Printed from at 06:09 AM, Jul 29 2016
Talk » Market » Discussing 'QE3 and Manhattan RE'

QE3 and Manhattan RE

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no fb page - translation, couldnt post a pic that wouldn't break mirrors or wouldn't make wolves howl. no twitter - translation, actually tracks followers and other than your pyschiatrist and yourself, nobody left who would dare follow. again, BORING! Back to football.....

steve, MA in fund raising?

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truth, i take that back. you havent managed to avoid social media all together. i do think there is a posting of you on one of those early cave painitings in france.

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Still waiting for Brooksie to point out all of that excessive regulation he was discussing.

One regulation would be a good start.

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consistently very bizarro. wolves still howling at the prospect of ur fb pic.....and thank gawd most of the og's are back in the house. the loons almost took over the place.

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heeerrreee we go again, out comes the victim card. so predictable, so boring, so hmmmmmm - crazy. the next post will be, gotta go off to the debutante ball. much too good for this stuff. what a maroon.

I never said or insinuated that I did not think Steve graduated from HS. Do I think he is obtuse? yes.

yes you your bff hungtersburg

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But why does the skanky deranged bitch keep using patronizing bigoted stereotyped phrases like "ma-MEE" and "Oye ma-MEE"? Is it because ethnic prejudice and severe mental illness are so vclosely aligned?

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Not so ... she only attacks those who bother to point out how offensive she is. All but one SE poster finds her offensive, in the extreme. I pity her even though she IS a skanky deranged bitch, with a side of self-aggrandizement.

Oh, and also there's a good possibility that trUth and that one other poster are actually the same person. They're both terrible writers, virtually incapable of basic communication.

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trUth, are you an aged groupie pretending to be a clientless publicist?

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She's switching to her usual script ... watching the teevee for a couple of hours so she can have another episode, blathering on about how we're "waiting for her" and have "nothing to do", etc. I had a busy day at the beach. She reminisced about Sing Along with Mitch Miller and The Gang, 487 times today alone.

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that one other poster

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Gollllly! A half-hour, at a teevee "party" watching your stories, and you haven't even been on a real estate website that pertains to New York residential real estate! I'm impressed!!

You really are the best aged bad white suburban rock "music" groupie EVER!!!

a battle against ennui, yes.

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It is really comical.

She remarks about other people having (in her imagination) nothing to do ever, and then boasts about spending quality time watching the teevee, and on the teevee is a bunch of self-aggrandizement from/by/about the teevee. Maybe they'll honor a show about the teevee on the teevee awards show on her teevee. Deep. What if there's, like, a whole galaxy in her Lee Press-On Nail, and that Lee Press-On Nail is in our galaxy, and our galaxy is just ... ?

It is really comical.

aboutready, the hypocrite!

"so why do you continue? after being such a vicious bitchy contributor? now you decide it should end?

fuck no, asshole.

go take some paxil. i'm drug-free and have been for fifteen years. i doubt your friend "truth" can claim the same."

No use hating, Brooksie! Just post us one of those regulations that you find oppressive and excessive.

We're still waiting.

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O great oracle, revealer of the future.

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Jeez Looeze, you looneytune, stop following me around everywhere.

Go back to Uranus or wherever you can find an apartment swap.

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It's a mean game!

Foiled again, Brooksie!

See in particular this paragraph:

"It comes down to the advantageous role banks play as the middlemen in the mortgage machine. Instead of holding on to new mortgages that earn interest over a number of years, BANKS SELL NEARLY ALL OF THEM TO INVESTORS AFTER PACKAGING THEM INTO BONDS. The federal government, through entities like Fannie Mae, attaches a guarantee of repayment on the loans, making the bonds even more attractive to the investors."

How do you like that?!

"On Friday, Wells Fargo and JPMorgan Chase, the top two mortgage lender"
"n the third quarter, banks probably originated as much as $450 billion of home loans, according to estimates by Inside Mortgage Finance"

those are the Mtge banks ya dope not the Bank portfolio's. there is a difference.

or look at this!!! who is foiled ya dope!

