DFA Federal Deposit Insurance Reform - PaperStephanie Bohn
Dr. Scott Hein, Professor of Finance and faculty director of the Texas Tech School of Banking, presented his research at the fourth annual Federal Reserve System/ Conference of State Bank Supervisors Community Banking in the 21st Century Research and Policy Conference at the Federal Reserve Bank of St. Louis.
Mortgage Lowest Rate is one of the best mortgage services provider in Canada. We give home purchase, refinance, home equity, renewal, mortgage life insurance and other services. For more information visit our site today.
A Primer on the Amendments introduced in the U.S. House to undermine the creation of a much-needed Consumer Financial Protection Agency, in the Wall Street Reform and Consumer Protection Act.
U.S. Lending Industry Meets Mortgage Process as a ServiceCognizant
In a challenging and changing market, mortgage process as a service, orMPaaS, can provide banks with the talent and systems to handle essen¬tial lending services, enabling them to focus on rebuilding their business through product innovation to capture market share.
An International Insolvency Law for Sovereign Debt? Learnings from the Euro ...Luca Amorello
Presentation of my new paper:
'An International Insolvency Law for Sovereign Debt?'
Seminar on “Sovereign Debt Restructuring and the Rights of Private Creditors”.
July 14, 2014,
House of Finance - Frankfurt.
DFA Federal Deposit Insurance Reform - PaperStephanie Bohn
Dr. Scott Hein, Professor of Finance and faculty director of the Texas Tech School of Banking, presented his research at the fourth annual Federal Reserve System/ Conference of State Bank Supervisors Community Banking in the 21st Century Research and Policy Conference at the Federal Reserve Bank of St. Louis.
Mortgage Lowest Rate is one of the best mortgage services provider in Canada. We give home purchase, refinance, home equity, renewal, mortgage life insurance and other services. For more information visit our site today.
A Primer on the Amendments introduced in the U.S. House to undermine the creation of a much-needed Consumer Financial Protection Agency, in the Wall Street Reform and Consumer Protection Act.
U.S. Lending Industry Meets Mortgage Process as a ServiceCognizant
In a challenging and changing market, mortgage process as a service, orMPaaS, can provide banks with the talent and systems to handle essen¬tial lending services, enabling them to focus on rebuilding their business through product innovation to capture market share.
An International Insolvency Law for Sovereign Debt? Learnings from the Euro ...Luca Amorello
Presentation of my new paper:
'An International Insolvency Law for Sovereign Debt?'
Seminar on “Sovereign Debt Restructuring and the Rights of Private Creditors”.
July 14, 2014,
House of Finance - Frankfurt.
Fed's 2020 Quantitative Easing Debunked along with the controversial US$ 2.2 trillion relief bill, viewed as pork-barrel funding
CARES Act allows the Fed to:
1. meet in secrets with Wall Street incumbents,
2. provide liquidity of $484b (slush fund) thru SPVs making loans & loans guarantees,
3. never be audited (zero oversight),
4. not compliant to US Code requirements, Section 552b of Title 5
How are Fannie Mae and Freddie Mac’s risk-sharing transactions working? This presentation highlights three measures—fair value, risk exposure, and net premiums—used to analyze those transactions.
Presentation by Mitchell Remy, an analyst in CBO’s Financial Analysis Division, at the Credit Risk Transfer Symposium.
This presentation discusses the importance of front-end regulations when issuing debt, and the importance of conducting an adequate due diligence before investing in sovereign debt. Ignoring the details of applicable law to a bond issuance are not “back-end changes” when an issuer implements measures authorized by applicable law.
Consumers' financial rights are protected by federal and state laws and regulations covering many services offered by financial institutions.
*All product and company names mentioned herein are for identification and educational purposes only and are the property of, and may be trademarks of, their respective owners.
Learn how to increase the effectiveness of your security operations as you move to the cloud. We will discuss how your current incident response, forensic investigations, monitoring, and audit response tactics have to change in the cloud. Pulling from experiences helping clients move to the cloud, industry research, and the school of hard knocks, this talk will help provide practical advice you can apply today.
Fed's 2020 Quantitative Easing Debunked along with the controversial US$ 2.2 trillion relief bill, viewed as pork-barrel funding
CARES Act allows the Fed to:
1. meet in secrets with Wall Street incumbents,
2. provide liquidity of $484b (slush fund) thru SPVs making loans & loans guarantees,
3. never be audited (zero oversight),
4. not compliant to US Code requirements, Section 552b of Title 5
How are Fannie Mae and Freddie Mac’s risk-sharing transactions working? This presentation highlights three measures—fair value, risk exposure, and net premiums—used to analyze those transactions.
Presentation by Mitchell Remy, an analyst in CBO’s Financial Analysis Division, at the Credit Risk Transfer Symposium.
This presentation discusses the importance of front-end regulations when issuing debt, and the importance of conducting an adequate due diligence before investing in sovereign debt. Ignoring the details of applicable law to a bond issuance are not “back-end changes” when an issuer implements measures authorized by applicable law.
