QE3 and Manhattan RE

Brooks, I don't know why you make posts that support my position and then argue against your own position: what I said was that there was not much of an appetite for securitizing mortgages, even with agency guarantees.

But if you need the precise figures, they are:

Year...CMBS....RMBS

2001...$63.7...$149.3
2002...$50.0...$247.6
2003...$72.3...$350.2
2004...$93.5...$438.4
2005...$156.7...$740.2
2006...$183.8...$725.6
2007...$229.2...$536.7
2008...$4.4...$32.4
2009...$8.9...$9.2
2010...$22.5...$12.1
2011...$34.3...$2.8
2012...$16.7...$2.3

It is precisely as I said.

However, existing securities continue to be traded.

The total volume of all mortgage-related and home-equity securities issued is:

2001 $1,805.5
2002 $2,492.7
2003 $3,408.8
2004 $2,349.9
2005 $2,705.2
2006 $2,632.4
2007 $2,448.3
2008 $1,407.4
2009 $2,043.1
2010 $1,979.3
2011 $1,662.4
2012 $1,310.5

Those figures include agency and non-agency.

Notice how the figures reached a peak at the peak of the bubble (2003), and have continued to decline since then, though not in a straight line.

The 2012 figures are as of 9/5.

Hope that helps - and next time you argue a point, you should argue your side of it, not mine.

The new BASEL rules really punish high LTV mortgages and appropriately so those people who think they are buying with less than 20%, 15% or 10% or 0% down are not compensating the banks properly for credit risk and probably want the ability to walk if things don't work out. The capital a bank must hold for category 1 mortgages(the good kind) starts off @ 35% if the ltv is under 60% but climbs to 75% with an 80% ltv and 100% at a 90% or over LTV. For category 2 its worse..

http://www.fdic.gov/news/board/2012/2012-06-12_notice_dis-d.pdf

To make what I said absolutely clear to you, Brooks, I wrote this:

"That said, what prevents banks from lending is mostly the market for asset-backed securities; right now there's a big market for ABS's for subprime car loans, so they're making shitloads of subprime car loans. Not so much for mortgages, however, even though mortgages come with a government guarantee."

And I posted the figures, first for agency mortgages, and above for non-agency and for all mortgage-related products, including commercial.

If there were a great demand for subprime mortgage securities as there is for subprime car loan securities, you'd see a lot more lending in the sector.

But it ain't there.

Regulators tell the banks they can only hold agency mbs, so even when called and replaced with 3.5% coupons the sellers of this paper have a captive audience. No need to discuss agency mbs, we need a reformed shadow banking system to show a healthy market.

No steve, it sounds to me like you are arguing with yourself. I quoted you, excuse me if I paraphrase I am in an i phone and find it difficult to cut and past, but you said that banks don't leave there mortgage, auto lns etc on their bs anymore, that they sell to third parties. This is wrong

Also, regulation, is limiting securitization,

Here is your quote Steve...."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."

I didn't say they didn't leave any; I said the sell the vast majority of them, and if you look on their balance sheets you will see that the vast majority of those loans are classified as "held for sale."

But there is no direct way of knowing exactly what % banks hold because once they sell them they are no longer on their balance sheets.

However, ALL mortgage banks must sell their mortgages because they are not depositary institutions so they have to repay their liquidity providers. Presently commercial banks hold mortgages that do not come with an agency guarantee because they have no choice.

However, the information is not from me:

http://www.investopedia.com/articles/pf/07/secondary_mortgage.asp#axzz26fKmf1sQ

And I quote: "Most mortgages are sold into the secondary mortgage market."

The largest holders of mortgages are the GSE's, who are in turn the largest issuers of MBS's.

Sorry - unlike you, I didn't make my information up. The GSE's hold about $5 trillion in mortgages and mortgage-related securities; that is about 1/2 of the entire amount of mortgage loans outstanding (about $10.1 trillion).

