Job opportunities for UHCL grads: FDIC getting BIGGER

Just read on Bloomberg that FDIC is getting a lot bigger for FY 2010. Maybe some of our undergrads can spin their FINC 4331 grades into a job!

I've had several students take FDIC positions over the years, and it's a great place to work. Lots of travel for some positions, though, or at least that's how it used to be (same with OCC).

Here's the link.

Maybe We'll Finally Get to use CDSs in Monopoly!!!!!

SEC has announced a new head of investor education, Kathleen M. Floyd, former exec director of the Stock Market Game. More here.

The Stock Market Game helps student math scores!! No kidding. See their info sheet here.

It should be interesting to see what kind of ideas she brings to the task. Investor ed, after all, is one of the most important areas right now. FDIC recently announced that financial literacy and underserved markets are back on the table too. Should be interesting times for educators.

This is the game that pre-college kids play. An interesting note from the article: a little knowledge can be dangerous, because research has found that those who have a little more experience with investments are MORE LIKELY to get scammed.

Who'da thunkit?

Farewell to a dedicated journalist.

Journalism has had its share of troubles lately. Heck, I'd be willing to say that journalism is dead. Over the last couple of decades it seems that fewer and fewer of those who are supposed to "report" are willing to put their names at risk.

Mark Pittman was an activist of sorts at Bloomberg. My blog posts here and here talk about how he confronted the Fed. I didn't agree with the reasons, but I'm glad he had the cojones to ask for the info.

Mr. Pittman was instrumental in blowing the cover off of the subprime crisis and also (ex post) the ratings fiasco of 2001-2003 that doomed the reputations of Moody's and S&P. It is thanks to him that we even know about some of this stuff. He was a reporter, a real journalist in the traditional sense, and we owe him a lot.

Mark Pittman passed away a few days ago, and some of his exploits are detailed here. I hope you'll give it a look when you can.

I think "he was a great man" is used too much these days. We should save it for people like Mark Pittman.

My condolences go out to his wife, family and colleagues. I hope you can see that Mark's work made a difference in this world, and that's all anyone can ask for.

PS Mr. Pittman refers to a Mother Jones piece in his interview that might be of interest to readers. The print version is here.

Zombieland! A few lessons for banks

OK, so maybe the "zombie vs. possession" metaphor is lost on Washington these days. But after seeing Zombieland this week, I thought I'd use Columbus' rules to draw some conclusions about the current (and past) banking crises.

For those of you who haven't yet seen this cinematic masterpiece (which, alas, contains a few off-color swear words), the narrator and central character is Columbus, who is trying to get to Columbus, OH to check on his folks. He starts in his "dorm room" in Austin and meets up with other survivors on the way. Mayhem ensues, blah blah blah. It is a classic.

This movie, too, doesn't involve Romeroesque zombies, but more of the neo-zombie we've seen in "28 Days Later" and other recent incarnations. These guys move quick, and there's none of the traditional emphasis on head shots.

Anyhow, Columbus is a real anal retentive type, because sometimes that's what's required to survive the zombie hoards. He has a set of rules that keep him alive amidst all those that aren't. Some are pretty obvious.

Rule #1: Cardio. The first to die in the Zombie Apocalypse (ZA) are those who can't run away (I'm miffed at his conclusion that it's a bunch of "fatties" that get it first -- some of us can run when we have to!) Nowadays, the zombies in the banking sense can run pretty fast, it seems. So perhaps the message is "be ready to run." I hope this doesn't apply too well to our current situation.

Rule #2: Double-tap. Make sure that you use one extra bullet/shell to confirm the demise of each zombie. What military types refer to as the 'double-tap'. Cheap insurance.

Now, if you only have a double-barrelled coach gun, as does our hero for most of the picture, it would pay to count those 18 buckshot per shell as "double" and save the second barrel when possible.

