Goldman And JPMorgan Probed Over Metals Warehouse Manipulations Submitted by Tyler Durden on 07/25/2013 17:43 -0400 Commodity Futures Trading Commission Department of Justice Federal Reserve Reality Following our initial uncovering of the manipulation and monopolization of the metals warehousing business two years ago , the last few days have seen the public's attention grabbed by the reality of what the banks are actually doing. Following this week's hearing, as the Fed reconsiders banks roles in non-banking businesses (and the 'societal benefit' ), it seems the CFTC has woken up. As the WSJ reports , the Department of Justice has opened an initial probe into the metals warehousing industry and the Commodity Futures Trading Commission has also sent letters to some firms telling them to preserve documents, in what is likely the beginning stages of an investigation. Via WSJ , ... The probe comes amid growing concern in Washington over banks' ownership of metals warehouses and other commodity assets. ... Banks that trade physical commodities have come under attack by government officials, companies and consumer groups, who worry about the ability of the financial sector to exert influence over markets for raw materials. ... Mr. Brown held a hearing on the subject this week at which some company officials alleged banks are deliberately creating shortages of aluminum and other raw materials for financial gain. The Federal Reserve has said it is reconsidering the permission it granted to banks over the past decade to participate in physical commodity markets . The permission expires later this year. Average: 5 Your rating: None Average: 5 ( 10 votes) !-- -- Tweet !-- - advertisements - .AR_2 .ob_empty {display: none;} .AR_2 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_2 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_2 {float: left;width:50%} .AR_2 li {list-style: none outside none !important;font-size: 10px;padding-bottom: 10px;line-height: 13px;margin:0;} .AR_2 .ob_org_header {color: #000000;text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .rec-link {color: #565656;text-decoration: none;font-size: 12px;} .AR_3 .rec-link:hover {color: #565656;text-decoration: underline;font-size: 12px;} .AR_3 .rec-src-link {font-size: 12px;} .AR_3 li {padding-bottom: 10px;list-style: none outside none !important;font-size: 10px;line-height: 13px;margin:0;} .AR_3 .ob_dual_left, .AR_3 .ob_dual_right {float: left;padding-bottom: 0;padding-left: 2%;padding-top: 0;} .AR_3 .ob_org_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} .AR_3 .ob_ads_header {color: #000000; text-decoration:bold; margin-left: 0px; font-size:14px;line-height:35px;} -- - advertisements - Login or register to post comments 10589 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: Guest Post: GLD And SLV: Disclosure In The Precious Metals Puzzle Palace First Official Complaint Filed To DOJ-Anti Trust Over JPM's Role In Silver Manipulation Case 2012 Year In Review - Free Markets, Rule of Law, And Other Urban Legends GATA Claims To Have Evidence Of "Massive Physical Short Gold And Silver Positions That Can Not Be Covered" Civil And Criminal Probes Launched Against JP Morgan For Silver Market Manipulation
Visualizing The Impotence Of Bernanke's Wealth Transmission Channel Submitted by Tyler Durden on 11/11/2012 13:39 -0500 We have discussed the apparent (though anecdotal) divergence between refinancing rates and interest rates a number of times. Furthermore, we have exclaimed at the significant drop in refi rates since QE3 (following the initial spike) noting the unintended consequence that US households are increasingly realizing that rates will never be allowed to rise and so every rate rise is not a signal to rush into refinancing but instead a signal to pause for lower rates . The chart below is somewhat surprising in its clarity as Goldman Sachs note that despite record low mortgage rates, borrowers are refinancing at a rate of just 20-30% per year - far lower than prepayment speeds we would expect. The great majority of 'in the money' mortgages are not being refinanced and while we suggest this is the unintended Bernanke conditioning, Goldman also opines that industry capacity and underwriting standards on the supply side; and consumer awareness and household behavior on the demand side. Via Goldman Sachs: I n normal times, borrowers with high credit quality would have refinanced as soon as mortgage interest rates declined. The chart above shows that this is largely the case before 2009 for Fannie Mae 30-year fixed rate mortgages. The percent of loans that are “in-the-money” for refinancing (defined as the borrower’s mortgage rate being at least 100bps above the market rate) is highly correlated with the subsequent prepayment speeds. However, this relationship broke down in 2008. Nearly 80% of outstanding Fannie Mae 30-year fixed rate mortgages are currently in-the-money for refinancing, but the actual prepayment speeds are much lower than what the historical experience would predict. Why aren’t more borrowers, especially those with stellar credit quality, taking advantage of today’s low mortgage interest rates and refinancing? On the supply side , one obvious suspect is the fact that industry origination capacity is constrained. The capacity constraints are a symptom of both substantial industry contraction as well as uncertainties related to reps and warranties exposure, the future of the regulatory landscape, and the outlook for housing and economy. Nevertheless, capacity constraints imply tight lending standards and less refinancing originations. This is consistent with our finding that borrowers with the highest FICO and lowest LTV are prepaying relatively faster today. Due to the tightness of industry constraints, today’s mortgage lenders are doing less advertising, marketing, and outreaching to encourage refinancing. This is consistent with our finding that the baseline prepayment speeds of all mortgages are lower than it was in 2003. On the demand side , we are harder pressed to think of reasons why borrowers, especially those with good credit and sufficient home equity, are not refinancing. One possibility is that many borrowers are not aware of how much the market rate has declined . Another possibility is that borrowers may think that lending standards are so tight today that they would be denied of refinancing, or that the process would be too much an ordeal. Lastly, household behavior such as inertia and procrastination that have been documented in the academic literature may be at play in the mortgage market, especially with industry solicitations having dropped off so substantially . It would seem - once again - that the so-called raison d'etre for QE3 is entirely broken, whether easing to ZIRP of LSAP, Bernanke's wealth-building transmission channel via housing is entirely broken ... and critically it is the banks once again that both benefit from the front-running capability as well as becoming the plug in the pipeline... Average: 4.375 Your rating: None Average: 4.4 ( 8 votes) Tweet Login or register to post comments 7434 reads Printer-friendly version Send to friend Similar Articles You Might Enjoy: QA with Alan Boyce: Freddie Mac and Inverse Floaters Pimco Borrows A Record $88 Billion To Bet On Fed's Upcoming MBS Monetization Obama Bluffs on ReFi? Mortgage Refinancing And The Fed's Perverse Incentives Fed Unintended Consequence #267435: Homeowners Front-Running QE By Not Refinancing
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