Given that GSE's hold half of all mortgages, and the securities are also held by other entities such as pension funds, etc., it is IMPOSSIBLE for banks to hold on to the majority of the loans they originate.

Impossible.

Front page of NY Times today. WRT My point #6 on the previous page of this theatd

6. Corporate earning are word.

http://www.nytimes.com/2012/09/17/business/earnings-outlook-in-us-dims-as-global-economy-slows.html?_r=1&hp

earnings are worse.

13. Investment banks still are trying to figure out how to make money and the downsizing continues

From the Economist, Sept 15th, "Nomura, a Japanese bank that pounced on the European and Asian arms of Lehman Brothers, is licking its wounds and retreating from its ambitions to build a global investment-banking powerhouse. Deutsche Bank, long reliant on its investment bank to boost profits, now hopes for utility-like returns on equity of just 12% compared with the 20% it used to earn.

The retreat also has a human cost. The financial industry in London, the world’s most international banking hub, will probably have shed 100,000 jobs by the end of this year from its peak of 354,000 in 2007. In New York the industry employs 20,000 fewer people than it did before the crisis, and it is likely to lose 2,600 more jobs this year. Pay is also falling fast—down by about 30% since 2007—and it comes with new strings".
http://www.economist.com/node/21562911

so buying Manhattan RE is for Sucka's

#1.
1. Manhattan’s apartment vacancy rate rose in August to its highest level for the month in three years

http://www.bloomberg.com/news/2012-09-13/manhattan-apartment-vacancy-rate-climbs-after-rents-reach-record.html

Steve, I just read your quote. you just don't get it, I can't argue with such a neophyte that contradicts himself.. just drop it. you don't get it

ie, however, ALL mortgage banks must sell their mortgages because they are not depositary institutions so they have to repay their liquidity providers. Presently commercial banks hold mortgages that do not come with an agency guarantee because they have no choice.

huh? banks are not depositary institutions. WTF are you talking about. DROP IT PLEASE!! go audit something.

Steve, Do you understand what is going on with the GSEs(for you, FNMAE and Freddie Mac do you know who they are) right now?

forget it.. i can't do this.. you obviously don't have a clue

From my point #11.
11. Forclosure pipeline will start to hit NY RE

http://www.bloomberg.com/news/2012-09-12/new-york-homebuyers-face-risk-of-fannie-rate-penalty-mortgages.html

my point # 9.
9. Unemployment is over 10% in NYC
http://labor.ny.gov/stats/pressreleases/pruistat.shtm

Mortgage banks are state-chartered institutions that operate as mortgage warehouses - they have lines of credit with other institutions that fund the loans, which they turn around and resell into the secondary market. I'm sorry if you don't know this.

There are 3 players in the mortgage origination market: commercial banks, mortgage banks, and mortgage brokers. They are not the same thing; not all mortgage lenders are mortgage banks. Countrywide was a mortgage bank.

Yes I do understand what is going on with GSE's - the fact is they hold half of all mortgages, and they originated none of them, and therefore banks cannot keep the majority of their loans on their books, because half alone are held by the GSE's.

It's unfortunate that you have decided to declare victory and walk away when you "obviously don't have a clue." I provided you with reliable sources that all clearly state that most mortgages are sold into the secondary market - contradicting your claim that banks kept them on their balance sheets - explained to you the difference between commercial banks and mortgage banks, provided you with real statistics on the size of the secondary mortgage market - commercial, residential, agency, and non-agency - and showed you real figures from Wells Fargo on its mortgage operations.

