Goldman Sachs claims the Senate subcommittee's characterization of its subprime business was “sloppy and incomplete.” (Photo Credit: CC BY/Ludovic Bertron/Flickr)

Goldman Sachs Group Inc., the securities firm Sen. Carl Levin, D-Mich., once described as a “financial snake pit, rife with greed, conflicts of interest and wrongdoing,” is preparing to strike back. The Wall Street Journal reports that the firm plans to counter the Senate’s financial crisis subcommittee’s 639-page report, which alleges that Goldman Sachs sought to profit by betting against the housing market and betraying its clients. Reports indicate that Goldman’s defense will focus on what the company believes to be “sloppy math” on the part of federal regulators.

‘Sloppy math and incomplete analysis’

The Senate Permanent Subcommittee on Investigations went through tens of millions of documents disclosed by Goldman Sachs, yet the securities firm says in its defense that the Senate’s analysis was incomplete. Goldman Sachs has not denied that the firm profited from the subprime mortgage crisis as prices fell and borrowers defaulted, creating the big short. However, the firm believes data suggest the Senate’s numbers are inaccurate.

One document the Senate found particularly damning for Goldman Sachs was a chart that characterized the company’s net short positions against the housing market being as high as $13.9 billion on June 25, 2007. Goldman says that number appears artificially large when juxtaposed against the 2007 net revenue of $11.6 billion the Senate reported. Goldman claims its actual net revenue was $46 billion.

Insider trading, truthful and accurate

The WSJ reports that Goldman Sachs will use data on bullish mortgage trades to temper the opportunistic venom behind such numbers, data to which the Senate already had access but chose not to highlight in its report. Goldman argues that billions of dollars in bullish trades – as well as more than $5 billion invested in prime mortgage bonds – more than offset the subprime short bets.

Despite the fact that former Goldman Sachs corporate board member Rajat Gupta backed away from his position following allegations of insider trading, the firm maintains that its dealings with the U.S. government have been “truthful and accurate,” according to a company representative for CEO Lloyd Blankfein.

Goldman Sachs gambled more than $1 billion of Gaddafi’s money

Sources

The Atlantic Wire

Goldman Sachs

Wall Street Journal

Free money from the Fed intended to boost lending was used to pad bank profits with sweetheart bond deals instead. Image: Flickr/DoGoLaCa CC-BY-SA

The Federal Reserve loaned billions to big banks at near-zero interest to bail them out during the financial crisis. Those billions were intended to maintain the flow of credit and prop up the economy. Instead of loaning the money to individuals and small businesses, the banks reaped outrageous returns with the money by investing it in government bonds, a new study has found.

Free money, no strings attached

It was no secret that banks gorged on easy money provided by the Fed during the financial crisis and used the cash to buy Treasuries. A new study released Tuesday by the Congressional Research Service reveals the degree to which banks abused the privilege. The Fed lent more than $3 trillion to banks at interest rates as low as 0.0078 percent with no strings attached, according to the report. The banks pledged junk-rated securities as collateral for the the taxpayer-backed loans. Instead of reinvesting the money in the economy, the banks parked the money in Treasuries and took an easy profit–effectively borrowing money from one branch of the government and loaning it back to another at a much higher rate. Sen. Bernie Sanders, I-Vt., who commissioned the study, called it “direct corporate welfare to big banks.”

Abusing U.S. taxpayers for profit

Some of the taxpayer-financed arbitrage outlined in the CRS report includes a Fed loan of more than $48 billion to Bank of America at rates from 0.25 to 0.5 percent during a three-month period of 2009. In the same period B of A, the largest U.S. lender, tripled its holdings of Treasuries yielding 3.5 percent to nearly $15 billion. In the third quarter of 2009 B of A took $2.9 billion from the Fed at 0.25 percent and bought $12 billion in Treasuries paying 3.2 percent. Also in 2009, J.P. Morgan Chase, the second-largest U.S. bank, borrowed $29 billion from the Fed at 0.3 percent and bought $20 billion in taxpayer-backed U.S. debt yielding 2.1 percent. In 2008, Citigroup took $15.8 billion from the Fed at 1.2 percent; $11.6 billion at 1.1 percent and $4.9 billion at 2.7 percent. At the same time it held $24 billion in Treasuries with an average yield of 3.1 percent.

While banks count cash, credit dries up

While the big banks were adding hundreds of millions of taxpayer dollars to their balance sheets using free money from the Fed, lending decreased. According to Fed and Federal Deposit Insurance Corporation data, credit contracted at nearly the most rapid rate ever recorded. In 2009, outstanding credit to U.S. households declined by $234.5 billion. For non-corporate businesses, credit dropped by $296.1 billion. Small businesses closed. Foreclosures skyrocketed. Millions of Americans lost their jobs. For banks, it was business as usual.

Sources

MarketWatch

Huffington Post

Firedoglake

Billions are pouring into the hedge fund industry, but most firms have yet to reach high water mark and performance numbers may be skewed. Image: CC Jim Champion/Geograph

Based on the billions that poured in last month, the hedge fund industry appears to have its swagger back. Investors are lining up to put their trust in mysterious firms notorious for market manipulation that give Wall Street a bad name. But the industry’s resurgence from the financial crisis has just a few big winners and analysts expect a hedge fund shakeout in 2011.

Hedge funds treading water

The hedge fund industry attracted $22 billion from investors in March, the highest rate in over a year, according to Hedgefund.net. Overall, the hedge fund industry is managing $2.5 trillion, 83 percent of the all time highs registered in 2008. But aside from a few superstars, hundreds of hedge funds are scrambling to reach their historic peaks, the point at which they can resume collecting profits. In fact, Hedgefund.net reports that about 35 percent of 2,500 funds that voluntarily report performance have yet to return to their high water marks. While investors are seeing returns, the hedge funds themselves can’t charge performance fees until the assets they manage return to their pre-financial crisis peak. For example, a hedge fund managing $100 million that lost 25 percent during the meltdown must generate returns of up to 35 percent on the remaining $75 million to hit the high water mark. It could take years before the fund resumes collecting 20 percent on investment returns.

