Groups Warn of Risk Retention Provision in House Financial Services Bill

/PRNewswire/ -- Following is a Joint Statement on Risk Retention from the Community Mortgage Banking Project and the Community Mortgage Lenders of America:

Late Tuesday evening, the House Financial Services Committee released draft legislation to address systemic risks and "too big to fail" concerns. We appreciate the efforts of the Committee to enact reforms that will ensure that the events that led to the current financial market crisis are not repeated. However, we are deeply concerned that one Subtitle of the just-released draft Financial Stability Improvement Act would have a devastatingly, adverse impact on the secondary mortgage market, forcing community-based lenders to reduce lending or go out of business, which will significantly raise the cost of credit for consumers seeking affordable mortgages.

We are concerned that the broad risk retention provisions in the draft Financial Stability Improvement Act could jeopardize affordable mortgages for consumers by crippling the ability of community-based lenders to tap the secondary mortgage market for funding. This would further accelerate the consolidation of the mortgage market into just a handful of the largest institutions. The result would be reduced competition and choice for consumers - an ironic and counterproductive result for a bill intended to mitigate "too-big-to-fail" concerns.

The draft bill requires all lenders to retain up to ten percent of the credit risk on any loan sold into the secondary market. In addition, entities that acquire mortgages and issue mortgage-backed securities will also be required to retain up to ten percent of the credit risk. The committee's intent is to create incentives for sound underwriting standards and enhanced risk management practices by creditors and issuers of mortgage-backed and asset-backed securities.

However, by setting risk retention requirements at each step of the process from sale to securitization, and layering it over multiple years of originations, the cumulative impact of these requirements on lenders and issuers will reduce liquidity significantly and undermine the ability of the secondary mortgage market to deliver hundreds of billions of dollars of low cost mortgage credit needed each year.

The impact would be particularly severe for local lenders, including independent community mortgage bankers and local banks. Today, these lenders provide consumers with safe and affordable mortgage products, local market knowledge and top quality service. But these companies rely heavily on their ability to sell these loans into the secondary market. Today, these local lenders account for more than 40% of all home mortgage originations, and more than 50% of FHA loans. These companies are critical to our nation's mortgage supply chain, but simply are not structured to retain cumulative layers of credit risk over multiple origination cycles.

Independent mortgage bankers would be forced out of business, while community banks would face liquidity and balance sheet constraints that would sharply limit their lending activities. Even the largest institutions would be constrained in their ability to effectively utilize the attributes of the secondary mortgage market in delivering mortgage funds efficiently.

By contrast, H.R. 1728, which already passed the House earlier this year, addressed the risk retention standards in the mortgage market by establishing standards for "qualified mortgage" products that would be exempt from the risk retention requirements, and would therefore enjoy ample availability in the primary market. Qualified Mortgage products are traditional fixed and adjustable rate mortgages. These plain vanilla products, appropriately underwritten, were not the products that drove the current mortgage market debacle. Other provisions of H.R. 1728 (such as requiring creditors to document income and assets and assess ability-to-pay) help ensure that mortgage lenders utilize strong risk management practices and conduct sound underwriting, but with fewer adverse implications for secondary market liquidity.

There is no need for Congress to chance such a drastic outcome, when a more sensible compromise on this issue was forged in H.R. 1728 and passed earlier this year. The undersigned organizations look forward to working with Congress to achieve its objectives, without potentially disrupting the well-functioning secondary market for safe and affordable traditional mortgages.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page
www.artsacrossgeorgia.com
Arts Across Georgia

Energy Industry Icon Re-Affirms Position that U.S. Equity Market Valuations Overdone: U.S. Energy Industry at Major Risk

/PRNewswire/ -- Karl W. Miller, a senior energy executive and institutional investor, today issued the following statement through his advisors, Re-Affirmed his position that U.S. Equity Market Valuations are Overdone and the U.S. Energy Industry is at major risk.

