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More Moral Hazard on the way

By cleg   2011 Nov 16, 7:25pm   5 links   35,815 views   22 comments   watch (0)   quote      

Brought to us courtesy of senators Kay Hagan of North Carolina and one of the banking lobby's most obedient lap dogs, Bob Corker of Tennessee;
The United States Covered Bond Act of 2011 is designed to allow bundling of any kind of debt including derivatives, into marketable securities guaranteed at full face value by the FDIC.

Asset classes eligible to be rolled into Covered Bonds are shown below including "H" which leaves the door open for anything left over, What would qualify would be the decision of one unelected official, the treasury secretary/Goldman Sachs representative.

(A) a residential mortgage asset class;
(B) a commercial mortgage asset class;
(C) a public sector asset class;
(D) an auto asset class;
(E) a student loan asset class;
(F) a credit or charge card asset class;
(G) a small business asset class; and
(H) any other eligible asset class designated by the Secretary, by rule
and in consultation with the covered bond regulators

The full text of the bill is here.
http://www.hagan.senate.gov/files/111109_CoveredBond_BillText.pdf

Thanks Bob Corker for working to build this new FDIC insured landfill where our TBTF banks can dump all of their unwanted financial refuse and collect 100 cents on the dollar on their way out.

Please write your congressman to stop this before it is too late.

#housing

Comments 1-22 of 22     Last »

1   FortWayne   2011 Nov 17, 12:01am     ↑ like   ↓ dislike   quote    

Thanks for the warning cleg.

2   david1   2011 Nov 17, 12:17am     ↑ like   ↓ dislike (1)   quote    

100% proof positive that the neither Congress(wo)man, nor anyone on their paid staffs actually writes the legislation.

Kay Hagan and Bob Corker cannot possibly believe this will help the majority of their constituents, even if they understood the bill. Which I doubt.

3   corntrollio   2011 Nov 17, 3:14am     ↑ like   ↓ dislike   quote    

Thanks for the heads up, but I need to do more research into what this is. My impression is that Europe already has covered bonds, and I'm not sure exactly what all the implications are. I do know that the FDIC is against this proposal.

4   justme   2011 Nov 20, 3:26am     ↑ like (1)   ↓ dislike (1)   quote    

http://en.wikipedia.org/wiki/Covered_bond

"For the investor, one major advantage to a covered bond is that the debt and the underlying asset pool remain on the issuer's financials, and issuers must ensure that the pool consistently backs the covered bond. In the event of default, the investor has recourse to both the pool and the issuer."

I'm not so sure that FDIC is becoming explicitly responsible for the bonds. Someone would have to analyze the bill or provide a link to a full analysis.

Anyone?

5   justme   2011 Nov 20, 3:29am     ↑ like   ↓ dislike (1)   quote    

Here's a bit more of an analysis:

http://tyillc.blogspot.com/2011/06/us-covered-bond-act-of-2011-wall.html

QUOTE:

So the pre-credit crisis securitization market could be repackaged as covered bonds.

Issuers of covered bonds are on the hook against losses.

In theory, this statement is true. But what happens if the issuer goes bankrupt? Remember, the issuer is a bank. Are investors in covered bonds still protected against losses on the underlying collateral? The Act says yes. As a result, the taxpayer is on the hook when the FDIC steps in to take over the issuer.

END QUOTE

6   justme   2011 Nov 20, 3:30am     ↑ like   ↓ dislike   quote    

More quotes:

"The covered bond legislation now pending before the Garrett subcommittee in the House is all about Wall Street and does nothing to increase the availability of housing credit," said market analyst Christopher Whalen with Institutional Risk Analytics.

"The bill lacks basic protections for investors in bonds and for the FDIC, which would be fully exposed to losses from covered bonds under the Garrett proposal," he said.

"Most banks today have more funding than can be employed. (Covered bonds) do not add any new, non-bank funding leverage to the system, which is the key objective if we are to avoid a catastrophe in housing."

7   Vicente   2011 Nov 20, 6:42am     ↑ like (1)   ↓ dislike (2)   quote    

None of the "saving the lil guys" actions have ever been about anything except SAVING BALANCE SHEETS of insolvent banks. Nothing new here.

8   Riemann Sum   2011 Nov 24, 12:39am     ↑ like (1)   ↓ dislike   quote    

Thanks for the mention of an underrated louche--my own senator, the Hon. Bob Corker. I have sent him several snarky messages, most recently about a banking bill that has a federalized "MERS 2" as its centerpiece. Now this. My last message asked him to please provide the names of the banking lobbyists that he gets to write this shite. We'll see if I receive any honest info. Not going to lose sleep over it.

9   Dr DIAS   2011 Nov 25, 7:33am     ↑ like (1)   ↓ dislike   quote    

What happened to the Buzz word "TARP"???

10   rickyd01   2011 Nov 25, 11:09pm     ↑ like (1)   ↓ dislike (2)   quote    

Is their anything that we can actually do to make our elected officials understand that we are tired of being robbed by corporate America and the federal reserve. When they print our money the scam starts and continues to fleece their accounts with taxpayer dollars, as we slip away into financial doom.

