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Obama & the debt ceiling: An explainer

Sep 26, 2013
The government is considering raising the debt ceiling -- again. But what exactly is the debt ceiling: Watch an explainer to understand what's at stake and what it means for you and me.
Posted In: debt ceiling, government spending, government shutdown

FHA: The next government housing bailout?

Sep 25, 2013
Reuters reports the Federal Housing Administration may need a bailout from the federal government.
Posted In: FHA, bailout, Fannie Mae, Freddie Mac

Twitter IPO rumors: NYSE not Nasdaq

Sep 24, 2013
Twitter’s a tech company, right? And tech companies list on the Nasdaq, right? So what the heck is Twitter doing listing on the NYSE?
Posted In: NYSE, Twitter, NASDAQ, linkedin

Explaining exchanges

Sep 19, 2013
You've heard of the New York Stock Exchange and Nasdaq. Do people really still stand around and yell out buy and sell orders at these places? Paddy Hirsch explains what an exchange is -- by taking us to the supermarket.
Posted In: stock exchange, stock, stock market

What's confidential about Twitter's IPO filing?

Sep 12, 2013
Twitter tweeted that it had "confidentially submitted" papers for a planned initial public offering. The news reached more more than 23.6 million people, so what's confidential about that?
Posted In: Twitter, IPO

Consumer credit rises, but no one's smiling

Sep 9, 2013
We're borrowing more, but neither as much as economists had hoped, nor for the kind of thing that will help the economy.
Posted In: consumer credit

Why the Fed's actions are hurting markets

We're reading a number of stories about the effect that an expected slowdown in the Federal Reserve's bond-buying program is having on emerging markets. They're all missing a central explainer of why these markets are hurting.

Here's my take:

The Fed's program pumped lots of cheap cash into the system - call it a bond-buying, stimulus or liquidity program. A lot of people used that cheap cash to invest in emerging markets.

And as investors anticipate the Fed putting the brakes on the program, two things are happening simultaneously.

  1. Investors figure there'll be less cheap money coming out of the Fed, which means there'll less money going in to so-called emerging markets. That will cause a slowdown in economies like Indonesia and India. And no-one wants to have their money in an economy that's slowing down. So investors are pulling their money out.
  2. Investors are nervous the entire financial system will slow down with less cheap money, so they’re piling back into safe stuff –- which means they're moving even more cash out of emerging markets and into safer, U.S. investments.

Together these actions translate to one big flight of cash away from emerging markets. And while no-one is in big trouble yet, we're already seeing the effects of this so-called flight of capital.

An analogy: Imagine you're living a high-flying, American Express Gold Card executive lifestyle. You use your big paycheck to buy a big car and a big mortgage and send your kids to Ivy League schools, and you amass big credit card bills, that you are having no problem paying off.

And then one day your boss comes into your office and tells you revenues are down at the firm and everyone's income is going to be cut in half -- including yours. Suddenly you're going to have problems paying your mortgage, your credit card bills and your kids' tuition. You may even have trouble fueling your car and feeding your family.

That's how those emerging nations feel.


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Aug 20, 2013

The down-low on Fannie and Freddie

As we reported today about President Obama's speech in Phoenix on the housing market, and specifically on Fannie Mae and Freddie Mac, we realized there's a lot of conflicting information out there about how much of the mortgage market Fannie and Freddie are actually responsible for.

Some say just 50 percent; others say as much as 90 percent.

The New York Times quoted an Obama Administration official saying , "the government guarantees more than 80 percent of all mortgages through Fannie Mae and Freddie Mac and F.H.A."

So what's going on here?

I got a clear answer from Edward J. Pinto of the American Enterprise Institute. Pinto used to work as the chief credit officer  at Fannie Mae, and he keeps a close eye on his former employer. He says people often conflate Fannie and Freddie with other government agencies, such as the Federal Housing Administration, the Department of Veterans Affairs and the Department of Agriculture.

Pinto says if you look at the agencies separately, of all the mortgages outstanding in the market right now, Fannie and Freddie are responsible for about 55 percent, other government agencies are responsible for about 15 percent, and the private label market is responsible for the remainder. 

Pretty simple, math, it seems. (Thanks, Ed!)


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Aug 6, 2013

SAC insider trading charges, explained

Jul 25, 2013
The criminal indictment of SAC Capital is all about the misuse of material of non-public information ... otherwise known as insider trading.

Fabrice Tourre's trial: The fabulous translation

Jul 16, 2013
A former Goldman Sachs trader known as "Fabulous Fab" has been found liable in a mortgage securities fraud case. During the case, a judge asked to ban jargon. But because bankers aren't able to resist -- and for your own knowledge -- here's a primer to help.
Posted In: Fabrice Tourre, Goldman Sachs, Lloyd Blankfein

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