You "can't do this" because you were proved wrong, and as a right-winger that you are you are unable to admit that you were wrong - or to show one shred of evidence to prove that what you're saying is right. Like Larry Kudlow and Rick Santelli before you, you are proved wrong at every turn, so instead of changing your tune, you just block your ears.

my point #5.
5. CPI is going higher as reported this week

http://www.businessweek.com/news/2012-09-14/u-dot-s-dot-consumer-price-index-rose-in-august-most-since-2009

My 10th point

10. Incomes is down
http://www.bloomberg.com/news/2012-09-12/u-s-poverty-rate-stays-at-almost-two-decade-high-income-falls.html

My bad Steve was quick to I misread your quote about mortgage banks. -thought you wrote just bank. But when someone one says the GSEs are the largest buyers of MBS when in fact they are shrinking their BS, I am quick to judge. Especially when at this point in time..(the last few years) Banks, REITs and the FED and large MM have been the largest buyers of MBS.. You see Steve.. Banks have to invest their bank deposits in something when they are not lending. The make money on that spread. When there are credit problems they buy securities that are AAA or with a government implicit guarantee. they make money off that spread..

Really, Brooks? Thank you for that lesson in banking. I learned that in Money and Banking, Econ 103, in 1979, but thank you for the refresher course, as incorrect as it is: most of the money that banks make on mortgages is in the origination and servicing of the mortgages. Once they sell them there is no "spread" because they don't own the mortgages anymore.

GSE's are still the single largest purchasers of MBS's - they are shrinking, but so is the entire market, and I can't tell you which is the cause and which is the effect.

The Fed does not purchase new issues of MBS's; it only purchases already existing agency debt, not direct placements.

Contrary to your claim, the securities don't have the guarantee; the mortgages have the guarantee. The banks sell the loans to the GSE, which guarantees them, and it then packages those loans into securities. So the securities do not have the guarantee; the underlying asset has the guarantee.

Banks buy securities that are AAA-rated when there are credit problems, and when there are not.

Steve forget it.. get up to date you are really a dope --
The GSE have been mandated to shrink their Balance Sheet, not because the market is gettingsmaller.
Also, Fed is buying MBS not agency debt. Do you understand the difference?

But back to you claim that I make everything up.

My point number 2.

2. The yield curve steepened after the qe3 announcement,

closing yield 12 Sept 14 Sept
2yr note .246 .254
10 yr note 1.76 1.86
30yr bond 2.93 3.08

do the math Steve unless you need a refresher in that too.

Maybe take a refresher finance, econ and math course.

So dispute your claim that Steve I make everything up, I have provided the source and a link to all of them(oh I forget point 2 was bloomberg). except for 3,4,7 and 12.

My source for point - besides being obvious to most has been discussed on this site and most recently by AR and apt23 on this thread.
point 7 read the front of any news paper. And 12 again obvious, and has been discussed by many here on this site.

oh point 4, I almost forgot; Here is the Fund Flow data site.

http://www.lipperusfundflows.com/#create:home:Home:/php/signup_trial.php

not only do you make everything up....you're made up.

Accelerated Wind Down of the Retained Mortgage Investment Portfolios at Fannie Mae and Freddie Mac

The agreements require an accelerated reduction of Fannie Mae and Freddie Mac’s investment portfolios. Those portfolios will now be wound down at an annual rate of 15 percent – an increase from the 10 percent annual reduction required in the previous agreements. As a result of this change, the GSEs’ investment portfolios must be reduced to the $250 billion target set in the previous agreements four years earlier than previously scheduled.

http://www.treasury.gov/press-center/press-releases/Pages/tg1684.aspx

Brooks , greyed out posters are not sources.

so says the queen of tomato sauce and the king of the useless, brainless post.

"Tell ol' Automatic Slim
tell ol' razor-toting Jim
tell ol' butcher-knife toting Harry
tell ol' fast-talking Fanny
We gonna pitch a ball
down at the union hall
we gonna romp and honk till midnight
we gonna fuss and fight till daylight
we gonna wang dang doodle all night long..." (Willie Dixon, "Wang Dang Doodle")

wow.

now i understand QE3.

wow.

Ceaseless reminiscing about Sing Along with Mitch Miller and His Gang.

Typically intrusive and off-topic.