11   Bristoll   2011 Nov 27, 12:57am     ↑ like (1)   ↓ dislike   quote    

Sen. Hagan has the major banks parked firmly in her backyard (Charlotte, NC). You can BET that they had as much or more to do with the authoring of this bill than Sen. Hagan herself.

She's a schill, nothing more.

12   windy   2011 Dec 3, 2:04am     ↑ like (1)   ↓ dislike (1)   quote    

"Comment Policy: Be Nice Or Take It Outside''

How do you 'be nice' while in the process of being raped by the corporate/globalist government?

13   MountainHome   2011 Dec 3, 5:01am     ↑ like (1)   ↓ dislike   quote    

Full face value? It must be nice to have such big backers if things so south. Great article!

14   Howard T Lewis III   2011 Dec 3, 2:22pm     ↑ like (1)   ↓ dislike   quote    

I have found a big pile of horse manure down the street with a market value of $760,000,000 dollars. I also have the paper work that guarantees this to be a realistic appraisal of this fine rejuvenator of the flora kingdom, and frequently utilized inspiration in today's creative markets. Would the FDIC insure this if I put it in to neat paper wrapped bundles and deposited it in Paulson's front yard?

15   PAUL LEO FASO   2011 Dec 4, 1:48am     ↑ like (1)   ↓ dislike   quote    

The stage is set for the final showdown of this preposterous, odious, illegal debt.

GOOGLE: CLASS ACTION LAWSUIT AGAINST THE FEDERAL RESERVE BANK

Or go to the link below for the only solution to this organized theft by deception.

STOP FINANCIAL SODOMY - IT KILLS EVERYTHING!

http://www.zerohedge.com/print/365866

16   Mr fancy pants   2011 Dec 5, 1:45am     ↑ like (1)   ↓ dislike   quote    

So...students can't file for bankruptcy on student loans, but the FDIC is insuring their payment?

Great. Banks are too big to fail, but our economy and freedoms are not.

17   TMAC54   2011 Dec 5, 9:56pm     ↑ like   ↓ dislike (1)   quote    

shrekgrinch says

The ONLY way this will stop is only after it all goes to hell.

NO candidate can run on a platform of truth (economic slowdown). Gubmint (FED) agents would commit rapid suicide admitting the truth.
I suggest Patrick.net starts a pool for predicting the NOVA. (when do they run out of promises ?)

I will shoot for 3/13/2013

18   TwoScoopsMcGee   2011 Dec 6, 1:02am     ↑ like   ↓ dislike (1)   quote    

Shrek, I agree with you!

Group A (people who own things for a living) make money lending money to the government and often pay little in taxes relative to what they get out of it: Government contracts, subsidies, military defense of their overseas holdings, ability to regulate the money supply to the benefit of lenders most of the time, leasing public land for token amounts, minimal royalties on resource extraction, price supports, etc. Even food stamps and section 8 makes them money.

Group B (people who work for a living) pay taxes not only on their own services, but to support the interest payments to Group A.

This is why there is no serious program aimed to alleviate the cause of debt by helping the borrowers, just programs to help the lenders. Compare the terms for HAMP and TARP! Not just for US citizens but also for foreign borrowers as well. The best they can hope for, as you alluded to, is stretching out the payment terms to add more time.

It may also be a major cause of why the bottom 80% has stagnated (and for some declined) while the top 20%, and in particular the top 1%, has seen their income explode, even though the economy grew substantially in general over the past few decades. The explosion of debt, public and private, and those who get the interest are generally not the 99%.

19   Honest Abe   2011 Dec 23, 2:59am     ↑ like   ↓ dislike (1)   quote    

Income disparity is caused by big government and punitive, over-regulated liberalism. Too hard for lefty's to connect the dots, because they are the principal, though not the only, cause of the problem...RINO's also contributed.

Todays book recommendation for our socialist leaning liberal friends, A Bull in China, by Jim Rogers.

20   tatupu70   2011 Dec 26, 7:02am     ↑ like (1)   ↓ dislike   quote    

Honest Abe says

Income disparity is caused by big government and punitive, over-regulated liberalism. Too hard for lefty's to connect the dots, because they are the principal, though not the only, cause of the problem...RINO's also contributed.

Funny how income disparity rises under deregulatory environments. 1920s, Reagan, etc.

History pretty much always disagrees with your "facts". Does that ever bother you?

21   bob2356   2011 Dec 27, 8:49am     ↑ like (1)   ↓ dislike   quote    

tatupu70 says

Honest Abe says

Income disparity is caused by big government and punitive, over-regulated liberalism. Too hard for lefty's to connect the dots, because they are the principal, though not the only, cause of the problem...RINO's also contributed.

Funny how income disparity rises under deregulatory environments. 1920s, Reagan, etc.

History pretty much always disagrees with your "facts". Does that ever bother you?

It hasn't bothered him at all so far.

22   Mick Russom   2012 Oct 24, 7:27pm     ↑ like   ↓ dislike   quote    

The main issue here is how can a debt be an "asset"

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