Mr. Miller has made it clear in prior research that there will be no meaningful economic recovery to sustain any equity market recovery until the defunct real estate holdings in the residential and commercial marketplace are properly vetted, written down to net realizable value, and sold off of the banks, hedge funds and insurance company books. This will mean bankrupting hundreds of institutions, which are already technically insolvent.

A recovery based upon negative net worth, and the U.S. Government underwriting the retail consumer and institutional marketplace on all fronts, including a ludicrous renewable energy plan and unrealistic and un-achievable health care proposal will not happen.

Retail investors should not be investing in the equity and debt markets at the current time, while the major banks, hedge funds, and private equity funds are insolvent on a majority of their asset based holdings. They require a rising equity market to float their portfolios and pull the retail investor back into the market to fill the gap. Unfortunately, the retail and high net worth investor is essentially insolvent as an investor class and the old model does will not work.

We need quick and brutal cleansing of the U.S. Financial system, and renewing Ben Bernake's term as Fed Chairman means nothing to solving the market problems and is window dressing. Retails investors should not be lured into purchasing equity or fixed income instruments until we essentially "bankrupt the US banking system" and hit the reboot button, which will have the effect of flushing out the illiquid hedge and private equity funds who are hanging on by a thread.

All of this is important, because a majority of the financial institutions can't purchase or operate critical energy infrastructure assets so desperately needed. This is what seasoned management does alongside of distressed capital investors. Unfortunately, these experts can't begin to work until the system is flushed.

The U.S. Renewable energy industry is on its rear end, and one need only ask T. Boone Pickens, who spent millions on marketing a renewable energy plan only to fail dramatically. If anyone wants to purchase distressed wind turbines, Mr. Pickens has hundreds of turbines scheduled for delivery with nowhere to go.

We have insufficient infrastructure in the U.S. to include Transmission lines, natural gas and oil pipelines and the "pork" energy plan that has come out of Washington does nothing to solve that problem.

So, where do we stand, and what should investors do? Sell the financial equity investments and get to the sidelines quickly, as the carnage is coming and is not for the faint of heart. It is best left to true distressed asset buyers and operators who know how to clean up what has become the largest financial and asset disaster in U.S. history.

Again Mr. Miller reiterates that China is irrelevant at the current time, given the fact that the U.S. is financially broke. Chasing China, Asia or Europe in the equity market rally has no relevance on the U.S. problems.

Yes, Oil is dollar based, but has no linkage to natural gas in the U.S. as it does in Europe and Asia. Essentially, Oil and Natural Gas are decoupled in the U.S. and investors should not chase a financially driven oil price when it has nothing to do with the fundamentals on the ground in the United States. Natural Gas is cheap and getting cheaper, as there is no demand. Thus, the pipeline and natural gas producers are suffering and overvalued as well. Sell them if you own them.

Mr. Miller retains a sell recommendation on renewable energy companies. We will see many of these names, which are highly levered fail and/or be purchased at distressed prices when the bust comes, and it is sure to come.

Mr. Miller re-affirms that investors should not confuse Warren Buffett's statements regarding deployment of capital versus sitting on cash with intelligent timing of investments, especially in the energy sector.

Be patient, let the assets get sorted out then make decisions about deploying capital. There is plenty of value and risk to go around.

-----
www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

Duke: Treasury Action Should Work, But at High Cost to Taxpayers, Professor Says

The Treasury’s proposed action to use government money to purchase mortgage-backed securities held by financial institutions should work, but at an unnecessary cost to taxpayers, says Steven Schwarcz, the Stanley A. Star Professor of Law & Business at Duke University.

Schwarcz has studied systemic risk for more than a year and has suggested, in congressional testimony last October, that the government should consider acting as a market liquidity provider of last resort, but to do so at the outset of a financial market panic. His article, “Systemic Risk,” will be published next month in the Georgetown Law Journal.

“The focus from the outset should have been on treating loss of confidence in the financial markets, which is the underlying cause of problems in the financial system,” Schwarcz says. “While it may have been necessary under the circumstances for the Fed to act to prop up AIG and Bear Stearns, among others, preventing financial institution failure amounts to treating symptoms of the disease, not its underlying cause. By delaying, the government missed a vital opportunity to nip the problem in the bud at a much lower cost to the American taxpayer.”

