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November 24, 2008 - Even in the current Era of Large Numbers, the third quarter 'earnings' reports for Fannie Mae and Freddie Mac were shockingly bad. The two firms combined have lost a total of $54.2 billion dollars. The bulk of the losses ($17 billion for Fannie alone) were attributable to writing-off deferred tax assets, but the GSEs also reported huge increases in 'credit-related expenses.'
November 17, 2008 - Resecuritizations or ReREMICs are following the trajectory of the ABS market pretty closely. ABS participants initially turned to this structure because it was a path to market liquidity. It was good way for dealers to try to move inventory around. In fact, in October, there were a few ReREMICs that came to market, most of which were driven by liquidity needs. However - since they are still part of the volatile market that we are all experiencing - sources said that bid lists for these transactions have been revised daily as a result of pricing and supply considerations. For now, the market for these deals has dried up.
November 10, 2008 - American politics took center stage last week, but the message President-elect Barack Obama had for U.S. citizens could be applied across Europe as well. It took nearly a decade to create the market dynamics that have resulted in the present economic situation, and it will, consequently, take some time to get out of this mess. Obama, on the campaign trail, has said that Americans will have to tighten their belts in the meantime.
November 3, 2008 - Even those familiar with the Argentine government's taste for theatrical populism were floored when President Cristina Fernandez announced two weeks ago that private pension funds would be nationalized. Denigrating the pension administrators as 'inefficient and ineffective,' Fernandez cast the confiscation as a move to rescue Argentines from an uncertain retirement. The funds, like the rest of the world, have been hit hard by falling asset values.
October 27, 2008 - The Treasury clearly has a lot riding on the success of the TARP program, as it may be its last shot at restoring some semblance of normality to the markets. There are concerns that TARP's immediate impact may be only cosmetic, and that the program might create major precedents for government involvement in the financial system. As it currently stands, TARP will have the Treasury buying troubled assets from banks, while separately injecting capital into selected institutions that apply for an infusion (as well as some that don't).
October 20, 2008 - Fannie Mae announced two weeks ago that it would cancel the planned increase in its adverse market delivery fee. The hike would have taken effect Nov. 1. The GSE's move is in line with Treasury Secretary Henry Paulson's mandate to boost the availability of mortgage credit, which includes looking into the guaranty fee structure of Fannie and its rival Freddie Mac. Keeping down agency fees is a way to ensure mortgages remain affordable.
October 13, 2008 - Europe has for months stood unified in its public position that it will be able to withstand the developing financial maelstrom because its banks are healthier than U.S. banks. Over the past few days, however, that position has changed. Belgian, French and Luxembourgian authorities have stepped in to shore up Fortis Bank. Irish, German and Danish governments have announced guarantees to backstop private bank deposits. And the Swedish government has increased the level of its deposit guarantees. Separately, the U.K. unveiled plans for a £50 billion ($87.18 billion) bailout. Broadly speaking, the U.K. bailout entails £50 billion of capital (£25 billion to be invested shortly with a further £25 billion if required) will be made available to U.K. banks and building societies in the form of preference shares, PIBS, or equity. The government will guarantee all short- and medium-term debt issuance, and will make available a £200 billion Special Liquidity Scheme.
October 6, 2008 - The credit crisis rippling from the U.S. was pressuring liquidity in Latin American markets well before the bailout plan's 'will they or won't they' moments last week sent stocks in the region gyrating. Players in different countries managed to squeeze ABS deals through, but pricing for some transactions toward the end of the quarter was, in some cases, brutal.
September 29, 2008 - It's fitting that the Financial Accounting Standards Board (FASB) released its proposed changes to Statement 140 and Interpretation 46 (R) the week the Lehman Brothers bankruptcy news broke. These FASB proposals, market participants fear, will further exacerbate the capital and liquidity constraints now being experienced in the ABS sector.
September 22, 2008 - The case of Lehman Brothers proves that the bar for banks has just been raised. Until last week, financial institutions of such size were seen as being in the too-big-to-fail category. Lehman found itself forced into bankruptcy as Barclays and Bank of America walked away from buyout talks. The failing firm listed more than $613 billion of debt.
September 15, 2008 - The importance of Fannie Mae and Freddie Mac not only to the U.S. mortgage market but to the worldwide economy was demonstrated last week when the U.S. Treasury Department put the two GSEs under conservatorship. As FTN Financial analysts aptly put it, 'If anyone was under the impression that the financial marketplace is not truly globally integrated, the actions by the U.S. Treasury Department to put Fannie Mae and Freddie Mac into conservatorship has shattered that impression.'
September 8, 2008 - The lazy, hazy days of summer didn't fully envelop residents of the DPR world. They weren't exactly lazy, when a handful of DPR deals either closed or ramped up in a market so grim that any cross-border closing is an event. But 'hazy' isn't so far off the mark, as players hid details as best they could. Turkiye Garanti Bankasi originated a deal where the involved parties let in some light, though pricing stayed in the dark. Barclays Capital led the Ä200 million, 10-year transaction sold entirely to the European Investment Bank (EIB), a multilateral that entered the sector of diversified payment rights only a few weeks earlier. Garanti was following in the still-fresh footsteps of Turkish peer Akbank, which closed a $393 million transaction via WestLB.
August 18, 2008 - The persistence of risk aversion is heightening the focus of cross-border emerging market players on financial future flows. In both EEMEA and Latin America, bankers are out pitching old-time originators, along with new entrants - a decision on a diversified payment right (DPR) deal is expected soon from the Bank of Azerbaijan (ASR,8/8/08), and Peruvian banks are keen too (ASR, 7/20/08).
August 11, 2008 - The Financial Accounting Standards Board (FASB) said on July 30 that it was delaying for one year or until January 1, 2010, the adoption of amendments to FIN 46(R) (consolidation of variable interest entities) and FAS 140 (accounting for transfers and servicing of financial assets and extinguishments of liabilities). The effective date was delayed at the behest of not only ABS industry participants but also certain government agencies including the Office of Federal Housing Enterprise Oversight, the Federal Reserve and the Comptroller of the Currency.
August 4, 2008 - The U.K. Council of Mortgage Lenders' (CML) hopes of kick-starting the U.K. RMBS and covered bond markets have been quashed before they ever got off the ground, although they have at least challenged the notion that some solution must be implemented to get U.K. mortgage lending going again. CML warned last month that the Bank of England's special liquidity scheme (SLS) has not helped banks raise the necessary funding to reawaken the mortgage market and said the government needed to act immediately to improve the situation before it deteriorated further.
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