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47 » VISIT US ONLINE @ DSNEWS.COM HAVE BANKS DONE ENOUGH TO PREVENT ANOTHER CRISIS? In a recent Bloomberg article, Mark White said the Trump administration believes banks have done enough to avert another crisis and should have more relaxed financial-strength requirements. According to White, though, we may not be all that much safer. e article states that, due to the Volcker Rule, which was adopted by Congress as a part of the Dodd-Frank Act in July 2010 and put into effect in July 2015, banks' trading operations should have become less risky in the last few years. e rule prohibits the costly speculative trading that was ever-present in 2008. Total trading assets at the six largest U.S. banks were relatively unchanged from 2009 to when Dodd-Frank was passed. But when looking at combined value risk—which is how much banks expect to lose on a worst-case scenario day—the numbers decreased from $1 billion to $279 million. e potential losses that value at-risk uses is based on data from about a year prior, so it can be misleading. It will register less risk if things are calm, and that has been the case in years following 2009. Adjusting for this, White explained that big-bank operations are about 25 percent less risky than 2009 and a bit higher than they were in 2016. "Make no mistake: Banks should take risks," White said. "Lending to people and companies is both inherently risky and crucial to the economy. But they don't have enough equity to absorb the inevitable losses from bad bets, and they're still taking plenty of risk in areas—such as the trading book—where they should be safer." FREDDIE TO OFFLOAD NEARLY $1B IN LOANS Freddie Mac has announced plans to sell off a pool of $983 million in seasoned re-forming and moderately delinquent loans. e pool is comprised of HAMP and other step-rate modified loans, as well as loans that have undergone GSE-specific modifications. All loans are currently serviced by Mr. Cooper— which changed its name from Nationstar Mortgage earlier this year. e sale—which will mark Freddie Mac's biggest seasoned loan transaction to date—will be completed in two steps, according to the Enterprise's announcement on the matter. "e initial step involves the sale of the loans via a competitive bidding process subject to a securitization term sheet," Freddie reported in late August. "e sale will be executed on the basis of economics, subject to meeting Freddie Mac's internal reserve levels. e second step will require the purchaser of the loans to securitize the loans and retain the first loss subordinate tranche. Freddie Mac will guarantee and acquire the guaranteed security issued from such securitization." e pool won't just go to the highest bidder, though. According to Freddie Mac, the chosen buyer will need to be a veteran investor with "substantial experience in managing both performing and moderately delinquent mortgage loans as well as securitizing mortgage loans." Credit Suisse Securities and e Williams Capital Group are advising Freddie Mac on the sale, which is the Enterprise's second transaction of its kind this year. Its first seasoned re-performing loan offering was sold in May and included $292 million in loans from Freddie's mortgage investments portfolio. As of today, Freddie Mac has sold off $7 billion in nonperforming loans. e GSE has also securitized $31 billion in re- performing loans—$26 billion of which were in participation certificates, while $5 billion were in structured offerings. DIMON: MORTGAGE INDUSTRY COULD BE $2T HIGHER JPMorgan Chase President and CEO Jamie Dimon had much to say on the state of the U.S. economy at the Delivering Alpha Conference in New York City, according to CNBC. Lending was the first talking point of Dimon's interview, where he debunked the myth that current economic policy hasn't affected lending. "Absolutely untrue," Dimon said. "Any … new small-business owner has trouble getting a loan. … Because of the higher cost of mortgaging, the servicing legal requirements, and less availability, we think mortgage could be $2 trillion higher." Dimon went on to say that even if that number were to be halved to $1 trillion, that would add 10 percent to lending and would contribute to growth, small business, middle-market, and even "rugs," along with homebuilding and new household formation. "You're telling me we're not holding ourselves back? e fact is, we are," Dimon said. "I do think these things are policy issues," he continued. "It's not just the way it is." Dimon recognized that Washington is a difficult place and recommended that thought, analysis, policy, and collaboration are the best ways to make progress in moving the industry forward. Consumer and business confidence is on the rise, but Dimon is of the opinion that the administration should remain focused on the agenda it pitched at the start of its campaign.

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