Friday, December 3, 2010

Witching hour



Banking Day reports that the witching hour for bank reform is upon us:
Momentum may be reaching a peak over the federal government’s activist policy package on banking, with talk of an announcement by the Treasurer, Wayne Swan, this Sunday.

Speculation over the contents of the policy plan is centring on a widening of the Australian Office of Financial Management’s mandate so it becomes an investor and guarantor of pools of mortgage securities.

The AOFM seems set to become an investor, and price leader, in subordinated tranches of mortgage-backed securities rather than restricting itself to AAA-rated senior debt, as it does now.

Some version of the Canadian system of guarantees on mortgage bonds, with the AOFM once again at its centre, is also being talked about.

Just about every option is covered here so it isn't adding much to yesterday's SMH leak. This blog will only note in passing that it hopes the SMH proves to be right because what is being suggested here is beyond the pale. If the AOFM uses your money and mine to buy subordinated tranches of RMBS, that is the the high risk securities that default first, then this blogger is emigrating.

And the SMH has more details on moves by credit unions:
An alliance of 25 credit unions is setting up a vehicle to tackle the big banks with money from superannuation funds and global markets.

Sources told BusinessDay plans were well advanced for the funding vehicle, which expects to raise up to $1 billion to provide mortgages. Bank regulator the Australian Prudential Regulation Authority has given in-principle support for the scheme.

Let's wait and see.

9 comments:

Anonymous said...

Falsum in uno, falsum in omnibus.

PeterJB

PeterJB said...

Thought this was interesting but certainly not unexpected:

The fact that National Australia Bank [ASX: NAB] had to borrow USD$4.5 billion from the US Federal Reserve during 2008 and 2009.

And Westpac Banking Corp [ASX: WBC] needed USD$1.09 billion in January of 2008 and 2009.

from Kris Sayce of Monday Morning...

... and about that ~US$5B of CDO's bought from Countrywide by some of the 4th Pillar?

Wikileaks next document release of the unknown bank(s) should be revealing.

LOL

Anonymous said...

"If the AOFM uses your money and mine to buy subordinated tranches of RMBS, that is the high risk securities that default first, then this blogger is emigrating"


Will they be defaulting first? or will they take precedence over local deposits?

It is getting close to time to withdraw all my funds from banks and credit unions.

Ryan said...

If the AOFM uses your money and mine to buy subordinated tranches of RMBS, that is the the high risk securities that default first, then this blogger is emigrating.

Hyperbole notwithstanding, there is nothing you or I can do about it - it's a done deal and the whole scam enjoys bilateral support. Resistance is futile. The only option remaining is civil unrest... and we're all too fat dumb and happy for that.

Incidentally, I really do plan to emigrate. I've been working toward it for a few years and will require a few more before I'm in a position to do so comfortably.

I read a great quote the other day (possibly in an article you linked to) that went something like this:

Chinese people tend to see the law — not as a set of rules governing fairness and defining legitimate rights and obligations, but as an arbitrary obstacle imposed from above which resourceful people will find a way to “beat”.

I've really come around to this way of thinking in the last few years.

Anonymous said...

"It is getting close to time to withdraw all my funds from banks and credit unions."

Already done. What took you so long? ;-(

"If... then this blogger is emigrating"

Any suggestions? I've been thinking precisely the same for 2-3 years, now getting more serious. Interesting that this view is beginning to spread in lots of places in the Western world:

http://www.zerohedge.com/article/leaving-america-redux-sovereign-mans-next-steps-guide-expats-waiting

Echoes of The Decline and Fall of the Roman Empire, anyone?

Anonymous said...

Already done. What took you so long? ;-(

The only safe place I can think of is government bonds but not keen on locking my funds up for so long on low yields.

A pity there are no more government banks.

Anonymous said...

Almost certain the AOFM will not be participating in the subordinated issues atleast.

By buying AAA rated RMBS, the federal debt taken on to purchase them is not officially recognised.

if they bought sub, the debt will be recognised. Not a great political move !!s

Anonymous said...

Am I naive in thinking the big four welcome the opening up of RMBS markets because they see it as a chance to offload their mortgage books?

And that they see the removal of mortgage exit and refinancing charges of another way to get these soon-to-be toxic loans onto someone else's balance sheet?

I keep reading that bankers really are a smart bunch.

Daniel said...

Be very careful if investing in Aussie treasurys as an alternative to bank deposits. The Fed gov is gonna be up to its neck bailing out the states and the banks when a correction comes. This is likely to be the method for further centralising power nationally. Think about it, this is why the Fed gov has a healthy balance sheet atm. If property and mining collapse the states should go too IMO.