Hedge fund market manipulation

Established hedge funds with billions in assets struggling to reach their high water marks keep the lights on with management fees–about 2 percent of those assets, and charge clients for expenses. Others who lost most of their client’s money simply shut down, reopen under a different name, entice new investors and start collecting performance fees. Then its business as usual, which includes classic forms of hedge fund market manipulation. For hedge funds that have returned to performance fee territory, most of them inflate reported returns by buying up their own holdings the last few seconds before a quarter ends. After their fabricated results are recorded, they dump the stock. A study conducted by analysts from Ohio State, Swiss Finance Institute, Toulouse School of Economics and Wharton confirms this practice. The research found evidence that shows stocks with a high percentage of hedge fund ownership benefit from startling last-second rallies more often than would be considered normal. After the manipulation, stocks with high hedge fund ownership also trended toward lower returns on the first day of the month.

The hedge fund mystique

With so many hedge funds struggling to make a comeback, industry experts predict a hedge fund shake-out in 2011 as underperforming funds lose top traders to rivals and disappear from the landscape. Statistics show this is already happening all the time. According to Hedgefund.net, the median return of 1,400 hedge funds tracked over the past five years is 41 percent. But during that time, 3,000 hedge funds fell by the wayside. According to Brett Arends at MarketWatch, the great numbers reported by the hedge fund industry only include a few of the survivors. He conducted his own 10-year comparison with a “vanilla portfolio” and 2,229 hedge funds that started in 2001. The vanilla portfolio gained 94 percent. The hedge funds that failed (75 percent) would have had to gain 60 percent for the industry as a whole to match the vanilla portfolio. One fifth of the 535 survivors didn’t come close.

Sources

MarketWatch

New York Times

AllAboutAlpha.com

The long-awaited release of discount window data by the Federal Reserve illustrates the global impact of Wall Street bank failures. Image: CC laura padgett/Flickr

To prevent going belly-up during the financial crisis, anonymous banks lined up at the Federal Reserve’s discount window for cheap loans. Last week the Supreme Court ruled in favor of a Freedom of Information Act request that the Fed had to reveal which banks borrowed from the discount window and how much was loaned. Data unveiled by the Fed Thursday shed light on how Wall Street’s meltdown spread damage around the globe.

Fed bails out the world’s banks

The discount window was created by the Fed a century ago to help healthy banks caught in a cash crunch with short-term loans. Due to the stigma in financial circles associated having to stand before the Fed with hat in hand, the identities of the borrowers have always been kept secret. But the Fed was forced to make the data public by the Supreme Court after it ruled in favor of a Freedom of Information Act request filed by Bloomberg and Fox Business. When the Fed finally released the data Thursday, any concern about a negative stigma may have been alleviated by the fact that just about every bank in the world had to stand in line at the discount window as the global financial system teetered on the brink of collapse. More than 25,000 pages of documents show the Fed lent as much as $110 billion through the discount window in one day as the financial crisis peaked.

Surprise! European banks were biggest borrowers

Wall Street banks have taken most of the flak for government bailouts during the financial crisis. But data released by the Fed revealed that European banks were among the biggest borrowers at the discount window. On Oct. 29, 2008, Belgian-French bank Dexia borrowed $26.5 billion and Dublin-based bank Depfa, owned by German mortgage lender Hypo Real Estate, borrowed $24.6 billion. The discount window also made multi-billion-dollar loans to other European banks including Austria’s Erste Group, Bank of Scotland and France’s Societe Generale. On this side of the pond, before it became the biggest bank failure in history, Washington Mutual borrowed $2 billion on Thursday, Sept. 18, 2008, to get through the weekend. When that loan was due Monday, Wamu took a $2 billion overnight loan and kept taking another $2 billion every night until it was taken over by J.P. Morgan Chase on Thursday, Sept. 25, 2008.

Data shows global extent of financial crisis

When the collapse of Lehman Brothers in September 2008 triggered the financial crisis, the global economy went into a tailspin, the financial system froze and banks around the world begged the Fed for help. The release of the discount window data shows just how bad the damage was and how quickly it spread. During testimony to a congressional panel investigating the financial crisis in November 2009, Fed chairman Ben Bernanke said of all the banks lined up at the discount window, only one was not at risk of total collapse. The Dodd-Frank financial reform bill passed in 2010 removes confidentiality from discount window lending, but not until two years have passed from the time the loans are made — about the same period it took the courts to force the Fed to do it this time.

Sources

Fox Business

Wall Street Journal

Reuters

The Supreme Court has legally bound the Fed to reveal which banks took discount loans during the financial crisis and how much they borrowed. Image: CC rpongsaj/Flickr

The Federal Reserve is being forced to release details about emergency loans made to Wall Street banks during the financial crisis of 2008. The Supreme Court on Monday sided with a reporter from Bloomberg News who sued to force the Fed to reveal the Wall Street banks that borrowed from a lending program called the “discount window.” Monday’s Supreme Court ruling adds discount window data to information about six other bank bailout programs Congress required the Fed to disclose in December.

Opening the discount window

The Dodd-Frank financial reform bill required The Fed to reveaal details about the $3.5 trillion Wall Street bank bailout of 2008; however, information about the discount window was not part of that disclosure. Using the Freedom of Information Act, Bloomberg News filed a request for discount window data in 2008 and the Fed said no. In 2009 a trial court ruled in Bloomberg’s favor and the Fed appealed. A federal appeals court upheld the ruling, which was appealed by the Clearing House Association, a trade group that represents 10 of the largest banks in the U.S. Monday’s Supreme Court decision upholds the ruling once again, which requires the Fed to release details about the discount window within five days. It is the first time the Fed will release confidential information about the discount window since the program began in 1913.

Looking through the discount window

During the financial crisis, the Fed reduced the discount rate, lowered the primary credit rate and extended the maximum term from overnight to ninety days in the discount window. The documents that must be released include the names of banks and the amounts borrowed through the discount window in April and May, 2008. As the financial services industry trumpets its government-backed return to profitability for investors, the discount window data could embarrass some of the biggest Wall Street banks. If the public knows how much Wall Street had to depend on government bailouts to survive the financial crisis, it might affect investor perception about the leadership of the banks that needed help and how that could affect their future financial condition.

Wall Street wins when losing, again

There may have been something about the discount window loans made in April and May 2008 that Wall Street desperately wanted to keep secret. The Clearing House Association said releasing discount window data would make banks think twice about seeking government bailouts in the future. But even though the Supreme Court upheld Bloomberg’s case, Wall Street lawyers managed to delay the release of discount window data for more that two years. The Dodd-Frank financial reform bill requires the Fed to release data on discount window loans made after July 21, 2010, but only after a two year grace period.

