Charles Duhigg’s article, "The Case Against Google", is available here


“It has been a rocky and tough year,” said Stuart Pratt, CoreLogic’s Global Head of Public Policy and Industry Relations at CoreLogic. “…I think this hyper-partisanship will continue going carrying forward into this second session. …Layered into that  of course  is the fact that this is an election year …which injects more politics into the process  than  might normally be the case. …I do think there is a chance for GSE reform. …A whole series of hearings has  ben  held. …There’s been, I think, a decent tennis match of ideas going on between Democrats and Republics. …It’s not clear to me that housing finance reform is easy…”   


“Public­sector unions are powerful political actors because they’re organized—largely by government, which solves the unions’ collective­action problem by forcing all workers to pay them,” wrote City Journal’s Daniel DiSalvo. “…In sum, these unions have gotten organized not because public workers demanded it but mostly because government has encouraged such organization. In the process, government has trampled on some public workers’ rights and fueled the rise of a muscular progressive interest group. The result is an imbalance of political power, with disastrous fiscal consequences for many states and cities."


"Petro is born and we are going to have a total success for the welfare of Venezuela...,” said President Maduro. “The largest and most important companies and blockchain in the world are with Venezuela, we are going to sign agreements."


In a new white paper, Urban Institute assesses how well the multi-guarantor system proposed in the draft under discussion in the Senate Banking Committee would serve low- and moderate-income (LMI) households. UI’s analysis concludes that the multi-guarantor system would do considerably better than today’s housing finance system. “The bottom line is that the proposed system provides considerably more and better-targeted support to assist LMI households,” wrote Urban Institute’s Jim Parrott, Michael Stegman, Phillip Swagel and Mark Zandi. 


“We innovated recycling and solar here [in California],” said City councilman Ben Bartlett. “…We pride ourselves on our frontier mentality.”


“…[T]he reduced emphases on currencies and external support is—or would be— a welcomed development, as it would suggest some normalization of economic affairs and would reduce the scope for international (economic) tensions in an increasingly fractured world.”


“Automation and the shared economy will change how the entire commuting model works,” wrote Visual Capitalist. “Meanwhile, an increased penetration of EVs will have an impact well beyond the engine, as charging infrastructure needs to be added, battery supply chains need to be created, and as legacy auto parts become obsolete. While these transitional changes take place, the auto market is expected to jump from $3.5 trillion (2015) to $6.7 trillion (2030) in total size—and a whopping 30% of the revenue will come from new services that don’t even exist today.”


“[On February 14,] the White House released its long-anticipated, 53-page infrastructure proposal,” wrote CEI’s Marc Scribner. “…The proposal has some elements that will appeal to free market fiscal conservatives. Others, not so much. Free marketeers will like the enhanced flexibility of states and the emphasis on non-federal dollars. They will dislike the planned net infrastructure spending increase and a failure to grapple with existing problems that have long plagued infrastructure policy in the U.S.”



"Core inflation is rising at a 2.9 percent pace over the past three months and will lead to further Fed hikes in the coming months." 


“In Munich, Toronto, Amsterdam, Sydney and Hong Kong, prices rose more than 10% in the last year alone.”



Aggregate household debt increased by $193 billion (1.5%) to a new all-time high on 12/31/17.  



“This Strategic Plan presents an opportunity to explain to the public how the Bureau intends to fulfill its statutory duties consistent with the strategic vision of its new leadership,” wrote CFPB Acting Director Mick Mulvaney. “If there is one way to summarize the strategic changes occurring at the Bureau, it is this: we have committed to fulfill the Bureau’s statutory responsibilities, but go no further. Indeed, this should be an ironclad promise for any federal agency; pushing the envelope in pursuit of other objectives ignores the will of the American people...” 


"The bottom line is that political shenanigans and influence pose a continuing threat to central bank independence, and the outlook in the US is worsening for the Fed’s independence," wrote Cumberland Advisors' David Kotck. 


“[T]he Dow Jones Industrial average traveled more than 22,000 points [the week of Feb. 12th],” according to CNBC. 


President Trump’s infrastructure plan has four goals:  (1) to generate $1.5 trillion for an infrastructure proposal, (2) to streamline the permitting process down to two years, (3) to invest in rural infrastructure projects, and (4) provide advance workforce training. "The current system is fundamentally broken and it’s broken in two different ways," a senior administration official told reporters. "We are underinvesting in our infrastructure and we have a permitting process that takes so long that even when funds are adequate, it can take a decade to build critical infrastructure."


“Now, the U.S. is going through another major shift in the ‘policy mix,’ with the federal government focusing on deregulation and tax cuts,” wrote First Trust economists. “In a nutshell, we’ve gone from a political philosophy that said ‘you didn’t build that’ to one that says ‘please build that.’ As a result, expectations about the economy are changing rapidly. The Atlanta Fed is now projecting real GDP growth at a 5.4% annual rate in the first quarter...  We think that’s on the optimistic side and expect growth at more like a 4.0% annual rate, but, either way, the economy is showing signs of an overdue acceleration…”



“If authorities do not act preemptively, cryptocurrencies could become more interconnected with the main financial system and become a threat to financial stability,” said Agustín Carstens, General Manager of the Bank for International Settlements (BIS) and former governor of the Bank of Mexico. Hinting of regulatory action to come, Carstens cautioned that the crypto ecosystem, as it “piggybacks” on the financial system, transfers its risks to the financial system and urged regulators to monitor the rapidly growing crypto ecosystem.



“Continued strong labor market performance is unlikely to translate into meaningfully higher inflation because Phillips curve effects are weak,” said St. Louis Fed president James Bullard. “However, inflation expectations have moved more in line with the [FOMC’s] 2% inflation target... I caution against interpreting good news from labor markets as translating directly into higher inflation. The empirical relationship between these variables has broken down in recent years and may be close to zero. …The measures today are closer to being in line with the ...2% inflation target, but remain a bit low.” 


Goldman Sachs is acquiring the employees who built Final, an Oakland, CA credit card startup, which offered a unique credit card that created a virtual credit card number of every merchant. In December, Final announced its plans to shut down its credit card portfolio. “Goldman gains about a dozen engineers and product managers with experience building a consumer finance product from scratch,” wrote FastCompany’s Ainsley Harris. “When they arrive the spring, they will join a growing roster of consumer-oriented employees, all part of the bank’s new Consumer and Commercial Banking division.” 


“The stable rise of China—both economically and most importantly technologically—is completely changing the nature of the global marketplace,” said Ian Bremmer. “It’s actually in some ways, unwinding globalization—shrinking supply chains but creating much more a zero-sumness between our big tech firms, their big tech firms, our bid data, their big data and therefore, our ability to work together. …China is already an economic superpower… [and] a technological superpower as well. Five years ago, you wouldn’t have either of those things." 


“Let me put it to you this way,” said former Fed Chairman Alan Greenspan in a January 31st interview on Bloomberg TV. “I think there are two bubbles. We have a stock market bubble, and we have a bond market bubble. I think at the end of the day the bond market bubble will be the critical issue……we are working our way to a major increase in long-term interest rates.”   


"The reason this announcement [by Amazon, JPMorgan Chase and Berkshire Hathaway] is disruptive isn't because it will dramatically alter the healthcare landscape anytime soon, but because it shows how health care reform should work in this country,” wrote Investor Business Daily. “You don't need government calling the shots to bring meaningful reforms… what you need are private companies experimenting with solutions, competing for consumer dollars, and reaping the rewards when they succeed or paying the price if they fail.”


Amazon, Berkshire Hathaway and JPMorgan are teaming up to form a consortium to focus on their employees’ healthcare for their U.S. employees with the goal of improving employees’ satisfaction and reducing costs. “The healthcare system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” said Amazon’s Jeff Bezos. “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”



“Cities are the engines of modern society," according to Visual Capitalist’s Jeff Desjardins. 


“I believe in America,” said President Trump. “As president …I will always put America first just like the leaders of other countries should put their country first also. But America first does not mean America alone. When the United States grows, so does the world. American prosperity has created countless jobs all around the globe and the drive for excellence, creativity, and innovation in the U.S. has led to important discoveries that help people everywhere live more prosperous and far healthier lives.”


“Our tax system, 20 years ago, was the same as everybody else,” said JPMorgan Chase’s Jamie Dimon. “Over 20 years ago, it’s come down here. We’ve all known that it’s a huge competitive disadvantage driving capital, brains, companies, headquarters overseas. Studies have shown maybe even 5,000 companies, net, are owned by foreign companies today.  I’m not against foreign ownership, I’m against [being] uncompetitive. 


“[Tax reform and changes in regulation]…happened and I think they’ll have pretty substantial impact on the economy,” said Stephen Schwarzman, Blackstone chairman and CEO. “…Geopolitical risks feels like it’s a little less than it was three month ago, but that doesn’t stop the development of nuclear technology and ballistic missiles… Economically, right now, the world’s expanding almost everyplace. And, things look good and probably will continue to stay good absent any of these unpredictable black swans.”



“Global economic activity continues to firm up,” wrote the IMF. “Global output is estimated to have grown by 3.7 percent in 2017, ...0.1 percentage point faster than projected in the fall and ½ percentage point higher than in 2016. …Global growth forecasts for 2018 and 2019 have been revised upward by 0.2 percentage point to 3.9 percent… [reflecting] increased global growth momentum and the impact the ...U.S. tax policy changes. The U.S. tax policy changes are expected to stimulate activity, with the short-term impact ...mostly driven by the investment response to the corporate income tax cuts.”


