IEHI Feed: The Bank Implode-o-Meter http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-64321 Tue, 23 Oct 2018 22:00:33 GMT GOP Tax Cut Deficits: A Good Thing For the Economy? (NOT SO FAST!) http://bankimplode.com/viewnews/2018-10-23_GOPTaxCutDeficitsAGoodThingFortheEconomyNOTSOFAST.html You often hear people complain that deficits are "evidence of overspending." It's taken as de facto proof that the government is behaving "irresponsibly" or "living beyond its means." But economists know (or should know) better. It is inflation (not deficits) that signals overspending. And what does CBO have to say about that? The answer is shown here.

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So let's remember that a deficit is merely evidence that the government is putting more money into the economy than it is removing via taxation. Thus, looming trillion-dollar deficits are a prediction that the government will be making trillion-dollar deposits to the broader economy beginning in 2020. Is that something to be up in arms over?

Woah, woah, woah -- hold on there! Yes, it's certainly true that inflation isn't manifesting right now, and perhaps won't, for the foreseeable future. But the second paragraph, stating that the deficits are like "depositing money into the economy", is just gobbledeygook! The government isn't taking this deficit money out of a "savings account" and just plopping the lucre into the economy -- the increased deficit is coming from more borrowing. This should be a cosmic "duh", but this eek-con-o-missed writer doesn't see it. At a minimum, this means that as much cash is being hoovered up by the government as is being "added" to the economy, so the additional deficits are, at best, a zero-sum.

Now, you might reply, "ok, more deficits, who cares? After all, the smart eek-con-o-missed says inflation is the only concern, and there's none of that happening." Well, larger deficits should be at least as much a concern as whether inflation is manifesting, for at least two reasons: (1) as a result of these additional deficits, it is all the more likely that there might, someday soon, need to be higher taxes to pay these creditors back, and/or (probably more likely), a debt default, and (2) many of these creditors are foreign, and they might as a result be able to exert increasing leverage over our country (leading to, e.g., exacerbation of nationalist "blowback", among other ills. Of course, such a thing could never happen...)

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iehi-feed-64318 Tue, 23 Oct 2018 13:19:52 GMT Wells Fargo to pay $65 million for allegedly lying to investors about fake accounts http://bankimplode.com/viewnews/2018-10-23_WellsFargotopay65millionforallegedlylyingtoinvestorsaboutfakeacc.html iehi-feed-64315 Sun, 21 Oct 2018 20:04:18 GMT Wall Street Loves These Risky Loans. The Rest of Us Should Be Wary. http://bankimplode.com/viewnews/2018-10-21_WallStreetLovesTheseRiskyLoansTheRestofUsShouldBeWary.html A financial assembly line that went haywire a decade ago and contributed to an economic crisis is gearing up again on Wall Street.

Back then, one of the products the banks churned out -- bondlike investments based on thousands of mortgages -- proved far riskier than most banks, investors and regulators had expected when many borrowers couldn't pay. The banking system froze, a financial panic ensued, and the country experienced its worst recession in decades.

This time around, a similar kind of investment, called C.L.O.s, are at the heart of the boom. And that's not the only parallel: The loans are being made to risky borrowers, lending standards are dropping fast, and regulators are easing the rules... this time, the underlying loans aren't going to high-risk homeowners. They're going to high-risk companies.

... demand for C.L.O.s has been so strong that investors aren't placing as many requirements on the loans being made to these risky borrowers... Nowadays, the vast majority of leveraged loans [are] so-called covenant lite loans [which] now account for roughly 80 percent of the new leveraged loans on the market.

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And when loans are repackaged and sold, most of the money effectively comes from the investors, not the banks. And there's a tendency to be less careful when lending other people's money. This incentive problem was at the heart of the lending that led to the last financial crisis.

To fix that problem, the Dodd-Frank financial regulation law required the loan packagers to retain some of the risks of the investments they created.