Now, alanfart is the SE police!

brooks2, gse are not the biggest buyer of mbs, but the biggest seller

they are the biggest buyers of loans and securitize them into mbs

I understand that... I don't think Steve does.

we were talking about banks then he snuck in mortgage banks when he started to figure out he was wrong

alkiealanhart, the loser-liar, typically intrusive and trolling.

He told se readers that ali r. would post a comment telling the truth about my lies.
Yet another off-topic BS comment from the drunken troll, alkiealanhart.

Truth,

alanfart and ar are hypocrites.

trUth, copy and paste exactly what I told SE readers.

alanhart,

How was your sunday dinner?

Columbiacounty, if Riversider is the Queen of Tomato Sauce, what are you the Queen of?

Wednesday is Prince spaghetti day.

What does wednesday have to do with sunday?

Financeguy: the bubble can keep right on going if there are enough buyers who don't need credit and they continue to believe in the pipeline following them.

FG: There are many on this board --including me-- who have been waiting for the pools of cash supplied by foreign buyers to dry up and NYC prices to drop. Credit is much, much tighter. And yet, prices are going up in many neighborhoods. How long do you think it can last?

Couldn't agree more about need for infrastructure and can't believe congress couldn't get it done while commodity prices were in the skids the past few quarters. Btw, the market seems to be pricing in an Obama win and if it goes that way, I expect the spending on infrastructure will get a boost. I find your posts fascinating but don't know much about your background. Can you drop a few hints about your profession, interest in NY RE? How bout a hint of age range? Not too many young guns with your perspective. At least not many in finance. Quite a few in the arts.

Brooks, please. First, MBS's ARE agency debt, but that's besides the point. The point is that Fed IS PROHIBITED BY LAW from buying anything but US Treasurys and agency debt. The Fed is further prohibited from buying Treasurys directly from the Treasury, and agency debt directly from the agencies. They must buy them on the open market. That is why they are called Open Market Operations.

Period, case closed. You're getting more and more ignorant by the post.

The fact that the GSE's have been ordered to shrink their balance sheets may or may not cause an overall reduction in the mortgage market. I'm not aware of any study that shows which is the cause, which is the effect, but when the agencies turn around and sell the mortgages, they are no longer on their balance sheet. They become off-balance sheet contingent liabilities.

Caomina seems to understand something else that Brooks doesn't - as I said, GSE's BUY mortgages, guarantee them, and securitize them: agencies sell mortgage securities, not buy them. They buy the loans and make the securities, but they do not securitize all mortgages they buy; some they keep on their books. Those are the ones that they were ordered to shrink, and the amount to fully ONE-HALF of all outstanding mortgages in the country, excluding the securities they issue.

I didn't make any comment about QE3, although a steeper yield curve would make sense b/c the Fed said it would stop Operation Twist after the end of the year, whose aim was to flatten the yield curve. I didn't make any comment on anything else you said, other than your ridiculous statement that banks keep most of their loans on their books, when they plainly do not.

>Brooks, please. First, MBS's ARE agency debt, but that's besides the point. The point is that Fed IS PROHIBITED BY LAW from buying anything but US Treasurys and agency debt. The Fed is further prohibited from buying Treasurys directly from the Treasury, and agency debt directly from the agencies. They must buy them on the open market. That is why they are called Open Market Operations.

This is a tremendously important fact.

>I didn't make any comment about QE3,

Wait a minute, isn't this thread about QE3? You came here to discuss Open Market Operations instead?

Foreign appetite for Manhattan is not likely to drop off soon. We represent a relatively safe investment for people in other countries worried about currency controls, inflation, arrest or having their assets confiscated.

Yes, and foreign appetite in Miami, too, like the NYT shill article about Argentinians buying Miami real estate, which article proudly states at once that Argentinians can't get money out of the country, and that therefore Argentinians are buying Miami real estate with money that they can't get out of Argentina.

And the two real estate agents who were studying Mandarin for their Chinese clients, as if a) there weren't enough Mandarin speakers in NYC already; and b) you could become fluent and conduct business in Mandarin in less than 30 days.

