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Home Publications Blogs Beat the Press What Sort of Loans Does the NYT Expect Investment Banks to Be Securitizing?

What Sort of Loans Does the NYT Expect Investment Banks to Be Securitizing?

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Friday, 27 June 2014 05:23

That's the obvious question that readers should be asking after seeing the paragraph at the end of an article on the Treasury Department's plan to help low income people stay and/or become homeowners:

"The Treasury had promised that Mr. Lew would address the expansion of credit to potential home buyers, millions of whom are unable to get a mortgage with today’s tight standards. No new programs were offered, though Mr. Lew said the Treasury was working to jump-start the all-but-vanished market for private mortgage-backed securities, which would help lenders grow more confident and make more loans."

The clear implication is that lenders would be making loans that don't meet the standards of Fannie Mae or Freddie Mac, but would be packaged into mortgage-backed securities by private issuers. Some folks may be old enough to remember the last time we saw something like this.

Comments (5)Add Comment
Those Who Don't Remember History
written by Larry Signor, June 27, 2014 7:13
...are the greedy profiteers who almost destroyed the economy. Hell, give'em another shot at it.
.....
written by djb, June 27, 2014 8:37
Maybe you would have to be around age 56 or older......in dog years
Mr. Lew represents Citibank
written by ifthethunderdontgetya™³²®©, June 27, 2014 10:34
.
Jack Lew’s Grotesque Citi Employment Deal and the Institutionalization of Corruption

http://www.nakedcapitalism.com/2013/02/jack-lews-grotesque-citi-employment-deal-and-the-institutionalization-of-corruption.html
~
Perhaps Lew needs to talk to the Fed who is mildly discouraging bank lending..
written by John Wright, June 27, 2014 10:47
As I remember an anonymous banker quoted in the press after Henry Paulson first proposed his rescue package in 2008 said "I don't care how much money Hank Paulson throws at us, we won't start lending until business is better."

Bank business may still not be much better.

If the banks need some encouragement to lend, why not have the Fed drop its absolutely voluntary interest payment of 0.25% on excess reserves?

I'm no economist, but this appears to me that the Fed is both subsidizing the banks and also encouraging the banks not to lend via this practice.

If I'm reading the data correctly, the banks need 90 billion to satisfy current reserve requirements and they are earning interest on 2581 billion in excess of the reserve requirements.

At 0.25% of $2581 billion, this is a gift to the banks from the Fed of $6.45 billion per year.

Maybe this isn't much in the overall scheme, but why is the Fed continuing this practice if the government truly wants to encourage lending?

see http://www.federalreserve.gov/releases/h3/current/
O.25%
written by Squeezed Turnip, June 27, 2014 1:40
Here's the official explanation.

Also remember that the overnight rate, by all dint, should be negative. A recent presentation by one of the Fed presidents uses work by the NZ bank to describe why some policy choices have been selected. (No time to find the link at the moment)

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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