at the time of qualification and must complete a servicing questionnaire to demonstrate a record of successful resolution of loans through alternatives to foreclosure;
o Modification requirements:  The new servicer will be required to evaluate all pre-2009 borrowers (other than those whose foreclosure sale date is imminent or whose property is vacant) for the Making Home Affordable programs, including HAMP.  All post-January 1, 2009 borrowers (other than those with an imminent foreclosure sale date or vacant property) must be evaluated for a proprietary modification, without an upfront fee or prepayment of any mortgage debt, and must provide a benefit to the borrower with the potential for a sustainable modification;
o Loss mitigation waterfall requirements:  Servicers must apply a waterfall that includes evaluating borrower eligibility for a HAMP or proprietary modification, a short sale, and a deed-in-lieu of foreclosure.  Foreclosure must be the last option in the waterfall.  The waterfall may consider NPV to the investor;
o REO sale requirements:  Servicers are encouraged to sell REO properties to individuals who will occupy the property as their primary residence or to non-profits.  For the first 20 days after any NPL that becomes an REO property is marketed, the property may be sold only to buyers who intend to occupy the property as their primary residence or to non-profits;
o Subsequent servicer requirements:  Subsequent servicers must assume the responsibilities of the initial servicer;
o Bidding transparency:  To facilitate transparency of the NPL sales program and encourage robust participation by all interested participants,
o Each GSE will develop a process for announcing upcoming NPL sale offerings.  This will include an NPL webpage on the GSE’s website, email distribution to small, non-profit and minority- and women-owned business investors, and proactive outreach to potential bidders.  Additionally, each GSE will host training sessions for interested non-profit and minority- and women-owned investors.  The GSEs will also offer small pools of NPLs where feasible;
o Reporting requirements:  NPL buyers and servicers, including subsequent servicers, must report loan resolution results and borrower outcomes to the GSEs for four years after the NPL sale.  These reports will help inform whether to make future changes to NPL sales requirements and determine whether an NPL buyer and NPL servicer continue to be eligible for future sales based on pool level borrower outcomes, adjusted for subsequent market events.  Consistent with applicable law, FHFA and/or the GSEs will provide public reports on aggregate borrower outcomes at the pool level.

  • The Federal Reserve announced stress test results for the 31 largest U.S.-based bank holding companies.  The results project that in the most severe scenario, loan losses at the 31 participating bank holding companies would total $340 billion during the nine quarters tested.  This scenario features a deep recession with the unemployment rate peaking at 10%, a 25% decline in home prices, a stock market drop of nearly 60%, and a notable rise in market volatility.  The 31 firms’ aggregate tier 1 common capital ratio would fall from an actual 11.9% in the third quarter of 2014 to a minimum of 8.2%.  This hypothetical post-stress minimum is significantly higher than the 31 firms’ aggregate tier 1 common capital ratio of 5.5% measured in the beginning of 2009.
  • The Office of Financial Research released a working paper entitled, Are the Federal Reserve’s Stress Test Results Predictable?  It found that projected losses by bank and loan category are fairly predictable and are becoming increasingly so.  It suggests three ways to reduce predictability. 

o The adverse and severely adverse scenarios required by Dodd-Frank stress tests could bring more diversity to the testing. 
o The number of scenarios could be expanded.
o The testing could be expanded to include knock-on and feedback effects between institutions, and interactions between solvency and liquidity.

  • GAO released a report on TARP’s CPP program, showing CPP returns have surpassed original investments.  As of December 31, 2014, Treasury had received $226.4 billion in repayments, sales, dividends, and interest, exceeding the amount originally disbursed by $21.5 billion.  As of the same date, the program was largely wound down, with only 34 of the original 707 institutions remaining.  Over the past 5 years, repayments and auctions were the primary means by which institutions exited CPP.  However, Treasury officials indicated that more of the remaining institutions may use restructurings as an exit strategy.  The 34 remaining CPP institutions showed some improvements in their financial condition, as measured by key metrics of financial condition, but many continued to miss payments and maintain low capital levels.



"It's highly unlikely that we would extend the coverage period [for the Home Affordable Refinance Program, created in 2009],” said Federal Housing Finance Agency Director Mel Watt. Extending HARP could have "moral hazard considerations" given that it was put in place to deal with the effects of the financial crisis, not as an ongoing program, Watt added. He also said his agency’s decision on guarantee fees, charged by Fannie Mae and Freddie Mac, might be delayed until April. It had been expected this month.


“The U.S. housing market is currently facing two challenges: (1) a dearth of credit creation and (2) a shortage of homes available for sale,” wrote Kroll Bond Rating Agency’s Chris Whalen. “The dearth of credit is a function of Dodd-Frank and the oppressive U.S. regulatory environment, which is discouraging bank credit expansion for consumers and businesses alike. Factors behind the shortage of homes for sale are more complex, especially in states (CA, FL) where some home prices are now above pre-2008 levels.”


Economic Studies at Brookings 


“There is a demographic trend happening today that no one is really talking about,” wrote LendAcademy’s Ryan Lichtenwalk. “It is a trend that will ensure a major tailwind for online lending platforms and a potential headwind for traditional banks. The millennial generation ...[doesn't] like doing business the way our parents’ generation did. …Above all else, millennials are open to a new way of doing things. We will be among the fastest group to adopt nontraditional banking services ...[including] mobile wallets, alternative payments services and  peer to peer lending.”


Representative John Delaney’s American Infrastructure Fund proposal: An idea whose time has come?


“The economic jury is still out on whether recent rates of growth are a temporary post-crisis dip or a longer-lasting valley in our economic fortunes,” said Andrew G Haldane, chief economist at the Bank of England. “Pessimists point to high levels of debt and inequality, worsening demographics and stagnating levels of educational attainment. Optimists appeal to a new industrial revolution in digital technology. Given its importance to living standards, this debate is one of the key issues of our time.”

03.01.15, Jeffrey Snider

February 27, 2015


Remarks by Stanley Fischer, Vice Chairman of the Board of Governors of the Federal Reserve System


A recipe for another global crisis?

" Seven years after the global financial crisis, global debt and leverage have continued to grow. From 2007 through the second quarter of 2014, global debt grew by $57 trillion, raising the ratio of global debt to GDP by 17 percentage points. This is not as much as the 23-point increase in the seven years before the crisis, but it is enough to raise fresh concerns. Governments in advanced economies have borrowed heavily to fund bailouts in the crisis and offset falling demand in the recession, while corporate and household debt in a range of countries continues to grow rapidly."

Richard Dobbs, Susan Lund, Jonathan Woetzel and Mina Mutafchieva

McKinsey Global Instittute

February 2015




“In the 1960s and 1970s, an additional dollar of earnings or borrowing was associated with about a 40-cent increase in investment,” wrote Roosevelt Institute’s J.W. Mason. “Since the 1980s, less than 10 cents of each borrowed dollar is invested ...[and] shareholder payouts have nearly doubled; in the second half of 2007, aggregate payouts actually exceeded aggregate investment. ...This change in corporate finance, associated with the “shareholder revolution,” means there is good reason to believe that the real economy benefits less from the easier credit provided by macroeconomic policy than it once did.”




JP Morgan contends it has $18 billion of synergies--$15 billion of revenue synergies and $3 billion of cost synergies.


This is the February 22, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • Freddie Mac announced results for 2014, showing net income of $7.7 billion for the year and of $227 million for the fourth quarter of 2014.  The GSE reported a net worth of $2.7 billion as of December 31, 2014, resulting in a dividend obligation to Treasury of $0.9 billion, expected to be paid in March 2015.  With the March 2015 dividend payment, the GSE will have paid $91.8 billion in dividends to Treasury.
  • Fannie Mae announced results for 2014, showing net income of $14.2 billion for the year and of $1.3 billion for the fourth quarter of 2014.  The GSE reported a net worth of $3.7 billion as of December 31, 2014, resulting in a dividend obligation to Treasury of $1.9 billion expected to be paid in March 2015.  With the March 2015 dividend payment, the GSE will have paid $136.4 billion in dividends to Treasury.  
  • The Federal Reserve and FDIC announced that they are extending the resolution plan, or living will, submission deadline for American International Group, Inc., General Electric Capital Corporation, Inc., and Prudential Financial, Inc., consistent with similar extensions provided to other firms in previous years.  The three organizations will be required to submit their second annual plans by Dec. 31, 2015, instead of July 1, 2015.
  • FHFA released its Refinance Report for the fourth quarter of 2014, showing:
    • In the fourth quarter of 2014, there were 37,397 HARP refinances, bringing the total from the inception of HARP to 3,270,451.
    • Borrowers who refinanced through HARP had a lower delinquency rate compared to borrowers eligible for HARP who did not refinance through the program.
    • More than 25 percent of all 2014 HARP refinances for underwater borrowers (those with a loan-to-value ratio greater than 105 percent) resulted in 15- and 20-year mortgages.