H.8; Page 2
Assets and Liabilities of Commercial Banks in the United States 1
Seasonally adjusted, billions of dollars
Account 2011
Aug 2012
Feb 2012
Mar 2012
Apr 2012
May 2012
Jun 2012
Jul 2012
Aug Week ending
Sep 5 Sep 12 Sep 19 Sep 26
1 Bank credit 9,241.4 9,566.1 9,593.4 9,638.7 9,678.3 9,704.8 9,760.7 9,783.9 9,814.6 9,807.6 9,797.0 9,819.6
2 Securities in bank credit 2 2,446.7 2,565.5 2,580.9 2,598.4 2,605.6 2,608.9 2,642.5 2,648.7 2,654.8 2,656.7 2,662.9 2,672.2
3 Treasury and agency securities 3 1,660.3 1,752.7 1,774.9 1,796.0 1,806.8 1,807.2 1,831.6 1,838.7 1,839.2 1,836.0 1,839.2 1,852.2
4 Mortgage-backed securities (MBS) 4 1,183.1 1,292.5 1,313.4 1,330.7 1,334.8 1,333.8 1,334.1 1,339.5 1,343.5 1,338.9 1,336.3 1,349.7
5 Non-MBS 5 477.2 460.2 461.6 465.3 472.1 473.4 497.5 499.2 495.7 497.1 502.9 502.5


And I am getting a little tired, get me some more coffee please. Black n strong

Brooksie, Brooksie, Brooksie! Originating a mortgage is not the same thing as keeping it on its books. You should know that by now, because I've been trying to teach it to you for weeks.

And I already previously posted banks' holdings of MBS earlier in the thread, which data I got from the Fed. And as I said there the holdings are immaterial to their total assets (about 1/15 of total assets) and they are held FOR SALE to manage bond portfolios, not as investments.

You can have your coffee anyway you want, but you're posting data that I already posted. Banks DO NOT KEEP THE BULK OF THE MORTGAGES THEY MAKE (which is what "originate" means, FYI) on their books, which is what you falsely claimed. Rather, they securitize them. They then MAY purchase MBS on the open market, but those are NOT the mortgages that they originate (necessarily), and they are not held as INVESTMENTS but rather for trading to manage a bond portfolio.

You'd be much better off admitting that you don't know what you're talking about than posting things that I've already posted, and pretending that they support what you said. If ignorance is bliss, you are surely very happy indeed!

Best regards,


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Ok Change your story again

But you are learning

No, Brooksie, read again - that is precisely what I have been saying all along, and it's all in the thread, including the Fed's numbers.

I've been trying to teach you these things, but I haven't been having much luck.

And laugh at me as you will for what I do as continuing education, but it is a semi-requirement of my trade so I pick the education that gives me a certificate, always from a Top University.

It's called marketing.


"I have seen no evidence that banks are buying Agency MBS's, because they have no incentive to. Moreover, the logic makes ZERO sense (as usual): Agency MBS's have as underlying assets agency-qualified (guaranteeable) mortgages. Therefore, it is impossible for them to buy agency MBS's because there are not enough qualified buyers, because agency MBS's are comprised of qualified buyers"DID YOU SAY THIS?

Did I just provide you evidence again?

Who is changing their story and who is learning from whom?

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I absolutely said that and I absolutely meant it, and I haven't changed my mind. Had I known that you would harp on it & try to misinterpret it I might have said "massive amounts," and said, "as investments," but then of course I have no way of knowing what you'll misinterpret next.

So - rather than take my explanation out of context, here is what I wrote:

"The vast amount of bank lending (mortgages, credit cards, car loans) no longer sits on banks' balance sheets, but rather is sold as ABS's to third parties."

And here was your answer: "FALSE"


Unless you are going to try learn me something, yet again.

That's right you know everything, but the world of banking and finance does not make sense to you.
Ok thanks.

Good luck

The Fed is aiming its unlimited buying power (since it can literally create money) at the market for mortgage-backed securities (MBS), the pools of mortgages where nearly all American home loans eventually end up. And the one of the largest holders of these MBS are the banks.

Banks have loaded up on MBS over the last couple years, for two very good reasons. First, MBS (certain kinds of them, at least) are very safe. The mortgage bonds of the giant housing-finance agencies Fannie Mae and Freddie Mac are considered as safe as US Treasurys, since these agencies are effectively under the wing of the US government, which bailed them out during the financial crisis. Better still, MBS pay a higher return than Treasurys do. Super-safe and higher-yield is an irresistible deal.

The result? The MBS holdings of large commercial banks are up 32% since the end of 2009—that’s the red line in the chart below. That’s outpaced the growth in other bank investments, especially that saw-toothed blue line at the bottom, which are real estate loans.

