Chinese banking faces concerns to recoup almost 23 % of the 7.7 trillion yuan ($1.1 trillion) they have loaned to finance local government activity infrastructure plans. Roughly half of all loans require servicing by secondary generators including sureties since the ventures can not bring forth sufficient income. The China Banking Regulatory Commission has adviced financial organizations to write off non-performing project loans by the end of this year.
Commission Chairman Liu Mingkang, enounced that borrowing by the alleged local government financing vehicles may endanger the banking system. China’s five-largest depository financial institutions, including Agricultural Bank of China Ltd., plan to raise approximately $54 billion to refill capital subsequent to the sector reached a record $1.4 trillion in credit last year. This situation resembles what the United States experienced during the period of easy money in the real estate market that culminated in the collapse of the housing market and initiated a world-wide financial crisis. The local governments arrange the funding options to finance projects such as highways and airports due to restrains on their ability to immediately borrow money. China's central government this year controlled borrowing on fear money isn’t being applied for feasible projects. It is written under the Chinese constitution that local governments cannot offer their own debt.
Saturday, July 24, 2010
Thursday, July 15, 2010
Goldman to pay $550M to settle fraud charges; SEC had alleged firm mislead buyers of mortgage-related investments http://ow.ly/2ca07
Sunday, July 11, 2010
November 12, 1999 A Day To Remember
Many people say that history repeats itself. Obviously real estate and the financial industry are not exempt from it. November 12, 1999 is the year that initiated the big financial crisis and almost put the whole world to a halt. I know many people will tell you that it started in September 2008 when Lehman Brothers publicly announced they were folding. However, the problems started way before that.
The fall of Lehman was the result of the event of November 12, 1999. This date is when President Clinton step up, possibly against his better judgment, and sign into law the brand-new Financial Services Modernization Act (also known as Gramm-Leach-Bliley), repealing Glass-Steagall of 1933. Then less than a decade later after the signing, this new act of 1999 would be directly responsible for bringing the entire world to the brink of financial ruin.
For those of you that do not remember, the Glass-Steagall Act of 1933, was the post–Wall Street crash legislation that prevented commercial banks from merging with investment banks, thus eliminating the opportunity for the "investment guys" to get their hands on limitless supplies of depositors’ money. Glass-Steagall was nothing less than a barrier, and it stayed in place for more than sixty years, but the major U.S. banks wanted it abolished. They’d tried but failed in 1988. It would take another four years for this Depression-era legislation to come once more under attack.
In early spring of 1998, however, a Wall Street detonator exploded, sending a sharp signal that the market was willing to go it alone despite the politicians. On April 6, 1998 Citicorp announced a merger with Travelers Insurance, a large corporation that owned and controlled the investment bank Smith Barney. The merger would create a vast conglomerate involved with banking, insurance, and securities, plainly in defiance of Glass-Steagall.
The $70 billion merger between Citicorp and Travelers went right ahead regardless. The result was a banking giant, the largest financial conglomerate in the world, and it was empowered to sell securities, take deposits, make loans, underwrite stocks, sell insurance, and operate an enormous variety of financial activities, all under the name "Citigroup". The deal was obviously illegal, but Citigroup had five years to get the law changed, and they had very deep pockets.
Then in November 1999, the necessary bills were passed 54–44 in the Senate and 343–86 in the House of Representatives. The investment industry said that this time it would be different. However, we know better and there were a reason for the 1933 law to be in place to begin with. I knew that Glass-Steagall had been put in place very deliberately to protect customer bank deposits and prevent any crises from becoming interconnected and forming a house of cards
or a row of dominoes. This old law that lasted for six decades had successfully kept the dominoes apart for more than half a century after his death. However, on November 12, 1999 this all changed. The rest of the story you know it by now.
The fall of Lehman was the result of the event of November 12, 1999. This date is when President Clinton step up, possibly against his better judgment, and sign into law the brand-new Financial Services Modernization Act (also known as Gramm-Leach-Bliley), repealing Glass-Steagall of 1933. Then less than a decade later after the signing, this new act of 1999 would be directly responsible for bringing the entire world to the brink of financial ruin.
For those of you that do not remember, the Glass-Steagall Act of 1933, was the post–Wall Street crash legislation that prevented commercial banks from merging with investment banks, thus eliminating the opportunity for the "investment guys" to get their hands on limitless supplies of depositors’ money. Glass-Steagall was nothing less than a barrier, and it stayed in place for more than sixty years, but the major U.S. banks wanted it abolished. They’d tried but failed in 1988. It would take another four years for this Depression-era legislation to come once more under attack.