Sources

New York Times

Bloomberg

Business Insider

As the debt collection industry booms, debt collection arrest warrants are interfering with pursuit of serious crimes in some states. Image: CC David Hudson Floyd/Flickr

The use of debt collection arrest warrants has mushroomed since the financial crisis. People often assume that the debtors prison is ancient history and they can’t be arrested for not paying a debt. But more than a third of U.S. states have laws that allow the debt collection industry to obtain arrest warrants to recoup money.

Debt collectors profit from public resources

More than 5,000 debt collection arrest warrants have been signed by judges in the U.S. since January 2010, according to the Wall Street Journal. In some states, debt collection arrest warrants can be issued if a borrower ignores court order to settle a debt or fails to attend a hearing. However, buying old debt for pennies on the dollar and using illegal tactics to collect those debts has become a booming industry. The  volume of debt collection arrest warrants in some states is draining the law enforcement resources needed to pursue more serious crimes. A growing number of legislators, judges and financial regulators are looking into limiting the debt collection industry’s ability to obtain debt collection arrest warrants to pressure borrowers.

Borrowers in contempt of court

Debt collection arrest warrants were typically issued for borrowers who defy repeated summons to appear in court. In debt collection cases, the warrant and arrest are usually for contempt of court. In the aftermath of the recession, many unscrupulous debt collectors use sloppy documentation and, in some cases, mistruths that that result in an arrest of a person who had no idea they were being charged with a crime. Last summer, the Federal Trade Commission began investigating the increasing use of arrest warrants in debt collection lawsuits. Last fall, Senator Al Franken, D-Minn., introduced legislation that bans the use of arrest warrants by private debt collection firms. Franken said the collection industry is taking advantage of sheriffs’ offices and other public resources to enrich themselves at the public’s expense. Franken’s bill would also require debt collectors to provide borrowers with information that verifies exactly what they owe.

How to avoid a debt collection arrest warrant

Despite the growing number of debt collection arrest warrants, an arrest is unlikely for most borrowers who get behind on their payments. Debtors prison was abolished in the U.S. in 1833. It is also illegal under the Fair Debt Collection Practices Act for debt collectors to threaten borrowers with arrest. Borrowers who are threatened with arrest by a debt collector are advised to get help immediately from a consumer law attorney. Those who do receive a summons to appear in court over a debt must not ignore it. It is even more important to appear before a judge if they are unaware of the debt or aren’t familiar with the company suing them.

Sources

Wall Street Journal

Startribune.com

Debt Collection Answers

Falling supply and rising demand will dramatically increase rental rates as Americans adjust their perceptions about home ownership. Image: CC kodiax2/Flickr

After about a decade of very low rent inflation, rising rents are emerging as a consequence of economic recovery. Rental vacancy rates have been dropping sharply, and rental market analysts are warning that double-digit rate increases are on the horizon. Further economic recovery may be at stake as rising rents feed inflation and subtract further from consumer spending already under stress from rising gas and food prices.

Why rental vacancy rates are falling

Rental rates have increased on average less than 1 percent per year over the past decade, according to the Commerce Department. During the recession, people who couldn’t afford to live on their own either doubled or tripled up with roommates or moved back in with their parents. Now many of these people are back on the market looking for their own place to rent. Millions of people who lost their homes in the foreclosure crisis, which continues, are also looking for apartments. Rental vacancy rates dropped from 10.3 percent in the third quarter to 9.4 percent in the fourth quarter of 2010. The 1.3 percent decline was the second-largest on record and the lowest rental vacancy rate since 2003. As rental vacancy rates continue to drop, rents will rise and the overall trend will accelerate.

How high will rents rise?

Rental rates are rising rapidly in every major U.S. metropolitan area and posing a major inflation risk. In the past three months, rents for primary residences are up 2 percent. Overall rents have increased 1 percent. In the next year, rents are expected to rise anywhere from 3 to 10 percent. In high-demand rental markets, such as San Diego, Seattle and Boston, increases could top 10 percent in the next two years. Housing costs account for 40 percent of the Federal Reserve’s core inflation calculation. Rising rents are expected to double the U.S. inflation rate from 0.8 percent in 2010 to 1.6 percent this year. By the end of the year, the U.S. inflation rate could reach 2 percent– the rate of inflation the Fed shoots for without factoring in housing, gas and food prices.

The challenge to meet rental demand

The housing crisis has changed the perception of home ownership in the U.S. as home prices continue to decline. Americans understand the economics of housing better now, and as long as a home isn’t a good investment, more will choose to rent. Rising rents are a function of supply and demand. Nearly 80 million aging baby boomers and 4.5 million people who lost their homes to foreclosure are entering the rental market. Yet multifamily rental construction starts plunged from nearly 350,000 units annually before the 2008 financial collapse to barely 100,000 annually. According to the Center for American Progress, more than 40 million new rental units may be needed in the next 30 years. In the short term, a lack of long-term financing options has few developers willing to risk building more rental housing.

Sources

CNNMoney.com

Daily Finance

CNBC

Huffington Post

As TARP ends, a Treasury official defended the program as he faced critics who said it helped Wall Street, not Main Street. Image: Alan Cordova/Flickr

The Troubled Asset Relief Program was a success, according to the man in charge of the infamous government bailout program. In the final hearing on TARP before the Congressional Oversight Panel March 4, Timothy Massad, the U.S. Treasury official in charge of the program, said it prevented a collapse of the financial system and will cost taxpayers less than originally proposed. But critics on the panel said TARP helped Wall Street, not Main Street, and in terms of economic recovery the program was a failure.

Why Treasury believes TARP was a success

The Troubled Asset Relief Program ended March 4 after spending about $411 billion to bail out Wall Street banks, the U.S. auto industry and homeowners at risk of foreclosure. Timothy Massad, acting assistant secretary for the Treasury Department’s Office of Financial Stability, told the Congressional Oversight Panel for TARP that the program helped back the U.S. economy away from the brink of a depression at a time when no other government tools existed to do so. Congress authorized $700 billion for TARP at the height of the financial crisis in October 2008. About $475 billion will ultimately be spent. Initially, the cost to taxpayers was projected at $341 billion, but TARP is estimated to end up costing just $25 billion. Big Wall Street banks, such as Goldman Sachs, Citigroup and Bank of America, have paid back their bailout money. The government has recovered $277 billion in TARP money so far.

