U.S. banks haunted by mortgage demons that won’t go away

By Rick Rothacker – Lenders like Bank of America Corp and Wells Fargo & Co say they are facing mounting pressure to buy back bad mortgages they sold to investors, signaling that banks‘ home-loan headaches could continue for years.

When selling the mortgages, banks made promises or “representations and warranties” about the loans. Investors can ask banks to buy back soured mortgages if these promises were evidently broken, for reasons such as poor underwriting, insufficient verification of income or other documentation errors.

Banks have fought some of these claims, but most lenders still expect to have to buy back many of the mortgages. more> http://tinyurl.com/7vab96n

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• Mortgage Bias: Economic Jim Crow (theroot.com)
• New week, new record as mortgage rates fall again (economywatch.msnbc.msn.com)

Which fundamental issues has Europe solved?

Euro bank notes Türkçe: Euro banknotlar
(Photo credit: Wikipedia)

Economist – The calm that descended in the wake of the European Central Bank‘s flood of cheap, long-term bank lendinghas broken. A trillion euros will buy you about four months, as it turns out. What happens now?

What are the euro zone‘s problems? Primarily:

• Peripheral workers are uncompetitive and easy routes to devaluation are off the table.
• Markets therefore question the ability of sovereigns to make good on their debts. In the absence of a lender of last resort to governments, yields rise and fears of insolvency are self-fulfilling.
• Because governments are individually responsible for domestic banking systems, this leads to fears of banking collapse, which feedback into the growth and debt problems. Without a printing press, governments can’t credibly promise to be bank-lender of last resort without further undermining solvency.

How has the euro area addressed the fundamental problems? The slow, grinding process of internal devaluation is underway but is a long way from completion. There have essentially been no active steps taken to facilitate internal rebalancing. more> http://is.gd/G53exg

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• 5 Visions of How to Solve the Euro Crisis (theneteconomy.wordpress.com)
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• Luther and the Euro crisis, Gene Veith, Cranach (The Blog of Veith)
• Outlook for Spanish firms darkens as crisis mounts, Blaise Robinson, Reuters

What Should the Financial System Actually Look Like?

By Nathan Lewis – What are banks’ role in society today? First, they operate a payments system. These are your checking accounts and so forth. Second, they are conduits of capital, making loans mostly to small entities like households and small businesses. In the U.S. in particular, businesses of any considerable size use direct corporate bond finance instead. In Europe and Asia, banks still have a role providing loans to large businesses.

Statistics on corporate bonds show the process of disintermediation that has occurred. In the U.S., corporations have $4,967 billion of corporate bonds outstanding, and $1,395 billion of bank loans. This compares to the eurozone, where corporations have €4,761 billion of bank loans, and €882 billion of bonds. In 1968, U.S. corporations had $139 billion of bonds and $105 billion of bank loans. more> http://is.gd/5Wcyzy

E-Book Lending Lures Readers Back to Libraries

Mobiledia/Forbes – U.S. libraries are seeing increases in the numbers of borrowers who want digital books, with e-book lending rates nearly tripling over the past year.

Since libraries began lending e-books a few years ago, the industry has grappled to find a solution that pleases readers, publishers, and lending institutions alike.

Unlike printed books, e-books don’t wear out and can be circulated over and over again. Digital titles also can’t be lost, stolen, or damaged, meaning libraries won’t have to repurchase the title from the publisher in the future. more> http://is.gd/T1x1oi

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• Check an E-Book Out From the Library (howto.wired.com)
• Alternatives to the Kindle Library Lending (savings.com)
• Amazon Offers Lending Library On The Kindle To Amazon Prime Subscribers (huffingtonpost.com)
• Penguin Group yanks e-books from library lending services (venturebeat.com)
• Penguin Books rethinks eLending (idlamit.wordpress.com)
• Penguin Stops the Availability of E-books (landbar.wordpress.com)
• Penguin Reverses Course For Now On Kindle Lending (huffingtonpost.com)
• Penguin restores most e-books to lending library services (venturebeat.com)