“Democracy faced its most serious crisis in decades in 2017 as its basic tenets—including guarantees of free and fair elections, the rights of minorities, freedom of the press, and the rule of law—came under attack around the world,” wrote Freedom House. “Seventy-one countries suffered net declines in political rights and civil liberties, with only 35 registering gains. This marked the 12th consecutive year of decline in global freedom. Over the period since the 12-year global slide began in 2006, 113 countries have seen a net decline, and only 62 have experienced a net improvement.”


"I think one of the arguments is if you deferred over 1% of growth through over-regulation etc., growth may, in fact, dispute the cycle,” said investor Sam Zell. “Maybe if eight of it is at 2% growth, that’s much longer than we’re used to. We’re dealing with something we don’t know about. We’ve never had 8 years of 2% growth. We’ve had a period of time where growth has been impeded by regulation by over-involvement of government by an anti-business White House. …I think the opportunity for the country to grow at 3% is real. I think the current [stock market] situation seems like irrational exuberance.”



“[A] flat yield curve will demonstrate to the markets and Congress that the majority on the FOMC has not the slightest idea how their policy moves impact the real world of money and credit,” wrote Chris Whalen. “Powell certainly seems to get the joke. His first challenge as Fed Chairman may be navigating the dangerous political mess created by Chairman Bernanke and Chair Yellen, who actually seem to think that the US bond market can endure several years of an inverted yield curve as we wait for the Fed’s portfolio to run off before the central bank completes the normalization of policy.”




"The reality is that administrative power is not our system of government," said Philip Hamburger. "The United States Constitution places the legislative power in Congress, which we elect… [T]here’s this alternative mode of government that does not really bind us through law but through mere command… [T]his is a threat to civil liberties; that in fact, administrative power eviscerates most of the procedural rights in the Constitution, and many other freedoms established by the Constitution. It’s, I think, the greatest civil liberty threat of our time."



In this 2018 white paper, the authors analyze FHA's 50 basis point cut to its mortgage insurance premium to study the impact of federal housing policy and interest rates on housing demand. "Our analysis suggests FHA borrowers increased the value of the housing they purchased by 2.5 percentage points... Because the rise in constant-quality house prices affected both FHA and other buyers..., non-FHA first-time buyers as a group incurred a cost of $180,000 for each of the 17,000 new first-time FHA buyers.”


“The Blockchain is real,” said JPMorgan Chase’s Jamie Dimon in an exclusive interview with Fox Business’ Maria Bartiromo. “You can have crypto yen and dollars and stuff like that. ICO's you have to look at individually. The Bitcoin to me was always what the governments are gonna feel about Bitcoin as it gets really big, and I just have a different opinion than other people. I'm not interested that much in the subject at all.”



"My personal opinion is that we're going to see a consolidation after a crash," said Charles Hoskinson, former CEO and co-founder of Ethereum. “"What's going to occur is a lot of these ventures that don't have strong fundamentals, don't have good tech, or just unrealistic projects, they will eventually run into some major wall they can't quite overcome. They will fracture up and you will see a lot of them are certain to fail."


On January 5, HUD published a notice in the Federal Register, saying it will suspend the Obama administration’s Affirmatively Furthering Fair Housing rule, which requires communities to analyze their housing segregation and submit plans for changing it in order to receive certain federal grants. HUD’s notice postpones the plan submission deadline until 2020. The delay is “a flagrant attack on efforts to ensure fair housing opportunities for all people, including minorities, women, families with children, and persons with disabilities,” said Representative Maxine Waters (D-CA), minority leader on the House Financial Services Committee. 


“One word that could describe Donald Trump’s unexpected ascendancy to the presidency is–‘revolt.’ …against the ‘status quo.’ After all, status quo bureaucracies, tax rates, institutions, regulations, and narratives promised prosperity, yet the economy was mired in slow growth and many felt it was hard to get ahead. Reliably blue states tilted red, and the pendulum swung the other way. Whether you agree with these developments or not, the U.S. hasn’t seen economic policy changes like this in a long time. The forces that support markets and entrepreneurship over government control are reasserting themselves.”


“The scale of the world’s political challenges is daunting,” wrote Eurasia Group’s Ian Bremmer and Cliff Kupchan. “Liberal democracies have less legitimacy than at any time since World War II, and most of their structural problems don’t appear fixable. Today’s strongest leaders show little interest in civil society or common values. In the 20 years since we started Eurasia Group, the global environment has had its ups and downs. But if we had to pick one year for a big unexpected crisis—the geopolitical equivalent of the 2008 financial meltdown—it feels like 2018. Sorry.”




"With a few key exceptions, the Conference Agreement’s provisions will generally impact both US and foreign corporations in tax years ending after 2017."


“The new tax legislation approved this week by … includes a provision that will cap the deduction for state and local taxes (SALT) at $10,000 per household,” wrote James Piereson, president of the William E. Simon Foundation. “The other provisions of the tax bill—especially the corporate tax rate cut—should encourage investment in the United States and spur faster economic growth. But the cap on state and local deductions may be the most significant in terms of its potential political consequences.”



"This is without question the single most important thing we can do to once again make America the best place to do business,” said House Speaker Paul Ryan (R-WI). With the House poised to vote on the Senate’s version of the tax bill today, the Republican’s tax reform could go down in history as the most substantial overhaul of the American tax code since the Reagan Administration. ““the plan would significantly lower marginal tax rates and the cost of capital, which would lead to a 1.7% increase in GDP over the long term [and] 1.5% higher wages,” according to the Tax Foundation.



“So far in 2017, 165 companies have raised more than $4 billion via [Initial Coin Offerings], up from $226 million in 2016,” wrote Wolf Richter. “Often, companies promise investors something of perceived value for their money, such as something for free down the road, other than ownership. It’s really more like a donation. The main thing is the digital token that can be traded for instant riches if enough buyers can be dragged out of the woods.” 


"Tax reform will help deliver expanded opportunity for individuals and American businesses of all sizes,” said Financial Services Roundtable CEO Tim Pawlenty. “Congress should quickly move tax reform over the finish line and enable America to go on economic offense." AEI Resident Scholar Alan D. Viard added, "The bill features a long overdue reduction in the corporate tax rate that will draw investment to the United States, boosting workers' productivity and wages. However, …a plan to address the long-run fiscal imbalance has become even more imperative.


On December 13, Republicans struck a deal in principle that will meld together the House and Senate tax deals and put the parties on a path to vote as soon as next week, according to aide. Senate Republicans will discuss remaining “small” issues at their conference-wide lunch today to obtain input from their rank-and-file members. Republicans appear poised to deliver tax reform legislation for Christmas. 


“Our immediate concern not the underlying policy motivations of the tax reform..., but rather with the way that these goals are effectuated through the proposed statutory changes. The House and Senate versions of the bill were drafted through a rushed and closed process, without adequate regard for the intricacies of the tax law and the risk of unintended consequences. This report illustrates exactly why a transparent and deliberative process is crucial when introducing dramatic changes to the tax law.”


“…[T]he U.S. working class—defined participants in the labor force with less than a four-year college degree—is more diverse than ever and growing more so,” according to the Center for American Progress. “Since 1960, the industrial work ...has been shrinking as a share of working-class employment; in fact, it has never made up the majority of U.S. working-class jobs. As a result of these trends, white male workers in industrial sectors now comprise just 11 percent of the broad working-class labor force.”



The count of oil rigs and rig employment provides a compelling illustration of how technology is reducing employment, according to John Mauldin. While the number of rigs in the oil patch has risen since mid-2016, the number of workers on those rigs is actually still falling. “This is the impact of a new robot called an iron roughneck: Tasks that used to require 20 people now need only five. And the iron roughneck is not even that widely deployed in the oil and gas industry—the trend will hit hard in the coming decade,” wrote Mauldin. “Roughneck jobs are relatively high-paying; it takes a great deal of training and skill to be able to do them.”





Here is a summary of forecasts for 2017, wrote Calculated Risk’s Bill McBride. “It is early (just nine months), but in 2017, new home sales will probably be around 615 thousand, and total housing starts will be around 1.200 to 1.210 million.  Brad Hunter (HomeAdvisor) appears very close on New Home sales, and Merrill Lynch and NAR appear close on starts.




“Alternative payment mechanisms such as PayPal and iDEAL will continue to grow at 20 to 30 percent a year for e-commerce transactions, driven by convenience and sky-rocketing fraud rates in card-not-present transactions,” according to Accenture. “We estimate that up to 25 percent of banks’ traditional cross-border payments revenue streams are at risk from these innovations. These are just a few of the seemingly endless examples of disruptive change in the payments industry. Traditional payments players are at a crossroad: figure out how to ride this whirlwind to success, or be content to just keep playing the traditional games.”



"The aftermath of the Great Recession was a particularly difficult period for many homeowners with a mortgage. The steep decline in home prices meant that by the end of 2011 many borrowers were “underwater”…[T]he unemployment rate nearly doubled and delinquency rates  ...spiked. In response, various mortgage modification programs were introduced to help homeowners struggling to make their monthly mortgage payments remain in their homes. ...We analyzed modifications to ...understand the impact of modifications on homeowner behavior."