Why critics say TARP was a failure

The Congressional Oversight Panel pointed out the severely underperforming TARP-funded Home Affordable Modification Program as evidence that government bailout funds benefited Wall Street but left the rest of America in the lurch. Two years ago the administration said that HAMP would help up to 4 million homeowners avoid foreclosure. However, only about 600,000 homeowners have received loan modifications to date. The oversight panel estimated that the program would prevent less than 800,000 foreclosures, information House Republicans are using to justify killing HAMP. Massad warned against doing so. He said that killing the program would prevent tens of thousands of at risk homeowners from getting help at a time when the housing and employment markets have such a long way to go.

Moral hazard and the status quo

Critics of TARP on the oversight panel contend that TARP condoned moral hazard by assuring Wall Street banks that they are indeed “too big to fail.” Knowing they will be bailed out in future crises will encourage Wall Street banks to continue taking unnecessary risks to maximize profits. TARP critics refused to acknowledge Massad’s claim that TARP was a success because the banking system has returned to the status quo, unemployment remains unacceptably high and the U.S. economy remains weak. Joseph Stiglitz, a Nobel Laureate on the oversight panel, said that in the ultimate objective of economic recovery, TARP was a “dismal failure.”

Sources

MarketWatch

ABC News

Reuters

Former Goldman board member Rajat Gupta faces insider trading charges for profiting from confidential information during the financial crisis. Image: CC World Economic Forum/Flickr

The level of notoriety that Goldman Sachs either enjoys or endures increased Tuesday. The Securities and Exchange Commission filed insider trading charges against Rajat K. Gupta, one of its former board members. Goldman Sachs was also forced to admit that it could lose billions from lawsuits by investors who were bilked by the bank during the financial crisis.

Gupta busted for Buffett tip

The SEC  is suing former Goldman Sachs board member Rajat K. Gupta for insider trading on suspicions that he passed confidential information to Raj Rajaratnam of the Galleon Group, a financier scheduled to go on trial for securities fraud and conspiracy charges. The SEC said that while Gupta served on Goldman Sachs and Procter & Gamble boards, he tipped off Rajaratnam that Warren Buffett was going to invest $5 billion in Goldman Sachs. Buffett bet on Goldman in September, 2008, during the worst of the financial crisis, a move that helped prevent the bank from collapsing and provided assurance to the markets that all was not lost. Rajaratnam allegedly used the insider trading information from Gupta to generate “illicit profits and loss avoidance of more than $17 million,” according to the SEC.

Why was Gupta lining Galleon’s pockets?

The SEC also charged Gupta for passing Rajaratnam information about Goldman Sachs financials for the second and fourth quarters of 2008 before the reports were made public. Additional insider trading charges against Gupta include giving Rajaratnam information about Procter & Gamble’s 2008 fourth-quarter financials the day before they were released. Rajaratnam allegedly used the Procter & Gamble data to generate $570,000 in ill-gotten gains for his Galleon Group. While a board member at Goldman Sachs and Procter & Gamble, Gupta directed investing for several Galleon hedge funds that the SEC has tied to the insider trading scheme. Gupta also had numerous other business deals brewing with Rajaratnam, who is scheduled to go on trial in federal district court in Manhattan on March 8.

Goldman overwhelms penalties with profits

After the SEC insider trading charges against Gupta made the news, Goldman Sachs shares dropped 1.2 percent. Goldman also reported that it could stand to lose $3.4 billion in damages over lawsuits involving mortgage backed securities it sold that became worthless during the financial crisis. Goldman released the information to comply with new SEC transparency rules regarding financial liabilities. In 2010 Goldman paid a $550 million SEC fine, the largest ever assessed to a Wall Street bank, for deceiving investors with collateral debt obligations. Yet 2010 was the fourth best year for profits in Goldman’s history. The firm’s trading revenue dropped 33 percent from the previous year in 2010, but revenue from investing and lending more than doubled.

Sources

New York Times

Forbes

Wall Street Journal

Business Week

Wall Street bonuses declined on average in 2010, but overall executive compensation rose with higher base salaries. Image: CC pingnews.com/Flickr

Wall Street bonuses for 2010 fell 8 percent on average from the previous year. Wall Street bonuses fell despite the fact that 2010 was the second-highest year ever for Wall Street profits. Overall compensation for Wall Street workers actually grew in 2010, with a greater percentage paid in base salaries rather than bonuses.

Wall Street bonus statistics

Wall Street bonuses in the financial services industry averaged $128,530 in 2010, according to New York State Comptroller Thomas DiNapoli. That figure represents an 8 percent drop from the $140,730 average for Wall Street bonuses the year before. Total Wall Street bonuses in 2010 were $20.8 billion, a 33 percent drop from 2006 before the financial crisis, when bonuses reached a record $34.3 billion. Despite the financial crisis, Wall Street profits added up to $27.6 billion in 2010, second only to 2009, when government bailouts and record low interest rates drove up profits to a record high $55 billion.

Wall Street bonus deception

The decline in Wall Street bonuses for 2010 is not a signal of executive compensation in decline.  The smaller bonuses are a response by the financial services industry to public backlash that arose about executive compensation during the financial crisis. DiNapoli reported that compensation for the financial services industry on Wall Street grew 6 percent in 2010. Financial reform regulation, along with the controversial nature of obscene bonuses, has motivated big banks to change the way they pay employees. Now, more money is funneled to them through base salaries rather than bonuses.

A new tax avoidance tactic

Wall Street firms are also deferring compensation to give financial regulators the impression they are encouraging long-term profitability instead of short term gain. By doling out smaller bonuses, Wall Street firms have also discovered a new and effective tax avoidance tactic. According to DiNapoli, tax revenue from the financial sector made up about 20 percent of New York state tax revenues before the financial crisis. That number has fallen to 13 percent. New York City’s tax revenue from Wall Street declined from 13 percent before the crisis to 7 percent in 2010.

Sources

CNNMoney.com

Wall Street Journal

NPR

The U.S. auto industry rode new models like the Chevrolet Cruze to the largest increase in sales since 2005. Image: CC crazytales562/Flickr

Ford increased U.S. auto sales more than any other automaker in 2010 and passed Toyota to take No. 2 in sales behind General Motors. Every automaker increased U.S. sales except Toyota, which saw a decline in numbers. While automakers such as Ford and GM enjoyed a 2010 resurgence, Toyota was burdened by a plague of recalls that tarnished its once-spotless image.

