Fed's Letter to Deutsche Bank

"In reviewing your earnings per annum,
We're less than impressed, and we pan 'em.
The bank may have gains,
But this letter pertains
To the haphazard way that you ran 'em."

The Wall Street Journal reports that the Federal Reserve Bank of New York has vented its frustration with the sloppy reporting of Deutsche Bank's US branches and subsidiaries.  In a December 2013 letter to the bank, senior Fed supervisor Daniel Muccia complained  that the bank's reports "are of low quality, inaccurate and unreliable. The size and breadth of errors strongly suggest that the firm's entire U.S. regulatory reporting structure requires wide-ranging remedial action."  It's a problem long in the making, wrote Mr. Muccia: "Since 2002, the FRBNY has highlighted significant weaknesses in the firm's regulatory reporting framework that have remained outstanding for a decade."

Of course, it's not only the Fed that should be concerned.  Investors too rely on firms' financial reports to value their securities and decide when to buy, sell or hold.  Lest we forget, the feeling that "you can't trust the numbers" was a factor in the global financial meltdown of not so long ago.

The $1.2 Trillion Rainy Day Fund

At a time which the bankers were stunned in,
The Fed gave emergency fundin'
To hundreds of banks
Of high and low ranks
In New York, Waukegan and London.

The US Federal Reserve has published the data on the 21,000 emergency loans to over 400 recipients, totaling $1.2 trillion, that it made from August 2007 to April 2010. Thanks to Bloomberg, the public can now comb through some very illuminating interactive graphics to compare and contrast the credits to companies large and small, American and international, banks and non-banks. Most know that the heaviest bailing-out went to Morgan Stanley, Citi and Bank of America; many are also aware that European banks such as Deutsche, Dexia and Dresdner availed themselves. But how many know of the lifelines thrown to Legacy Texas Group, Sharon Savings Bank and Stupp Bros.?

Overheard at a Mortgage Lender

"To originate loans to the maximum,
One must feed the demand to invest in 'em;
If a borrower's no good,
Then it's best if you would
Not disclose what does not show the best in 'em."  

The "reckless" practices of the mortgage origination industry were illuminated in a federal lawsuit filed against Deutsche Bank and its US mortgage lending subsidiary.  MortgageIT Inc. was purchased by the German bank in 2007, as it tried to capture more volume in the booming mortgage bond business.  The suit alleges that the bank was so eager not to disrupt its mortgage origination flow that it literally locked documentation of underwriting violations in a closet, only to have them "outed" in court when the boom turned to bust.  The US government has paid out $386 million in claims on defaulted mortgages, and is liable for $888 million more.

Why Does the Greek Crisis Matter?

Josef Ackermann deftly explained
Why Greece has the markets so strained:
Like a wellhead that leaks,
A default by the Greeks
Could probably not be contained.