Consumers' financial rights are protected by federal and state laws and regulations covering many services offered by financial institutions.
*All product and company names mentioned herein are for identification and educational purposes only and are the property of, and may be trademarks of, their respective owners.
Learn how to increase the effectiveness of your security operations as you move to the cloud. We will discuss how your current incident response, forensic investigations, monitoring, and audit response tactics have to change in the cloud. Pulling from experiences helping clients move to the cloud, industry research, and the school of hard knocks, this talk will help provide practical advice you can apply today.
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odd-Frank and Basel III Post-Financial Crisis Developments and New Expectations in Regulatory Capital. Following the recent global financial crisis of 2009, financial regulators have responded with arrays of proposals to revise existing risk frameworks for financial institutions with the objective to further strengthen and improve upon bank models. In this meeting, Dr. Michael Jacobs will discuss new developments and expectations in regulatory capital with particular reference to the definition of the capital base, counterparty credit risk, procyclicality of capital, liquidity risk management, and sound compensation practices. He will also explain the implications of the Frank-Dodd rule for financial institutions and will conclude by presenting the implementation schedule for Basel III.
Moderninizing bank supervision and regulationcatelong
This is the testimony of Chris Whalen to the Senate Banking Committee on March 24, 2009 about bank and financial institution regulation and supervision.
In a speech following the September 11, 2001, terrorist attacks and in the midst of the accompanying U.S. recession, Federal Reserve Chairman Alan Greenspan made a declaration that turned the world of the investment bankers upside down. Greenspan declared that the FOMC (Federal Open Markets Committee) stood prepared to maintain a highly accommodative policy stance for as long as needed to promote satisfactory economic performance. Translated from central banker speak, what Greenspan meant is that he is willing to inflate the money supply and hence lower interest rates for as long as necessary to “revive” the economy and repair it from the shock it received on that fateful day. What this meant for investors in the U.S. Treasury bond market is that they were not going to make any money on U.S. treasury securities for a very long time. Smart investors, diverted from the bond market, scanned Wall Street for a similar low-risk, high-return investment that could take the place of U.S. Treasury securities, and they fell in love with residential mortgages. On September 18, 2008, after months of economic anxiety and several massive bailouts of distressed firms by the government, the stock market had its largest single-day drop since September 11, 2001. Officials and commentators declared an economic emergency and moved on two fronts. The Department of the Treasury and Federal Reserve Board ("Fed") dusted off a 1932 statute and invoked the Fed's authority to stabilize failing firms by lending them money, although some were allowed to fail.
1. Johnson–Crapo Housing Finance Reform Misguided
Senators Tim Johnson (D?SD) and Mike Crapo (R?ID) have released a new housing finance reform
bill, and as expected, it is very similar to the bill that Senators Bob Corker (R?TN) and Mark Warner
(D?VA) released last June.
Both Senate proposals would wind down the government-sponsored enterprises (GSEs) Fannie Mae
and Freddie Mac, but both would also replace the GSEs with a new government agency. Both bills
magnify the problems that contributed to the 2008 financial crisis, but the Johnson?Crapo bill goes
even further than the Corker?Warner approach.
The Federal Mortgage Insurance Corporation (FMIC)
The centerpiece of the Johnson?Crapo legislation is the Federal Mortgage Insurance Corporation
(FMIC), a new government entity that serves several purposes. First, the FMIC acts as a new federal
regulator of the mortgage industry, designed to monitor the safety and soundness of various
financial institutions. The current regulator of the GSEs, the Federal Housing Finance Agency,
would become an independent agency within the FMIC.
Another key FMIC function is to administer a special fund to cover losses on mortgage-backed
securities (MBS). Essentially, the FMIC is designed to take over the insurance function that the
current GSEs provide on MBS. The FMIC would provide an explicit taxpayer guarantee of 90 percent
of losses on these securities, whereas Fannie and Freddie provided an implicit federal backing of
losses. Proponents of this new approach argue that it improves the old system because the FMIC
requires private capital to share in the losses.
2. In particular, Johnson?Crapo requires a 10 percent first-loss provision. The idea is that the FMIC
picks up the tab only after losses exceed the amount put up by private investors, thus providing a
?risk-sharing mechanism.?
There are at least two problems with this logic. First, this mechanism allows private investors to
price their own risk knowing that their losses are capped, thus leading to more risk taking. Second,
Section 305 of Johnson?Crapo allows the FMIC to waive the risk-sharing provision in the event of a
financial crisis (up to three times in any three-year period).
In other words, 90 percent of private investors? losses will be covered unless there is a national
crisis, in which case they would lose nothing.[1] As the 2008 crisis made clear, these are the kinds of
government guarantees that lead to more leverage in the economy, thus magnifying underlying
economic risks.
