Recently, the FDIC proposed a stringent risk retention requirement for banks in order to exempt them from having to retain 5% of capital against mortgage loans used in securitizations. Banks would be exempt from this requirement if those loans had a minimum 20% down payment. Per the FDIC, such a requirement would bring back investor confidence as there would then be less leverage in the bond deals. A funny thing has happened over the last two years — risk-taking has returned to the mortgage market. The ABX Index (a proxy for values based on the value of representative subprime mortgages) … Continue Reading →

My vote for people in glass houses goes to U.S. Senator Robert Menendez of New Jersey for urging the SEC to play security police on the capital markets in the wake of the attack on NASDAQ OMX. Everybody is looking at this like markets are in jeopardy from hackers. Sure, they might be. As might power grids, water treatment facilities, railroads, and anything else with a network. Is the SEC going to watch all of them, too? Seriously, is this a surprise to anybody? Really, the attack was on Directors Desk. Never heard of it, have you? It’s a solution … Continue Reading →