Back to banking, though: even though we bailed out the thrift system in '89, we still had to come back and implement Basel in 1991 with FDICIA (and eliminate some patronage at the same time) and "prompt corrective action". Seems like whatever happens this time is going to be politically approved as well, with some House and Senate members pushing for lending standards to drop again. Hope we've got another barrel left after they decide what to do with Fannie and Freddie (even though I'd argue that they are "possessed" and not the living undead). See here.

Rule #3: Beware of bathrooms. This is where we let our guard down, where we are also most vulnerable for a variety of reasons. In other words, banks, when eliminating the waste, are the most at risk. Maybe we should make sure they don't cut too much.

Rule #4: Seat belts. It pays to take advantage of built-in safety mechanisms. Plus, EVERYBODY is supposed to wear them. Maybe FDIC should start stopping folks just to check. And make sure all vehicles are equipped, too.

Rule #7: Travel light. You never know when all those extra assets will have to be carried at market values. Or when things that were good as gold yesterday will be revalued downward because the ratings agencies were revealed to have no clothes.

Rule #12: Bounty. It's the quicker-picker-upper. Kind of like regulatory capital in the 80s. Good to have some around.

Rule #17: Don't be a hero. Ask Jamie Dimon at JPMorgan how that's going for him these days.

Rule #18: Limber up. The Fed certainly heeded this one back in 2007, as they started to create liquidity programs for any and every purpose. Just in case. This works best alongside cardio. See Rule #1.

Rule #22: Know your way out. Sounds like something for Bernanke to consider in the future. 2006 is calling! Not that all that liquidity wasn't useful, but it's being used (erroneously) to trick the rest of the world into looking askance at the dollar. Not good.

Rule #29: The Buddy System. We're not alone in this, just almost alone. The jackals out there are licking their chops on this, hoping the US takes a big dive and takes a hit for market economies. Hint: Fannie, Freddie, FHA, and CRA/HMDA have nothing to do with market economies. Patronage is patronage, here or in China. Thanks for playing.

Rule #31: Check the backseat. Or, the reset dates and reset rates for that matter. And income. And appraisals. And buyout clauses. And most importantly, don't let anyone in the backseat do the driving.

Rule #32: Enjoy the little things. Like bonuses for the next 5 years. And political contribs for that matter.

Rule #33: Swiss Army Knife. This is from the Boy Scouts -- be prepared. Everything on that knife has a purpose.

If you haven't seen "Zombieland" you'd better hurry up. It looks as though its theatre days are numbered, but there's always the dollar cinema run to consider. I can't wait for folks in Congress to get a chance to watch this -- maybe their favorite zombies (Freddie and Fannie) will collapse under their own weight and keep us from having to finally, finally put them down. Remember, double-taps.

More to come.

Fannie & Freddie had to start disclosing trade data last March

Found in the DRAFT folder:

Fannie and Freddie and other govt. types are going to have to start disclosing trade data for their bonds, beginning in March.

WOW!

Transparency is probably a good thing.

Edit 06/10: I wonder if this actually happened or not.

Minimum payments got you down? Thank regulators

I've heard a lot of noise lately about everyone's minimum credit card payments going up, especially those over at JP Morgan/Chase/WaMu (or whatever they're calling themselves this quarter).

I found a couple of nuggets from Treasury and OCC advising that banks were going to be expected to raise their minimum credit card payments over time to a level that could reasonably be expected to amortize the balance. This has been the requirement for commercial credit since forever, so it makes sense that it's coming to consumers.

Look here and here. These go back a few years, but we're seeing their effect now.

From a societal standpoint, it's a good thing if people don't carry their credit card debt forever. From an immediate default standpoint, and for what it is doing to the economy right now, it's not good. Bloomberg, in fact, just announced today that defaults are way, way up here.

I have friends and family who are dealing with this, and it's no fun. Especially with Chase, who's raised some minimums to 5% of the card balance. Wow. That's hard to keep up with if you're not used to it. Another thing, they're raising rates to reflect people's creditworthiness. So some folks are paying upwards of 20% this month when they were below 10% up to this point.