The Conference Committee must now resolve the differences between the House (HR 1) and Senate (S 1) versions of a tax overhaul. Conferees will decide the fate of the requirement in the 2010 health care law that most Americans be insured, as well as two tax breaks regarding those with high medical costs and development of treatments for rare diseases. Also, the Committee must decide if the alternative minimum tax will be scrapped for corporations and what tax rate businesses will pay.




“The BEA’s second estimate shows real GDP grew at an annualized rate of 3.3 percent in Q3 2017, up from the first estimate of 3.0 percent,” wrote Regions Bank’s chief economist Richard Moody.  “Fixed investment, inventories, government spending, and net exports were all revised higher relative to the initial estimate. Adjusted after-tax corporate profits rose by 5.8 percent in Q3 and were up 7.7 percent year-on-year.”



"[The CFBP is] a wonderful example of how a bureaucracy will function if it has no accountability to anybody,” said Representative Mick Mulvaney (R-SC) in a 2004 interview. “It turns up being a joke, and that’s what the CFPB really has been in a sick, sad kind of way.” On Thursday, Mulvaney added, “The structure of the CFPB is just fundamentally flawed… There is no accountability with the American taxpayer here. I’m hopeful that will change.” 


“The core problem with the MID …lies in how it affects housing markets. Inevitably, any policy that provides a tax reduction for those who buy or own homes increases the price of housing, through the implicit promise that the tax code will lower the effective house payments. MID supporters say that it encourages homeownership, but the Urban Institute finds that it mostly ‘rewards affluent households who would have bought homes anyway,” giving these homeowners “incentives to buy more expensive homes, take out larger mortgages, and buy vacation homes...’”


If confirmed, I would strive …to support the economy’s continued progress toward full recovery. Our aim is to sustain a strong jobs market with inflation moving gradually up toward our target. We expect interest rates to rise somewhat further and the size of our balance sheet to gradually shrink. …I am committed to making decisions objectively and based on the best available evidence. In doing so, I would be guided solely by our mandate from the Congress and the long-run interests of the American public."


“On behalf of the 1.3 million members of the National Association of REALTORS® (NAR), I want to express the Association’s strong opposition to ‘The Tax Cuts and Jobs Act,’ which the Senate Committee on Finance approved last week.  …[We] believe this bill …would reverse a century’s worth of tax policy that has recognized the value of homeownership to American middle-class wealth creation... [T]his tax reform effort is a serious step in the wrong direction. The overall effect of this legislation would be to batter homeownership... [and raise] taxes directly on millions of homeowners.”



“On November 2, House Republicans released their tax reform bill titled, ‘Tax Cuts and Jobs Act,’ wrote Michael Best Strategies’ Denise Bode and Anne Canfield. “This past week, on November 16, the House of Representatives passed ‘Tax Cuts and Jobs Act’ (H.R. 1) as approved by Ways and Means Committee ...227 to 205. On November 16, the Senate Finance Committee passed their version of the ‘Tax Cut and New Jobs’ ...14-12. Next week, the Senate Budget Committee will review the Senate Finance Committee passed bill to ensure that it complies with the requirements set forth in the FY2018 Budget Resolution."


“One approach [to monetary policy] is to plan on relying on [the Fed’s] unconventional policy tools, that is, follow the same playbook as during this past decade and hope that suffices [to handle a recession],” said John Williams, president of the San Francisco Fed. “A second is to find ways to make the lower bound more negative, giving conventional monetary policy more room to maneuver. A third is to raise the inflation target. And fourth is to modify inflation targeting by moving to a price level or nominal income target.”



"Trust politicians to do the opposite of what they should do," wrote Scott Grannis, former chief economist at Western Asset Management. "The overriding problem that is keeping Congress from achieving true, growth-friendly tax reform is concern that lower tax rates would mean a larger budget deficit. Consequently, politicians are trying to 'pay for' lowering some taxes by raising others and/or reducing allowable deductions. Instead, they should be focusing on the urgent need to cut taxes in order to reduce the deficit and strengthen the economy."


Approximately 67% of central banks and 86% of other public sector institutions are directly experimenting with digital ledger technology protocols, according to the first Global Blockchain Benchmarking Study by the Cambridge Centre for Alternative Finance. “This is the first major empirical DLT study focused on enterprise and the public sector,” said Dr. Garrick Hileman. “The over 100-page report contains new, non-publicly available data on what is actually happening right now in DLT areas such as targeted use cases, emerging revenue models, the timing of deployment, and remaining challenges.”


“We have some takeaways,” wrote Cumberland Advisors’ David Kotoch. “First, the tax code will not be made simpler by this bill, and the implementing of a postcard tax form is a political gesture that means nothing. …My conclusion is that there will be a tax reform bill. The Republican leadership must have one and will compromise to get it, no matter what they have to exchange for the necessary votes. I also believe that Trump will sign any tax reform bill that makes its way to his desk. He is desperate for a victory. He will claim all sorts of wonderful political gains. Such is the nature of political hyperbole.”



“Artificial Intelligence is the new electricity,” said Andrew Ng, co-founder of Coursera and an adjunct Stanford professor who founded the Google Brain Deep Learning Project. “About 100 years ago, electricity transformed every major industry. AI has advanced to the point where it has the power to transform [every major sector in coming years]. While AI has actually been around for decades, it is taking off now because of the ability to scale data and computation, according to Ng.



“The [tax reform] legislation is currently being refined and perfected as it moves through the legislative process,” wrote MBS’ Denise Bode and Anne Canfield. “…On November 9, the Ways & Means Committee voted and passed their revised legislation which will be considered on the House floor sometime the week of November 13. On November 9, the Senate Finance Committee released their tax bill overview, "Tax Cuts and Jobs Act ." The Senate Finance bill is different in many aspects from the Ways & Means' bill and requires a side-by-side analysis, which MBS has provided in this tax reform update..." 


The Chinese government played the U.S. national anthem for the first time ever to their own country.



“Of the eight permanent votes on the FOMC—the seven members of the Board of Governors and the president of the New York Fed—only three are currently known if Yellen decides to leave: Jerome Powell, Lael Brainard, and Quarles,” wrote Wolf Richter. “The other five are unknowns... [leaving] decision-making power at the Fed next year in the hands of a group of people ...dominated by unknowns. Monetary policy is undergoing a critical change in direction, with rates being hiked and QE being unwound. While there doesn’t seem to be a lot of airspace between Yellen and Powell... the rest of this new Fed ...could be off the charts.”


"We continue to believe that tax legislation has around a two-thirds chance of becoming law by early 2018," wrote Goldman Sachs' chief economist Jan Hatzius. "The release of the House legislation is a positive step in that it moves the process forward. It also demonstrates that meaningful base-broadening might be more achievable than we have believed. However, it does not alter our outlook for the odds of enactment, since the Senate is likely to release its own bill shortly and the vote in that chamber represents the greater obstacle to passing tax reform."


On November 2, House Republican leaders released the full details of a highly anticipated tax code rewrite, which serves as the preliminary Chairman's mark. The Ways & Means Committee will work through the weekend to refine and perfect this sweeping legislation that affects nearly every facet of the U.S. tax code. “It'll be the biggest tax cut in our history,” said President Donald Trump. When the Committee begins markup, the final chairman's mark will be available.


"Despite the hawkish tone of the statement, market odds of a December rate hike were little changed following the statement, moving to 87.5% from 82.8% two days ago," wrote First Trust economists. "That said, just two months ago the markets had 34.5% odds on a third rate hike in 2017. Looking further ahead, markets are pricing in one to two rate hikes in 2018. We think three hikes next year more likely, as improved economic and tax policy out of Washington, push economic growth higher." 


“The Federal Reserve made a colossal gamble with its so-called ‘Quantitative Easing’ or ‘QE,’ which is simply a euphemism for its $4.4 trillion binge of buying long-term bonds and mortgages,” wrote R Street Institute's Alex Pollock. “Its big bid for long bonds, along with parallel programs undertaken by other members of the international fraternity of central banks, has artificially suppressed long-term interest rates, and has deliberately fostered asset-price inflations in bonds, stocks, and houses. Will this gamble pan out?”


"With the exception of the additional information that will be provided to applicants regarding HUD-approved counseling agencies, requesting information about applicants’ language preferences is more likely to lead to confusion and uncertainty... Moreover, if the FHFA intends to use the collection of language preference information to require mortgage industry participants to provide more in language resources for LEP consumers, …[t]hese costs would likely be considerable—especially for many of the smaller players in the mortgage industry."


This can’t end well. investors in European “junk” bonds are willing to accept the same no-default return as they are for U.S. Treasury bonds. 


“With companies like Google, Apple, and Amazon getting involved in payment transactions, banking as we know it could dramatically change,” wrote Andy O’Sullivan. “I spent over 10 years working for a bank and I loved it. I think their days are numbered though, probably; mainly as I believe the services and products they provide will be gradually replaced by large tech companies who have better relationships with consumers. …[I]t doesn’t really matter how ‘digital’ a bank goes, or how happy their customers currently are, other companies that have better relationships with customers will gradually take the business away.”