FHFA is continuing its efforts to reach HARP-eligible borrowers, with a March 4 event in Newark, NJ. 



"these kinds of price movements only occur during severe economic dislocations of a global scale."


Average borrower left with the average load of $33,000 in class of 2014.


215,000 TEU is equivalent to about 1.2% of the fleet—nearly the ‘idle’ boxship capacity of 1.3% of the fleet.



San Francisco, Santa Fe, New Mexico, Seattle and Maine are considering the creation of public banks.



“The biggest risk is this illusion of liquidity,” said Mohamed El-Erian, Allianz chief economic adviser. “People actually believe that they can quote rationally bubble-wide til the turn and when that turn comes, they actually believe they’re going to reposition themselves. …History tells us that there isn’t as much liquidity as people like to think there, when there’s a major change in the market paradigm.”


Up to 100 financial institutions around the world have been hit by sophisticated cyber attacks on the finance industry, according to Kaspersky Lab, a Russian security company.


On Sunday morning, the FAA released proposed rules to speed up the integration of unmanned aircraft into the American economy under the following conditions: (i) drones can only be flown in daylight hours within the direct line of site of the operator; (ii) operators must be at least 17 years old, pass an aeronautical knowledge test and obtain an FAA UAS operator certificate; (iii) drones must be under 55 pounds, can’t fly higher than 500 feet or faster than 100 mph, and can’t fly over people; and (iv) drones can’t allow “any object to be dropped.” The rules, open for public comment, would go into effect in 2016. 



This is the February 15, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The Office of Financial Research released a working paper entitled, Process Systems Engineering as a Modeling Paradigm for Analyzing Systemic Risk in Financial Networks, proposing that a modeling methodology called signed directed graphs (SDG) is a useful framework to address systemic risk.  The SDG framework can represent and reveal information missed by more traditional network models of financial system.  This framework adds crucial information to a network model about the direction of influence and control between nodes, providing a tool for analyzing the potential hazards and instabilities in the system. The paper also discusses how the SDG framework can facilitate the automation of the identification and monitoring of potential vulnerabilities, illustrated with an example of a bank/dealer case study.
  • The banking agencies released an optional tool to simplify calculations of risk-based capital requirements for securitization exposures. The agencies are making this tool available for all banks that use the simplified supervisory formula approach to help calculate associated capital requirements.  Banks may opt to use the simplified supervisory formula approach under the standardized approach.  The revised capital rule replaced the existing generally applicable risk-based capital standards with a standardized approach.  Banks subject to the advanced approaches risk-based capital rule must use the standardized approach to determine their risk-based capital floor, and all other banks must use the standardized approach to determine their overall minimum risk-based capital requirements.

"Is there any hope for an end to the currency wars?" asked Charlie Bilello. "Perhaps. There is a a growing consensus that the Federal Reserve will make a peace offering with a rate hike by the middle of this year. …[T]he alternative, doing nothing, may be more harmful still as the unintended consequences of distorting market rates is becoming more and more obvious... Will the Fed choose to ‘save capitalism’ or continue with the command economic system that has been serving the short-term interests of financial assets to the detriment of the real economy? …They either need to abandon the Bernanke “wealth effect” theory or continue the status quo."


Dallas Fed President Richard Fisher in an interview with CNBC's Steve Liesman.


FHA requires lenders to certify the mortgages they’ve originated have no errors. When errors occur, the Department of Justice has used the False Claims Act to pursue treble damages from the lenders. (Case in point: DoJ's $614 million settlement with JPMorgan Chase.) Many lenders have opted to apply credit overlays or discontinue FHA lending altogether to limit litigation and repurchase risk. In an effort to expand credit, FHA officials are considering changing the lenders' certification and clarifying other penalties they could face for certain mistakes.


Brookings Institute. What they are.  Where they are. And Why they Matter.


BankAlliance, a group of 200 small banks, is teaming up with Lending Club to purchase consumer loans originated through the marketplace lender’s website. The alliance with Lending Club will help small banks over come the costs of underwriting a large pool of loans, while meeting regulatory requirements and helping them extend credit to borrowers with lower credit scores than they previously served. The banks will own the loans acquired through Lending Club and absorb any losses incurred. 


“Exit from the euro does not even enter into our plans, quite simply because the euro is fragile” said Greece’s finance minister Yanis Varoufa. “It is like a house of cards. If you pull away the Greek card, they all come down.  Do we really want Europe to break apart? Anybody who is tempted to think it possible to amputate Greece strategically from Europe should be careful. It is very dangerous. Who would be hit after us? Portugal?”


 "What if Dodd-Frank created a too-small-to-succeed problem in addition to the too-big-to-fail problem?” asked Professor Marshall Lux, author of the study. 


An example of regulation of JPMorgan derivatives trades.


An interview of Larry Summers. McKinsey & Company Insights.


“The Eurozone will create the compromise for Greece,” wrote John Mauldin. “…[W]hen the next European crisis hits, probably triggered by France, Europe will either have to create a true fiscal union and mutualize the debt of all countries or break up the Eurozone. Since an increasingly large portion of Europeans (especially younger voters, who are becoming the majority as time goes by) want to keep the European Union, and since we are talking a political decision and not an economic decision, I think they will end up neutralizing Greece’s debt. Then the debt problem then simply goes away. Voilà! Problem solved."


This is the February 8, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • FSOC announced revised procedures and updated FAQs regarding its process for reviewing nonbank financial companies for potential designation.  The changes are designed to provide:  earlier engagement with companies under consideration; transparency, through making information public; and engagement with designated companies during FSOC’s annual reevaluations of designations. 
  • On February 3, 2015, the European Commission published a report that recommends granting pension funds a two-year exemption from central clearing requirements for their over-the-counter derivatives due to the cost of holding cash for variation margin requirements.





McKinsey Global Institute


“In 2015, the first wave of 7.3 million homeowners who lost their home to foreclosure or short sale during the foreclosure crisis are now past the seven-year window they conservatively need to repair their credit and qualify to buy a home,” wrote RealtyTrac. “More waves of these potential boomerang buyers will be moving past that seven-year window over the next eight years corresponding to the eight years of above historically normal foreclosure activity from 2007 to 2014."


In an analysis of loss severity of residential mortgages, Urban Institute’s Laurie Goodman and Jun Zhu found:

  • Mortgage insurance significantly lowers the severities;
  • Small loans have higher severity than larger ones;
  • Real-estate-owned sales have higher severity than short sales; and
  • No stable relationship exists between the state of origination and severity.  



With oil prices crashing and demand falling, U.S. oil companies have announced their plans to cut their capital spending in 2015.


“[The] lending of yesterday is done through these stodgy banks and government run balance sheets and programs,” said Insikt CEO James Gutierrez. “Lending of the future is going to be through awesome customer experiences built by new companies that realize they [have]  more, unique data on customers—and if they put that data to work, can make really attractive loans. ...The lending of the future is going to be through awesome customer experiences built by new companies that realize they [have] more, unique data on customers."

 America’s “advanced industries” stand out as a vital component for the future of the U.S. economy.

21+ million people voted Lost Dog the Super Bowl’s best advertisement.   


There is currently €1.5tr or $1.7tr of Euro area government bonds of greater than one year maturity trading with negative nominal yields, almost all of them of core euro governments of up to 5 years maturity,” wrote JP Morgan analysts. “This figure rises to $1.8tr if one adds $16bn of Swedish, $60bn of Swiss and $45bn of Danish government bonds currently trading with a negative yield. Almost all Japanese government bonds are trading with positive yields this week. …So the total universe of government bonds traded with a negative yield was $3.6tr last week or 16% of the JPM Global Government Bond Index.”


Inflation and deflation across the world with Charlie Rose.


