Europe and Its Common Currency: It’s Really Over… But Not Today

I’ve written about Europe a lot over the past couple of years and not out of just a Schadenfreude enjoyment of watching a slow motion disaster far from our shores but because it seems to me that really matters, both in terms of its impact on the global financial marketplace and the probable knock-on effect on domestic U.S. finance markets. It also deserves our attention because it contains lessons for all and sundry policymakers and opinion purveyors about policy choices that simply don’t work.

Of course, the first and most portentous mistake in Europe is don’t ever get into a land war in Southeast Asia, er, I mean never sever control of fiscal and monetary policy; in other words, their big mistake, the Euro-zone currency itself.

Until now, I have shied away from the conclusion that the center could not hold, and held firmly to the notion that somehow Europe would muddle through. Continue Reading

ABS Las Vegas 2015

A securitization community coming off of record issuances in 2014 has entered the new year with a mixture of nerves and optimism.  An estimated 6,500 finance professionals and attorneys converged for the 2015 ABS Las Vegas conference.  The new risk retention rules, and their impact on CLOs in particular, were on everyone’s lips – to the point that one panel moderator opened his remarks by saying that he was narrowing the stated discussion topic to focus exclusively on CLO risk retention, at the urging of the panelists and audience. Continue Reading

Regulators: It’s in Their Nature

Here’s one from left field that I only began to focus on recently.  In mid-December, the gnomes of Basel published several “Consultative Documents” on bank capital and credit risk issues.  First of all, I’m somewhat suspicious by the open palmed amiability of something called a “Consultative Document.”  That suggests a dialogue with regulators but this is Euro-speak for “Proposed Rule.”  My experience is that once something gets to the Proposed Rule stage, the relationship between the regulatory and the regulated is short on consultation and long on prescription.  But hey… maybe this is different.  Continue Reading

Breaking The Code

I saw the movie Imitation Game last weekend, which is the story of Alan Turing and his role in breaking the Enigma Code which shortened World War II and saved millions of lives.  (Spoiler Alert:  He did it, we won.)  Turing, played by Benedict Cumberbatch, was terrific, even if you’re not a certified “Cumberbitch.”  It got me thinking that to actually navigate this economy, you have to be pretty good at code breaking.  There’s always a lot of code speak.  First, there’s the code of each of the hermetically sealed subcultures of business and markets (recent example on my desk is a note entitled:  Response to BCBS/IOSCO Consultation Document by GFMA, AFIRE, ASIFMA and SIFMA).  We will come back to this in a later commentary, but today let’s focus on officialdom when the often intentionally obscure or misleading Orwellian doublespeak of politics and policy achieve its higher expression.  Is it getting worse?  Well, it’s certainly not getting better.

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CREFC January Conference – Rolling into 2015

For those of us living in the northeastern U.S., last week’s Commercial Real Estate Finance Council (CREFC) January Conference could not have been better timed to escape the brutal cold for the tropical beaches of Miami.  We were joined at Miami Beach by a record number of attendees at this year’s conference.  The mood of the attendees was overwhelmingly positive, which translated into a number of lively sessions, and even livelier social gatherings.  2014 was a great year for the commercial real estate finance industry, and most industry insiders expect 2015 to be even better.  Our industry continues to grow like a rolling snowball, with no end in sight for 2015. Continue Reading

Schrodinger’s Cat

We here at CrunchedCredit are getting ready, as we do each year at this time, to polish up the palantir and make our predictions and business projections about the coming year.  While it can be a fun exercise, it’s actually serious business.  To start with, you need a macro view of the geopolitical situation, the markets and the economy.  To not start with a macro view is to make a choice, and a bad choice at that.  Continue Reading’s 5th Annual Golden Turkey Awards

This is our fifth annual Golden Turkey Awards at CrunchedCredit.  It just gets easier and easier. There are simply so many worthy contenders for an award this year.  You know, we don’t stop and take a moment often enough to just say thank you to our government and its enormous regulatory apparatus for being such a reliable source of material for us.  We read in awe at the breathtaking nonsense often emanating from our elected panjandrums and their regulatory cohorts and enabling self-appointed policy elites.  I’m so appreciative of the studied, surely serious, perhaps well meaning, ham handed and ultimately self-defeating efforts of our government to micromanage economic outcomes.  We here at CrunchedCredit spend a fair amount of time talking to the aforesaid.  The poverty of understanding about how financial markets work is really stunning.  You have to admire the willingness of our government, marinated in hubris, to weigh in, chest out and chin high on so many issues above their intellectual fighting weight.  So let me take this moment to just say thanks.

But, of course, what makes our life as card-carrying members of the commentariat good, makes the life of those trying to actually conduct business in this regulatory free fire zone excruciatingly difficult.  Our job is calling B.S., sussing out the inanity, stripping away the syntactic chaff behind or within which much regulatory product is hidden and trying to provide some helpful guidance about how to deal with this increasingly complex world along the way.  Not to diminish that getting our fiscal and monetary policy right is a deadly serious business, but we can’t help but find some humor in all this.

So, here it is – our Golden Turkey Awards for 2014.

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“First” Deeds of Trust now Second in Line?

Never a dull moment.  We at Crunched Credit are probably guilty of excess and perhaps myopic focus on our federal government and its regulatory apparatus; it is such a consistently reliable source of commentary and outrage.  So here’s one out of left field, but no less important for that.  Continue Reading

The Continuing European Banking Crisis and Hidden Capital Shortfalls

Who says that Europeans don’t get Halloween?  After more than a year in the making, the European Central Bank (“ECB”) just finished its most recent stress test and found that pretty much everything was kinda OK.  Sure, a few banks here and there in the nether regions flunked, but perhaps with the exception of that most wonderful Banca Monte dei Paschi di Siena, no one flunked that badly.
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Risk Retention and Stockholm Syndrome

After three years of waiting, we now have our Risk Retention Rule.  All six of the Agencies responsible for the Rule – the FDIC, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Department of Housing and Urban Development, the Federal Housing Finance Agency and the SEC – have finally managed to agree, albeit with significant dissent at the FDIC and the SEC, on a Final Rule.  Note that Richard Cordray of the Congregation for the Doctrine of the Faith (in Progressive Causes) …er…the Consumer Financial Protection Bureau, apparently had a heavy finger on the scales, which is why there was material dissent at the FDIC and SEC.  So, after all those years of waiting, we have “it.”  “It” of course is another five hundred some odd pages of commentary and bloviating and a relatively few pages of actual Rule which, as we study it more, will inevitably have left much that will need to be subsequently clarified.  We have already found technical inconsistencies between the commentary and the Rule.  Continue Reading