My recommendation: Get thee to a credit union ASAP. If you're credit report is clean enough, you should be able to refinance that credit card debt and pay it off before Chase starts coming after various body parts.

Still waiting on all that Fed disclosure, Bloomberg

I haven't heard anything else about the August 25th NY Court ruling that requires the Fed to release their data, other than this. So they have until 9/30 to appeal. Thank goodness!!!!

I emailed Mark Pittman (the Bloomberg reporter on this story) about this yesterday, and I'll post anything I get back from him.

Update! Mr. Pittman says we should expect resolution in months, not weeks. I guess this is sort of a big deal. Thanks to him and Bloomberg for keeping us up-to-date.

Welcome

Not sure what I want to put here, but we need a LeftWorld blog, don't we.

The ongoing banking struggle, AP style

You gotta love the way the media makes a story sing! Vague sources, just enough factual content to make it believable. Here's an example from AP, about the developments in the banking industry.

http://finance.yahoo.com/news/Meltdown-101-Why-banks-apf-78787609.html?x=0&.v=1

Sources such as "industry experts" can't be beat! There are some AP-types out there doing their job, but it's amazing how many just repeat what they've heard elsewhere, as in this case.

Thomas Sowell on the Subprime debacle

As promised, I'm posting a NewsMax link to an interview with Thomas Sowell from May.  He has a new book out about the housing crisis and the law of unintended consequences.

(I'm not big on NewsMax, per se, but this was a better link than the 2008 post on Sowell's column page here. You should look at that one, too).

Sowell explains the Subprime fiasco and the root of Congress' involvement better than I could. As someone who witnessed these things as they happened, I think he has a good handle on it.

Fed now required to release TARP and other borrower names (Bloomberg)

Well, mayor of NYC Mike Bloomberg has proven what control of the media will give you.  He's finally succeeded in getting the Freedom of Information Act to apply to the Federal Reserve, as mentioned in the article here.

There are always two sides of things, but the anonymity of borrowers at the discount window (which all of these programs are, essentially) has never been questioned before.  The real trouble with this ruling is that banks will be reluctant, going forward, to go to the Fed for temporary liquidity because it may appear to make them look weak to the market.

Of course it's ridiculous to assume that discount borrowing implies weakness, but that's likely how it will be taken.

In the short term, we'll see prices of these banks TANK after the announcement.  Maybe that's what Bloomberg is really after -- a good capital crisis which will be much more widespread than last year's hit to the top ten.

The Latest:  The Fed is appealing this ruling.  We'll wait and see if they have to release names tomorrow (probably not).

Zombie Banks versus Possessed Lenders: Romero's "Night of the Living Dead" versus Raimi's "The Evil Dead"

Just some thoughts we were discussing in class last semester, given the rhetoric about "Zombie Banks" from Nouriel Rhoubini and others.

In the 80s, we discussed the thrift problem in terms of "zombies" -- some institutions were technically dead, but their existence threatened the other, well-run banks. Just like Romero's zombies from "Night of the Living Dead," these things were artificially kept alive by regulators and their incentive structures were all screwed up. They took on more risk and paid higher deposit rates and hurt their across-the-street competitors and raised everyone's costs.

Romero zombies are the walking dead that eat the living (as distinguished from Haitian zombies, which don't really exist). They will continue to seek and eat the living until their diseased brain is disabled. Max Brooks' "Zombie Survival Guide" or "World War Z" stand as good references here. Michael Lewis' "Liar's Poker" is a good reference for the zombies of the S&L era.

WaMu (or Wachovia home lending) are good examples of that kind of thing today, but I'd argue that most institutions that are in trouble today (starting with Fannie and Freddie) are technically The Possessed and not zombies. They may still harm the living, but they are the manifestations of pure evil in a living host and not the dead brought alive to walk again. Big distinction!