This is the February 1, 2015 update to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • SIGTARP released a quarterly report to Congress, showing: 
    • Regarding CPP:
      • Treasury’s treatment of smaller CPP banks differs from its treatment of large CPP banks.  Treasury took a public and active role with the largest CPP banks, and became more like a passive investor in the smaller CPP banks.  SIGTARP suggests that Treasury could have assisted small CPP banks repay their TARP funds by restructuring or exchanging the shares.  
      • Some private investors have bought out Treasury’s CPP stakes at discounts from 1% to 90%.  In some instances, the private investors buy and flip CPP shares at a profit, often in a matter of weeks or months.
      • As of December 31, 2014, 68 institutions remained in CPP.  In 34 of them, Treasury holds only warrants to purchase stock.  
      • As of December 31, 2014, taxpayers were still owed $5.5 billion related to CPP.  According to Treasury, it had write-offs and realized losses of $5 billion in the program, and $197.2 billion of the CPP principal (or 96%) had been recovered.
      • As of December 31, 2014, of the 34 CPP banks with remaining principal investments, 26 had missed at least five dividend payments, and Treasury had assigned observers to 12 current CPP recipients, while 12 declined consent to Treasury observers. 
    • Treasury and SIGTARP disagree about whether Treasury is doing enough to ensure timely processing of HAMP applications.  The report states:

“While Treasury requires that servicers review a completed HAMP application within 30 days, Treasury allows servicers to extend the review time indefinitely if the application is incomplete, even though the homeowner may not be at fault. . . . Treasury must do more to ensure that servicers help homeowners complete their application faster than the current rates.”  [CFPB regulations usually prohibit servicers from acting on incomplete loss mitigation applications.]

  • Beginning in mid-2013, Treasury approved a HHF program for blight elimination.  Through December 2014, Treasury has approved blight elimination programs in six states, Alabama, Illinois, Indiana, Michigan, Ohio, and South Carolina.  Treasury did not authorize new funds for these states, but instead reallocated funds from the states’ other HHF programs.  
  • HUD released an interim final regulation that will govern the Housing Trust Fund.  HERA created the Housing Trust Fund and the Capital Magnet Fund and required the GSEs co contribute to them, but FHFA suspended the contributions a few months later when the GSEs were out into conservatorship.  FHFA revoked the suspension in December 2014.  Treasury, which administers the Capital Magnet Fund, issued regulations for it in 2010, at 12 C.F.R. Part 1810.
  • The Federal Reserve released a report, Strategies for Improving the U.S. Payment System, on a plan for collaborating with payment system stakeholders to enhance the speed, safety and efficiency of the U.S. payment system.  It is the result of 18 months of research to identify key gaps and opportunities, gaining industry and end-user perspectives on needs and priorities and defining ways to achieve payment improvements.  The paper outlines the Federal Reserve's intent to establish a task force to identify approaches for implementing safe, ubiquitous, faster payment capabilities.  The paper calls for a task force to advise the Federal Reserve on reducing payment fraud and advancing the safety, security and resiliency of the payment system.  Additionally, the Federal Reserve will pursue efforts to enhance payment system efficiency through work on standards, directories, and business-to-business payment improvements, alongside efforts to enhance Fed-provided services for same-day ACH, risk management, and settlement.



Canfield Press


Bill Gross, Janus Capital Group, Investment Outlook


In 2014, global freedom has suffered a disturbing decline with 60% of the world's population, or 2.6 billion people, living in countries that are not completely free, accrording to Freedom House. 



“The anti-austerity Syriza political party has won in Greece,” wrote George Mason’s Anthony Sanders. “Alexis Tsipras was sworn in as Greek prime minister and handed a mandate to form a government that will challenge international creditors over the budget cuts. ...Tsipras said his priority is ‘for Greece and its people to regain their lost dignity.’ The reaction? Greece 10 year sovereign yields spike 53 basis points.”


Diverging monetary policies will "test capital flows across the global economy, including to emerging markets," said Mark Carney, governor of the Bank of England. The $9 trillion of borrowings in U.S. dollars by companies in the developing world “will test the resilience of that new financial system.” He added, "We are particularly concerned about an illusion of liquidity that has existed in a number of financial markets. I would say that illusion of liquidity is gradually being disabused.”


World Economic Forum in  Davos.


Forum Debate at the World Economic Forum in Davos.


Panel Member Penny Pritzker, U.S. Secretary of Commerce at Davos.


We have seen in the last few years you have to trust in Mario,” said Blackrock's Fink.


This is the January 25, 2015 updates to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • The European Central Bank announced an expanded program of purchasing sovereign bonds to address the risks of prolonged low inflation.  Combined monthly purchases will amount to €60 billion.  They are intended to be carried out until at least September 2016 and in any case until the Governing Council sees a sustained adjustment in the path of inflation that is consistent with its aim of achieving inflation rates below, but close to, 2% over the medium term.  The ECB will buy bonds issued by euro area central governments, agencies, and European institutions in the secondary market against central bank money, which the institutions that sold the securities can use to buy other assets and extend credit to the real economy.  Purchases of securities of European institutions (which will be 12% of the additional asset purchases, and which will be purchased by NCBs) will be subject to loss sharing.  The rest of the NCBs’ additional asset purchases will not be subject to loss sharing.  The ECB will hold 8% of the additional asset purchases.  This implies that 20% of the additional asset purchases will be subject to risk sharing.





On January 20, the Supreme Court heard oral arguments in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, in which Texas challenged the disparate impact theory of discrimination under the Fair Housing Act (FHA).  The Justices focused on (i) whether the phrase “making unavailable” in the FHA provides a textual basis for disparate impact, (ii) whether three provisions within the 1988 amendments to the FHA demonstrate congressional acknowledgement that the FHA permits disparate impact claims, and (iii) whether they should defer to HUD’s disparate impact rule.


“We have a deflationary set of circumstances with zero interest rates or negative interest rates,” said Ray Dalio, founder of Bridgewater Associates LP. “How far will negative interest rates carry you? It’s going to begin to call into question what the value of holding money is. What is money? With negative interest rates, literally, the under the mattress looks good.”


Jed Kolko, Trulia Chief Economist and VP of analytics. on CNBC


"We are fifteen years into this new century. Fifteen years that dawned with terror touching our shores; that unfolded with a new generation fighting two long and costly wars; that saw a vicious recession spread across our nation and the world. It has been, and still is, a hard time for many. But tonight, we turn the page."

President Barack Obama
State of the Union Address
January 20, 2015


The ECB faces a crucial test of its resolve to do ''whatever it takes'' to preserve the euro when it decides this week on buying government bonds.



“Major centrals banks claim to be independent, but they are all ultimately under the control of politicians,” wrote Saxo Bank’s CIO and chief economist Steen Jakobsen. “Many developed countries have tried to anchor an independent central bank to offset pressure from politicians and that’s well and good in principle until an economy or the effects of a monetary policy decision beginning spinning out of control. At zero bound for growth and for interest rates, politicians and central banks switch to survival mode, where rules are bent or even broken to fit an agenda of buying more time.”



“The current bear market for oil may actually be the beginning of a longer and extended period of low commodity prices,” wrote Abe Gulkowitz in The Punchline. “First, the price of oil at $100/bl or above had been an absurdity. Second, many nations simply cannot afford to curtail pumping oil, even at a loss in the short run. Third, global growth is proving to be woefully inadequate and uncertain. Fourth, the shale gas revolution has transformed America’s energy markets, with profound effects for economic growth, competitiveness, security, and environmental quality.”


This is the January 18, 2015 updates to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • MetLife challenged FSOC’s designation that the company is a nonbank systemically important financial institution, on a number of bases, including that the designation was based on “numerous critical errors that fatally undermined the reasoning[,]” and on a fundamental misunderstanding of state insurance regulation.  The complaint asserts that FSOC repeatedly denied MetLife access to data and materials FSOC used.  MetLife states that procedural shortcomings severely impaired its ability to respond to FSOC.  “These deficiencies were exacerbated by the extraordinary design in the Dodd-Frank Act of FSOC itself, which identifies individual companies for designation, establishes the standards that govern the designation decision, and then sits in judgment of its own recommendations, relying each step of the way on the same staff that identified the company for designation in the first place.”

MetLife also asserts that it is not a “nonbank financial company” subject to FSOC designation.  The Dodd-Frank Act permits FSOC to designate U.S. or foreign nonbank companies, under § 113(a)(1) or (a)(2).  The difference between the U.S. and foreign companies depends on where they are chartered.  For both U.S. and foreign companies, the definition of a nonbank financial institution, in § 112(a)(4), and depends on whether the company is “predominantly engaged” in financial activities.  A company is predominantly engaged in financial activities if at least 85% of its consolidated annual gross revenues are from, or consolidated assets are related to, “activities that are financial in nature” as defined in § 4(k) of the Bank Holding Company Act.  MetLife states that it is not predominantly engaged in activities that are financial in nature because more than 15% of its revenues are from, and assets are related to, insurance activities in foreign markets, while the Bank Holding Company Act defines insurance activities as financial in nature only if they are conducted in the U.S.  MetLife v. Financial Stability Oversight Council, No. 15-45 (D.D.C. Jan. 13. 2015).