“Today’s prevailing low funding costs and financial market volatility support a sanguine view of risks to the global economy in the near term. But increasing leverage signals potential risks down the road, and a scenario of a rapid decompression in spreads and volatility could significantly worsen the risk outlook for global growth. A retrospective real-time analysis of the global financial crisis shows that forecasting models augmented with financial conditions would have assigned a considerably higher likelihood to the economic contraction that followed than those based on recent growth alone.” 


To stem the financial crisis, the Federal Reserve purchased massive volumes of Treasury and government agency MBS, ballooning the Fed’s balance sheet to $4.5 trillion. The Fed kept nominal interest rates close to zero. Even now Fed policy rates are negative in real terms. Banks have accumulated $2.34 trillion in reserves balances that earn interest from the Fed while adapting to a myriad of new post-crisis regulations. How has a decade of exceptional Fed monetary stimulus and the regulatory efflorescence affected the US banking system?


"...When governments raise taxes not to enhance services but to pay for the costs of the past, this not only weakens their advantage relative to low-tax jurisdictions but also to high-tax jurisdictions with a reputation for a high quality of life. If New Jersey had only to fund its employees' normal retirement costs, it would have billions more to spend on any number of core priorities. Structural problems manifest themselves with the greatest clarity during the good times. Fiscal strain during times of growth is a sure sign that a government is poorly prepared for the next recession.”


“In cities like New York, Los Angeles, Miami, and San Francisco, you put in more than 100 hours to make enough money just to pay for housing. That’s longer than two-and-a-half weeks, meaning well over 50% of your take-home pay! Not surprisingly, unaffordable places are all located on the either coastline. In fact, 8 of the 10 most expensive places are all located in California. …The best places tend to be old manufacturing cities like Toledo, OH and Memphis, TN (17 and 18 hours, respectively).”


“The current social contract is mired in the quicksand of global finance. It is being kept alive by the corpulent balance sheets of central banks, who do their government’s bidding so that the politicians do not have to put unpleasant choices in front of their electorates. This cowardly behavior gives rise to slogans and sloganeers, who provide familiar but false checklists of remedies. ‘Take bank control’…’America First’…’One Belt, One Road’…’Ein Volk, ein Reich, ein Fuhrer’…’One Man - One Kill’. Central banks are currently furnishing the excess credit that, in the past, has been followed by an orgy of blood.”


In a 60 Minutes interview, Joe Rannazzisi, the head of DEA's Office of Diversion Control, tells the inside story of how America’s opioid crisis was allowed to spread. “This is an industry that's out of control,” said Rannazzisi. “What they wanna do, is do what they wanna do, and not worry about what the law is. And if they don't follow the law in drug supply, people die. That's just it. People die.” Over the last two decaded, the opioid crisis has claimed 200,000 lives.



"First, we will cut taxes for everyday, hardworking Americans,” said President Trump. “Under our framework, the first $12,000 for a single individual and the first $24,000 for a married couple, will be tax-free. …The second plank of our tax framework is to make the tax code more simple, fair, and easy to understand… Third, we will cut taxes on American businesses to restore our competitive edge and to create more jobs and higher wages for American workers. …Finally, our framework encourages American companies to bring back the trillions and trillions of dollars in wealth parked overseas. Trillions of dollars."  



“The cumulative 2009–19 budget deficits are set to end up at $8.93 trillion—$4.6 trillion higher than projected for the same time period when Obama took office. This consisted of $5 trillion in new legislation, partially offset by $400 billion saved by economic factors and technical changes. The economy grew more slowly over this decade than had been projected in 2009. …The Affordable Care Act (ACA) has reduced the 2009–19 budget deficit by $275 billion, as its steep tax increases and Medicare cuts exceeded the cost of new health benefits.”


“In the wake of Hurricanes Harvey and Irma, Americans from all walks of life set aside their differences to help those in need,” wrote Craig Stevens. “Their example should send a message to policymakers. For too long, Washington has put barriers in the way of the country’s energy infrastructure demands, discouraging investment and ultimately putting communities at risk. It’s time for a paradigm shift. It’s time government regulators partner with the private sector to build the energy network necessary to ensure the United States’ long-term energy security.”



Every company will become a technology company,” said Cisco Executive Chairman John Chambers.


Today, Puerto Rico has $70 billion of on-balance sheet debt and $30 billion of “acute” off-balance sheet unfunded pension debt, according to Haymarket Capital’s Kyle Bass. The island has a population of 3.5 million—of which only 1.4 million have jobs and 60% to 70% of those employed work for the government. “You have to be a little crazy to think that $100 billion of debt—or even $70 billion of on-balance sheet debt—is worth anything with only 1.4 million workers and the economy of Puerto Rico,” said Bass. “In the end, where’s the true value?” 


“Creating a 21st century Puerto Rico may seem a little premature when most Puerto Ricans are currently without electricity, drinkable water, or permanent shelter,” wrote Newt Gingrich. “However, creating a 21st century Puerto Rico must be advocated and described as early as possible. Puerto Ricans must know their island will have a future worth investing their lives in. …The key to Puerto Rico's future is to avoid rebuilding obsolete, old infrastructure and instead investing money in a new, modern, 21st century Puerto Rico. This will increase economic growth and improve quality of life on the island.”



"...[T]hey owe a lot of money to ...Wall Street," said President Trump. "We're gonna have to wipe that out ..."



“Reportedly, [President Trump] was concerned with several aspects of the [tax] plan, including questioning the lowest rate being set at 12% versus 10% and setting the corporate rate at 20% versus the 15% rate he has long advocated," wrote MBS' Denise Bode and Anne Canfield. "He also left open the possibility of establishing a fourth, top rate for the wealthy, but letting Congress decide on where the threshold for the rate should be set. …[T]he President is presumably signaling that he is willing to roll up his sleeves and start negotiating with any and all parties in order to get a robust tax cut plan enacted.”


“[H]ow does the United States fare on an international basis, as measured by rate of homeownership?  Before you look at the next paragraph, interested reader, what would you guess our international ranking on home ownership is?,” asked R Street’s Alex Pollock. “The answer is that, among 27 advanced economies, the United States ranks No. 21. This may seem like a disappointing result, in exchange for so much government effort. It looks like U.S. housing finance needs some new ideas other than providing government guarantees.”



“…There's an old saying, there are those companies that have been breached and know it and there are those companies that have been breached and don't know it,” said Equifax CEO Rick Smith in an August 17th speech. “That's how prevalent it is becoming. There are literally close to thousands of data breaches occurring in the U.S. every single year. Every time you think you’re ahead of the curve, those three buckets of perpetrators have got a lot of time on their hands to find ways to penetrate.”


“Our prayers have been answered,” said House Speaker Paul Ryan (R-WI). “America is grateful for this moment.”

“You have no idea how great this feels, to be back at work here in the people’s House," said Representative Steve Scalise (R-LA). "I’m definitely a living example that miracles really do happen.”


“A drop in the population growth rate can induce two opposing effects on real interest rates,” wrote analysts at the Federal Reserve of San Francisco. “On the one hand, GDP growth is influenced by population growth. Lower population growth slows down productivity and potential GDP growth, pushing interest rates down. On the other hand, lower population growth eventually drives up the share of older households (retirees) in the population. Because retirees consume out of their savings, the increasing share of retirees leads to an increase in consumption…” 


A cyber breach occurred at Deloitte, one of the world’s big-four accounting firms, involving “usernames, passwords and personal data on the accountancy’s top blue-chip clients,” wrote The Guardian’s Nick Hopkins. “The Guardian understands Deloitte clients across all of these sectors had material in the company email system that was breached. The companies include household names as well as US government departments. So far, six of Deloitte’s clients have been told their information was ‘impacted’ by the hack.” The breach occurred in October 2016.


“We're in the such late stages of a game that is the largest global imbalance I've ever seen in my life,” said Kyle Bass “When you look at on balance sheet and off balance sheets, you look at on balance sheet in the banks, you look in the shadow banks. The number of total credit in the system, China is right at $40 trillion. Think about the number I just said. $40 trillion. And that's using an exchange rate of call it 6.7 to the dollar, right? So it's grown 1,000% in a decade. And we're on a $40 trillion credit system on $2 trillion of equity on maybe $1 trillion of liquid reserves.”


“The Fed has become massive,” wrote First Trust economists. “Its balance sheet is nearly 25% of GDP. Never before has it been this large. And yet, the economy has grown relatively slowly. Back in the 1980s and 1990s, with a much smaller Fed balance sheet, the economy grew far more rapidly. So how do you drain the Fed? By not appointing anyone that is already waiting in D.C.’s revolving door of career elites. We need someone willing to challenge Fed and D.C. orthodoxy. If we had our pick to fill the chair and vice chair positions ...we would be focused on the likes of John Taylor, Peter Wallison, or Bill Isaac.”



“There’s a new wrinkle in the story of one of the largest data breaches in history,” wrote Jeffrey Tucker  on Foundation for Freedom Education. “The hack of Equifax may have compromised the personal data of one in five Americans. The hackers have now demanded a ransom with the threat of releasing that information to the commercial marketplace (“monetizing the information”). They are demanding 600 Bitcoins, which is worth about $2.4 million. ...Pay attention to the preferred denomination of ransom money, and you see the future of money and payment systems.”