Then of course there was the Irish Carpenter.

steve, first of all, don't accuse my alias doesn't know something that i do. he just pretends sometimes

secondly, Fed IS NOT PROHIBITED BY LAW from doing anything, you cannot even audit this privately own corporation.

Steve you seem to change your points arguments with the tied. I really don't think you have a clue. Go google some thing else and to try to support another argument about something else and pretend you are an expert in which you clearly are not

MBS= mortgage backed security

Th operative word= backed --- back by collateral which are mortgage loans that must confirm to the agency underwriting standards.
The agency insures the payments of principal and interest of these collateralized mortgage operations.

The agencies also issue debt that is not collateralized to find there operations additionally they used to issues equity and preferred securities which ate now worthless.
They agencies continue to issues debt and have been meeting these obligations with he help of Unccle Sam.

You see Steve there is a difference between agency debt and MBS

Again typos/ misspelling and grammar I blaming on the iPhone

Caos - the Fed is prohibited by law from buying bonds directly from the Treasury or the agencies; the agencies and the Treasury ARE audited, so therefore somebody would find out.

Moreover, the Fed is not a "privately-own[ed]" corporation - that would be the First and Second Banks of the United States. The Fed is an independent government institution chartered by Congress; it does not have any owners.

Oh, Brooksie! I'm sorry that you didn't know that banks sell most of the mortgages they originate on the secondary market (score one for me), that mortgage banks are not depositary institutions (score another one for me), that MBS's ARE agency securities (another one for moi!), that the GSE's don't guarantee their MBS's, but rather the underlying mortgages (yup - another for me!), and that the GSE's securitize many - though not all - of the mortgages that they purchase (indeed, one more for Stevie!).

I could go on, but no need to - from the very beginning, with your rants of "Socialist" against FGuy, it was obvious that you belong to the Rick Santelli / Larry Kudlow School of Wreckonomics, which wreckonomics have never worked.

Give it up Steve.... You can bend and twist anything the way you want, but you don't have a Fking clue

This Wang Dang Doodle is still going on.
You guys have lots of energy.

stevejhx
about 2 hours ago
Posts: 12090
Member since: Feb 2008
ignore this person
report abuse Brooks, please. First, MBS's ARE agency debt
,
A perfect example.. Again this is clealy not true.

Twist the words the way it it suits you.. you don't have a Fking clue

can it, crazy

brooksie,

my sense is that you should stay away from subjects involving politics and finance. you have strong opinions, many of which I (and others) disagree with. but where one tries to engage you in reasonable discussion, your writing is so inarticulate as to make it hard to understand whatever is it you are trying to explain. And, where, it seems you a making an intelligible point, the base knowledge to support your point is so weak as to make your whole message (and your thought process) laughable.

i enjoy your work with price choppers, and the sorry state of the Midtown East market.

Truth,

Have you noticed, aboutready has been using the word 'projecting', recently? It dawned on me, ar is modeling the conversations she had with her psychiatrist, when she had her bout with paxil. ar is an interesting piece of work!

Brooksie, clearly it is true:

http://www.federalreserve.gov/newsevents/reform_mbs.htm

GSE's issue mortgage-backed securities; others can and do as well, but the primary issuers are GSE's.

http://www.sec.gov/answers/mortgagesecurities.htm

Let me quote directly from the SEC:

"Most MBSs are issued by the Government National Mortgage Association (Ginnie Mae), a U.S. government agency, or the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), U.S. government-sponsored enterprises."

A subset of MBS's is CMO's - collateralized mortgage-backed obligations. Normally, though, CMO's are issued by private entities; MBS's are issued by the GSE's.

Yikes- most people seem to grey out brooks2. In fact, 80% of the posts on this page are greyed out for me,

LMAO at jason!

jason, join us in being grey, or are you graycist?

Gray is the New Black.

I would not take it that far, 50 shades of grey does not include blacks like the jetsons and flinstones.

his Wang Dang Doodle is still going on.
You guys have lots of energy.

