All items from Credit Slips

MLEA at the University of Illinois

On October 11 & 12, the University of Illinois College of Law will host the 12th annual Midwestern Law & Economics Association conference. The event consists of law professors and economists presenting papers with varying degrees of law-and-economics content, ranging from empirical analyses and formal economic modeling to legal philosophy and doctrinal papers infused with economic thinking. Paper submissions are due by August 1 and should be submitted to me at rlawless-at-illinois-dot-edu. More information can be found here.



From Credit Slips
Posted 3 days 7 hours ago

On the Valuation of Hedge Funds (or Hedge Fund Managers)

So Felix Salmon has taken a justifiable swipe at some oddish Bloomberg articles on Citibank's spinoff of its internal hedge fund, as required by the Volcker Rule.
But in doing so, it seems as though he may have hit his own wicket.  (OK, I'll admit to wishing I was here, rather than grading Con Law exams).
For example, he argues that "all future income is reliant on both the investors and the managers sticking around, which means that the value of a hedge fund to its managers is always going to be higher than the value of a hedge fund to an outside investor with little ability to keep the managers in place."



From Credit Slips
Posted 1 week 3 days ago

Cries for Relief from the Hungarian Financial Crisis

ForintNo, not that Hungarian financial crisis. Now that the country seems to have more or less righted itself, its citizens are still struggling with their own debts. Reuters reports that the Managing Director of the National Bank of Hungary has called for the country to adopt a personal insolvency law, much as Ireland just did in the midst of its own crisis.



From Credit Slips
Posted 1 week 4 days ago

Who is Mel Watt?

On May 1, President Obama nominated Rep. Mel Watt (D-N.C.) to be the director of the Federal Housing Finance Agency, the conservator for the mortgage giants Fannie Mae and Freddie Mac.
These two entities together currently back a large majority of new mortgages and hold or guarantee about half of all U.S. mortgages. Like other entities immersed in the mortgage market, Fannie and Freddie suffered great losses in the mortgage meltdown and were taken over by the federal government at the end of the Bush administration in September 2008.
Watt could be a key figure in the late stages of the mortgage crisis and in redefining the role of Fannie Mae and Freddie Mac going forward.  So who is this eleven-term congressman and what does he care about most?



From Credit Slips
Posted 1 week 5 days ago

Jon Stewart's Residential Evil

Any time The Daily Show has a piece that mentions both MERS and the OCC, it gets a link on Credit Slips. There is even a short clip featuring former Credit Slips blogger and current U.S. Senator (in that order) Elizabeth Warren. 



From Credit Slips
Posted 1 week 5 days ago

Bankruptcy Filings Over the Next 12 Months

2013 Projected Filings from MayBankruptcy filings have continued to decline, and using data supplied by Epiq Systems, my analysis suggests the same trend will occur over the next twelve months.
First, looking back at March and April, bankruptcy filings declined 12.0% and 11.8% respectively on a year-over-year basis. The daily filing rate in March was just short of 4,900 and in April was 4,575.



From Credit Slips
Posted 1 week 6 days ago

Obama to replace DeMarco at FHFA

with Mel Watt, according to an AP story today.  Congressman Watt of North Carolina was a moving force behind Miller-Watt-Frank, the mortgage reform legislation that eventually found its way into Dodd-Frank financial reform.  Given that our all-but-nationalized housing finance system is directed by this somewhat obscure agency, the occupant of this post can have a huge influence on the future direction of credit, housing and the economy.
If he is confirmed, Watt can be expected to make major changes to Fannie and Freddie policies, for example on principal write-downs and cracking down on mortgage servicer errors and abuses.   Perhaps he could also begin to envision a more rational future assignment of the public and private roles in financing homes, in which public subsidy serves a public purpose and private capital carries the burden of its own credit risk.



From Credit Slips
Posted 2 weeks 5 days ago

The Stakes Of Design

SlotThat 99% invisible is a vibrant architecture and design podcast might have been beside the point in Credit Slips land -- but for the fact that its current show (Episode 78) focuses on the design and technology of casino slot machines, and the particular profitability of penny slot machines. The short piece is built on the work of M.I.T. professor and anthropologist Natasha Dow Schüll.



From Credit Slips
Posted 2 weeks 6 days ago

Harry's Here! -- Everyone Wants a Piece of NML's Pari Passu Pie

Just two sunny weekend days after NML et al. filed their rejection of Argentina's offer, a new batch of defaulted bond holders have come to ask the court for their piece of Argentina's pari passu distribution. The Duane Morris Individual Plaintiffs apparently believe that
[T]he only sensible resolution is a lump-sum payment of all interest and principal that has accrued and become due and payable in eleven years to all the current holders of the holdout bonds ... . Such a payment would be directed through an order for specific performance, which this Court has endorsed as the appropriate remedial device. NML Capital Ltd., 699 F.3d at 261-262.4B. [Emphasis in the original.]
NML et al. disagree and urge the court to reject the proposed amicus brief:
[T]his Court’s March 1 Order directed Argentina to state what it is prepared to pay Appellees specifically, not what it is willing to pay adversaries in other cases.



From Credit Slips
Posted 3 weeks 5 days ago

Qualified Residential Mortgages

The New York Times has a major article about the Qualified Residential Mortgage rulemaking under the Dodd-Frank Act. I think there's a lot of confusion about this ruling-making. I'm going to try and clarify a few things in this post.

What Is Actually Required by the Dodd-Frank Act.
 The Dodd-Frank Act requires that a "securitizer" retain 5 percent of the credit risk unhedged on any securitized asset unless the securitization consists solely of "qualified residential mortgages." A securitizer is basically the securitization's sponsor, although the credit risk can be shared between a sponsor and an originator of the securitized assets. 
The Dodd-Frank credit risk retention requirement, however, is not limited to mortgage securitization. It covers all types of securitizations. While this doesn't matter much for credit card securitizations, which already have skin-in-the-game requirements, it will affect auto loan securitizations, commercial mortgages, and other sundry asset classes. 
The QRM Definition



From Credit Slips
Posted 3 weeks 5 days ago