The 30-year fixed rate mortgage has three major flaws, according to Fed staffers Wayne Passmore and Alexander von Hafften. “First, because homeowner equity accumulates slowly during the first decade, homeowners are essentially renting their homes from lenders. …Second, in each monthly mortgage payment, homeowners substantially compensate capital markets investors for the ability to prepay. …Third, refinancing mortgages is often very costly. We propose a new fixed-rate mortgage, called the Fixed-Payment-COFI mortgage, that resolves these three flaws.” 


We are now seeing signs of bubbles in more and more parts of the capital market where we wouldn’t have expected them," said Deutsche Bank CEO John Cryan. “I welcome the recent announcement by the Federal Reserve and now also from the ECB that they intend to gradually bring their loose monetary policy to an end. …[T]he era of cheap money in Europe should come to an end—despite the strong euro. …There is only one European city which can fulfil these requirements and that city is Frankfurt. It’s not about a choice between Dublin, Paris or Frankfurt – it’s about a choice between New York, Singapore or Frankfurt.”


Moody’s Analytics projects loss in southeast Texas to be between $51 billion and $75 billion,with home and vehicle damage estimated at $30 billion to $40 billion. However, total losses could continue to rise as the storm moves into Louisiana. According to [Warren] Buffett, if those uninsured losses top $150 billion, there will be noticeable effects on the economy. “I don’t think it would be a full percentage point for a year or anything like that. But it has a real effect. It destroys wealth. If there’s $150 billion, or something, of uninsured losses that’s real wealth,” Buffett said on CNBC’s Squawk on the Street.


DS News

Brianna Gilpin

August 30, 2017


“We believe the demand for single-family rental homes will remain strong due to...demographic, financial and preference-related reasons,” said Sandeep Bordia, head of research & analytics for Amherst Capital. “In the Institutional SFR space, ...valuations remain attractive. At the same time, financing costs have come down significantly. This setup of supportive demographics, attractive cap-rates, modestly strong home price appreciation, cheaper and more broad-based financing argue for strong equity returns in the space over the coming years." 


“To inject more dynamism into the global economy we need to raise potential output growth, and …lift productivity growth,” said ECB President Mario Draghi. “For advanced economies that are close to the technological frontier, this depends crucially on openness to trade. Yet openness to trade is under threat, and ...policies aimed at answering this backlash are a vital part of the policy mix for dynamic growth. …[E]ncouraging regulatory convergence ...helps protect people from the unwelcome consequences of openness, [which] ensures that we do not lapse into protectionism over time.”



Bringing simplicity and transparency to consumer finance. 


“Through six decades, the PMI industry has played an important role in expanding credit access and mitigating lender and GSE risk,” wrote Urban Institute’s Laurie Goodman. “Although the industry went through substantial turmoil during the last housing and financial crisis, it has since recovered and restructured and should be more resilient going forward. Demographic changes and other mortgage market developments provide the industry both opportunities and challenges to expand its role to support historically underserved populations and first-time homebuyers using private capital.”


“The Treasury knew precisely what it was doing for the subordinated debt holders,” wrote Alex Pollock. “‘These agreements support market stability,’ said then-Treasury Secretary Henry Paulson..., ‘by providing additional security and clarity to GSE debt holders—senior and subordinated—and support mortgage availability by providing additional confidence to investors…etc.’ Treasury slipped that ‘and subordinated’ in there in the middle of the paragraph, without any further comment... Treasury was trapped as an unintended result of the Fannie and Freddie reform legislation of earlier in that bailout year…”



Bionik Labs’ ARKE is the latest robotic exoskeleton that enables paraplegic people to rise to their feet and walk using their paralyzed legs,” wrote IEE Spectrum’s Eliza Strickland. “And it’s the first to integrate the hardware with the Amazon Echo platform, allowing exoskeleton users to control the device with simple voice commands addressed to Amazon’s Alexa, the virtual assistant used in home automation. ARKE is still a prototype; the company hopes to bring it to market within the next few years.”


Nearly half of Americans say they have used heroin in the last 30 days. 


“Although today high levels of inequality in the United States remain a pressing concern for a large swath of the population, monetary policy and credit expansion are rarely mentioned as a likely source of rising wealth and income inequality,” wrote Mises Institute’s Louis Rouanet. “Focusing almost exclusively on consumer price inflation, many economists have overlooked the redistributive effects of money creation through other channels. One of these channels is asset price inflation and the growth of the financial sector.”


“US consumer debt is at an all-time high of over $1 trillion (mostly credit card debt), with an additional $1.3 trillion in federal student loans. Americans… especially younger people, are far too heavily indebted to be able to save any money for a down payment. Moreover, despite all the hoopla about the low unemployment rate in the US, wages are totally stagnant. So the average guy isn’t making any more money, or able to save anything… all while home prices soar to record levels as major funds gobble up the supply.”


“The end of the 35-year secular decline in interest rates has profound implications for the mortgage market,” wrote Urban Institute’s Laurie Goodman. “Higher rates will alter the mortgage landscape in these six dimensions: (1) mortgage origination volumes will decline; (2) profitability will decline and industry consolidations will continue; (3) prepayment speeds will slow; (4) home prices will generally increase; (5) repeat homebuyers will continue to languish; and (6) the second-lien market may return.” 


"For nearly a century, our domestic policy disagreements—over federal spending, health care, and the social safety net—have taken place against the backdrop of a government whose functions are increasingly bureaucratic, rather than political,” wrote Real Clear Policy’s Anthony Mills. “Even the debate over government’s size, which has characterized our politics for so long, takes for granted the existence, if not the necessity, of the administrative state.”



REX Real Estate Exchange, which charges a selling commission of 2%, performs a rigorous analysis of data, including consumers’ income, location, spending habits, etc., to locate homebuyers and sellers and reaches out to customers through ads on social media. 


“If there was any question whether the GSEs have been sufficiently reformed in conservatorship, there should no longer be a question,” wrote Josh Rosner. “…[E]ven under the most severely adverse scenario, the GSEs demonstrate that if they were allowed to rebuild capital, not at the level of 3.5% as I have been recommending, but at much lower levels, they would continue to remain solvent and able to execute their mandates. This severe scenario is the equivalent of another 100-year flood.”


“By any measure, real-term interest rates are much too low and therefore unsustainable,” said former Fed chair Alan Greenspan. 


“In total, the 10 largest banks combined, on an annualized basis, will plow 99% of their earnings into share-buybacks and dividends. Share-buybacks alone amount to $83 billion (not counting dividends),” wrote Wolf Richter. “Under existing capital rules, if the banks were to retain this capital instead of buying their own shares with it, they could have increased commercial and consumer loans by $741 billion. And they could have still paid out their big dividends. If they cut their dividend payments some, they could have boosted their lending by over $1 trillion.”


U.S. growth forecast downgraded by IMF.

The growth forecast in the United States has been revised down from 2.3 percent to 2.1 percent in 2017 and from 2.5 percent to 2.1 percent in 2018. While the markdown in the 2017 forecast reflects in part the weak growth outturn in the first quarter of the year, the major factor behind the growth revision, especially for 2018, is the assumption that fiscal policy will be lessexpansionary than previously assumed, given the uncertainty about the timing and nature of U.S. fiscal policy changes. Market expectations of fiscal stimulus have also receded.



World Economic and Financial Surveys

International Money Fund

July 24, 2017



Australia’s Black Economy Taskforce outlined 35 recommendations to curb the country's black economy. The taskforce argued that a “consumer-focused action” was needed to crack down on cash payments in which the customer failed to get a receipt. Taskforce chairman Michael Andrew floated the idea of issuing $50 and $100 bills with nano-chips with expiration dates. Creating "disappearing cash" would help the government crack down on the black economy, argued Andrew.


“It appears Congress did not expressly provide in Dodd-Frank for how a vacancy should be filled if the CFPB Director were to resign,” wrote Ballard Spahr’s Alan Kaplinsky. “Dodd-Frank provides only that the Deputy Director ‘shall serve as acting Director in the absence or unavailability of the Director.’ It does not expressly authorize the Deputy Director to serve as Acting Director when a vacancy in the position of Director is created.  As a result, a vacancy can only be filled using one of the Vacancies Act’s three permissible methods.’”


“Japan is facing a population collapse that threatens its very existence,” wrote CBS News. “As with many of its problems, Japan is not looking for conventional solutions. It's pressing forward in its own, uniquely Japanese way. The world's third largest economy is looking to buttress its diminishing human population with a growing population of robots. …Dr. Hiroshi Ishiguro [the Godfather of Humanoids] ...envisions a day when robots can be called upon to help sustain a certain quality of life in Japan.”


On July 27, House Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch (R-UT), and House Ways and Means Committee Chairman Kevin Brady (R-TX)  issued a joint statement, outlining their common goals for tax reform legislation and their commitment to fixing "our broken tax code for families, small business, and American job creators competing at home and around the globe." 


“First, the Fed qualified its reference to maintaining its current policy of rolling over principal payments by saying this was the policy only for the ‘time being,’” wrote First Trust economists. “…Second, at the last meeting in June, the Fed said renormalization would start ‘this year’.”