A snapshot of U.S. auto sales

U.S. auto sales rose 11 percent in 2010 over 2009 and every major automaker except Toyota reported a sales increase. Ford, the only U.S. automaker to forgo a government bailout during the financial crisis, led all automakers with a 19 percent increase. Ford recorded increased sales for the second year in a row, a feat it hadn’t accomplished since 1993. Industry-wide, U.S. auto sales totaled 11.6 million units — an increase from 10.4 million in 2009, the first recorded increase since 2005 and the largest bump since 1984. Highlights included hefty sales gains for GM’s Chevrolet Cruze, Ford’s Fiesta and Chrysler’s Jeep Grand Cherokee.

Why Ford passed Toyota

Ford passed Toyota as No. 2 in U.S. auto sales with 1.97 million vehicles sold in 2010, compared with Toyota’s sales of 1.76 million vehicles. Toyota reported that its sales were down 0.4 percent for the year. Toyota recalled more than 8 million cars and trucks worldwide in 2010, in large part for a phenomenon that became known as “unintended acceleration.” The Japanese automaker temporarily suspended production and sales of eight models in the U.S., including its best-selling Camry and Corolla. While Toyota worked to fix flaws in existing models, GM, Ford, Nissan and Hyundai were busy churning out new and better models.

Auto industry in legitimate recovery

The impressive performance leads analysts to believe that the U.S. auto industry is experiencing a legitimate recovery. The proliferation of new models and higher quality standards also has them declaring that Toyota’s days as the dominant automaker in the U.S. and the world may be gone for good. As Ford and GM demonstrated in 2010, new, well-made products are what matters most as U.S. car buyers return to dealer showrooms.

Sources

Bloomberg

New York Times

CNN

The Santa Claus rally is a year-end stock market surge occurring in countries where Christmas is a national holiday. Image: CC Vanessa Pike-Russell/Flickr

The Santa Claus rally in the stock market, if it has arrived on schedule, will begin Monday, Dec. 27. Historically the Santa Claus rally is the last five trading days of the year in countries that celebrate Christmas. The Dow Jones Industrial Average, already enjoying a strong December, hit a two-year high on Dec. 22.

Yes Virginia, there is a Santa Claus rally

The Santa Claus rally, also known as the “December Effect,” occurs during the final week of trading before the new year. A Santa Claus rally is generally reliable because of an increase in trading that must be executed before the end of the year for accounting and tax purposes. Santa Claus rallies are also attributed to traders anticipating the “January Effect,” an infusion of funds into the market that occurs at the start of the new year. Since the financial crisis hit in 2008 the January Effect has had diminished impact, but Santa Claus rallies in recent years have remained strong.

Evidence for the Santa Claus rally

The Santa Claus rally may have something to do with celebrating Christmas as a national holiday. A study by researchers at a New Zealand university found that year-end stock market surges became evident in Britain when Christmas became a national holiday in 1835. The same phenomenon started happening in the U.S when Christmas became officially observed in 1870. The study also found that year-end market surges are stronger in countries where Christianity is the dominant religion and Christmas is widely celebrated. The study, however, doesn’t answer the question of why celebrating Christmas would lead to a Santa Claus rally.

The Santa Claus rally 2010

The 2010 Santa Claus rally may have started early. The Dow hit a two-year high on Dec. 22 and gained for the 10th time in 11 sessions. As Christmas drew near, volume was light and many traders had already taken the week off. The market has showed optimism over signs that the global economy is improving. Reassuring statements from China about how the euro zone will be able to solve its debt problems have also helped. Plus, the general lack of economic news or corporate maneuvers during the holiday season have put normally jittery traders at ease.

Sources

MarketWatch

Investorplace.com

Wikipedia

The UBS dress code seeks to polish appearances at the Swiss bank that lost more money than any other European bank during the financial crisis. Image: CC menage a moi/Flickr

The UBS dress code is a 43-page handbook issued by the Swiss bank UBS AG to its employees. In meticulous detail, the UBS dress code outlines how its army of suits must dress for success. UBS, some analysts say, issued the dress code as part of an effort to rebuild its reputation after taking a bath in the financial crisis.

UBS dress code: camouflage for bankers

The UBS dress code is a style manual fit for a prep school with a little bit of fashion and beauty advice thrown in. The idea is to blend in to the surroundings with an extreme level of conformity that covers everything from underwear to the lunch menu. The UBS dress code comes on the heels of an advertising campaign reaching out to clients who were burned by UBS, the world’s largest private bank, during the financial crisis. The style manual is being tested in five UBS branches in Switzerland. If employees become more successful, the dress code will be enforced at all Swiss UBS branches.

How to dress for success at UBS

Overall, the UBS dress code espouses the bland, generic look people expect from bankers: dark suits for men, neutral outfits for women. Short skirts that are too tight are a no-no. Flashy jewelery is out for both genders, especially male earrings. But Swiss being Swiss, a distinctive wristwatch is standard equipment. Men need a haircut every four weeks and Grecian Formula is out of the question. Women must use light makeup limited to foundation, mascara and “discreet” lipstick. Other standards include no cartoon socks, trendy eyewear, nail art, strong fragrances or garlic breath. And never, ever wash and iron your shirts yourself.

UBS needs more than a dress code

When the financial crisis hit in 2007, UBS wrote down about $50 billion in mortgage related assets and cut 11,000 jobs. It was also embroiled in an investigation of UBS tax evasion in the U.S. During the financial crisis UBS reported more losses ($57.3 billion) than any European bank. Top executives left and took their clients with them. UBS CEO Oswald J. Grubel has been pleading with investors personally to keep them from defecting. He claims to have been successful. It must have been his properly-knotted tie.

Sources

Wall Street Journal

Business Insider

New York Times

A sweeping insider trading investigation by the SEC is affecting the financial industry on many levels. Image: CC David Paul Ohmer/Flickr

The first shot in what could be the largest insider trading case in history may have been fired Monday. The FBI raided the offices of two hedge funds in Greenwhich, Conn., as part of a massive insider trading probe. Last fall the Securities and Exchange Commission issued subpoenas to more than 30 hedge funds and other investment firms in an investigation of deals that led up to the financial crisis, and charges could be filed by the end of the year.

Three-year SEC investigation bears fruit

Insider trading involves profiting from purchasing stock in companies that are about to be bought before the deals are known to the public. When the value of those shares rises after the deal is announced, the inside traders sell them. The SEC is putting the finishing touches on a three-year investigation that is expected to result in insider trading charges against independent consultants, Wall Street banks, hedge funds and mutual funds across the U.S. Authorities told the Wall Street Journal that criminal and civil probes are looking at multiple insider trading rings that made tens of millions in illegal profits.