  • On January 14, 2015, FHFA released its 2015 Scorecard outlining specific priorities for Fannie Mae, Freddie Mac and their joint venture common securitization platform (CSP).  The 2015 Scorecard furthers the goals outlined in FHFA's Strategic Plan for the Conservatorships.  The goals include:  
    • Maintain, in a safe and sound manner, credit availability and foreclosure prevention activities for new and refinanced mortgages to foster liquid, efficient, competitive and resilient national housing finance markets. [40%].  For this goal, the GSEs are to:
      • Work to increase access to mortgage credit for creditworthy borrowers, consistent with the full extent of applicable credit requirements and risk-management practices: 

§  Effectively implement key loss mitigation activities, 

§  Maintain the dollar volume of new multifamily business for each Enterprise at $30 billion or below, excluding affordable housing loans, loans to small multifamily properties, and loans to manufactured housing rental communities. 

  • Reduce taxpayer risk through increasing the role of private capital in the mortgage market.  [30%]  For this goal, the GSEs are to:

§  Transact credit risk transfers on reference pools of single-family loans with UPB of at least $150 billion for Fannie Mae and $120 billion for Freddie Mac.

§  Determine the feasibility of multifamily risk transfers; and

  • Implement private mortgage insurance eligibility requirements. 
  • Build a new single-family securitization infrastructure for use by the GSEs and adaptable for use by other participants in the secondary market in the future.  [30%]  For this goal the GSEs are to:
    • Finalize the Single Security structure, including security features, disclosure standards, and related requirements. 
    • Develop a plan to implement the Single Security in the market.
    • Provide active support for mortgage data standardization initiatives:
  • The Federal Reserve and FDIC released the public portions of resolution plans for firms with generally less than $100 billion in qualifying nonbank assets, and the FDIC released the public portions of resolution plans of 22 insured depository institutions, mostly subsidiaries of bank holding companies that submitted resolution plans.





"Over 35% of Americans have debt and unpaid bills that have been reported to collection agencies."



FHFA’s 2015 Scorecard will assess Fannie Mae, Freddie Mac and Common Securitization Solutions on (i) the safety and soundness of their activities; (ii) their support of a competitive, resilient, and liquid secondary mortgage market; (iii) their consideration for diversity and inclusion consistent with FHFA's expectations for all activities; (iv) their cooperation and collaboration with FHFA, each other, and stakeholders; and (v) the quality, thoroughness, creativity, effectiveness, and timeliness of their work products.


“The key problem for banking industry is it’s difficult for banks to generate revenue,” said Chris Whalen, senior managing director at Kroll Bond Rating Agency. “You have regulation, you have a lack of demand for credit. …We’re in an extraordinary environment. Zero rates are driving stock prices… The central bankers keep saying ‘if we do more of what we’ve been doing, things are going to get better.’ I think that’s wrong. I think we have to look at different approaches to what’s essentially a deflationary trap for the entire world...”



“Oil is incredibly important right now,” said Doubleline’s Jeff Gundlach during his 2015 Market Outlook webinar. “If oil falls to around $40 a barrel then I think the yield on ten-year Treasury note is going to 1%. I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be—to put it bluntly—terrifying."


95% of the county economies have not recovered to pre-recession unemployment lows.


“Prices have to remain low enough to keep capital out of the [oil] market,” said Goldman Sachs' Jeff Currie. “...[T]his market is experiencing a paradigm shift right now. And what’s driving that shift?... Shale is fast cycle production, which means you put capital in today, you can get production in 30- or 60-days from now. …Capital is now the new margin of adjustment…Once you get down to $40 a barrel…, if you stay there for six months, you start to create real default probabilities …that’s going to be the driver to ...take action on financial stress.”


The next housing solution: 3D print your own. 


“Over the past 30 years, there have been six major declines in the price of oil (defined as a greater than 50 percent cumulative decline),” wrote Guggenheim’s Scott Minerd. “The current decline now stands at around 55 percent, matching the magnitude of some of the worst historical oil crashes. However, most of the past declines have been due to faltering global demand, whereas the current slump is due to a glut of oil. …With no near-term signs of supply letting up, oil prices could continue to fall.”


This is the January 11, 2015 updates to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • On January 6, 2015, GAO released a TARP report entitled Treasury Continues to Wind down Most Programs, but Housing Programs Remain Active, as of September 14, 2014, showing:
    • Treasury has exited four of the nine TARP non-housing programs, and was managing $2.9 billion in remaining assets. 
    • Treasury incurred $15.2 billion in lifetime losses on AIG.
    • Treasury has recouped 86% of its expenditures and incurred an estimated lifetime cost of $12.2 billion for the Automotive Industry Finance Program.  It still holds 13% in Alley Financial.
    • Treasury has disbursed $13.7 billion (36%) of the $38.5 billion in TARP housing funds.  The number of new HAMP permanent modifications added on a monthly basis rose in early 2013 but fell in 2014 to the lowest level since the program’s inception.  Homeowners have until at least December 31, 2016, to apply for assistance under MHA programs, and Treasury will continue to pay incentives for up to 6 years after the last permanent modification begins.  Treasury’s obligation under FHA Short Refinance will continue until September 2020.
    • Treasury estimates it had income of $16.1 billion on CPP and $4 billion each on its Asset Guarantee Program and Targeted Investment Programs.
    • Treasury does not know when it will completely exit the CPP program.  By the end of 2014, all of the institutions with outstanding preferred share investments were required to pay dividends at a 9 percent rate, rather than the 5 percent rate that had been in place for the past 5 years.





Attached please find an updated Roadmap to the Dodd-Frank Act Rulemakings, Studies, and Reports.

  • The CFPB proposed amendments to Regulations E and Z regarding prepaid financial products to require disclosures, apply limited liability and error resolution procedures, and to protect consumers from unauthorized transfers.  It would apply to prepaid cards but not gift cards.  
  • The CFTC reopened the comment periods for an aggregation proposal and a position limits proposal both released in 2013, until January 22, 2015.
  • Treasury proposed regulations to require qualified financial contract recordkeeping with respect to positions, counterparties, legal documentation, and collateral.  The Dodd-Frank Act provides that if the federal primary financial regulatory agencies do not prescribe such regulations to assist the FDIC as receiver to exercise its rights and fulfill its obligations within 24 months of enactment, which they did not, the FSOC Chairperson must.



Canfield Press



As Nebraska Supreme Court Clears the Pipeline.


A fireside chat with Walter Isaacson.


Acturial Assessment for 2014.

Laurie Goodman, January, 2015


"President Obama’s pen and phone imposed $181.5 billion in regulatory costs during 2014, including proposed and final rules,” wrote American Action Forum’s Sam Batkins. “In 79,066 pages of regulation, Americans will feel higher energy bills, more expensive consumer goods, and fewer employment opportunities.. …How does $181.5 billion in total burdens compare on a personal level?

  • Per Capita: $567
  • Per Voter (18 years and older): $692
  • Per Day the Government was Open: $726 million"

“[Anti-EU populism is] going to prevent good policies being implemented going forward,” said David Woo, head of global rates and currency research at Bank of America Merrill Lynch. “…Weak governments across ...Europe are going to find it more and more difficult to do the right things economically speaking to basically revive their economies.  …They’re going to have to embrace more populist policies and that’s going to be the problem.”


“[Falling oil prices is] one of the things that’s causing a dramatic shift in global power," said Eurasia Group President Ian Bremmer. “It's one of the reasons the United States has so much less interest in getting sucked into the Middle East. It’s one of the reasons why President Putin in Russia is likely to be much more on the offensive in 2015 than he otherwise would be, recognizing that in the nearer term, it’s better for him to act.”


“There’s something fundamental that’s going on [in the oil market]…”  said former Fed chairman Alan Greenspan. “…The market continues [to be] weak and that’s largely because the structure of the market has changed. The marginal producers are gradually becoming the shale producers. …At the moment, OPEC is not functioning. And, I’m not at all convinced that, short of a major change in the Saudi’s view of the future, that’s going to fundamentally change.”


Just the U.S. dollar EM corporate debt: $5.7 trillion, split between $3.1 trillion in bank loans and $2.6 trillion in bonds." Below, dollar denominated credit to all foreign non-bank borrowers totaling est. $9 trillion.


Attached please find an updated Roadmap to the Dodd-Frank Act Rulemakings, Studies, and Reports.  


  • The Federal Insurance Office released a report entitled The Breadth and Scope of the Global Reinsurance Market and the Critical Role Such Market Plays in Supporting Insurance in the United States.  The report states that a substantial portion of reinsurance supporting the U.S. insurance sector is provided by companies not licensed in all states and, in many cases, neither domiciled nor licensed in the U.S.  It states that non-U.S. reinsurers accepting reinsurance premium ceded from U.S. insurers are not subject to the same state supervision applicable to licensed or accredited U.S. insurers and reinsurers.  Such reinsurers are indirectly regulated by state laws requiring that, to obtain “credit for reinsurance,” the non-U.S. reinsurer must post collateral for reinsurance liabilities, but state law is varied.  Treasury and the U.S. Trade Representative are considering an agreement with respect to collateral requirements for reinsurers and preemption of state laws.   