But those rules have been weakened this year. A court decision exempted some of the firms that create C.L.O.s from a requirement that they hold at least 5 percent of the credit risk in such investments. The Federal Reserve and the Securities and Exchange Commission declined to appeal the decision.

... while people in the C.L.O. business point out that these assets fared pretty well during the last recession, nobody knows how the investments will perform when the next downturn comes.

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iehi-feed-64311 Fri, 19 Oct 2018 19:13:53 GMT New York's luxury real-estate market is crashing http://bankimplode.com/viewnews/2018-10-19_NewYorksluxuryrealestatemarketiscrashing.html iehi-feed-64310 Fri, 19 Oct 2018 19:12:24 GMT No down-payment, no problem: BoA underwriting $10B in subprime mortgages with NACA http://bankimplode.com/viewnews/2018-10-19_NodownpaymentnoproblemBoAunderwriting10BinsubprimemortgageswithN.html Bank of America is giving out $10 billion in mortgage commitments to borrowers with non-traditional backgrounds at a series of events across the country. The fixed-rate loans for 15- or 30-year terms carry an interest rate of about 4.5 percent and approved borrowers put no money down.

The bank is partnered with Boston-based brokerage Neighborhood Assistance Corporation of America (NACA) for the events, which have drawn a crowd of about 10,000 across cities like Charlotte and Atlanta, according to CNBC.

The nonprofit uses "character-based lending criteria" to assess hopeful borrowers' ability to pay for a mortgage despite poor credit history. According to NACA's CEO Bruce Marks, "that's what's going to help people who've been locked out of homeownership to really become homeowners and to build wealth."

The problem with no-money-down deals is, no matter how well you screen, in the event of a bad downturn, even good credits can lose their jobs. At that point, they have no equity margin of safety to go on, so foreclosure, and note-holder losses, are much more likely.

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iehi-feed-64309 Fri, 19 Oct 2018 15:01:29 GMT Mark Stopa's Former Firm Creates Mess For Thousands Of Foreclosure Clients http://bankimplode.com/viewnews/2018-10-19_MarkStopasFormerFirmCreatesMessForThousandsOfForeclosureClients.html iehi-feed-64308 Thu, 18 Oct 2018 23:37:16 GMT Bitcoin - Hold On - The Ride's Just Starting! (Elliot Wave Analysis) http://bankimplode.com/viewnews/2018-10-18_BitcoinHoldOnTheRidesJustStartingElliotWaveAnalysis.html iehi-feed-64304 Thu, 18 Oct 2018 19:46:31 GMT Fed points to more rate hikes amid criticism from Trump http://bankimplode.com/viewnews/2018-10-18_FedpointstomoreratehikesamidcriticismfromTrump.html Federal Reserve officials remain convinced that continuing to gradually increase interest rates is the best formula to preserve a steady economy, according to minutes released Wednesday of the central bank's most recent policy meeting. That may not please President Donald Trump, who has been vocal in his criticism of the central bank's actions.

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Another development from the last meeting saw the committee remove the word "accommodative" from its description of the future policy path. In a post-meeting news conference, Powell told reporters not to read too much into the move, but the minutes provided more detail on why the FOMC decided to change the language.

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iehi-feed-64302 Thu, 18 Oct 2018 01:42:17 GMT Bond Market Rout Just Wiped Out $1 Trillion From Investors http://bankimplode.com/viewnews/2018-10-17_BondMarketRoutJustWipedOut1TrillionFromInvestors.html iehi-feed-64301 Thu, 18 Oct 2018 00:39:30 GMT FBI looking at Manhattan DA over potential corrupt quid pro quos (INCL. TRUMP KIDZ' CASE) http://bankimplode.com/viewnews/2018-10-17_FBIlookingatManhattanDAoverpotentialcorruptquidproquosINCLTRUMPK.html In another case, the DA also failed to bring criminal charges against two of President Trump's children in an alleged real estate scam. Vance's office cleared daughter Ivanka Trump and son Donald Trump Jr., who were being looked at for allegedly defrauding Trump SoHo investors and would-be buyers by lying about the number of condos that had been sold.