Hey Truth., Have a good New Year

Brooksie, Wang Dang Doodle and all, you're confusing your terms. "Agency Debt" refers to Fannie Mae, Freddie Mac, Farm Credit, FHLB, Farmer MAC, Sallie Mae, and TVA. Agency MBS's are a subset of all agency debt.

Common and preferred stock of the GSE's was never considered "debt" because stock is equity, not debt. What you are discussing are "Agency Debentures," which is a different type of instrument issued by government agencies for their own internal funding.

http://www.investopedia.com/terms/f/fanniemae.asp#axzz26lRH3xo2

The Fed can only buy MBS's issued by these agencies; it cannot buy private issues.

Steve sound like you are finally figuring it out

And I guess you do read the new grays. Maybe you will learn something

Keep googling maybe you will find more of your errors

No errors on my part, Brooksie, though I do occasionally read some of the Grays.

Agency MBS's are a subset of Agency Debt - I don't think that I ever stated otherwise, though I did have to reread your thick wording to figure out what you were trying to say, because it is inconceivable to me that anyone could misread what I wrote the way you did when I was so very clear about it.

Nothing to do with Google - I was quite correct, though your interpretation of what I said was all wrong.

Git yontef, Riversider.

alkiealanhart's zababonehs mikh arts nisht.

steve, you are either a liar or a brain-washed dumb

the fed is ALWAYS a privately owned corporation since it incorporated, (this is also written on the wall in their office building but guess you are too blind to see it) there's no such thing as an independent government institution chartered by Congress; the fed has many owners including a few top investment banks.

http://www.federalreserve.gov/faqs/about_14986.htm

The Federal Reserve System fulfills its public mission as an independent entity within government. It is not "owned" by anyone and is not a private, profit-making institution.

As the nation's central bank, the Federal Reserve derives its authority from the Congress of the United States. It is considered an independent central bank because its monetary policy decisions do not have to be approved by the President or anyone else in the executive or legislative branches of government, it does not receive funding appropriated by the Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms.

However, the Federal Reserve is subject to oversight by the Congress, which often reviews the Federal Reserve's activities and can alter its responsibilities by statute. Therefore, the Federal Reserve can be more accurately described as "independent within the government" rather than "independent of government."

The 12 regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation's central banking system, are organized similarly to private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.

>The Reserve Banks are not operated for profit
>dividends are, by law, 6 percent per year.

6% of what?

It looked to me like the debate between Brooks2 and Stevejhx went off the rails over factual dispute as to whether bulk of mortgages originated by banks are sold off or held on the books. Prior to seeing the back and forth, my sense, based on conversations with my own banker at Wells Fargo, was that the bulk of mortgages WFB originates are still sold off, but that they do some noncomforming and creative loans for private banking clients that they keep on the books because they no longer have a choice - that is why the underwriting hurdles are so high; they now really care if those on the other end of the loan can pay them back. I also looked on Quora, and and one Alex Song, a hedgefund analyst provided a slide from a GS presentation that suggested that 62% of loans originated are still sold off as MBS. See http://www.quora.com/Mortgages/What-percentage-of-U-S-mortgage-loans-have-not-been-securitized-or-traded. Accordingly, my sense is that Stevejhx was right as to the point that touched off the crazy back and forth. I like Brooks2 and was distressed to see Brooks2 dig in so hard on a suspect point; Brooks2 - what makes you believe so strongly that the banks are keeping the bulk of mortgages they originate on their books? or did I completely misunderstand what you were saying (always possible).

Also, we were with a Brazilian contingent this weekend, and listening to them, I cannot imagine the bubble at the high end of Manhattan RE (over $5 million) is going to end anytime soon. All I could think about listening to them was the French Revolution. I actually couldn't take it any more and flat out asked them if they were worried about the disparity in wealth; they looked at me and explained that all their cars are armored, and also explained that most of their buildings have helipads. The conversation then turned to wishing they could travel by helicopter as easily in the states as they can in Brazil.