Goldman Sachs one of many targets

In one of many aspects of the SEC insider trading investigation, prosecutors suspect that Goldman Sachs bankers leaked information about health care takeover deals to certain investors in a flurry of acquisitions leading up to the financial crisis. Another focus of the investigation is on “expert network” firms hiring former employees of companies targeted for acquisition that pass along advice to hedge fund investors. According to Integrity Research Associates, more than a third of hedge funds use expert networks. Independent analysts and research boutiques are also feeling the heat.

FBI involvement signals jail time ahead

Federal prosecutors are expected to start filing criminal and civil insider trading charges before the end of the year. Because the FBI and U.S. prosecutors are involved along with the SEC, analysts expect some hard jail time to be involved. This would be different than the civil suit brought by the SEC against Goldman Sachs for mortgage fraud last summer. Goldman Sachs wriggled off the hook on that case by paying the largest penalty ever by a Wall Street firm. The $550 million dollar fine amounted to about two weeks’ worth of Goldman Sachs profits.

Sources

Wall Street Journal

MSNBC

Politics Daily

After urging from the White House, banks have been taking a second look at loan applications that could be loosening lending standards. Image: Thinkstock

Wall Street banks have been taking the heat for starting a credit crunch in the aftermath of the financial crisis. While major U.S. financial institutions received billions in government bailouts, they’ve been refusing to make loans. Last December President Obama met with bank executives at the White House and urged them to find new ways to increase small business lending. One of the ideas suggested was to take a “second look” at loan applications. Since that December meeting, several major U.S. banks have started second look programs. Nine months later, there are signs that a second look may be making a difference.

Second look gains traction

When the president challenged Wall Street banks to take a second look at lending last December, he actually went further. An Associated Press report on the meeting said that when Obama asked bankers to “explore every possible way” to increase small business lending, He suggested that they take a “third and fourth look” as well. U.S. Bancorp CEO Richard Davis, chairman of the Financial Services Roundtable, said he would present the idea to other members of the group, which represents the country’s largest financial companies.

Lending the old fashioned way

Nine months later, the Financial Services Roundtable says nearly all its members have second-look programs. Members include Bank of America Corp., J.P. Morgan Chase & Co., PNC Financial Services Group  Inc. and U.S. Bancorp. The Wall Street Journal reports that second look programs are a throwback to good old-fashioned loan underwriting. Instead of automated analysis of credit scores and other data that drove the industry when credit was easy and cheap, now banks are taking into consideration a borrower’s track record and relationship with them. Some banks search for credit report errors that hurt borrowers the first time around, or ask about unreported sources of income that could lower the risk of a consumer loan. The Journal said the second look program may be having an impact. Last month’s Federal Reserve survey of senior loan officers showed the first easing of lending standards for small businesses since 2006.

Worth a second look

A second look costs more for the banks, but banks are starting to see a business opportunity, instead of merely avoiding risk. Alan Sherter at bNET writes that banks could be  implementing second look programs for PR purposes, rather than increasing risk in lending. Also, the loans that are being made are unlikely to jump-start the small business engine that could reduce the unemployment rate. But those caveats probably won’t matter to a struggling local business able to survive, and perhaps even grow, because of a second look.

New mortgage rules designed to protect consumers and prevent another financial crisis are being debated in Congress this week and being aggressively fought by lending industry lobbyists. Flickr photo.

The U.S. House and Senate will start on refining mortgage legislation Tuesday. The legislation would enforce the biggest overhaul to mortgage lending rules in decades. The mortgage legislation, part of the financial reform bill, is intended to end the risky lending practices blamed for causing the financial crisis. Mortgage industry lobbyists are working overtime to take the teeth out of provisions that would protect consumers and limit the industry’s ability to find loopholes in underwriting standards.

Mortgage rules to prevent another financial crisis

Proposed changes to mortgage lending rules include new rules for loan repayment, the ability to sue your lender for fraud or poorly underwritten mortgages, revised appraisal rules and rules about how much risk lenders must share on the loans they sell to investors. Housing Watch reports that most of these rules will affect how expensive mortgages will be and what types of mortgages will be offered by lenders. One of the key new rules mortgage industry lobbyists want to undermine requires lenders to hold a 5 percent stake in loans that are bundled and sold with other loans. Those bundles are the mortgage-backed securities that imploded and caused the financial disaster.

Will mortgage lenders behave?

With mortgage legislation that requires lenders to hold a stake, the idea is that they will act more professionally with their underwriting. When lenders sold their risk along with their loans, they were very careless and handed out many loans that were destined for default. The Wall Street Journal reports that mortgage industry lobbyists want to exempt mortgages from the 5 percent risk-retention requirement if the loans fully document a borrower’s income and assets and don’t include interest-only payments, negative amortization or balloon payments. Exempt loans would also have to cap certain mortgage-origination fees at 3 percent of the loan.

More expensive mortgages with new rules?

Banks say new mortgage lending rules about risk retention will make mortgages more expensive for consumers because banks will be required to hold more capital, a challenge for smaller lenders. But Housing Watch said consumer groups support “encouraging the market” to sell safer products. New mortgage lending rules will make more paperwork for borrowers, but they already push a lot of paper trying to get loans in today’s constricted credit markets. More diligence from banks about verifying a borrower’s income to prevent default should be good for everyone.

Protecting borrowers from predators

New mortgage lending rules also include compensation guidelines that prevent lenders from making more money by making riskier loans. This provision of the financial reform bill would bar lender-paid commissions based on the rate or type of loan. The Wall Street Journal reports that brokers say that the rule would make it harder for them to compete with banks, reduce competition and raise costs for consumers. Consumer advocates say the changes will make it easier for borrowers to shop for loans and compare prices. Barry Zigas, director of housing policy for the Consumer Federation of America told the Journal that the new provisions will shift the burden of proof “from the consumers having to protect themselves from unreasonable fees to the providers of services justifying their costs.”

Saving mortgage lenders from themselves

Other new mortgage rules that industry lobbyists are fighting include limiting the fees mortgage lenders charge if a borrower refinances the loan or pays it off early. They also don’t like the rule that requires them to prove that it is in the borrower’s best interest to finance a loan, instead of just pushing a new loan to benefit from additional fees or commissions. Finally, mortgage lenders don’t want borrowers to be able to sue them if they violate the new mortgage rules. Industry lobbyists say this would make buying mortgages too risky for investors.