In Sam Raimi's classic film "The Evil Dead," several youngsters (meddling kids) visit the omnipresent cabin in the woods and replay an audio tape of a scholar's reading from The Necronomicon, or the Book of the Dead. This awakens a disembodied evil in the forest that begins to possess them one by one, leading each possessed partier to attack the others in turn. Finally, our hero Ash (portrayed by the terminally underrated Bruce W. Campbell) manages to replay another incantation and send the evil spirits back to their own dimension.

"How does this relate to our current situation?" you ask.

Freddie and Fannie worked fine for years and years before Congress decided that their role could be expanded to backing subprime stuff. Big banks were encouraged, if not outright required, to purchase subprime and "liar" (AKA stated income) loans to meet their Community Reinvestment Act obligations. Most of this activity accelerated in the early 1990s, but it was continued and encouraged by every Congress and administration since Carter. Washington, again, forgot the unintended consequences of messing with the markets.

To be sure, there was enough greed to go around. Congress was hungry to get the credit for "helping" people get home loans. Same with a few presidents in there. Mortgage bankers were hungry to make all those loans and pass them off to investors who had hedged their risk in the credit default swap market. Moody's and S&P gave up trying to rate mortgage-backed securities properly and ignored the risk of credit default swaps in large part. Mortgage originators didn't care whether or not their customers could ever hope to repay loans on homes in CA and elsewhere that were terribly overpriced. Sure they were overpriced -- FHA and others were pumping money into the markets. Congress argued that FHA limits were too low (which, by the way, Frank in the House and Dodd in the Senate have argued again this summer. It continues).

We have a few zombies this time. With WaMu charging no fees and offering services galore, it's hard for the little bank on the corner to compete. It drives down margins and profitability, and therefore capital (via retained earnings or surplus). Pretty simple to understand. Also, if folks worry about WaMu (as they should) they might worry about MyLittleBank and cause it some funding anxiety in the short-term.

With Wachovia creating "Pick-a-Payment" mortgage loans, everyone has to cut their fees to compete. GoldenWest (which was bought by Wachovia and started the trouble there) was making loans based on appraised home value, not based on the borrowers' abilities to repay. And they were getting press and bragging about it! Wow!

But the big distinction this time around is the "possession" of the housing aftermarket by Congress and political types in general. In their effort to "do good" they really threw a bubble into the market, and corrupted the legitimate mortgage-backed security market and the for-fee ratings agencies. There's no trust left in any of it.

Raimi's Evil Dead promised to "swallow your soul." And it looks as though the soul of the mortgage markets will be swallowed for a while to come.

Neat Site

I get a lot of "targeted marketing" on this blog address, but I got one today that I thought I should share.

Beware of spam, but there might be some interesting things here. It's sponsored by ads from "online colleges" AKA diploma mills, so you never know what they'll put on there, really.

If you find anything there useful, you might want to drop me a note so I can let everyone know.

Lots going on this summer.

Greetings everyone:

Sorry about the lack of posts, but there's been a good bit going on this summer. As you may know, Dr. Williams and I are putting our courses on line next year (3333 Intermediate Finance in the fall, for her; 4331 Banking in the spring, for me). It's a lot of work, and tough to maintain the same quality from one modality to the other.

I hope everyone's summer has been fun. We're getting things ready for the fall. It should be exciting.

Comprehensive Financial Regulation Reform

Here's the latest from 1600 Penn. Ave. regarding reform of the evil and seditious financial system in this country.

http://online.wsj.com/article/SB124524649229423271.html

The actual proposal is here:

http://online.wsj.com/public/resources/documents/finregfinal06172009.pdf

(or online at the White House I guess).

I just cruised through it quickly, and I could only find the word "subprime" used to connect to the weathered accusations that "predatory lenders" caused the recent housing problem. No mention of Freddie or Fannie activities promoting securitization of subprime to the detriment of portfolio risk, or the expansion of the housing market in response to political initiatives.