Advocates of this approach claim that such risk sharing does not amount to a taxpayer-funded
bailout because the FMIC provides loss coverage through a federal mortgage insurance fund, which
in turn is funded by user fees that MBS investors would pay. The reality, though, is that these types
of government funds merely amount to obligations that, in the event of a crisis, would simply be paid
from tax revenue. In fact, Section 303(d)(9) states:
The full faith and credit of the United States is pledged to the payment of all amounts from the
Mortgage Insurance Fund which may be required to be paid under any insurance provided under
3. this title.
This provision is more than a minor footnote to the first-loss provision and the supposed taxpayer
protections in the Johnson?Crapo bill. The bill makes it clear to all investors that taxpayers will be on
the hook for losses in a crisis, just as they were under the old GSE system. But now there is an
explicit statement and a known maximum loss.
The FMIC and Affordable Housing Goals
The Johnson?Crapo bill claims to end the affordable housing goals of the old GSE system, and
technically it does.[2] However, it replaces these goals with a more nebulous mandate. Section 210
gives the FMIC the explicit purpose of ensuring ?equitable access to lenders and borrowers.? This
section of the bill even requires the FMIC to define segments of the ?primary mortgage market in
which lenders and eligible borrowers have been determined to lack equitable access to the housing
finance system.?[3] The bill then provides an example of the ?traditionally? underserved markets
that the FMIC may define, a list that closely follows the groups included in the GSEs? housing goals.
In addition to this general expansion of the idea behind the affordable housing goals, the
Johnson?Crapo bill makes several specific changes ostensibly related to low-income housing. The bill
expands both the base and the rate for the national Housing Trust Fund and the Capital Magnet
Fund.[4] While current law would apply a 4.2 basis point fee to the GSEs? new purchases of
mortgages, the Senate bills increase the fee to 10 basis points and apply that rate to the outstanding
principal of mortgages eligible for FMIC purchase.
4. In other words, money would be supplied to both of these housing funds at a higher rate than under
current law, and the annual amount would be sure to grow because each year?s purchases raise the
outstanding principal. Aside from these specific increases, Title V of Johnson?Crapo also gives the
FMIC the flexibility to adjust the fees it charges individual participants in the secondary market
based (partly) on their record in underserved markets.
Section 504 also creates the new Market Access Fund with the explicit purpose of providing grants
?to address the homeownership and rental housing needs of extremely low-, very low-, low-, and
moderate-income and underserved or hard-to-serve populations.? Collectively, these funds would
result in even more money being doled out as block grants to so-called affordable housing groups for
programs that are difficult to monitor and nearly impossible to evaluate. Compounding this problem
is the fact that the FMIC would serve both as the overseer of this affordable housing mission and as
the industry?s safety and soundness regulator?a feature of the old system that failed miserably.
What Congress Should Do
Congress should:
Reject the approaches being offered in the Senate bills. Both of these policies provide explicit
taxpayer guarantees that are not necessary.
Adopt a policy that gets the federal government out of the U.S. housing finance market. One good
example of such a plan is in House Financial Services Committee Chairman Jeb Hensarling?s (R?TX)
Protecting American Taxpayers and Homeowners (PATH) Act.
Prevent a Government Takeover
The Johnson?Crapo bill, like the Corker?Warner proposal, contains policy that is misguided for
numerous reasons. Johnson?Crapo creates a new government entity with an ill-defined affordable
housing mandate and the explicit authority to protect MBS investors in the event of a financial crisis.
If the Senate?s approach is adopted, banks will be the only segment of the market left without an
explicit guarantee against mortgage losses.
The Senate bills would not help people buy homes; they would only protect investors and special
interests at taxpayers? expense.
?Norbert J. Michel, PhD, is a Research Fellow in Financial Regulations in the Thomas A. Roe
Institute for Economic Policy Studies and John L. Ligon is Senior Policy Analyst in the Center for
Data Analysis at The Heritage Foundation.
[1] It could be argued that certain companies in the system envisioned under Johnson?Crapo would
not receive full protection, but exactly how such a scenario would work is unclear.
[2] Press release, ?Johnson, Crapo Announce Agreement on Housing Finance Reform,? Committee
on Banking, Housing, and Urban Affairs, U.S. Senate, March 11, 2014,
5. http://www.banking.senate.gov/public/index.cfm?FuseAction=Newsroom.PressReleases&ContentRec
ord_id=ef6c85f2-9ba5-ccf0-6a01-1d83fcf2f502 (accessed March 23, 2014.)
[3] The FMIC can define up to eight such segments in the primary market (i.e., the market where
individuals borrow money to purchase a home as opposed to the secondary market, where those
mortgages are sold as part of MBS).
[4] Corker?Warner also proposes to expand these funds. See Norbert Michel and John Ligon, ?GSE
Reform: Trust Funds or Slush Funds?? Heritage Foundation Issue Brief No. 4080, November 7,
2013,
http://www.heritage.org/research/reports/2013/11/gse-reform-affordable-housing-trust-funds-or-slus
h-funds. ?
http://www.heritage.org/research/reports/2014/03/johnsoncrapo-housing-finance-reform-misguided