The Treasury’s proposed bailout plan is a semi-strong version of Schwarcz’s proposal, which he said would work most effectively if used at the outset of a market panic. The current panic has become so entrenched, however, that financial institutions now distrust the creditworthiness of other financial institutions; they do not know how much in mortgage-backed securities those institutions hold or the value of those securities.

The Treasury, therefore, needs to address both this counterparty risk perception and the market collapse. It is proposing that government money be used to purchase, at a deep discount, mortgage-backed securities held by financial institutions, which would stabilize market prices and reduce counterparty risk.

'This should work," says Schwarcz, "but it will be much more expensive than if the government had stabilized the market at an earlier point."

-----
www.georgiafrontpage.com
Georgia Front Page
www.fayettefrontpage.com
Fayette Front Page

Synovus Announces Leadership Changes

BUSINESS WIRE --Synovus (NYSE: SNV), the Columbus, Georgia-based financial services company, has appointed Mark G. Holladay to the newly created position of Chief Risk Officer of Synovus. Kevin J. Howard will replace Holladay as Chief Credit Officer. Roy Dallis “D” Copeland, Jr., was named to the new position of Chief Commercial Officer. All appointments are effective immediately.

“Establishing the Chief Risk Officer position is a significant step in ensuring we maintain high, stringent standards for managing enterprise risk,” said Richard E. Anthony, Chairman and CEO of Synovus. “Mark’s experience in lending and credit risk management makes him the clear choice to fill this role. We are also pleased to have Kevin Howard move into the Chief Credit Officer position. He has demonstrated his skill in this area and is ready to take on his new responsibilities.”

Reporting directly to Richard Anthony, Holladay’s new responsibilities include overseeing the Enterprise Risk and Credit Risk Management areas of the company.

Holladay was promoted to the position of Executive Vice President and Chief Credit Officer of Synovus in 2000. He was appointed Executive Vice President of Banking/Client Delivery in 1994 and previously served as Senior Vice President of Commercial Lending. Holladay began his career with Synovus in 1974 with Columbus Bank and Trust Company (CB&T). Holladay is a graduate of Columbus State University with a Bachelor of Science Degree in Biology. He has also completed the School of Banking and Master of Banking School programs at Louisiana State University.

In his new role, Howard will report to Synovus President and COO Fred L. Green III. Among his responsibilities, he will manage the credit and loan administration standards set for Synovus banks.

Howard was named Senior Vice President and Credit Manager of Synovus in 2004. In 2000, he was promoted to the position of Senior Vice President of commercial real estate, correspondent and affiliate lending. He joined CB&T as a Vice President in 1993, after five years in commercial banking. Howard is a graduate of the University of Alabama with a Bachelor of Science Degree in Finance, and he completed the Commercial Lending Graduate School of the University of Oklahoma.

Synovus is also strengthening its commercial banking strategy through the appointment of D Copeland as the new Chief Commercial Officer. Copeland will be responsible for leading efforts to expand relationships with middle market businesses throughout the southeast.

“As a seasoned banker, and through his most recent success as CEO of one of our community banks, D will infuse a new level of energy into our commercial banking strategy,” said Anthony. “C&I is an important line of business for diversifying Synovus’ commercial credit portfolio and for generating new revenue.”

Copeland most recently served as the President and CEO of Citizens First Bank in Rome, Georgia. He has led various banking departments from Retail and Commercial Banking to Senior Manager of the Financial Services Group at CB&T. Copeland began his career with CB&T in 1992. He is a graduate of the Georgia Institute of Technology with a Bachelor of Science Degree in Management.

-----

www.fayettefrontpage.com
Fayette Front Page
www.georgiafrontpage.com
Georgia Front Page

News to Use in Fayetteville, Atlanta, Columbus, Peachtree City and all of Georgia