Trust Citi to win from losing most profitable unit 3 Mar 2015 The U.S. mega-bank has at last offloaded OneMain to rival Springleaf for $4.25 bln. The subprime unit’s 6.7 pct return on assets far exceeds anything else at Citi. And yet the deal provides a one-off income boost, frees up capital, accesses tax breaks and removes a distraction.
Bakries down but not out in $3.6 bln debt rejig 17 Dec 2014 The Indonesian family can no longer ignore the debt problem at Bumi Resources. Weak coal prices make the equity look almost worthless and creditors, including China’s CIC, face a big haircut. However, the powerful Bakries may still emerge on top – as they have before.
Ivory tower beats market to U.S. mortgage fix 17 Sep 2014 Academics at the AEI, a free-market think tank, have hit on what may be a simple solution to the nation’s home-loan morass: replace the 30-year mortgage with a 15-year product that quickly gets borrowers’ skin in the game. Even BofA and an affordable housing advocate support it.
Value of college in U.S. is far from a no-brainer 16 Sep 2014 Despite higher university enrollment, wages are falling for young Americans. Research from the New York Fed shows higher education isn’t always a good investment. Some degree programs aren’t paying off. Loading up on debt to pay soaring tuition fees is riskier than it seems.
LendingClub IPO mixes disruption with confusion 4 Sep 2014 The peer-to-peer lender is growing fast, with fans ranging from John Mack to Larry Summers to Google. But it’s struggling to turn a profit, lacks some advantages of traditional banks and has yet to be tested by an economic slump. Investors need to know whether it’s fish or fowl.
U.S. banks face lurch from recovery to recession 22 Jul 2014 Lending at the likes of PNC and U.S. Bancorp is up, and less cash is needed against bad loans. But low interest rates are keeping returns tepid. That raises the risk some may cut corners. It also means there may be no big earnings boom before the economy slows again.
Buyout barons make a tricky target for Carney 8 Jul 2014 The Bank of England governor could follow U.S. authorities in limiting the debt ratios for loans backing leveraged buyouts. The sentiment is noble, and the American model could be adapted. But taming animal spirits is hard when markets are global and banks’ influence is waning.
Edward Hadas: The stupidity of student debt 2 Jul 2014 Education loans keep growing in the U.S. and the UK. The new reliance on debt is financially dangerous and shows weak economic thinking. The sensible way to fund the social good of higher education is pay-as-you-go: with affordable tuition, donations and government money.
Obama student loan fix spares rod, spoils borrower 9 Jun 2014 Extending repayment caps and debt forgiveness to older graduates gives too many high earners a break. Making everyone pay a flat percentage of income would be simpler, fairer – and cheaper for taxpayers. It could also deliver a valuable lesson in financial responsibility.
Playing nice starts to pay off for Argentina 29 May 2014 The country has added a deal with some creditors from its 2002 default to its recent settlement with Repsol. Its export credit market can now reopen, raising much-needed cash. Selling international debt would raise more – but requires resolving its remaining bondholder lawsuit.
Fannie, Freddie overlord sets back mortgage reform 13 May 2014 New housing finance watchdog Mel Watt is reversing his predecessor’s plans to shrink the U.S. government giants. That means Uncle Sam will probably stay on the hook for 90 pct of new home loans. Profits will remain high as a result, complicating Congress’ efforts for reform.
Fannie investors may be using magic calculators 12 Mar 2014 The latest plan to wind down the U.S. mortgage giant tanked its volatile stock. Some hedge funds still want to revitalize the business. Trouble is, even kind assumptions suggest Fannie isn’t worth enough for shareholders to get anything back – unless Uncle Sam is crazy generous.
Securitisation muzzling does more harm than good 17 Feb 2014 Over-egging the practice of repackaging loans as bonds helped cause the 2008 crisis. Yet supervisors keen to avoid a repeat are loading investors in asset-backed debt with excessive capital charges. Smart firms may find workarounds, but the reforms hamper a key source of credit.
New U.S. mortgage bubble index is worth watching 19 Dec 2013 Many people thought the last U.S. housing boom was unsustainable – but couldn’t prove it. Metrics created by a Washington think tank could help spot the next round of home loan excesses as they emerge. It may repay investors and regulators to keep the new data on their checklists.
Pain of China’s rising rates is well hidden 12 Dec 2013 Banks are paying more for their funding; so are borrowers in the bond market. Yet that’s not stopping credit from growing twice as fast as GDP. It shows how far China still is from having a properly market-driven monetary system.
New U.S. mortgage supremo set to be step backwards 26 Nov 2013 Congressman Mel Watt is President Barack Obama’s pick to be Fannie Mae and Freddie Mac’s new regulatory overlord. Last week’s Senate rule change makes him a shoo-in. But with no experience, clear political bias and campaign cash from both companies, he’s a bad choice all round.
Moment of truth looms for Britain’s payday lenders 25 Nov 2013 Britain will cap the rates Wonga and rivals can charge borrowers for short-term loans. At present, annualised rates can top 5,000 pct. Payday lenders argue that reflects default risk; regulators worry about limited competition. What happens next should show who’s right.
Fannie, Freddie buyout offer too good to be true 14 Nov 2013 A group of investors wants to buy their insurance businesses. The offer of a takeover windfall might appeal. But the easy transition they promise and the need for no taxpayer backstop sound unlikely. The plan wouldn’t end the cycle of privatizing profit while socializing losses.
Rehab needed for U.S. 30-year mortgage habit 11 Nov 2013 America’s standard home loan format only really works well with stable interest rates. Floating-rate mortgages make more sense, especially when rates shoot up. But neither borrowers nor regulators seem fond of them. These obstacles risk a shock to the recovering housing market.
Say goodbye to American housing finance reform 7 Nov 2013 Bailed-out mortgage backers Fannie and Freddie had an astounding $39 bln quarter. That sort of performance won’t last forever, and it doesn’t erase the companies’ past misdeeds. But as Congress mulls fixing the housing system, it might have trouble slaughtering two cash cows.