The SEC today announced that Goldman Sachs would be prosecuted for their part in the mortgage crisis. Image from Flickr.

This morning, the Securities and Exchange Commission brought charges up against Goldman Sachs for fraud. The SEC alleges that Goldman Sachs defrauded investors by “misstating and omitting key facts.” The SEC suit against Goldman Sachs is an outgrowth of the investigation into the collapse of the U.S. housing market, urged on by unsecured loans at all levels of the financial system.

The SEC suit against Goldman Sachs

The downfall of the housing market and much of the associated U.S. economy is the “fault” of many different entities such as Goldman Sachs. Specifically, the SEC is alleging that Goldman Sachs had a cut-and-dry conflict of interest that they lied about. Specifically, Goldman Sachs allowed a hedge fund that was making bets on mortgages to have a say in the “quality” of those mortgages. Goldman Sachs then told investors that an independent third party had verified the quality of these investments.

Goldman Sachs responds to the SEC filing

At the same time that the Securities and Exchange Commission filed its  suit against Goldman Sachs, Goldman Sachs released a response. The response was all of one sentence:

The SEC’s charges are completely unfounded in law and fact, and we will vigorously contest them and defend the firm and its reputation.

The products Goldman Sachs was selling

The basis of the SEC filing against Goldman Sachs is a product called Collatoralized Debt Obligations, or CDO. A Collateralized Debt Obligation is simply a group of mortgages. Once a homeowner gets a mortgage, the bank bundled it up with lots of other mortgages, and sold that bundle. Because the homes acted as collateral, many banks and investment firms saw these CDO products as safe investments. The idea is that payments on the mortgages would continue to come in, and the investment firm would make money. What many banks – like Goldman Sachs – did not tell investors is that these mortgages were not all good. In fact, many of these home loans were practically payday loans – given with no credit check and no certainty that the mortgage would actually be paid.

The specifics of the Goldman Sachs CDO

The debt obligation that the SEC filing against Goldman Sachs is based on is the ABACUS CDO. Goldman Sachs bundled up all these bad mortgages, known as Residential Mortgage Backed Securities, or RMBS. Goldman Sachs then asked ACA Management LLC to analyze how risky the investment might be. What Goldman Sachs did not tell ACA Management or investors was that these mortgages had been selected by a group of people who had taken out a bet that the mortgages would fail. In other words, investors bet that the mortgages would fail, then selected mortgages they knew would fail. When Goldman Sachs sold these mortgages in groups, the company didn’t tell investors that huge bets had been taken out against the mortgages. To put it simply, Goldman Sachs knew that this was a bad investment and didn’t say a thing about it.

Find out more about the Goldman Sachs inside job

A great resource to find out more about how these financial products work and how some companies made billions of dollars off the housing collapse is the This American Life episode Inside Job

Sources

Securities and Exchange Commission
MarketWatch

Photo from Picasa

An Amazing Sight to See

The ever evolving emirate of Dubai is altering its landscape once again. According to an Associated Press article (See: http://finance.yahoo.com/news/Dubai-opens-halfmilehigh-apf-1107781099.html?x=0), the world’s tallest skyscraper was formally opened on Monday. In typical sensational Dubai style, the building was presented amid a spectacular showering of 10,000 fireworks. The structure is an astounding 2717 feet high and boasts lavish apartments, high-end office spaces and a Giorgio Armani-designed hotel. Resembling a sort of space shuttle, this monstrous steel and glass construction required 1.5 billion dollars to complete. Once financially gainful, Dubai has become deeply in debt. Even amid all of this apparent opulence, there are financial difficulties.

And the Neighbors come to the Rescue

The tower itself, once known as Burj Dubai (or Dubai Tower) has now been named Burj Khalifa in reference to the leader of neighboring emirate Abu Dhabi. Sheik Khalifa Bin Zayed Al Nahyan has come to the aid of Dubai in its financial crisis. The oil-rich Abu Dhabi has a great deal of money to spare and has contributed billions in recent months, to help with Dubai’s financial predicament. In addition to being designed in a luxurious manner, the tower had additional costs related to its astonishing size. As explained on the UK site, The First Post, the 192 concrete piles that make up the foundation of the building had to be sunk 150 feet into sandstone bedrock. A series of airlocks were also required to hold back the cold air flowing down from the top of the tower, which could otherwise develop into a forceful wind.

Is it Even Safe?

At more than 1000 feet higher than the next tallest building, Taiwan’s Taipei 101, there are bound to be concerns voiced over the new structure’s safety. Developers of the tower insist that it is very safe, due in part to its reinforced concrete structure. Also included every 25 to 30 floors are refuge floors which have separate air supplies and enhanced fire resistance to offer occupants added protection in case of emergency.

Is the Cost Worth it?

Even outside of the cost of Burj Khalifa, Dubai has been battling some serious financial woes. The property market has taken a plunge and government owned investment company, Dubai World has fallen into serious debt. The good news is that most of the apartments, 1044 in total, have been sold thus far. The office space remains a struggle as it has yet to be claimed.

The Idea Behind it All

It has been suggested that Dubai undertook such a large scale project to revive confidence in its strength, power and influence, but many seem to see the venture as ostentatious and unnecessary. Perhaps all of the attention and speculation surrounding the intent of the tower is exactly what this area needs now though. After all, it is tough to go back at this point. Dubai is probably better off making the most of the renewed interest in the area with all of its extravagant and unique structures. After all it has been said that there is no such thing as bad publicity, and that may just be the case in this instance. Dubai will have to wait and hope

Feel like the government is rolling the dice when it comes to debt relief? Don't forget how much must be factored in! (Photo: flickr.com)

The global recession continues to batter our financial shores, and world governments are working non-stop to implement programs designed to restore the financial viability of borrowers and promote debt relief. There are numerous theories regarding just how government should go about assisting populations as they progress toward debt relief. Whether their action should be a) measured and look toward long-term stability or b) immediate in order to quell the pain the general population is facing and jump-start the economy through multi-billion dollar stimulus is being debated across the globe.

A June 2009 study by Luc Laeven and Thomas Laryea of the International Monetary Fund entitled “Principles of Household Debt Restructuring” (see http://www.cnbv.gob.mx/recursos/fmitsr24.pdf) states that any government-sponsored program to promote debt relief should help individual borrowers while at the same time minimizing fiscal cost, reducing the possibility that banks will fail and establishing the a clear plan for real recovery. Unfortunately, it is unclear for nations like the United States whether such a clear plan is in place.