This is where QE3 comes in. The Fed says it will buy mortgage bonds. It has massive buying power. That pushes up the prices of the bonds. And at a certain point, the idea is that the banks won’t be able to resist. They’ll bite, selling their bonds, and collecting a big pile of cash.

But after a few high-fives around the boardroom table, the bankers realize they now have another problem. They’ve got a pile of cash they’ve got to invest profitably. And there aren’t a lot of good places to go. Why don’t they just go buy more MBS?

They could. But remember, MBS are more expensive now. And in the world of bonds, prices and investment returns move in opposite directions.

And QE3 has been hugely successful in driving down the yields on mortgage bonds. A good gauge of these yields is known as the “current coupon” yield. Basically, it’s the going yield on a mortgage bond that would be stuffed with the mortgages banks are currently giving out. Mortgage interest rates have been going down. So the return on these bonds is looking skimpier and skimpier:
This really stumps bankers, who are still sitting at the boardroom table looking at their massive pile of money. Think, bankers. Think. What could you possibly do with a giant pile of money that you need to make a return on? Banks aren’t like other investors. Because of regulatory constraints they can’t bet the farm on the stock market or highly leveraged gold ETFs. (Though they’d probably like to. ) Isn’t there some complicated derivative trade they could put it on? There’s got to be something. Suddenly a scrawny junior executive has an idea. It’s something bankers used to do in the old days. He saw it in a movie once. What was it called again? It started with an “L.”

See-- they have not been lending-- they have been buying MBS-- QE3 will force banks to lend because it will be more profitable.

more coffee please

The fed buying MBS just makes it easier for origninators to get loans off thier books to securitizers. The fed is buying up a lot of MBS which makes less paper available to other natural buyers. If rates stay low its not more profitable. Ultimately we need loan demand and for banks to be willing to make mortgages to get the whole cycle going again.

Ok before that know it all, steve jumps all over that, I should have said, not lending as much. And, in theory, banks become more profitable if they lend more at higher yields than buying MBS at higher prices or lower yields. This obviously depends on the quality of the borrower.

Hmm. Where to start? First, let's see: publishing an article from Wordpress. A blogger. Very nice, very nice indeed. Brooksie, why not write something yourself on Wordpress and reference it as "authority"?

Then let's see: "The MBS holdings of large commercial banks are up 32% since the end of 2009—that’s the red line in the chart below. That’s outpaced the growth in other bank investments, especially that saw-toothed blue line at the bottom, which are real estate loans."

Here is a more reliable source:

And you will see very clearly that the Fed DOES NOT BREAK OUT MBS's from Treasuries, so YOU CANNOT TELL from the information you have provided what the breakdown is of those holdings. And the chart itself says the same thing.

Owned you have been, once again. I highly doubt MS has better information than the Fed.

Then there's the blog's nonsensical "MBS's pay more." OF COURSE THEY DO! Because they're riskier, because of default and prepayment risk. Remember, MBS's are NOT guaranteed by the government; they are guaranteed by the agencies, which are currently in receivership.

Here's something that might learn you something: Purchase Program - Stroebel and Taylor.pdf

Of course, they're not bloggers. They're Stanford University economists. But that shouldn't matter, should it?

Here's what they conclude: "We show that a sizable portion of the decline in mortgage [versus Treasury] spreads can be attributed to declines in default risk and prepayment risk...."

Your blogger says "The mortgage bonds of the giant housing-finance agencies Fannie Mae and Freddie Mac are considered as safe as US Treasurys...."

PURE CRAP. They are not. As mentioned, there is a default risk, and second of all, as mentioned, there is the prepayment risk, MAKING MORTGAGE BONDS THE MOST DIFFICULT BONDS TO PRICE THAT THERE ARE.

Just a true fact. I learned it in kindergarten.

Then, were that not enough, let's look at your MS figures. Actually, let's not. Let's just say that they are BALANCE SHEET FIGURES at the closing dates of fiscal quarters. BALANCE SHEET FIGURES, which tells you ABSOLUTELY NOTHING ZERO about what the banks held in their portfolios anytime between those BALANCE SHEET DATES.

Since you've obviously never even stepped inside of a bank beyond to make an ATM withdrawal, let me inform you that it is common knowledge that banks adjust their portfolios at the end of the reporting periods to make them look better - or, usually, less risky. Balance sheet figures AT a certain date are meaningless unless you know the average balances during the fiscal period, and have the statement of cash flows to make sense of what they're doing. And, as the Fed does, adjust them seasonally.