In 2012, Vance met with an attorney for the pair, Marc Kasowitz, who had previously given him $25,000. An additional $32,000 was donated after the office declined to prosecute Ivanka and Trump Jr.

Vance returned Kasowitz's first installment prior to the sit-down. He gave back the second sum of cash in October 2017 after he was criticized for not going forward, and for taking the lawyer's money.

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iehi-feed-64300 Wed, 17 Oct 2018 20:06:58 GMT Trump to ask for Across-the-Board 5% Spending Cut; Still Touts Tax Cuts and Hiked Military Spending http://bankimplode.com/viewnews/2018-10-17_TrumptoaskforAcrosstheBoard5SpendingCutStillToutsTaxCutsandHiked.html ``. After approving the $1.3 trillion budget plan Congress sent him in March, Trump threatened he will "never sign another bill like this again."

Trump's ask comes as the Treasury Department reports that the federal budget deficit rose this year to $779 billion. That amounts to a 17 percent increase over the previous year, and is the highest deficit in six years.

Trump has previously called for deep, double-digit percentage reductions for some federal departments that were rejected by Congress. His first proposed budget last year included the complete elimination of 62 agencies, which lawmakers ignored.

More: The national debt and the federal deficit are skyrocketing. How it affects you

But the president has also come under fire on two fronts recently: Conservatives have grown increasingly restive about budget deficits, an issue that has received far less attention from Republicans lately than it did during the Obama administration.

Trump has also blamed Democrats in Congress for seeking increased spending on domestic programs in exchange for Trump's desire to build up the military. Unwilling to threaten a shutdown before the midterm election, Trump has indicated in recent weeks that he felt compelled to go along with spending bills to secure his desired increases for the Pentagon.

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Earlier this week, Treasury Secretary Steven Mnuchin suggested that the rising deficit was the "dire consequences of irresponsible and unnecessary spending."

But a report from the nonpartisan Congressional Budget Office, released earlier this month, said tax cuts Congress approved last year partially led to the deficit jump.

Budget analysts said Trump's demand is very unlikely, and would have little impact on the budget deficit in any event.

Stan Collender, a professor of public policy at Georgetown University, said if you cut the entire annual federal budget by 5%, it would be only $200 billion to $300 billion -- and the federal budget deficit for next year is projected at $1.1 trillion.

Trump has bragged about his defense hikes, and presumably isn't interested in cutting that budget, Collender noted. And he hasn't said anything about reducing the real drivers of federal spending, entitlement spending like Social Security and Medicare.

"This really shows Trump is not ready is not ready for prime time," Collender said.

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iehi-feed-64297 Tue, 16 Oct 2018 15:29:17 GMT Why New York Has So Many Empty Storefronts http://bankimplode.com/viewnews/2018-10-16_WhyNewYorkHasSoManyEmptyStorefronts.html Separate surveys by Douglas Elliman, a real-estate company, and Morgan Stanley determined that at least 20 percent of Manhattan's street retail is vacant or about to become vacant... From 2010 to 2014, commercial rents in the most-trafficked Manhattan shopping corridors soared by 89 percent, according to ­CBRE Group, a large real-estate and investment firm. But retail sales rose by just 32 percent. In other words, commercial rents have ascended to an altitude where small businesses cannot breathe.

... the 2018 landlord waiting game is denuding New York of its particularity and turning the city into a high-density simulacrum of the American suburb. The West Village landlords hoping to lease their spaces to national chains are turning one of America's most famous neighborhoods into a labyrinthine strip mall. Their strategy bodes the disappearance of those quirky restaurants, curious antique shops, and any coffee shops that aren't publicly traded on the NYSE.