“On July 7, 2017, …[the CFPB] announced regulations to finalize changes and clarifications to the [TRID] Disclosure rule… For the most part, the CFPB finalizes its proposals with modifications here and there to address issues and questions raised by public comments… [and] declines to finalize certain proposals based on concerns for unintended consequences or borrower confusion. In ...perhaps the most important proposal..., the CFPB declines to finalize its proposal to address the ‘black hole’ on resetting fee tolerances… [and] offers a new proposal with a 60-day comment period.”


“Newly unsealed documents show that as early as December 2011, high-level Treasury officials knew that Fannie and Freddie would soon become profitable again,” wrote New York Times’ Gretchen Morgenson. ““The materials also show that government officials involved in the decision to divert the profits knew the change would most likely generate more money for Treasury than the original rescue terms, which required the companies to pay taxpayers 10 percent annually on the bailout assistance they had received.”


“Is this …the kind of economy in which the Federal Reserve should be tightening monetary policy?” asked John Mauldin. “No – yet the Fed is doing so,  partly because they waited too long to end QE and to begin reducing their balance sheet. FOMC members know they are behind the curve, and they want to pay lip service to doing something before their terms end. …The attitude among central bankers, who are basically all Keynesians, is that messy reality should not impinge on elegant theory.”


“...The NFIP has serious design flaws. Premiums are not priced to be actuarially sound, meaning they do not reflect covered risk. About 15–20 percent of policyholders receive an explicit subsidy, saving them 60–65 percent on the cost of their premium. Such subsidies are not based on need. The remaining “full-risk” policies are not actuarially priced either, as they do not include a “loading charge”—something private insurers use to build up reserves for especially costly years. Largely as a result of these deficiencies, the NFIP owes more than $25 billion to the U.S. Treasury. NFIP rates are also inaccurate...” 


“When, if at all, should a mortgage lender or servicer be required to conduct business in a foreign language simply because the consumer has expressed a preference to communicate in a different language? Where does one draw the line in terms of both the number of languages and the scope of the tasks in which a lender should be prepared to conduct business at the request of the consumer? …[D]oes the consumer’s expressed language preference follow ownership of the loan or the mortgage servicing rights…?”


Banks face disruption that could cause a "Kodak moment" that renders them obsolete within the next 5-15 years.


“Since 2000, consumers and businesses have substantially changed their payment choices, with check payments primarily being replaced with card payments and electronic transfers via the automated clearinghouse (ACH) system,” according to The Federal Reserve Payments Study 2016. “In 2015, checks written accounted for 13.4 percent of noncash payments and 15.4 percent of their value, compared with 57.8 per-cent of noncash payments and 66.7 percent of their value in 2000.”


“More than 50 companies are working on autonomous [car] systems,” according to CNBC. “103 electric vehicles will be launched by 2020. …In the ten key markets surveyed, each vehicle used in car sharing is likely replacing the need for 19 personal vehciles.”


“Cops are regular people who believe in the possibility of making this a safer world,” said NYPD Commissioner O’Neill. “It’s why we do what we do. It’s why we run toward, when others run away. [Police Officer Miosotis Familia] believed in the possibility of being part of something larger than herself. …[and] wanted other people to know her, to work with her, and to help her make this a better city for all of us. Everything our government stands for—freedom of speech, freedom of worship, freedom from want, freedom from fear—everything starts with public safety. Miosotis knew this, and she wanted all of us to play our part."


“During the financial crisis, I …described the American economy as the ‘best looking horse in the glue factory’,” said former Dallas Fed President Richard Fisher. “Today, I look at the U.S. economy through a different equine lens. I have another visual of our potential: that of Secretariat at the Belmont stakes in 1973. …winning Belmont by an unimaginable 31 lengths... That is the American economy. … There’s no country, there’s no people, there’s nobody anywhere on the planet that can outpace us if we are given the freedom to run.”


“First, strategic risk is elevated, as banks make decisions to expand into new products or services, consider new delivery channels, or otherwise search for sustainable ways to generate returns in a persistent low interest rate environment. …Second, credit risk is relatively stable overall. …Third, operational risk remains elevated as we see more sophisticated cybersecurity threats and the need for sound governance over product service and delivery. …Finally, with respect to compliance risk management, ...banks struggle with both consumer and Bank Secrecy Act compliance.” 


“As the 115th Congress continues to debate a wide range of fiscal and public policy priorities this summer, the issue of housing finance reform at large remains on the congressional to-do list,” said Corelogic’s Stuart Pratt. “Part of that reform includes examining the future state of the appraisal industry. …While not at the epicenter of broader housing finance reform discussions at this point, addressing the challenges and capitalizing on the opportunities facing the appraisal industry is a topic that is gaining greater levels of attention in the halls of Congress.”  


“What, exactly, is the administrative state?” asks RealClearPolicy’s Anthony Mills. “Where and how does it fit into our political system? Is it necessary or harmful in modern political life? How does support for or skepticism of administrative power map onto our current political divisions? What is the future of the administrative state in our populist era? This is the topic of our new podcast, “The Future of the Administrative State,” which explores the virtues and vices of administrative power at a time when both Right and Left fear a growing executive branch.” 


“The fundamental question of our time is whether the West has the will to survive,” said President Donald Trump. “Do we have the confidence in our values to defend them at any cost? Do we have enough respect for our citizens to protect our borders? Do we have the desire and the courage to preserve our civilization in the face of those who would subvert and destroy it? We can have the largest economies and the most lethal weapons anywhere on Earth, but if we do not have strong families and strong values, then we will be weak and we will not survive.”


“Dozens of Greek, Italian, Spanish and even German lenders have volumes of troubled assets higher or similar to that of Spain’s fallen lender Banco Popular,” wrote Wolf Street’s Don Quijones. “They, too, are at risk of insolvency. “Banks tend to fail when the Texas ratio, a measure of bad loans as a proportion of capital reserves, surpasses 100%, meaning that they don’t have enough capital to cover all the bad stuff on their books. As we reported a few months ago, 114 out of the approximately 500 banks in Italy have Texas ratios of over 100%. Of those, 24 have ratios of over 200%...” 


“In the nine years since Fannie Mae and Freddie Mac were placed into government conservatorships, the market has evolved substantially away from the failed system of the past,” testified Ed DeMarco before the Senate Banking Committee. “That process cannot be completed absent bipartisan legislation that deals with the status and charters of the GSEs and addresses related issues such as the role and health of FHA. …While differences remain to be worked out, we are encouraged that compromise solutions are within reach.” 


"The rise of digital mortgage lenders is threatening traditional lenders’ market share,” wrote Accenture. “The majority of top mortgage lenders by origination in 2016 (six out of 10) were nonbanks, up from just two in 2011.1 Based on Accenture research and the level of industry disruption and consolidation, 20 to 30 percent of today’s lenders will be gone by 2020. Digital is not just changing the players; it is changing the game.”


“[G]reater financial openness can channel financial instability," wrote BIS. "...[I]t can increase the amplitude of financial booms and busts—the so-called 'pro-cyclicality' of the financial system. …The free flow of financial capital across borders and currencies can …increase the system’s 'excess elasticity'. The dominant role of the US dollar as international currency adds to this weakness, by amplifying the divergence between the interests of the country of issue and the rest of the world. Hence the outsize influence of US monetary policy on monetary and financial conditions globally.”


“The first technology revolution caused World War I,” said Alibaba’s Jack Ma. “The second technology revolution caused World War number-- war two. This is the third technology revolution. People are already unhappy. Because a lot of machine learning, artificial intelligence, killing a lot of jobs. So this is what I think. The way to figure out the job creation, one of the best ways, is to help small business to sell their local products across the board. And we have to prepare now. Because next 30 years, is going to be painful.” 


“Amazon’s stunning acquisition last week of Whole Foods signaled an inflection point in the development of retail…,” wrote’s Joel Kotkin. “In the last year alone, 50,000 positions were lost in the retail sector, and as many as 6 million jobs could be vulnerable nationwide in the long term. Store closings are running at a rate higher than during the Great Recession. Yet, there’s an opportunity opening for cities and regions to take advantage of new space for churches, colleges, warehouse space and, most importantly, housing.”


“The U.S. public sector pension system is hurtling toward a catastrophic and potentially unavoidable collapse,” wrote American Interest Blog.  [According to a new report,] even as state and local governments shovel more and more money in, they are falling further and further behind as liabilities balloon exponentially. [A second report concluded that] even a white-hot bull market through 2020 would not be enough to start closing the pension hole. Most likely, unfunded liabilities (already in the trillions of dollars) will surge. And in the case of a stock market collapse, all bets are off."



The Financial Services Roundtable sponsored a forum on financial regulation, featuring Congressman Blaine Luetkemeyer (R-MO), Counselor to the Treasury Secretary Craig Phillips, FSR CEO Tim Pawlenty, as well as industry and policy thought leaders, to  discuss the Treasury Department’s first executive order report, the CHOICE Act, and next steps on the regulatory horizon.


“[O]nce in a generation or so, there is an opportunity to do something transformational—something that will have a truly lasting impact long after we are gone,” said Speaker Paul Ryan. “That moment is here and we are going to meet it. Ladies and gentlemen, we are going to fix this nation’s tax code once and for all. You may recall that the last time we did this was three decades ago—the same year I got my driver’s license. …But as the world changed, our tax code has remained stuck in neutral. It has ballooned to 70,000 pages of rules and regulations that few people today actually understand.”