In early spring of 1998, however, a Wall Street detonator exploded, sending a sharp signal that the market was willing to go it alone despite the politicians. On April 6, 1998 Citicorp announced a merger with Travelers Insurance, a large corporation that owned and controlled the investment bank Smith Barney. The merger would create a vast conglomerate involved with banking, insurance, and securities, plainly in defiance of Glass-Steagall.
The $70 billion merger between Citicorp and Travelers went right ahead regardless. The result was a banking giant, the largest financial conglomerate in the world, and it was empowered to sell securities, take deposits, make loans, underwrite stocks, sell insurance, and operate an enormous variety of financial activities, all under the name "Citigroup". The deal was obviously illegal, but Citigroup had five years to get the law changed, and they had very deep pockets.
Then in November 1999, the necessary bills were passed 54–44 in the Senate and 343–86 in the House of Representatives. The investment industry said that this time it would be different. However, we know better and there were a reason for the 1933 law to be in place to begin with. I knew that Glass-Steagall had been put in place very deliberately to protect customer bank deposits and prevent any crises from becoming interconnected and forming a house of cards
or a row of dominoes. This old law that lasted for six decades had successfully kept the dominoes apart for more than half a century after his death. However, on November 12, 1999 this all changed. The rest of the story you know it by now.
Monday, July 5, 2010
Mortgage Rates Are Down But Not Helping The Housing Market
There is a strange phenomenon occurring at the mortgage broker offices these days. Mortgage rates have sunk to levels not seen in more than a half-century, for example 4.58 percent for an average 30-year fixed loan. Yet brokers and lenders report not a flood but a trickle of customers. So What is Happening? Lending standards prevent many from refinancing, qualifying for mortgage; the famous tale of the haves and have-nots. The haves are those who stand to save money from refinancing and have the financial standing to do so. Since mortgage rates have been low for so long, most of them already have refinanced in the past 18 months. Doing so again wouldn't be worth the cost for most. For many of the homeowners who refinanced over the past two years, rates would need to drop to around 4 percent for refinancing to be financially worthwhile.
The have-nots? Those are the millions of Americans pummeled by the housing collapse. They have little or no home equity or no money for down payments. Or they lack the credit or steady income to get or refinance a mortgage. The 4.58 percent average for a 30-year fixed-rate loan last week was the lowest on records that mortgage company Freddie Mac has kept since 1971. The last time rates were lower was the 1950s, when most long-term home loans lasted just 20 or 25 years. However, mortgage lending standards have tightened so much since the financial crisis that many people with decent but not-stellar credit can't qualify. Lenders are demanding stronger credit scores and higher down payments or home equity. In other words, the pendulum has swung too far the other way. Most people in the lending industry acknowledge that lending standards were far too lax during the boom. May be the goal is to have tighter qualifications to prevent the mortgage crisis we just lived, but allowing the market to flow, in other words, the pendulum needs to come back to the middle.
Another factor that seems to affect the slower demand for new loans, is that some borrowers who do have good credit and solid jobs are still being rejected for refinanced loans. It's because their homes are worth less than they owe on their mortgage. About a quarter of American households with a mortgage are in this predicament. Blame the housing bust. It shrank home values and depleted home equity.
The have-nots? Those are the millions of Americans pummeled by the housing collapse. They have little or no home equity or no money for down payments. Or they lack the credit or steady income to get or refinance a mortgage. The 4.58 percent average for a 30-year fixed-rate loan last week was the lowest on records that mortgage company Freddie Mac has kept since 1971. The last time rates were lower was the 1950s, when most long-term home loans lasted just 20 or 25 years. However, mortgage lending standards have tightened so much since the financial crisis that many people with decent but not-stellar credit can't qualify. Lenders are demanding stronger credit scores and higher down payments or home equity. In other words, the pendulum has swung too far the other way. Most people in the lending industry acknowledge that lending standards were far too lax during the boom. May be the goal is to have tighter qualifications to prevent the mortgage crisis we just lived, but allowing the market to flow, in other words, the pendulum needs to come back to the middle.
Another factor that seems to affect the slower demand for new loans, is that some borrowers who do have good credit and solid jobs are still being rejected for refinanced loans. It's because their homes are worth less than they owe on their mortgage. About a quarter of American households with a mortgage are in this predicament. Blame the housing bust. It shrank home values and depleted home equity.
Home Buyer Credit Is Extended
On July 2, 2010, President Obama signed into law bills extending the closing deadline for claiming the federal homebuyer tax credit and temporarily reinstating the National Flood Insurance Program. Under HR 5623 homebuyers who were under contract by April 30 now have until Sept. 30 to close their home purchase and claim the federal homebuyer tax credit, if they meet other eligibility requirements. Real estate and lending industry groups said thousands of homebuyers would have missed the original closing deadline of June 30 because they were waiting for bank approval of short sales, or coping with other delays caused by third parties handling their closings.
Subscribe to:
Posts (Atom)