Canfield Press



Groceries are the biggest untapped opportunity in e-commerce.


"The innovation that will shape the coming year, I think, will be the consumer use of digital currencies.." Walter Isaacson, Aspen Institute CEO.


“[T]he Greek political turmoil complicates matters for the ECB and its ...sovereign QE program,” wrote Morgan Stanley analyst Elga Bartsch....[A] sovereign default in the Eurozone and the prospect of the ECB potentially incurring severe financial losses is likely to intensify the debate on the Governing Council, where purchases of government bonds remain highly controversial. ...The specter of default does not only make the issue of sovereign QE less certain again than the market believes, it also could create new limitations in its implementation.


Changes in technology are happening at a scale, which was unimaginable before and will cause disruption in industry after industry. This has really begun to worry me, because we are not ready for this change and most of our leading companies won’t exist 15–20 years from now.

Five sectors to keep an eye on:  Manufacturing, Finance,  Health Care, Energy and Communications. 


By Steve H. Hanke  , This article appeared in the January 2015 issue of Globe Asia .


The collapse of oil prices is a “net positive for the global economy—particularly for consumers, but it’s not without what I call the bad and the ugly,” said Mohamed El-Erian. “The bad is it discourages investment in energy and alternative energy. The ugly is it may tip certain countries over—Russia, …Venezuela, Nigeria. It’s what you call the high absorption ones—the ones that cannot cope easily with sharp declines in oil prices. …This is a fundamental change in the oil market.” The supply paradigm for oil has changed.  


Gianna Bern, Brookshire Advisory and Research on Bloomberg.


This is the December 28, 2014 updates to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  These updates include the following:

  • FHFA announced that it is challenging two Nevada foreclosures by homeowners’ associations (“HOA”) based on the HOAs’ assertions of super-lien status.  Some states, including Nevada, grant HOA liens for a few months’ of unpaid HOA assessments priority, and this HOA lien takes priority even over a first mortgage lien that predates the HOA lien.  In one suit, FHFA claims that the HOA did not establish that its lien fell into the super-priority category, and in both cases FHFA asserts that the HOA lien cannot be prior to Fannie Mae’s lien, while Fannie Mae is in conservatorship.  This argument is based on HERA § 1145(j)(3), which provides that during conservatorship:

“No property of the Agency shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Agency, nor shall any involuntary lien attach to the property of the Agency.”

In both cases, the HOA foreclosure sales price was considerably less than the outstanding mortgage loan amount.

FHFA also emphasizes that the GSEs cannot purchase a mortgage loan on a property that has a first-lien PACE loan attached to it.  FHFA stresses that “it is important for states and municipalities to understand these restrictions before continuing to offer the [PACE] programs.  Additionally, FHFA believes that borrowers should fully understand these restrictions prior to taking out a first-lien PACE loan.”  FHFA states that, in addition to aggressive enforcement of PACE policies, it is continuing to explore other possible remedies and legal actions to protect the GSEs’ lien position in response to first-lien PACE programs.

  • CBO released a report, Transitioning to Alternative Structures for Housing Finance, on mechanisms that could attract private capital to the secondary mortgage market:
    • A market with a single, fully federal agency that would carry out the two GSEs’ main function of buying eligible mortgages and turning them into securities that are guaranteed against losses from default on the underlying mortgages.  The transition to such an agency would require little or no change to the structure of the GSEs’ guarantees, the fees charged for them, or the GSEs’ loan limits because no significant amounts of new private capital would be required beyond those that are expected to be invested under current policy.  By the end of the transition period, the federal agency would have a smaller share of the market than Fannie Mae and Freddie Mac have today.
    • A hybrid public-private market with federal guarantees against catastrophic losses.  Under that structure, the government and private investors would share credit losses on eligible MBSs, with federal guarantees covering catastrophic risks (those associated with severe downturns in the housing market) for a significant share of mortgages.  As a result, taxpayers would bear most of the losses during a crisis, but private investors would bear most of the losses in other periods.  The main policy mechanism used to transition to that structure would be sharing credit risk with private investors.
    • A market with the federal government as “guarantor of last resort,” in which private companies would guarantee most new mortgages in normal times, but the government would fully guarantee most new mortgages during financial crises.  (In normal times, the government would guarantee a small sample of mortgages of all sizes to ensure that it is capable of doing so in times of crisis.)  The major policy actions taken to establish the new structure would be auctioning off the GSEs’ new guarantees and raising their loan limits.
    • A largely private market with no explicit federal guarantees of MBSs (other than those provided by the Ginnie Mae).  That structure would minimize the explicit credit risk borne by taxpayers.  The main policy changes made during the transition would be raising guarantee fees and lowering loan limits until the GSEs no longer guaranteed new mortgages.
  • FHFA released its Foreclosure Prevention Report for the third quarter of 2014, showing:
    • Fannie Mae and Freddie Mac completed 72,700 foreclosure prevention actions in the third quarter, bringing the total to more than 3.3 million since the start of the conservatorships.  These measures have helped nearly 2.8 million borrowers stay in their homes, including 1.7 million who received permanent loan modifications.   
    • The number of 60+ day delinquent loans declined 3 percent to the lowest level since the start of conservatorships;
    • The serious delinquency rate fell to 2 percent at the end of the third quarter;
    • Approximately 34 percent of all permanent loan modifications helped to reduce homeowners' monthly payments by over 30 percent in the third quarter;
    • About 22 percent of borrowers who received permanent loan modifications in the third quarter had portions of their mortgage balance forborne;
    • Nearly 12,900 short sales and deeds-in-lieu were completed in the third quarter, bringing the total to approximately 594,200 since the start of the conservatorships; 
    • Third-party sales and foreclosure sales fell 9 percent to nearly 39,100 while foreclosure starts dropped 13 percent to approximately 74,600 in the third quarter;
    • The REO inventory of Fannie Mae and Freddie Mac declined 9 percent during the quarter to nearly 120,100 as dispositions continued to outpace acquisitions.



Demand for oil is down—half of what was predicted for 2014—and the oversupply of oil came from the U.S., according to Boone Pickens, founder of BP Capital. “We’re already seeing the oil rig count come down,” said Pickens, noting that 75 rigs have dropped in the last three weeks in the U.S.  “I think [oil] will be back up to $90 to $100 a barrel in 12 to 18 months,” said Pickens. “…OPEC is not a cartel anymore—it’s a trade association.”


To paraphrase Dr. Seuss, we are living through a period of incredible “thinks”:

  • In the next 10 days, 112,000 people in the US, Europe and Japan will reach the retirement age of 65.
  • In each of the last three years, sales of adult diapers in Japan have exceeded sales of baby diapers.
  • Meanwhile, 97 out of every 100 births now occur in developing countries.
  • 56% of the world economy is currently being supported by official policies of zero interest rates.
  • In the last 15 years, the value of prime London real estate has quadrupled; and yet today, UK interest rates are the lowest they have been in 300 years.
  • In the next 10 seconds, the US national debt will have risen by $322,000.
  • 2015, the U.S. federal government will spend $3.77 trillion (an amount larger than Germany’s GDP), while 50 million people live in poverty in the United States.
  • The number of U.S. government regulations increased from 834,949 in 1997 to 1,040,940 by 2012.
  • In the last 10 years, the number of industrial robots is up 72%, while the number of US manufacturing jobs is down 16%.
  • And by 2023, the average $1,000 laptop will be able to communicate at the speed of the human brain (and 25 years later, at the rate of the entire human race).

Nouriel Roubini,  New York University


“Small businesses, not big businesses, give two-thirds of Americans their first job,” said Carly Fiorina, former CEO of HP. “They employ half the people. Small businesses innovate at seven times the rate of big businesses. So …if we want to grow our economy, we have to start focusing on the most important resource we have –human potential—and unlock it ...[by revitalizing] Main Street entrepreneurship. Today, for the first time in our history, we are destroying more businesses than we are creating.”


Technical innovation is outpacing regulators’ ability to act and react. It is not clear what direction public norms about privacy will emerge. 