In Jane Jacobs's famous vision of New York, the city ideally served as a playful laboratory, which nursed new firms and ideas and exported its blessedly strange culture to the world. Today's New York is the opposite: a net importer of the un-weird, so desperate to bring in national chains to pay exorbitant leases that landlords are willing to sit on barren blocks.

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iehi-feed-64296 Tue, 16 Oct 2018 15:06:29 GMT Nationstar Executive Admits Aurora Bank Forged Note Endorsements http://bankimplode.com/viewnews/2018-10-16_NationstarExecutiveAdmitsAuroraBankForgedNoteEndorsements.html iehi-feed-64294 Mon, 15 Oct 2018 22:29:39 GMT Stocks fall, led by tech, as Wall Street fails to bounce back from last week's rout http://bankimplode.com/viewnews/2018-10-15_StocksfallledbytechasWallStreetfailstobouncebackfromlastweeksrou.html iehi-feed-64293 Mon, 15 Oct 2018 15:36:33 GMT 1 Trick Pony: Without Corporate Buybacks, Market Plunges http://bankimplode.com/viewnews/2018-10-15_1TrickPonyWithoutCorporateBuybacksMarketPlunges.html To avoid tripping insider trading rules, companies typically avoid buyback shares during the two weeks prior to reporting earnings. Last week's market storm -- the Nasdaq's worst week since March -- occurred during the darkest part of these so-called "blackout" windows.

"Right now, we're pretty much at a trough in corporate liquidity," said Keith Parker, head of US equity strategy at UBS.

Parker said that previous market tailspins, including the scary sell-offs in February as well as the one in April, coincided with buyback blackouts. "Almost to the day," he said.

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iehi-feed-64292 Mon, 15 Oct 2018 15:32:04 GMT Beware! Fed Will Continue To Suck Until Something Implodes | The Wall Street Examiner http://bankimplode.com/viewnews/2018-10-15_BewareFedWillContinueToSuckUntilSomethingImplodesTheWallStreetEx.html iehi-feed-64291 Mon, 15 Oct 2018 13:41:21 GMT Foreclosed Homes Appreciating Faster than Typical Home http://bankimplode.com/viewnews/2018-10-15_ForeclosedHomesAppreciatingFasterthanTypicalHome.html iehi-feed-64290 Sun, 14 Oct 2018 19:58:57 GMT Gundlach says the global stock market is signaling 'something bad' is happening http://bankimplode.com/viewnews/2018-10-14_Gundlachsaystheglobalstockmarketissignalingsomethingbadishappeni.html iehi-feed-64289 Sun, 14 Oct 2018 19:39:43 GMT GOP Candidate Bill Schuette Has Campaign Stunt Blows Up In His Face http://bankimplode.com/viewnews/2018-10-14_GOPCandidateBillSchuetteHasCampaignStuntBlowsUpInHisFace.html iehi-feed-64288 Sun, 14 Oct 2018 19:07:00 GMT Why Entrepreneurs Will Turn To The Crowd For Funding http://bankimplode.com/viewnews/2018-10-14_WhyEntrepreneursWillTurnToTheCrowdForFunding.html ``More investors are participating in funding rounds, and per equity crowdfunding regulations, those shares and debt agreements can actually be traded on public secondary markets (pending at most a one-year lock up period). The larger the investment community participating in these seed rounds, the greater the secondary market for those rounds. Investors no longer have their money locked up in a startup for 5-10 years as they wait for that startup to either be acquired in an M&A or to go public via an IPO. They can trade their investment for profit or loss much sooner than was possible before. With that liquidity, there is what is known as a "liquidity premium."

Investors are willing to pay more for liquid asset because they are safer investments (investors can get out quicker). There's also a psychological element to it. People are averse to risk, and long-term holding is risky. Traditionally, with these types of assets, there is an illiquidity discount in today's market, in which you may invest $40,000 in a startup, but you may have to give anywhere between a 20-30% discount off your investment to get another accredited investor interested enough to buy your shares.

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