What Should the Structure of Government Aid Be?

Laeven and Laryea suggest the following framework:

• Clear Objective: Troubled loans (bad debt) must be converted. Debt service requirements might be reduced for some borrowers who are suffering due to interest or currency exchange rate explosion.
• Scope of Debt Relief: Helping those who cannot satisfy their debt but would likely be able if debt restructuring were to occur. The criteria for choosing such borrowers would be difficult, and would have to be feasible within the envelope of public funds received to operate the debt relief program.
• It Must be Proportional: Bring the greatest aid to those who are in the greatest need.
• Voluntary Participation: Banks should not be forced to restructure borrower debt, as this will give rise to legal challenges that will hinder the debt relief process.
• It Must be Simple: Household debt involves a large sample of loans, so simple rules are needed if systemic abuse is to be avoided. The government and banks must share information in order to conduct analysis of debt load.
• There Must be Transparency and Accountability: President Obama promised transparency during his tenure. This kind of openness is essential in order to perform the analysis necessary for debt relief using public funds. All organizations involved should know where the money is going, and if a mistake is made or there is an intentional infraction, those responsible should be required to stand accountable.

Unsustainable Debt Requires Swift but Sure Action

The world financial crisis has hit many countries hard. Household debts on the individual level (as well as the ability to service such problems) create a downward spiral from which it is difficult to escape toward debt relief. Financial institutions reel in the face of consumer financial paralysis, as their own balance sheets will with non-performing loans. As a result, banks tighten the rains on available credit, which in turn affects housing prices and the value of other assets. This lessening of collateral value comes back to hit households where it hurts. Consumption goes way down, which hurts retail and leads to unemployment. Greater unemployment contributes mightily to slackening income figures.

Turn Frowns Upside Down? How?

How will society effectively deal with the massive volume of distressed loans? Government involvement will necessarily bring costs; what we have to decide is whether the benefit of their involvement in debt relief outweighs said costs. Any government spending to affect debt relief should be tempered by the need to remain fiscally responsible, suggest the study authors.

The rise in personal bankruptcies and foreclosures presents an important hurdle for government involvement in debt relief. Working each case out individually through the court system is hardly efficient. A gridlocked system based on allowing the market to correct itself – while legal fees mount – suggests in the minds of the authors that a more organized debt relief approach from world governments is necessary.

Is Government Debt Relief Feasible or Credible?

This is an interesting question. If intervention can produce real gains in helping to alleviate public debt without abusing the will of taxpayers, perhaps governments should move forward. The study authors remind us that if debts are written down in value, banks will need their own recapitalization programs in place. These programs should be tuned toward establishing solvency for the financial institutions, rather than gross profits.

The Case-By-Case Approach

If government agencies can assess the current size of the financial problem they face by determining

• An accurate, current picture
• The problem’s evolution to this point
• How the financial burden has been concentrated across a sample of individual banks
• How debt relief via restructuring will help these lending institutions,

then Laeven and Laryea figure that the path for government involvement would be open.

The approach to the problem should advisably first focus on case-by-case debt relief (when numbers make such an approach feasible). Dealing with household insolvency through a framework that addresses collection enforcement, the value of collateral after debt is secured, loan modification that respects the capacity for debtors to pay and (in some cases) debt relief via discharge after a liquidation period. While this framework would address legal issues, the authors suggest that governments could also offer incentives and make loan restructuring easier by promoting such things as nonbinding private sector guidelines for the restructuring process.

Across-the-Board Government Subsidies

When a case-by-case approach isn’t feasible, the authors suggest government-sponsored debt restructuring for debt relief. This would involve direct financial support to debtors. Some or all loans could be covered, where the government would give funds to banks that agree to restructure loans. The creation of asset management companies that buy and resolve bad debt would be another approach. In addition, household subsidies along the lines of debt forgiveness or interest rate/tax rebates are options under this plan.

Ideally, only those who are honestly unable to repay their debt could take advantage of such across-the-board government debt relief programs. Determining a person’s ability to pay is tricky business. “Debt restructuring,” write the authors, “should not be regarded as an instrument that can displace sound macroeconomic policies.” Caution and close study would be needed.

A Restructuring Plan

This would include a variety of incentives and reforms, claim the authors. It begins with incentives for borrowers, where they are encouraged to restructure their loans with a series of subsidies. There would be subsidized refinancing, write-offs and insurance against being harmed by exchange or interest rate hikes in the future. In the area of bad mortgages, the authors state that shared appreciation mortgages might be one way to go. Repayment would then necessarily be related to the value of a home when it is sold. These mortgages could be written so that governments could share in the upside as value appreciates.

Lenders could also receive their share of incentives. Tax credits for those who agree to restructure loans or even access to low interest credit lines as a reward are not out of the realm of possibility in Laeven and Laryea’s plan. To help prevent an endless chain of recapitalization aid, the government could also create “an effective personal bankruptcy framework for addressing collective enforcement of creditor claims and rehabilitation of debtors.” Helping borrowers in that case could also help lenders.

Foreign Currency Loans

Considering that the authors compiled their study for the International Monetary Fund, it comes as no surprise that the issue of foreign currency loans is addressed. They suggest such loans could be converted to local currency, and when the exchange rate problem becomes too prohibitive, liquid assets denominated in the original currency could help make up the difference.

And as a Last Resort…

When the above measures aren’t enough, the authors believe that a new standard for modifying bad loans is needed, as well as temporary bans on foreclosure and repayment. Governments who delve into these areas do so at their peril, however, as lending contracts are superseded. The market could begin to view contract enforcement capability in a negative light, which would diminish investor confidence. In that instance, debt relief is not procured and incentives to default are unintentionally created because the danger of penalty is not so near.

Debt Relief Through Asset Management Companies

Of the ideas Laeven and Laryea present, debt relief through the use of asset management companies has the most promise in my eyes. Such companies would be better equipped to resolve bad debt than the already overtaxed lenders who require recapitalization. Then, on a case-by-case basis with banks, the government can be more selective as to where taxpayer dollars go to help. The relative strength of a financial would be taken into account.

Various Countries are Applying Variants of These Ideas

However, there is no one solution that works for all nations. Debt relief is necessarily a long, slow process, one that individuals may not be able to stomach as they stare down their monthly slate of bills to pay. But for lasting change, it appears that slow reform may be the only route for true debt relief.