You are correct NYCNOVICE, I said this. "Most banks are retaining the few newly underwritten Mortgage lns on their BS. Banks are buying Agency(govt guaranteed) MBS because they an not find enough qualified borrowers"

But Steve did not understand that the loans banks make that don't conform to agency underwriting standards(FNMAE and FReddie AMc) they are holding on their BS(there is virtually no securitization market for NON-AGency MBS). Addionally, since banks are having difficulty finding good credits to lend to they are buying AGENCY MBS whick banks can lever.

It is also easy to see that steve does not understand the difference between Agnency Debt and and Agency MBS.

When the FED announced additional stimulus with QE3, they said the would be purchasing MBS(AGECNCY MBS). NOT AGECNY DEBT.. there is a difference. I think Steve just started to realize this when I challenged is inteligence.

Brazilian waxes...... Mmmmmmm mmmmmm. So pretty

I read Steve to agree that banks are holding nonconforming loans; but that they are selling conforming loans for securitization (even though they may subsequently buy them back in their securitized version, which is a lot less risky than keeping them whole on the their books). I thought his simple point was that banks have incentive to use any gained QE3 liquidity to make other more lucrative loans (e.g., subprime car loans) that still have strong ABS market such that QE3 was not going to have any real effect on Manhattan real estate (topic of the thread). The rest re whether MBS issued by GSE's qualifies as agency debt that can be purchased by Fed under terms of QE3 is completely over my head. Accordingly, I will bow out and go back to lurking, because as all of my posts make clear, economic/financial analysis is hard and hurts my head.

Lurk under one of your aliases. Flmaozz.

I wonder who writes 'hurts my head'. Flmaozzz

Throw enough sh1t on the wall something will stick

It seems like everybody understands what I wrote except Brooksie. I posted the figures that showed that non-agency MBS's and related products have had virtually zero market since 2008. I posted figures that shows that even MBS's with agency guarantees have seen their volume fall considerably.

Brooksie said: "Most banks are retaining the few newly underwritten Mortgage lns on their BS."

That is false. Most banks are selling their mortgages to GSE's and others. Very few banks are issuing non-conforming loans, but most of those that they are issuing they have to keep on their balance sheets, which is not only what I said, but for which I posted figures.

Brooksie said: "Banks are buying Agency(govt guaranteed) MBS because they an not find enough qualified borrowers"

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.

Brooksie also claims: "It is also easy to see that steve does not understand the difference between Agnency Debt and and Agency MBS."

That's not so easy to see because Agency MBS's are a subset of Agency Debt, because Agency MBS's have recourse to the Agency. You made a comment that was not at all clear: the agency debt you are referring to is called "Agency Debentures," and I never made any comment whatsoever on Agency Debentures. All I said was that the Fed is limited to buying agency debt - debentures and MBS's - on the open market, and not directly from the agencies. The rest of it you made up as part of a new argument trying to prove that I didn't know what I was talking about, when I wasn't even addressing the point that you raised.

Ever. All I said was that the Fed would buy agency debt as part of QE3. Brooksie then made a differentiation between agency debentures and agency MBS's, which differentiation I never, ever mentioned. In Brooksie's narrow mind agency MBS's are not agency debt; however, structurally, on the balance sheet, unless it is an MBS with recourse to the lender (and most do not have recourse), they are identical as they are debts of the agency.

And my whole point WAS: "that banks have incentive to use any gained QE3 liquidity to make other more lucrative loans (e.g., subprime car loans) that still have strong ABS market such that QE3 was not going to have any real effect on Manhattan real estate."

Brooksie - you should really avoid trying to paint people as stupid, because you wind up painting a self-portrait.

Noah, There are two realities about the Fed, one listed in your link http://www.federalreserve.gov/faqs/about_14986.htm
and another one that engages in secretive dealings and then stonewalls freedom of information requests from Bloomberg and fights audits sponsored by Congress, or pays out CDS @ 100 cents on the dollar without even negotiating. And the actions of the regional Fed banks are at a whole different level from the "up front" manner of Bernanke and Co.