In fact, the proposal includes a couple of paragraphs (no sources cited) that tell us how CRA can't be blamed for subprime, etc. I guess if a lie is repeated often enough, it becomes truth. (And yes, I've looked into who REALLY said that, and I'm not sure I believe the IntraWeb, so I won't cite anyone here.)

Unfortunately, the thrust of this effort is to reign in 25 years of helpful broadening of the banking system by folks who don't really understand how things work. Diversification, geographic and otherwise, is necessary for financial stability. What ISN'T necessary is a Congress and/or administration trying to hand out money based on demographics and not repayment ability.

That's just one person's opinion, of course.

From Dick and Betty Ward (my uncle and aunt), some insight on the current Wall Street & banking mess:


A young boy enters a barber shop and the barber whispers to his customer,
'This is the dumbest kid in the world. Watch while I prove it to you.'
The barber put a dollar bill in one hand and two quarters in the other, then called the boy over and asked,

'Which do you want, son? ' The boy took the quarters and left the dollar.

'What did I tell you?' said the barber. 'That kid never learns!'

Later, when the customer leaves, he sees the same young boy coming out of the ice cream store & says

'Hey, son! May I ask you a question? Why did you take the quarters instead of the dollar bill?'

The boy licked his cone and replied, 'Because the day I take the dollar, the game's over!'

From @ RISK, and Palisade, FREE SEMINARS!!!!!!

Got this email today from Jaime (Johnson) Weisberg at Palisade:


I’d like to remind you about Palisade’s upcoming DecisionTools Energy Risk Forum and complimentary Academic Symposium in Houston May 21-22.

The Energy Risk Forum will be held at the Hyatt Regency on May 21. The one-day event features customer case studies and specialized software training to demonstrate how @RISK and DecisionTools risk analysis software are being used to solve real-world problems faced by the oil, gas, and energy industry.

The Academic Symposium is a free one-day event at the University of Houston on May 22nd. The symposium will demonstrate how the DecisionTools Suite can easily enable quantitative risk and decision analysis to be added into academic syllabi.

WHAT’S COVERED

Topics at the Energy Risk Forum will include:

· Hands-on software training on @RISK, PrecisionTree, and RISKOptimizer

· Cross-border pipelines and political risk

· Construction and project risk analysis

· Environmental liability estimation

· Natural gas market optimization

· Subsea oil and gas field optimization

· And more


View the full schedule and register: http://www.palisade.com/2009Conf/energy/schedule.asp


Topics at the Academic Symposium will include:



· Overview of the DecisionTools Suite 5.0

· Teaching business leaders how to make good decisions

· Selecting the right distribution for modeling

· Capital budgeting

· Capital inequities and sports wagering

· And more



View the full schedule: http://www.palisade.com/2009conf/academic/schedule.asp

There is no charge for this event. To register, please contact Jaime Weisberg: mailto: jweisberg@palisade.com or call 800-432-RISK x 311.

Job search resource from Dr. Kevin Wooten, UHCL prof

Found on the web. Lengthy, but mostly free-standing and hugely entertaining. Enjoy!!!!!


Uploaded on authorSTREAM by aSGuest8501

Finance Networking Reception on 4/23

Financial Management Association (FMA) and Career Services held their first Finance Networking Reception in the SSCB Atrium on Thursday 4/23. There were several faculty in attendance, and 76 students participated. We had several employers on the panel, and about ten tables for leaving resumes and finding out about careers.

The employers in attendance were:

Direct Energy (Bobby Miller)*
Dynegy (Tiffany McCaa)*
Belt Harris (Mark Rubio)*
Assoc. Credit Union of Texas (Amanda Loy and April Howe)*
Lockheed Martin
First Investors*
State Farm*
JSC Federal Credit Union
INEOS
NASA Co-op and Internships in procurement

* alums



Chuck Crocker of Career Services, and Jeremy Adams, Shine Lin, Charlie Roeder & Jeff Lee of FMA worked very hard to get this organized. The idea came from Chuck, and simultaneously from Ed Waller (Finance prof and department chair for the finance folks).