The Fed data, as I mentioned, are seasonally adjusted annual rates. And what they show is that there was an increase in "treasury and other agency securities" of 15.5% in 2009 and 15.1% in 2010. But real estate loans did not fall significantly in those years (-5.6% in both 2009 and 2010). What did fall SIGNIFICANTLY were interbank loans (-38.1% and -23.3%, respectively), and what did GROW were cash assets ( 157.3% in 2008; 47.9% in 2009; and -7.8% in 2010; 47.6% in 2011).

So your theory - and/or that of the fool blogger you post - that banks replaced residential real estate loans with MBS's is JUST PLAIN FALSE. What they did do is stock up on cash and stop lending to other banks, because, a la Lehman, they were afraid of who might fail next.

In 2011, banks' total holdings of Treasury and other securities increased by a paltry 2.8%.

So except for 2 years in the depths of the worst financial crisis in the history of the world since the Great Depression, banks did increase their holdings of treasury and agency debt. But it was not at the expense of real estate loans; it was at the expense of interbank lending.


Then, since the very premise of your moronic blogger is wrong, there's really no need to go beyond that. But I will, since you need to be learned stuff. Your freaking blogger doesn't even know what a "current coupon" is. Let me enlighten you:

It is a measure of the prepayment risk of MBS's.

"See-- they have not been lending-- they have been buying MBS...."

Not according to the Fed they haven't. They've been hoarding cash. To the extent that they have been buying MBS's - not significantly, as shown - it's because the Fed was buying them so their price was going up.

Not even the Fed can force a bank to lend. They will lend when there is low risk. During the financial crisis they stopped interbank lending; there was no material change in mortgages held on their books.

Here is a chart of their mortgage originations:

They are ALWAYS choppy and, in fact, have been going down steadily since the start of the housing boom, in 2002.

More coffee please. My Breville cost about $700 - I hope you don't get me that Dunkin' Donut shit you usually drink.

Steve keep writing you sound dumber by the second

Qhen the teacher gave you a D, did you beg her after class for a better grade? Is that how you got threw school? I meant to say this not this

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I'm having a DEELICIOUS coffee from my $700 Breville machine right now, Brooksie, before I take my Mercedes Benz out for a spin later on.

No Dunkin' Donuts crap for me.

Sorry, though, that you have ZERO understanding of financial statements, bank lending, or how the Fed works.

And are reduced to quoting a BLOGGER as authority.


Oh, Brooksie! More bad news for you:

"Like other big banks, Wells Fargo makes home loans before selling most of them to investors after attaching a government guarantee. Those gains totaled $2.61 billion in the third quarter, up 225 percent from $803 million in the third quarter of last year."

LOOK AT THAT! Banks sell most of their mortgages.

Which is what I said: "The vast amount of bank lending (mortgages, credit cards, car loans) no longer sits on banks' balance sheets, but rather is sold as ABS's to third parties."

To which your answer was: "FALSE".

And you're still not willing to admit you're wrong.

Rather, you focus on a BLOG that contains an unsubstantiated opinion by a BLOGGER that is completely unsupported by FACT, aka Federal Reserve data.

It is no wonder that you buy your coffee at Dunkin' Donuts.

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Steve, Steve, Steve, How is the world of banking and finance going to make sense to you if you don’t acknowledge the facts? Humm, you sound so confused, I don’t know where to begin.
Let me try here.
I tell you that banks are buying mortgage backed securities because they are having difficulty finding qualified buyers to lend to. You say this does not make sense to you.

Again, your quote, “I have seen no evidence that banks are buying Agency MBS's, because they have no incentive to. Moreover, the logic makes ZERO sense (as usual): Agency MBS's have as underlying assets agency-qualified (guaranteeable) mortgages."

I provide you with Data from the Federal Reserves website which showed that banks did indeed buy MBS. You disregard this data and argue that the banks don’t buy a significant amount of mortgage backed securities.

Again, your quote, "I stand by what I said - there is no rush of banks flowing into MBS's, except in your mind, and in an obscure article from 2010 presented without any supporting evidence. Next... ps: see if you can Google anything else about MBS's, because if you do your due diligence you will see that pension funds, insurance companies, hedge funds, and sovereign wealth funds are the largest holders of MBS's, for the guaranteed cash flow."

I then provide you with Morgan Stanley Research, that clearly displays banks and MM(Money Managers) are the number 1 holders of MBS followed by the Fed, overseas investors, then the GSEs and REITS.