“Frankly, we’re not hopeful that the coming years will unfold gently, not because the Fed will or will not normalize its balance sheet, but because a great deal of damage is already baked-in-the-cake as the result of years of yield-seeking speculation and low-grade credit issuance,” wrote economist John Hussman. “If there was clear evidence that activist monetary policy has reliable economic benefits..., there might be some justification for what the Fed has done. But …despite vapid theoretical diagrams and baseless verbal prose to the contrary, the hard economic data fail to support that view.”



"Two different kinds of economies in the United States."

We have two sectors— two different kinds of economy in the U.S.—two different kind of categories of sectors. Divide into one may call fast change sectors and slow change sectors. Slow sectors are like retail, transportation media—in which technology has had a huge impact. Software is eating those sectors.


There’s massive change happening in those [fast change] sectors.


The other part of the economy is what you might call the slow change part of the economy,which is all the sectors in which the opposite of that is happening. These are sectors like healthcare, education, construction, elder care, child care and, also by the way, government. The big six. In those sectors the opposite of that is happening. In those sectors, we have a price crisis.


Initial talks on Brexit begin today in Brussels. 


"There is a crisis in the world of mortgage finance, but it has nothing to do with the debate of government-sponsored enterprises such as Fannie Mae and Freddie Mac," wrote Chris Whalen. "The situation with the GSEs is a Washington story that deals mostly with issues of equity and public policy, but gets virtually all of the attention from the financial media. To the bond market, though, the only validation needed to support the “AAA” rating of the GSEs is the credit support of the United States, period." 


[After the 2008 crisis,] we had an inverted regulatory action,” wrote former BBT CEO John Allison. “Instead of letting the bad banks fail, the government bailed them out. At the same time, regulators attacked good banks—banks that had made prudent investments and had gone into the crisis with strong balance sheets—by radically tightening lending standards. That approach made things drastically worse: the last thing you want to do in a credit crunch is suddenly impose additional restraints on lending, but that’s exactly what regulators did."


“…[T]he administration should focus on long-term growth and on creating an institutional environment where investment is responsive to the wants and needs of users,” wrote Cato’s Ryan Bourne. “That approach requires ...a reassessment of the whole framework of infrastructure policy. …Harnessing private-sector expertise should come as part of a broader attempt to remove current barriers to investment and to devolve decisions on infrastructure to as low a level of government as possible.”



"Due to our responsibility before Allah and then before our peoples and the world, we have to stand united to fight the forces of evil and extremism whatever their source, in compliance with the orders of our true Islamic religion. Islam was and will remain the religion of mercy, tolerance and coexistence, which were confirmed by clear examples. During its bright eras, Islam provided the best examples in coexistence and harmony among interreligious and intercultural. But today, we see some who considered themselves as Muslims seek to present a distorted image of our religion where they seek to link this great religion with violence.

We say to our brothers, sisters, sons and daughters of Muslims everywhere that one of the most important purposes of Islamic law is self-preservation and there is no honor in committing crimes. Islam is a religion of peace and tolerance. Islam urged reconstruction of the land and prohibition of destruction and corruption. Islam considered killing an innocent as killing all people. Our way to achieve purposes of our religion and win the paradise is to spread the tolerant values of Islam based on peace, moderation and prevention of destruction and corruption on the ground.

We, as countries and peoples, condemn all forms of harm to relations of the Islamic countries with the friendly countries and classification of peoples and states based on religious or sectarian basis. Such abhorrent acts are only made as a result of attempts to exploit Islam as a cover for political purposes that fuel hatred, extremism, terrorism and religious and sectarian conflicts.

The Iranian regime and its affiliated groups and organizations such as Hezbollah and the Houthis, as well as ISIS (Daesh) and Al-Qaeda and others are clear examples. The Iranian regime spearheads the global terrorism since Khomeini revolution until today. Since 300 years ago, we, in this country, did not witness terrorism or extremism until Khomeini revolution emerged in 1979. Iran has rejected initiatives of good neighborhood provided by our countries based on good faith.

Iran replaced these initiatives with expansionist ambitions, criminal practices, interferences in the internal affairs of other countries, flagrant violations of the international law, and violations of the principles of good-neighborliness, coexistence and mutual respect. ........"

King Salman of Saudi Arabia

Arab Islamic American Summit

May 21, 2017


“This week the House will vote on the Financial CHOICE Act…” wrote AAF’s Meghan Milloy. “It’s landmark legislation that’s been years in the making, first taking on the form of CHOICE 1.0 last year, and finally receiving approval as CHOICE 2.0 this year. Coming in at nearly 600 pages, there is a lot to digest. What’s in this for the average American? The overarching goal of this administration and this congress is to improve economic conditions, and the best way to improve economic conditions is to do so from the ground up."


On June 6, the House will begin debate on The Financial CHOICE Act (H.R. 10), which was passed by the Financial Services Committee on a party-line vote  (34-26).  Speaker Paul Ryan (R-MN) outlined five reasons to support H.R. 10, including (1) it reins in Dodd-Frank.; (2) it delivers relief to Main Street; (3) it ends taxpayer bailouts; (4) it cuts the deficit by $24 billion; and (5) it reins in unchecked Washington bureaucrats. The timing of the final passage of H.R. 10 will depend on the number of amendments offered by lawmakers and the length of the debate. 



“The cascading fiscal crisis in America’s fifth-largest state just got more acute,” according to American Interest Blog. “The situation in Illinois is partly the product of political gridlock that might abate with the right leadership. But it also points to a broader failure of institutional organization that we call the 'blue model.' The combination of defined-benefit pension systems for public employees, powerful public sector unions, and the shady accounting schemes needed to prop them up are pushing states and localities across the country down the path to Puerto Rico.”


"This brief draws upon the lessons learned from that experience to outline a framework for bipartisan consensus in this transformed political environment, wrote Bipartisan Policy Center’s Michael A. Stegman. “The ‘middle-way’ approach described here is not dependent upon any one structure or future role for the …[GSEs], though it does assume the continuation of a government guarantee of qualified …[MBS]."


“[T]he more important part of [housing finance] reform—the part still in need of fresh thinking—is whether and how to produce broader and more sustainable access to credit for first-time home buyers and low- and moderate-income Americans as well as how to increase the supply of affordable rental housing. ...[T]his is a vital part of ensuring that reform creates a system that can meet the needs of an evolving 21st century American economy. ...[I]f Washington is going to engage in a financial restructuring exercise, the focus should be on improving the lives of current and future generations of Americans.” 


“To every Gold Star family who honors us with your presence, you lost sons and daughters, husbands and wives, mothers and fathers,” said President Donald Trump. “They each had their own names, their own stories, their own beautiful dreams. But they were all angels sent to us by God, and they all share one title in common—and that is the title of hero. Real heroes. Though they were here only a brief time before God called them home, their legacy will endure forever.”


“America’s infrastructure needs are overwhelmingly for maintenance, not expansion...” wrote Aaron Renn. “There is a mismatch between funding structures and infrastructure needs that must be fixed. Politics and regulatory barriers are often a greater problem than money, and until we improve this, progress on fixing infrastructure will be limited. Private capital alone will not solve the funding challenge and comes with big problems of its own. There’s no such thing as free money.”



“…[W]e must drive out the terrorists and the extremists from our midst, obliterate this evil ideology, and protect and defend our citizens and people of the world,” said President DonalD Trump. “All civilized nations much be united in this effort. This trip is focused on that goal:  bringing nations together around the goal of defeating the terrorism that threatens the world, and crushing the hateful ideology that drives it so hard and seems to be driving it so fast.”


Trump’s speech “marks our moving to working closely with the Sunnis and not what President Obama had embarked upon, which is essentially a partnership with Iran,” said former CIA Director Woolsey


“Most of us in business think that regulations have been holding back growth,” said JP Morgan Chase’s Jamie Dimon. 


“You need large institutions to support your large companies and your large economies,” said Brian Moynihan, president of Bank of America. “The reason why the U.S. banks are larger is because our economy is 30% to 40% larger than the next biggest… What do you accomplish out of [breaking up banks]? …With [Bank of America’s] $200 billion capital base, $500 billion of liquidity behind it and only have about $30 billon dedicated to trading businesses that people are most concerned about—I’d rather than that structure—especially as a person at the end of the day that has to pay for the cleanup.” 


“The oil industry is more than 150 years old, and oil ‘should’ be getting more expensive to find and to pump, not less,” wrote Walter Russell Mead. “The most obvious oil fields should have been found first, and the most promising wells dug long ago. We should now be living in a world of diminishing returns, with more and more money chasing less and less oil... [leading] so many doom and gloom thinkers in the 20th century to agonize over ideas like ‘peak oil’. All that may happen some day, but apparently not soon.”


“The Lilium Jet belongs in a category of aircraft called VTOL—vertical take-off and landing,” wrote Daily Beast’s Clive Irving. “…Lilium has proved that VTOL flight is no longer uniquely the province of billion dollar military airplane programs like the V-22 Osprey and F-35. This is something you could keep in a garage. …Lilium [claims] …the final five-seat air taxi version of its design will be able to make the trip from Manhattan to JFK Airport in five minutes, initially at a cost per passenger of $36, but eventually falling to a good deal less than that.”