Steve, Still trying to cover your tracks?

"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"

huh?

Go talk to a bank treasurer then Steve.

Steve, Can you read. What happened when you tried googling this?

"commercial bank MBS holdings"

"There was a $51.4 billion increase in the agency MBS holdings of large commercial banks in the past two weeks, the largest jump in 18 months, according to the latest survey data from the Federal Reserve"

http://www.structuredfinancenews.com/news/-209256-1.html

lets see y ou squirm out of this one now

That's an EXCELLENT article you posted, Brooksie!

Dated August 2, 2010.

Google that.

Hmm. More conspiracy theories from the guy who posts 2+ year old articles:

"another one that engages in secretive dealings and then stonewalls freedom of information requests from Bloomberg and fights audits sponsored by Congress, or pays out CDS @ 100 cents on the dollar without even negotiating. And the actions of the regional Fed banks are at a whole different level from the "up front" manner of Bernanke and Co."

First, though Brooksie might not like it, nothing that the Fed did was illegal. Second, he cites nothing other than "a whole different level" as his "evidence" of the Evildoing at the Regional Fed Banks.

Which really do nothing but hold deposits and perform audits on their member banks, and they do economic research.

So what Evildoing are they doing, Brooksie?

"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 not you say this? or it makes "ZERO sense" now, but then it made sense?

keep it up Steve - try covering your tracks on this one

I absolutely did say that, and I stand by it. They do not hold MBS's as investments. See Wells Fargo's financial statements in that regard:

"Table 10 presents a summary of our securities available-for sale portfolio. Securities available for sale consist of both debt and marketable equity securities. We hold debt securities available for sale primarily for liquidity, interest rate risk management and long-term yield enhancement. Accordingly, this portfolio consists primarily of liquid, high-quality federal agency debt and privately issued mortgage-backed securities (MBS). The total net unrealized gains on securities available for sale were $7.0 billion at December 31, 2011, down from net unrealized gains of $8.3 billion at December 31, 2010, primarily due to gains realized from sales partially offset by slight widening of credit spreads in some asset classes."

They do not list any MBS's in their investment portfolio.

Notice also how they lump "agency debt" into MBS's - like all rational people in the world do, except you - and the overall amount is a pittance: $210 billion at a bank with assets well in excess of $1 trillion.

Most MBS's are purchased by insurance companies and pension funds, for the income stream and the AAA rating, and they are held to maturity. Banks don't hold MBS's to maturity because they are very difficult to manage and value, given the ability of borrowers to prepay.

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.

o god u just won't admit it when you are wrong... i give up- waste of time

You should give up - I do when I'm wrong.

But I'm not. 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.

Here's an article from 3 weeks ago:

http://www.myplaniq.com/articles/20120901-hedge-funds-pile-into-mbs-go-for-mortgage-gains/

"Hedge Funds Pile into MBS, Go For Mortgage Gains"

And here's another one from May:

http://www.zerohedge.com/news/pimco-total-return-fund-mbs-holdings-hit-record-137-billion-fund-rises-all-time-high-aum

"PIMCO Total Return Fund MBS Holdings Hit Record $137 Billion As Fund Rises To All Time High AUM"

What more do you want from me, except to have me admit to being wrong when I'm not?

Can't believe this stupid conversation continues,.

anecdotes don't really count but just to pile on, my broker has presented several mbs investments, has been pushing them, has invited me to presentations by hedge fund managers that have highlighted mbs investments. For a couple of years now, this is where the big time money has been going.

Correct apt23, but my guess is that those HF are buying Non-agency and sub-prime MBS.
If they are buying agency mbs, they are buying agency mbs derivatives I would imagine.

Steve does not seem to acknowledge that I said buyers of agency MBS are banks, reits, the fed and MM(last I checked pimco was a mm).