Again, your quoate, “GSE's are still the single largest purchasers of MBS's"

You dispute Morgan Stanley's research. MS by the way is equipped with a vast research department of quants, accounts, traders.. etc that clearly have the means to dig through bank balance sheets(their customers btw) talk to treasurers, portfolio managers etc to get this data. "
It clearly displayed how the banks increased their holding of MBS from $853 billion to $1.442 Trillion from 2007 to 2012"
I even post a blog so someone else could try to explain to you in layman’s terms why banks are buying MBS.
But you tear apart him explanation and contradict your self again and again.
You blast the Blogger for saying that they are government guaranteed. You say they are not, but it is common market knowledge that both Freddie Mac and Fannie may have AAA ratings because of the implicit guarantee by the US government. O’yea. This guaranteed became explicit when the government bailed then out during the financial crisis. BTW GNMAE is a government institution and is guaranteed by the US government. Yes there are GNMAE MBS too.
You also said that Banks use MBS to manage their duration. Your quote, "Clearly banks do not hold an overwhelming amount of MBS's, and what ones they do are in their trading portfolio to manage interest rate and duration risk".

Then you go on to say that that they have credit and prepayment risk. Yes, you are correct here, they do have prepayment risk. Does it make sense to you that Banks use MBS to manage their duration risk when such inherit optionality and as say, "credit risk" when there are easier tools to use they don't have this optionality and have not credit risk?


Did you know that the WSJ post closing prices for MBS daily?

I can go on and on Steve, but again. I really don’t have time for this. Please for your next continuing education class, take financial statement analysis class, take an updated class in money and banking. Please don’t blat your nonsense all over the web.

Sorry Steve, Still a “D” I can’t give you a C-. If you want, you can repeat the class..

O yea figure's a muppet like you would buy $700 coffee.

Hmm. Still relying on bloggers?

When will you simply admit that you know nothing - as is obvious to all readers - since you still think that banks keep most of their mortgages on their books, when they clearly don't?

"I tell you that banks are buying mortgage backed securities because they are having difficulty finding qualified buyers to lend to..."

And the Fed says they are not, and you haven't provided any evidence that they are.

"that clearly displays banks and MM (Money Managers) are the number 1 holders of MBS followed by the Fed"

It clearly shows no such thing.

"The WSJ post closing prices for MBS daily"?

Really? Is that why they attach to it, "Indicative, not guaranteed"?

Every bond is different, youngling. That's why when you look at the same data on Barron's, they add this legend: "*EXTRAPOLATED from BENCHMARKS based on PROJECTS from Bear Stearns prepayment model, ASSUMING interest rates remain UNCHANGED."

In other words, a nice, but meaningless figure, unless you think that there are only 12 mortgage-backed securities in the world, because there are only 12 in the chart.

Remember what happens when you ASSUME.

ps: based on "PROJECTIONS," not "PROJECT" - my bad typo!

And yes, despite the fact that MBS's are difficult to price you CAN use them to manage duration risk, provided that you don't plan on holding them for a long time.

Which is why what MBS's banks show in their portfolios are classified as "assets held for sale," aka, for trading, and not as investments.

Keep on ASSUMING - you're doing a good job of it.

Steve- What is your point? I post closing prices from the WSJ? Then you post them from Barrons? Are the closing prices of treasury prices meaning less too .. because there are more than 1? there is more than one 10yr note too you know? those prices are meaningless?

So you mean to tell me that with the average daily trading volume of MBS of over $90 billion that they difficult to price?


You are so blatantly wrong it is truly laughable!!

I guess I am glad I don't trade those! Whew!!!!

First, you don't even know what they are: they are NOT closing prices, but rather model-estimated benchmarks for different types of notes with different nominal interest rates.

Second, treasury prices do not have the default and prepayment risks, and therefore all like treasuries trade at the same interest rate.

And third, yes, actually, they are extremely difficult to price, and that is not from me via my advanced certification from NYU in FIXED INCOME SECURITIES MANAGEMENT (you can look it up), it is the first thing you learn in the textbooks about pricing securities.

Here are some course notes on how to do it:

I'm very glad you don't trade MBS's, either, as they're not available for individual traders to invest in, though you could buy an ETF.

Qe3. Nyc re. Yada yada yada.

Sprintzzzzzz. Beytches!

Steve, What's this link Above from Stern u posted Bozzo! No u stfu! U idiot. Read carefully how it says MBS are negatively convex educate yourself again fking poser!

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