Banks Warm to Mortgage Bonds That Burned Them in 2008
Citigroup, Goldman Sachs and Wells Fargo are getting back into the business
Banks are getting back into the business of building mortgage bonds, laying the groundwork for a market that stands to grow as the Trump administration tries to reduce the government’s role in housing finance.
Citigroup Inc., Goldman Sachs Group Inc., Wells Fargo & Co., and JPMorgan Chase & Co. over the past year have restarted or expanded the business of spinning fresh pools of mortgages into securities.
They are adding a jolt of energy to efforts to revive the so-called private-label market for mortgage bonds, which virtually disappeared after it blew up during the financial crisis of 2008. Smaller operators have long tried, but mostly failed, to rebuild what was once among the most significant businesses on Wall Street.
Ron Paul: US interest rates are going negative, and the Fed can’t stop it
Ron Paul is warning negative interest rates will crush the global economy.
The former Republican congressman from Texas believes the U.S. won’t be the exception.
“We will join the rest of them and go to total negative rates in hopes that that will be the solution,” he told CNBC’s “Futures Now” on Thursday. “We’ve never had as many currencies in negative interest rates. $17 trillion worth of bonds [are] in negative interest rates. It’s never existed before. And, that’s a bubble. So, we’re in the biggest bond bubble in history, and it’s going to burst.”
Paul, a former presidential candidate and vocal libertarian known for his economic and stock market bubble warnings, contends the Federal Reserve’s policies are powerless in this environment. He doesn’t believe this week’s Fed meeting will provide any kind of relief and cutting rates will not be the answer.
“You can’t predict exactly where the creation of credit goes,” said Paul. “We have a ton of inflation with all that QE [quantitative easing]. And, every time you lower interest rates below market levels and create new credit, that’s a bubble.”
Paul has been waving the red flag for years, warning that a once in a lifetime market drop of 50% or more will strike stocks. With bonds yielding negative rates now in focus, he suggests the danger is ballooning to unseen levels.
Yet, he’s unsure of the timing of a collapse.
“You don’t know this precise time. But you know it can happen,” he said. “How do you sell a bond that pays a negative rate? Who’s going to jump up and down?”
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