“Big picture, the near term looks good and the longer term looks scary. That is because: (1) the economy is now at or near its best, and we see no major economic risks on the horizon for the next year or two; (2) there are significant long-term problems (e.g., high debt and non-debt obligations, limited abilities by central banks to stimulate, etc.) that are likely to create a squeeze; (3) social and political conflicts are near their worst for the last number of decades; and (4) conflicts get worse when economies worsen.”




“…[I]t is especially irresponsible for the Enterprises not to have such a limited buffer because a loss in any quarter would result in an additional draw of taxpayer support... [T]his could erode investor confidence [,] …stifle liquidity in the [MBS] market and …increase the cost of mortgage credit for borrowers. FHFA has explicit statutory obligations to ensure that each Enterprise …fosters ‘liquid, efficient, competitive, and resilient national housing finance markets.’ To ensure that we meet these obligations, we cannot risk the loss of investor confidence."



“The modern administrative state reflects a profound failure of republican self-governance,” wrote National Affairs’ analysts. “Today’s federal agencies wield immense power and broad discretion, with too little accountability to the people, and too little regard for the rule of law. But this is not a failure of the agencies themselves. Rather, it is the collective failure of our ...legislative, executive, and judicial branches, [which] have chosen to cede such power and discretion to the administrative state; they have eschewed [using] their constitutional powers to direct, channel, and restrain its energy and will.”


“The competitors facing asset and wealth managers, banks, and insurance companies aren’t who we thought they were,” wrote PwC’s John Stadtler. “Emerging technology presents incredible opportunities—for someone else. And change is fast. The customers seem to be changing their minds about what they value most. …This report, our inaugural look at the top issues facing financial institutions in the coming year, is a chance to put it all in perspective.” PwC’s report outlines challenges that banks face in their business environment, economic factors and technology trends.


“France is really the sick man of Europe in many ways. …France is fundamentally a socialist country.”


“Looking forward, housing finance reform requires a holistic approach,” wrote Blackrock analysts. “Most significantly, a sustainable plan needs to consider the roles and structures of Fannie Mae, Freddie Mac, and the Department of Housing and Urban Development (which encompasses FHA and GinnieMae) as well as their regulatory regimes, keeping in mind multiple constituencies. …And, of course, the Federal government has an interest in protecting both the economy and taxpayers.”


“Congress and Treasury officials …should be watching this process [e.g., Puerto Rico’s bankruptcy process] closely,” wrote American Interest’s Walter Russell Mead. “The improvised restructuring and oversight process just set in motion is designed to put Puerto Rico’s government back on track. The federal government may be asked to intervene once again as the fiscal vise tightens around other U.S. states and localities; and it’s crucial that it has a plan for managing the coming wave of fiscal distress.”


“There are talks of a few more dollars going into—what we call the safety net provision—this high risk pool to deal with the whole pre-existing concern,” said Rep. Jordan (R-OH).   


“I haven’t said [that Fannie Mae and Freddie Mac would] be privatized,” said Treasury Secretary Steven Mnuchin. “What I have said is I’m committed to housing reform. We’re committed to not leaving them as-is for the next four years. “We want to make sure that there is ample credit for housing. It’s a very, very important part of the economy, but we also want to make sure we don’t put the taxpayers at risk. And as you know, those two companies only exist because we have a giant line from the Treasury that supports them. We’re committed to having housing reform…”


“When a market becomes overly concentrated, you reduce competition and competition is the life blood of what makes a free economy work.”


“Eight years,” wrote Milken Institute’s Ed DeMarco and Michael Bright. “It has been eight years since the '“temporary' conservatorships of Fannie Mae and Freddie Mac ... began. Eight years since these two enterprises’ bondholders were rescued by a nearly $200 billion taxpayer injection because of their central role in the American housing market. …But here we sit. After eight years. It is time—long past time—for us to move beyond this situation. It is time for the mortgage market to grow up, to learn from the mistakes of the past, and to begin serving the needs of the 21st century American economy…”


“The MBA’s [GSE reform] plan, like many other proposals, fails to address the question: ‘What is the problem we should be seeking to solve’,” wrote Graham Fisher’s Josh Rosner. “Any changes to the system should seek to create a stable, cyclically neutral or countercyclical, system for the provisioning of mortgage credit in economically adverse environments during which banks and market participants are unwilling to make or hold new mortgage loans. …The recognition of the provisioning of societally necessary goods and services is the reason that we charter electric, water, gas and other utilities."


“This going to be the biggest tax cut and the largest tax reform in the history of our country,” said Treasury Secretary Mnuchin.



“The Trump administration has been much more focused on enforcement than had been true previously,” said Commerce Secretary Wilber Ross. “There’s a good reason for that. The U.S. is the least protectionist of the major powers and yet we have the highest [trade] deficit—$500 billion. The other countries that talk about free trade are really very protectionist—Europe, China, Japan. So they have the rhetoric of free trade, but the reality of protectionism. That set of facts is not going to be permitted to continue. Their rhetoric must match their behavior…”


“The obvious favorite of the second round is Emmanuel Macron.”


Is France ready for a coalition government?


“Instead of putting all stock transactions through a centralized hub, the blockchain can be used to directly transfer share ownership between investors,” wrote Visual Capitalist. “…[S]tock exchanges could run using a blockchain under the hood, with no longer any need for a centralized settlement or transfer of share certificates. This is cheaper, faster, reduces risks, and more secure. It also would be fully transparent. Even better, such a platform could also serve as the base for other value adds – and fully transform the way we think about equity markets."


The transportation revolution is going to shake our world.

[Connected and autonomous vehicles] will transform our economy and change the landscape of almost every industry. Although some sectors will be more significantly affected than others, ripple effects will be felt throughout most, if not all industries. As the effects compound, the overall magnitude of the impacts would multiply. ...With the assumption that CAVs will eventually become pervasive, or at least hold a large share of the automotive market, it is nassured that they will have a strong economic impact, potentially as much as $1.2 trillion or more. Professor Kara M. Kockelman University of Texas-Austin January 2017.

Professor Kara M. Kockelman

University of Texas-Austin

January 2017




“Dodd Frank was in some ways a failure of ambition and in other ways a concession to inappropriate pressures…”


“Last year, a strange self-driving car was released onto the quiet roads of Monmouth County, New Jersey,” wrote MIT’s Will Knight. “…The car didn’t follow a single instruction provided by an engineer or programmer. Instead, it relied entirely on an algorithm that had taught itself to drive by watching a human do it. Getting a car to drive this way was an impressive feat. But it’s also a bit unsettling, since it isn’t completely clear how the car makes its decisions. …The system is so complicated that even the engineers who designed it may struggle to isolate the reason for any single action.”


“…[C]apital regulation …is the single most important element of prudential financial regulation,” said former Fed Governor Tarullo.  “The new features of G-SIB surcharges and stress testing help guard against a severe new financial crisis and contain the [TBTF] problem. As proposals for regulatory change swirl about, it is crucial that the strong capital regime be maintained... Neither regulators nor legislators should agree to changes that would effectively weaken that regime...  It would be tragic if the lessons of the financial crisis were forgotten so quickly.”


“Researchers at …Kaspersky …described an unprecedented case of wholesale bank fraud, one that essentially hijacked a bank’s entire internet footprint,” wroteWired’s Andy Greenberg. “At 1 pm on October 22 of last year, the researchers say, hackers changed the Domain Name System registrations of all 36 of the bank’s online properties, commandeering the bank’s desktop and mobile website domains to take users to phishing sites. In practice, that meant the hackers could steal login credentials at sites hosted at the bank’s legitimate web addresses."


“The opportunity now exists for Congress and the president to not just deal with an up or down vote on the question of a Department of Education, but to show creative leadership by calling for a thoughtful dialogue about new approaches to the issues of the future, not simply replaying the battles of the past,” wrote Christopher Cross.  “The federal government must not direct states and communities; however, it should lead the nation with research, data and the funding of innovation, as well as assuring that individual rights are protected.”


"Our job is to call out risk where we see them."


“Machine learning is absolutely the future of underwriting,” said Sandeep Sood, VP of software engineering at Capital One. “But the startups that are doing that today, they take, what I call a fairly shallow data—like social graphs—and make these wild claims that those superficial elements are really the best predictive pieces to figure out if someone should be qualified or not. I would argue, and I think Capital One would argue, that 25 years of solid credit card data is the best way to predict the future.” 




Growing divergence in America

Ever since 2000, basic indicators have offered oddly inconsistent readings on American economic performance and prospects. It is curious and highly uncharacteristic to find such measures so very far out of alignment with one another. We are witnessing an ominous growing divergence between three trends that should ordinarily move in tandem: wealth, output, and employment. Depending upon which of these three indicators you choose, America looks to be heading up, down, or more or less nowhere.


Nicholas Eberstadt

Our Miserable 21st Century

February 15, 2017







“What Waze has done for traffic globally, we have done the same for public safety,” said Nadim Curi, CEO of the anti-crime app CityCop. “What we are doing at CityCop is to make all of this information [about crime incidents] that today is private or is lost, to make it public. The criminals have always taken advantage of this lack of information. They have always the same modus operandi, in the same areas, at the same hours, against the same unaware people. CityCop is making all of this information public for the people to be much better informed of what is happening.”


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: