Word: nonbanker
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...latter approach, so far putting $216 billion of the TARP hoard into capital injections. On Wednesday, Paulson said that Treasury has concluded that, for the moment at least, buying illiquid mortgage securities "is not the most effective way to use TARP funds." Instead, Treasury will look to help nonbank lenders involved with credit cards, auto loans and other forms of consumer finance...
...Less obvious is the support the dollar is getting from an unlikely quarter: global hedge funds and other nonbank financial entities. This shadow banking system has borrowed trillions of dollars to leverage its investments. But the crisis has triggered massive early loan repayments, and because these loans must be repaid in the U.S. currency, demand for the dollar has increased, driving up its value. It's not just hedge funds that are affected. Foreign banks, which hold $12 trillion in dollar assets and liabilities, are also in the process of deleveraging...
...could make with the capital you had. In the late 1970s, a lot of very smart Wall Street types managed to create a shadow banking system to finance more aggressive, risky and profitable investments, including novel vehicles based on the bad home loans peddled mostly (although not exclusively) by nonbank mortgage firms. (The government-sponsored Fannie Mae and Freddie Mac bought into the high-risk innovations of the shadow banking system around 2005 by buying a bunch of now-toxic mortgage-backed securities...
...greatest disturbance in credit markets in a decade. At the root of the turmoil is aggressive lending to American home buyers who previously were unable to obtain credit. Financial engineers pooled these loans together and sold off pieces representing different presumed levels of risk. In the process, the nonbank financial institutions buying these "structured credit products" - hedge funds and other supposedly sophisticated players - replaced banks as the engines of credit creation in recent years. Unlike banks, however, these institutions lack deposit insurance and do not have direct access to central bank lender-of-last-resort safety nets. When the quantitative...
...charge 80% of the time when someone puts a card in a B. of A. machine." Moreover, he says, the cost of the transaction is just a small part of the bank's expenses, which include purchasing, installing and maintaining the machines as well as paying rent at nonbank locations. "Banks are being singled out for special treatment," Magnani says. "What other industry has been told it can't charge for products and services?" Concurs Robert Litan, a Brookings Institution economist who has completed a study of ATM fees for the American Bankers Association: "There is no justification for imposing...