Everyone is to be congratulated on such a successful turnout, and we should look forward to doing this again next year.

Results of the Finance Networking Reception

Financial Management Association (FMA) and Career Services held their first Finance Networking Reception in the SSCB Atrium on Thursday 4/23. There were several faculty in attendance, and 76 students participated. We had several employers on the panel, and about ten tables for leaving resumes and finding out about careers.

The employers in attendance were:

Direct Energy (Bobby Miller)*
Dynegy (Tiffany McCaa)*
Belt Harris (Mark Rubio)*
Assoc. Credit Union of Texas (Amanda Loy and April Howe)*
Lockheed Martin
First Investors*
State Farm*
JSC Federal Credit Union
INEOS
NASA Co-op and Internships in procurement

* alums



Chuck Crocker of Career Services, and Jeremy Adams, Shine Lin, Charlie Roeder & Jeff Lee of FMA worked very hard to get this organized. The idea came from Chuck, and simultaneously from Ed Waller (Finance prof and department chair for the finance folks).

Everyone is to be congratulated on such a successful turnout, and we should look forward to doing this again next year.

FMA Finance Networking Night

The student Financial Management Association (FMA) chapter is going to be helping with the Finance Networking Reception on April 23rd (Thursday) from 4:30 until 7 PM. Career Services (led by Chuck Crocker) has graciously committed to helping FMA get things rolling.

As of today, we have 6 companies committed in the energy, financial services, and accounting industries. The program will be a panel discussion of what to expect when you get out and what each company/job does, followed by a meet-and-greet where you'll be able to ask questions individually of the representatives. Most of the folks coming are recent alums, so they'll know where you're coming from.

You can sign up at the Career Services web site at UHCL.edu:

Go here, scroll to the bottom.

Please plan to get involved if you can. Professional dress required.

FMA/Career Services event in April

We're going to be helping with Finance Networking Night on April 23rd (Thursday) from 4:30 until 7 PM. Career Services (led by Chuck Crocker) has graciously committed to helping FMA get things rolling. Right now we're asking some financial services and energy alums to come on campus and spend some time talking about their careers.

Please plan to get involved if you can. More information as we find out who's coming.

FMA at UHCL

I hope the semester is treating everyone well.

I wanted to let people know that the UHCL student chapter of the Financial Management Association (FMA) will be having welcome sessions next week, M-TH at 5:30 in Bayou 2504. We need to organize, get some officers and volunteers, and get ready for a busy semester. Also, folks need to find out about FMA National Honor Society.

So far, we've planned a resume/career session with Chuck Crocker, and at least one other program event. In addition, Career Services will be hosting an Employer Night in April for folks interested in working in finance & accounting within energy and financial services. It should be fun!

Welcome to a New Year in WebCT

Happy New Year everyone! I hope the holidays were fun and relaxing.

Drs. Waller, Williams, Murasko, and I just got back from San Francisco where we interviewed candidates for our vacant Econ professor position. It was an interesting three days, but we didn't get out of the hotel meeting rooms much. So, yes, I've been to San Fran, but no, I didn't do anything there but work and sleep.

Dr. Williams and I got stuck in San Diego because of some mechanical trouble SouthWest was having. It was a hoot.

To start the new year off right, I'm reminding folks that the AOL interfaces for all of my classes are now dust (along with everything else stored at AOL FTP or Hometown). RIP. As my 2-year-old would say - "done".

So... we're relying on WebCT for everything now. I'm in the process of updating stuff and it will be available to students on 1/17 (UCT's date).

Welcome to a new semester, and good luck to everybody!