The change to two accounting rules known as FAS 140 and FIN 46R would affect trillions of dollars in off-balance-sheet assets at banks and financial companies. The FASB voted last year to eliminate a concept known as the "qualifying special-purpose entity," or QSPE, that banks used to keep assets like mortgage-backed securities and special investment vehicles off their books. [1] Doomers who’ve been with us for a while will recall that FAS 140 has been my principle blogging concern since my first day with Doom. That great wave of balance sheet consolidation you are now seeing on the horizon is…
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At the end of the movie The Wizard Of Oz, the Tin Man asked, What diid you learn, Dorothy? That’s a good question to ask about any situation- what were the lessons learned? We are still sorting out the answer to that when discussing the housing crisis, but Alice Rivlin, senior fellow at Brookings and former vice chair of the Federal Reserve has some pretty decent answers: The American dream of home ownership for average families is lying in a heap of toxic assets, but it can emerge stronger than ever if we learn the right lessons from the sad…
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Assessing that risk means answering two basic questions. Is China buying fewer foreign assets? And is it diversifying away from the dollar? Few have delved deeper into the murky world of China’s capital flows than Brad Setser of the Council on Foreign Relations in New York, and his analysis suggests a more complex picture than official statistics portray. [1] Yesterday The Economist confirmed what many Doomers already knew.[1] The CFR’s Brad Setser is the go-to guy for analysis on China and their relationship with American financial obligations. Indeed, Wednesday’s post [2] at his "Follow the Money" blog is yet another…
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Housing Doom is pleased to present the first installment of our unauthorized annotated transcript of the American Enterprise Institute’s March 17, 2009 seminar "The Deflating Bubble, Part V: Forecast and Policy Recommendations for the Next Six Months." [5] This is the introduction by session moderator Alex Pollock. The event site has several resources, including both an audio and a video recording of the 2 hour proceedings. There is a brief summary, but as yet no official transcript. Highlights   "The red line on there is a simple extrapolation of the trend from the beginning of series through 2000. And in…
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I’m more than usually over my head this week, what with the WSJ reporting that general foreign investor demand for treasuries had strongly rebounded in February,[1] but that yesterday T-bills sold off strongly.[2] What’s really bizarre was that last week’s foreign Treasury Debt buy was nearly the largest Doom has ever seen. Obviously that didn’t impress Mr. Market. UPDATE: Brad over at CFR has now posted a long must-read analysis [7] on the issue. Treasuries are the only US asset foreign investors still want, despite their low yields. Over the past 12 months, the US — rather amazingly — could…
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Here is Housing Doom’s sixth installment of our unauthorized annotated transcript of the American Enterprise Institute’s October 30, 2008 seminar "The Deflating Mortgage and Housing Bubble, Part IV: Where Is the Bottom?" [1] This is the presentation by John Makin. He does not make use of a slide deck. Here is the official transcript. There is a video and an audio-only recording of the event at the event site. Highlights   "The supply of liquidity in the US is not growing because the multiplier is falling so fast, even though the Fed is injecting tons of money." "So in an…
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Bill Gross, the co-chief investment officer at Pimco who has persistently said Treasurys are overvalued, increased the holdings of U.S. government debt in the Pimco Total Return Fund to 28% of market value last month from 15% in February, according to the company’s Web site. In January, the weighted market value of Treasurys in the fund was negative 2%. Still, it is too early to judge whether the shift constitutes a new trend. … … In contrast, Gross cut holdings of mortgage-backed securities last month to 65% of market value, after lifting it to 86% in February, the highest since…
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Apparently, interest in the Treasury’s Public Private Investment Program (PPIP) has been lower than the Treasury anticipated.  They have now decided to relax their guidelines: WASHINGTON – As part of an ongoing effort to refine the guidelines and enhance the effectiveness of the Financial Stability Plan programs, the Treasury Department today released additional guidance for potential investors in the securities portion of the Public Private Investment Program (PPIP). The new guidance extends the deadline for application to the program and clarifies that participation criteria will be viewed holistically — failure to meet any one criterion will not necessarily disqualify a…
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Hat tip to Freedom’s Phoenix for this one:

… there is plenty of pricing information on triple-A private RMBS and CMBS. They may not trade where banks holding lots of this paper at a loss wish they traded, but they do trade. Let’s get something clear, too — they NEVER traded with the kind of depth or frequency that Treasury, agency debt or Ginnie, Fannie and Freddie MBS do. Each bond is unique enough that it has to be manually evaluated — anything from a simple cash flow calculator that uses market conventions for prepayments and defaults – or elaborate option pricing models that take into account hundreds…
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If Americans want to get ahead, they are going to have to work harder.  Apparently we worked all of 2008 just to pay for the bailouts: [Hat tip Freedom's Phoenix!] March 31 (Bloomberg) — The U.S. government and the Federal Reserve have spent, lent or guaranteed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s. New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and…
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Put all of the authority in one institution, under one person–the Fed Chairman–and let the Federal Reserve sort out the regulatory pieces over banks, thrifts, insurance companies. investment banks, holding companies, hedge funds. The Fed can have “managing directors” and oversight units for those each industries all reporting to the Board of Governors or a Board governor for each of them, with his/her own jurisdiction. But, all financial services actions get coordinated by that Board. Egad! he’s serious … . . (Disclaimer: After working on the Hill for 11 years, I joined the Carter Administration, in 1980, as Director of…
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The comments by People’s Bank of China Gov. Zhou Xiaochuan are setting a framework for talks on how to resolve the huge trade imbalances between China and the U.S., analysts said. [1] That same MarketWatch report asserted that China’s and Japan’s central banks would be maintaining their Treasury Debt holdings.[1] Setser has a long analysis [2] and HuffyPo is seeing an "Anti-Dollar Contagion" [3] taking shape. There’s intense interest in this issue as the G20 approaches. Later, after Treasury Secretary Tim Geithner’s famous visit to the CFR, Brad (who’s based there) posted a fresh assessment of the situation where he…
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When the media need some good news, all it takes is one data point: March 24 (Bloomberg) — U.S. home prices fell 6.3 percent in January from a year earlier, the smallest decline in five months, as lower mortgage rates began to spur demand. The decline was led by a 21 percent drop in the region that includes California, the biggest U.S. state, the Federal Housing Finance Agency in Washington said today. The monthly house price index is down 9.6 percent from its peak in April 2007. The pace of home-price declines is slowing as cheaper financing lured buyers and…
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A significantly different market landscape greets investors this week, courtesy of the U.S. Federal Reserve’s decision to buy up U.S. Treasury securities. [1] Late last week US fiscal discipline completely broke down, and now the world has woken up to the idea that it doesn’t have a proper reserve currency anymore. So now what? UPDATE: So the first thing that happens is the misquoting of a mid-level Chinese official [3] who made a routine assurance that China is planning to hold onto treasuries as a commitment to buy more of the paper.  You need to read deep into the text…
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