This is the December 21, 2014 updates to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  These updates include the following:

  • Treasury announced that it agreed to sell all of its remaining 54.9 million shares of Ally Financial common stock at $23.25 per share, recovering $1.3 billion.  Treasury reports that in total it recovered $19.6 billion on Ally, $2.4 billion more than it put in.  
  • The OCC released its Mortgage Metrics Report for the third quarter of 2014, showing:
    • 93% of mortgages were current and performing at the end of the quarter, compared with 91.4% a year earlier.  
    • The percentage of mortgages that were 30 to 59 days past due was 2.4% of the portfolio, an increase of 1.9% from the previous quarter but an 8% decrease from a year earlier.  Seriously delinquent mortgages were 3.1% percent of the portfolio, a decrease of 14.5% from a year earlier.
    • Loans in the process of foreclosure at the end of the third quarter fell 41.5% from a year earlier. 
    • The number of home retention actions decreased by 34.3% from a year earlier. 
    • Servicers implemented 3,595,553 modifications from January 1, 2008, through June 30, 2014.  Of these, almost 57% were active at the end of the third quarter and almost 43% had exited the portfolios of the reporting institutions, through payment in full, involuntary liquidation, or transfer to a non-reporting servicer.  Of the 2,047,719 modifications that were active at the end of the third quarter, approximately 68.6% were current and performing, 25.7% were delinquent, and 5.7% were in the process of foreclosure.


  • The Federal Reserve and OCC released an interim final regulation that amends the definition of “qualifying master netting agreement” under the regulatory capital rules, and the liquidity coverage ratio rule, as well as under the lending limits rule applicable to national banks and Federal savings associations.  The rule also amends the definitions of “collateral agreement,” “eligible margin loan,” and “repo-style transaction” under the regulatory capital rules.  The amendments are designed to ensure that the regulatory capital, liquidity, and lending limits treatment of certain financial contracts is not affected by implementation of special resolution regimes in foreign jurisdictions or by the International Swaps and Derivative Association Resolution Stay Protocol.
  • The banking agencies propose to clarify, correct, and update their regulatory capital rules applicable to banking organizations that are subject to the advanced approaches risk-based capital rule.  The proposed revisions are largely driven by the agencies’ observations during the parallel-run review process.  They are also intended to enhance consistency of the U.S. regulations with international standards.
  • Treasury released a report on the State Small Business Credit Initiative (“SSBCI”), a program enacted in 2010 and funded with $1.5 billion.  Under this program, states could apply for federal funds to extend credit to small businesses by demonstrating a minimum of $10 in new private lending for every $1 in federal funding.  Applications were due in June 2011.  The report shows that, as of September 30, 2014, states deployed $1,003,975,220, of which $943,285,735 was from original SSBCI allocations and $60,689,485 was from funds repaid and reused.  



“Because policymakers have already raised the [g-fees] charged by Fannie Mae and Freddie Mac close to those that CBO estimates would be charged by private insurers, the budgetary costs of the two GSEs’ activities over the next 10 years are expected to be small,” wrote the agency. "As a result, the budgetary savings would also be small under any of the transition paths to a more private system that CBO considered. Thus, the choice between the different market structures probably rests primarily on considerations other than budgetary costs.”


Russia has lost control of its economy and may be forced to impose Soviet-style exchange controls after its central bank’s efforts to stem the ruble’s collapse failed. “The situation is critical,” said Sergei Shvetsov, vice chairman of Russia's central bank. “What is happening is a nightmare that we could not even have imagined a year ago. If a rise of 650 basis points won’t do the job, we are near the end. That means stringent capital controls.” BNP Paribas’ Michal Dybula, warned that the plunge of the rubble risks setting off a systemic bank run. 



Attached please find an updated Roadmap to the Dodd-Frank Act Mortgage Rulemakings.  The updates include:


  • The CFPB proposed several amendments to its mortgage servicing rules relating to loss mitigation, successors-in-interest to homeowners, and bankruptcy.


  • The CFPB finalized a regulation that permits a cure period for points and fees calculations for QM mortgage loans until 2021, and amends the definition of a small mortgage servicer.


  • The CFPB proposed changes to its integrated disclosures, including permitting revised loan estimates to be delivered the day following a rate-lock.


  • The banking agencies, Farm Credit Administration, and NCUA proposed rules requiring escrows of flood insurance premiums, under the Homeowner Flood Insurance Affordability Act of 2014.. 





Attached please find an updated Roadmap to the Dodd-Frank Act Rulemakings, Studies, and Reports.


  • The Comptroller finalized a rule that adjusts the timing of its annual stress testing cycle by three months and that clarifies how the agency calculates regulatory capital in the stress tests.


  • The Federal Reserve proposed a capital regulation to identify whether a U.S. bank holding company is a global systemically important banking organization (“GSIB”). A GSIB would be subject to a risk-based capital surcharge based on its systemic risk profile.  Eight U.S. firms would currently be GSIBs: Bank of America Corporation, The Bank of New York Mellon Corporation, Citigroup Inc., The Goldman Sachs Group, Inc., JPMorgan Chase & Co., Morgan Stanley, State Street Corporation, and Wells Fargo & Company.  


The first method would consider the GSIB's size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity, consistent with a methodology developed by the Basel Committee.  The second method would replace substitutability with use of short-term wholesale funding, and would generally result in significantly higher surcharges than the BCBS framework.  Under the proposal, estimated surcharges for bank holding companies that are GSIBs currently would range from 1.0 to 4.5 percent of total risk-weighted assets.




Canfield Press


The 10-year Treasury note vs. the high yield corporate index shows investors are pulling back from the credit markets generally because of perceived dysfunction.


How will lower energy prices impact inflation? And will falling prices impact the Federal Reserve’s move to raise interest rates? "That 800 pound gorilla known as oil—will anybody notice it?” asked Dorothy Weaver, CEO of Collins Capital. “Yes. It will be noticed. The Fed will have to address it. It needs to be proactive. [Fed Chairman] Yellen will want to keep her options open. People are spooked and nervous right now. Anything can be a tipping point for the market and the Fed does not want to be that tipping point."


“There is no doubt that the fall in the price of oil in 2014 has been a significant economic shock,” wrote Deutsche Bank analysts. “Most estimates suggest that this should add to global growth, weigh on global inflation and most likely have varied but oil-specific asset price implications (EM oil producing nations and US HY weakness stand out); however it is likely that growth tailwinds from this year’s fall in oil prices will not be the main story for investors in 2015.”


This is the December 14, 2014 updates to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  These updates include the following:

  • The Federal Reserve proposed a capital regulation  to identify whether a U.S. bank holding company is a global systemically important banking organization (“GSIB”).  A GSIB would be subject to a risk-based capital surcharge based on its systemic risk profile.  Eight U.S. firms would currently be GSIBs: Bank of America Corporation, The Bank of New York Mellon Corporation, Citigroup Inc., The Goldman Sachs Group, Inc., JPMorgan Chase & Co., Morgan Stanley, State Street Corporation, and Wells Fargo & Company.  

A first method would consider the GSIB's size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity, consistent with a methodology developed by the Basel Committee.  A second method would replace substitutability with use of short-term wholesale funding, and would generally result in significantly higher surcharges than the BCBS framework.  

-Under the proposal, estimated surcharges for bank holding companies that are GSIBs currently would range from 1.0 to 4.5 percent of total risk-weighted assets.

  • The Federal Reserve proposed a capital regulation that would illustrate application of the common equity tier 1 capital qualification criteria to depository institution holding companies that are not organized as stock corporations.  The proposal would amend Regulation Q to address unique issues presented by certain savings and loan holding companies that are trusts and by depository institution holding companies that are employee stock ownership plans.  

Institutional investors may structure their investments in banks and bank holding companies through non-stock entities, such as limited liability corporations and limited partnerships.  However, certain capital instruments issued by these firms may not qualify as common equity tier 1 capital.  The Federal Reserve expects to propose regulatory capital rules in the future for savings and loan holding companies that are personal or family trusts and are not business trusts, and would provide a temporary exemption for those entities from the revised capital rules.  The Federal Reserve also expects to clarify the application of its regulatory capital rules to depository institution holding companies that are employee stock ownership plans.  The proposal does not apply to most depository institution holding companies.

  • Treasury announced that it completed its first pre-defined written trading plan for common stock of First BanCorp., Puerto Rico, selling 4,388,888 shares for $22 million (about $5 per share), leaving Treasury with 15,291,553 shares, or 7.2 percent of the company’s common stock, down from 9.2 percent.  Treasury intends to sell additional shares of common stock in the company through a second pre-defined written trading plan.  Treasury reported that on November 30, its outstanding investment in the company was worth $239 million, its largest remaining CPP investment, while the second-largest was worth much less, $50.2 million.





The Opec oil cartel no longer exists in any meaningful sense and crude prices will slump to $50 a barrel over the coming months as market forces shake out the weakest producers, Bank of America has warned.


The drop in oil revenues has triggered a self-reinforcing feedback dynamic.


In a December 11 letter to Fannie Mae and Freddie Mac, FHFA Director Mel Watt directed the GSEs to begin setting aside 4.2 basis points on each dollar of new mortgage purchases for allocation to the Housing Trust Fund and Capital Magnet Fund, pursuant to the Housing and Economic Recovery Act of 2008. Separately, FHFA sent to the Federal Register an Interim Final Rule to address the statutory requirement that the allocations may not result in transferring their expense to originators or other GSE counterparties. The Interim Final rule has a 30-day comment period.


Rapid integration leveraging simple interfaces will become standard.


Consumer choice will shape the future of payments.  Accenture 2014 Consumer Survey


“I think we’re going to see distressed debt in the high yield market soar—in terms of amount of distressed in energy and then you’re going to see defaults there,” said Martin Sass, founder at MD Sass Associates. “….There are ripple effects that are destabilizing [for] the market. We’re seeing increased volatility in the market, which I think are going to be characteristic of 2015—not only because of oil, but because of a lot of macro factors. We have Fed rate hikes likely to be forthcoming, we have Europe teetering on recession…”


“Since Fannie and Freddie’s 3% [down payment] program targets first time homebuyers, defaulters if they haven’t owned a home in 3 years and lower-income households, this a segment of the population that has been pulverized since the last decade,” wrote Anthony Sanders, finance professor at George Mason University. “The black unemployment rate and 20-24 age unemployment rate both remain above 10%. In other words, the pool of potential beneficiaries as designed is likely to be small.”


QE and Inflation Expectations... a slide presentation.


Tony Crescenzi, PIMCO


“The highly abnormal is becoming uncomfortably normal,” wrote BIS. “Central banks and markets have been pushing benchmark sovereign yields to extraordinary lows—unimaginable just a few years back. …Moreover, estimates of term premia are pointing south again, with some evolving firmly in negative territory. And as all this is happening, global growth—in inflation-adjusted terms—is close to historical averages. There is something vaguely troubling when the unthinkable becomes routine.”


This is the December 7, 2014 updates to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  This update includes the following:

  • Treasury and HUD announced enhancements to Making Home Affordable (MHA) programs as follows:
    • Homeowners in HAMP will be eligible to earn $5,000 in the sixth year of their modification.  Before this change, HAMP Tier 1 permanent modifications earned a “pay for performance” principal balance reduction, payable annually for the first five years, if the loan is in good standing and has not been paid in full.  HAMP Tier 2 borrowers will be eligible to receive a principal balance reduction payment of $5,000 in year six.  The announcement says approximately one million homeowners with HAMP modifications are eligible to earn the increased HAMP incentive.
    • Subject to investor guidelines, servicers must offer to re-amortize an eligible HAMP Tier 1 reduced loan balance (excluding deferred principal) over the remaining loan term, at year 6.
    • The interest rate for HAMP Tier 2 modifications will be reduced by 50 basis points.
    • Relocation assistance is increased to $10,000, up from $3,000.




McKinsey Global Institute's Michael Chui and James Manyika moderate a discussion at the Churchill Club.


Myles Udland, Business Insider.


The international payments market is $26tn, and small to md sized businesses remain largely underserved. 


Zanny Minton Beddoes, The Economist


“How could they?” asked Janus Capital’s Bill Gross. “How could policymakers have allowed so much debt to be created in the first place, and then failed to regulate their own system accordingly? How could they have thought that money printing and debt creation could create wealth instead of just more and more debt? How could fiscal authorities have stood by and attempted to balance budgets as opposed to borrowing cheaply and investing the proceeds in infrastructure and innovation.”


2015: economic growth will be 'below par and brittle".  Morgan Stanley.


“The key problem is that monetary policy always trumps safety and soundness,” said Knoll Bond Rating Agency’s Chris Whalen. “That’s been the historic conflict in the Fed.  ...[T]he way that large bank supervision is handled by the Fed in New York is really a problem. …When you see Dudley say that we’re ‘not cops on the beat, we’re fire wardens'—no, you’re a cop on the beat. You’re responsible for the safety and soundness of a bank holding company and they only have permission to own that bank, so long as you allow them…”


Revised capital standards are contributing to rapid growth.


"On November 24, 2014, K&L Gates filed a brief with the Supreme Court on behalf of the American Financial Services Association, [CMC], the [ICBA], and the [MBA] as amici curiae in Texas Department of Housing and Community Affairs v. The Inclusive Communities Project, Inc., No. 13-1371,” wrote the law firm. “The brief supports the petitioners’ argument that the Act is properly read as being limited to cases of intentional discrimination and explains the negative impact of the disparate-impact theory on the residential mortgage lending industry.”


On November 25, FHFA directed Fannie Mae and Freddie Mac to sell existing REO properties to any qualified purchaser at the property’s fair-market value, a step that will allow principal write-downs for underwater homeowners. The new policy will apply to only 121,000 foreclosed homes that are currently on the GSEs’ books. “In our experience at Boston Community Capital, permitting sales at fair-market value is a just and sound strategy for helping the many underwater homeowners still seeking relief,” said CEO Elyse Cherry. 


P2P Lending Accounts for 90% of UK Alternative Finance Market.




This is the November 30, 2014 updates to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  These updates include the following:

  • FHFA directed the GSEs to permit former homeowners who have been through foreclosure and want to buy their homes back to purchase them at fair-market value, for use as their principal place of residence.  The GSEs used to require repayment of the full loan amount.  Under existing GSE rules, former borrowers must wait three years after a foreclosure to be eligible for a GSE loan.  This policy revision is limited to GSE REO of single-family homes as of November 25, 2014.  The GSEs hold approximately 121,000 REO properties.  Certain property exclusions may apply.
  • FHFA released its Refinance Report for the third quarter of 2014, showing:
    • Total refinance volume for the third quarter exceeded 389,000, while HARP refinances were down slightly at 44,136, or 11% of total refinance volume. 
    • Since 2009, there have been nearly 20 million GSE refinances, including more than 3.2 million through HARP.  
    • More than 25% of all HARP refinances for underwater borrowers (LTV greater than 105%) were for 15- and 20-year mortgages through the third quarter.
    • Year-to-date through September, HARP refinances represented 33% of total refinances in Georgia and 31% in Florida, nearly double the 16% of total refinances nationwide.
  • FHFA released an interactive map of HARP-eligible loans with a refinance incentive, meaning a note rate 150 basis points above the market rate.  FHFA estimates that, as of second quarter 2014, there are more than 722,000 such borrowers.  FHFA states that nationwide these borrowers could save, on average, as much as $200 per month.
  • The Federal Reserve announced, and invited public comment on, a proposal to apply enhanced prudential standards to General Electric Capital Corporation (“GECC”).  The agency describes the standards as including standards similar to those for large bank holding companies, such as for risk-based and leverage capital, capital planning, stress testing, liquidity, and risk management.  The standards would also include independence requirements for GECC’s board, restrictions on intercompany transactions, and the enhanced supplementary leverage ratio that applies to the largest, most systemic U.S. banking organizations.  
  • The Federal Reserve and FDIC announced that they had completed their review of Wells Fargo’s 2014 resolution plan, and noted improvements from the original plan, including the description of the firm’s preferred resolution strategy and the progress in addressing obstacles identified by the agencies.  The agencies note that the firm's 2014 plan provides a basis for a resolution strategy that could facilitate an orderly resolution under bankruptcy.  The agencies have also identified specific shortcomings of the 2014 plan that need to be addressed in the 2015 plan. 





Umpqua's store in San Francisco is the latest manifestation of the project.


Key U.S. lawmakers sent three open letters to the EU expressing great concern about a plan calling for an unbundling of search engines from other services. “We support healthy competition and a fair playing field for Internet companies in the U.S. and around the globe and we believe these goals can be accomplished through the traditional regulatory process,” wrote Rep. Darrell Issa (R-CA). “We believe that antitrust enforcement should be applied independent of politics and firmly rooted in our shared and international principles,” wrote House Judiciary Chairman Bob Goodlatte (R-VA) in a separate letter.


~~Power has shifted from companies to consumers, and expectations have never been higher.  Companies can’t get away with having crummy products, at least not for long.  For example, bad product reviews trump clever marketing. Today, great products win. Meanwhile, within companies the power has shifted as well.  Individuals and small teams can have a MASSIVE IMPACT. They can create new ideas, experiment, fail, and try again, and get their successes to a global market.

The people that can have the biggest impact of all are the ones we can smart creatives. These are the product folk who combine technical knowledge, business expertise, and creativity.  When you put today's technology tools in their hands and give them lots of freedome they can do amazing things, amazingly fast.




The housing market is a patient in recovery......


“Although peak credit has been surpassed, a substantial portion of the rise in credit is in the form of student loans that cannot and will not be paid back without bailouts,” wrote Mike Shedlock. “Importantly, millennial attitudes towards cars and other material goods is not the same as their parents. …Millennials will assist aging boomers via taxation and by overpaying for Obamacare. ...[B]ecause boomers live longer than ever, the economic drain and time commitment from millennials will increase every year. This has downward implications on the economy...”


~~:  "We are investing in a paperless society where everyone in the world is becoming either a banker, a fund manager, or a hairdresser - it's all about services. A non-productive society reigns supreme in most developed countries."  Saxo Bank.



Benedict Evans, partner at Andreessen Horowitz


Founders Fund Partner Peter Thiel 


CFPB Director Richard Cordray discusses the need for a safer, faster payment system



:  American entrepreneur Marc Andreessen



American entrepreneur Marc Andreessen



This is the November 23, 2014 updates to the “Roadmap to Financial and Housing Market Stabilization Plans” document.  These updates include the following:

  • FHFA released its strategic plan for 2015 through 2019.  FHFA states that it reflects the strategic goals established in the agency’s 2014 strategic plan.  The strategic goals are:
    • Ensure safe and sound regulated entities
      • Assess the safety and soundness of regulated entity operations 
      • Identify risks to the regulated entities and set expectations for strong risk management 
      • Require timely remediation of risk management weaknesses 
    • Ensure liquidity, stability and access in housing finance
      • Ensure liquidity in mortgage markets 
      • Promote stability in the nation’s housing finance markets 
      • Expand access to housing finance for qualified financial institutions of all sizes and in all geographic locations and for qualified borrowers 
    • Manage the GSEs’ ongoing conservatorships
      • Preserve and conserve assets 
      • Reduce taxpayer risk from GSE operations
      • Build a new single-family securitization infrastructure.
  • FHFA released its fiscal 2014 Performance and Accountability Report.  It discusses the agency’s success under a number of goals as met, partially met, or unmet.  Most were met.  Partially met goals include: maintaining the rate of HARP refinances; completing the common securitization platform; and completing plans to standardize data.  Goals not met include:  increasing single-family g-fees; completing beta-testing for the national mortgage database; and establishing mortgage insurer standards.
  • FHFA released its annual report on g-fees, showing that g-fees more than doubled from 2009 through 2013, and increased at a higher annual rate in 2013 than in the prior four years.  
    • G-fees increased to an average of 51 basis points in 2013 compared to an average of 36 in 2012 and 22 in 2009;
    • The g-fee increases in 2012 reduced pricing differences between small and large lenders in 2013; 
    • The percentage of loans sold to the GSEs by extra-large lenders decreased from 60 percent in 2010 to 49 percent in 2013 while the percentage of loans sold by extra-small lenders increased from 8 percent to 19 percent over the same time period;
    • The 2012 fee increases substantially reduced the pricing difference between 30-year fixed rate and 15-year fixed rate loans.
  • The Federal Reserve Board announced two reviews to ensure that its examinations of large banking organizations are consistent, sound, and supported by all relevant information.  At the request of the Board, its Inspector General is examining whether there are adequate methods for decision-makers to obtain all necessary information to make supervisory assessments and determinations, and whether channels exist for decision-makers to be aware of divergent views among an examination team.  The Board is reviewing whether its decision-makers receive the information needed to ensure consistent and sound supervisory decisions regarding the supervision of the largest, most complex banking organizations, and whether adequate methods are in place for those decision-makers to be aware of material matters that required reconciliation of divergent views related to supervision of those firms.
  • GAO released a report on FSOC entitled Further Actions Could Improve the Nonbank Designation Process.  GAO found key areas in which FSOC could enhance the accountability and transparency of its designation process.  The report states:
    • Tracking and monitoring.  FSOC has not centrally recorded key processing dates, tracked the duration of evaluation stages, or collected information on staff conducting evaluations, such as the number or type of staff contributed by member agencies. Without such data, FSOC’s ability to effectively monitor the progress and evaluate the quality and efficiency of determination evaluations is limited.
    • Disclosure and transparency.  FSOC’s transparency policy states its commitment to operating transparently, but its documentation has not always included certain details.  For example, FSOC’s public documents have not always fully disclosed the rationales for its determination decisions. 
    • Scope of evaluation procedures.  FSOC has evaluated how companies might pose a threat to financial stability using only one of two statutory determination standards (a company’s financial distress, not its activities).  By not using both standards when appropriate, FSOC may not be able to comprehensively ensure that it has identified and designated all companies that may pose a threat to U.S. financial stability.
  • GAO released a report on bank capital entitled Initial Effects of Basel III on Capital, Credit, and International Competitiveness.  The report states:
    • The U.S. Basel III capital requirements likely will have a modest impact on lending activity, as most banks may not need to raise additional capital to meet the minimum requirements.  GAO estimated that less than 10 percent of the bank holding companies collectively would need to raise less than $5 billion in total additional capital to cover the capital shortfall.  Banks with a shortfall tended to be small, with less than $1 billion in assets.  According to officials from the eight community banks GAO interviewed, they do not anticipate any difficulties meeting the capital requirements but expect to incur additional compliance costs.  Officials from the 10 global systemically important banks that GAO interviewed said they have been incurring significant costs to comply with the new requirements, but three said that U.S. minimum capital ratios for Basel III tend not to be the binding capital constraint. 
    • Jurisdictional differences in the implementation of the Basel III capital standards have arisen, but their competitive effect on internationally active banks is unclear.  For example, some jurisdictions are subjecting certain of their banks to capital or leverage requirements above the Basel III minimums or exempting banks from certain capital requirements.  In addition, other factors can affect the competitive position of internationally active banks, such as differences in accounting treatment, cost of capital, and tax rules across jurisdictions.
  • Treasury announced results of its auctions of CPP shares in three institutions.  Treasury had announced it would also auction its shares in Liberty Shares, Inc. (Hinesville, GA) but it did not because it did not receive sufficient bids above its required minimum.
    • First United Corporation (Oakland, MD), for $30,060,300; Treasury paid $30,000,000;
    • Lone Star Bank (Houston, TX), for $2,000,881; Treasury paid $3,072,000; and
    • Porter Bancorp, Inc. (Louisville, KY), for $3,500,000; Treasury paid $35,000,000.  Measured by the investment amount outstanding, this was the third-largest remaining institution in CPP at the end of October 2014.





AFSA’s study, Fair Lending: Implications for the Indirect Auto Finance Market, found that the disparity alleged by the CFPB between the amount of dealer reserve charged to minorities and non-minorities is not supported by data.  There is little evidence that dealers systematically charge different dealer reserves on a prohibited basis, according to the study.  Instead, variations in dealer reserves across contracts in the study could be largely explained by objective factors other than race and ethnicity.

Me, my car, my life

“We believe that the government conservatorship of Fannie Mae and Freddie Mac is not a long-term solution to provide access to mortgages, and that Congress should enact comprehensive housing finance reform,” wrote Senators Warner and Warren in a letter to FHFA Director Watt. At the Senate Banking Committee’s oversight hearing for FHFA, Chairman Tim Johnson (D-SD) added, “…[I]f Congress cannot agree on a smooth, more certain path forward, I urge you, Director Watt, to engage the Treasury Department in talks to end the conservatorship."


The Election is over...


"A fatal flaw of a government committee like FSOC is that governments themselves are major creators of systemic risk, including of course the U.S. government, with its huge financial activities," wrote AEI's Alex Pollock. "This is especially true of central bank money printing blunders, like those which set off the enormously destructive Great Inflation of the 1970s, or which stoked the U.S. housing boom as it turned into a bubble in the 2000s. Indeed the Federal Reserve, the central bank to the world, is itself the greatest creator of systemic risk of them all."


FHA’s Mutual Mortgage Insurance Fund (MMIF) had an economic value of $4.8 billion, up from negative $1.1 billion for FY2013, according to the fund's FY2014 audit. The MMIF’s capital-reserve ratio grew to 0.41%, below the 2% statutory requirement. The report concluded that FHA’s reserves will not hit the 2% threshold until 2016—a year later than previously estimated.


“[I]nflation is not expected to surge in the near future,” according to the Federal Reserve Bank of San Francisco. “…[T]he risks to the inflation outlook remain tilted to the downside.”



Supreme Court to review court tax fight.


Markets traded lower as the Japanese economy unexpectedly slipped back into a recession. “The big question is has Abenenomics failed?” asked Patrick Chovanec, Silvercrest Asset Management. “It was always clear that QE was not going to be enough to get the Japanese economy back on tract. You needed substantive reform—…labor markets, immigration, trade, agriculture—and that just didn’t happen. In the mean time, they were trying to walk the line with the fiscal situation.  …I think it’s good that they are talking about postponing the [second tax] increase.”



This is the November 16, 2014 updates to t