Morning Report: Regulation increases the cost to originate by 18% 5/5/16

Posted on May 5, 2016 by Brent Nyitray

Markets are flattish this morning on no real news. Bonds and MBS are flat as well

Announced job cuts increased 5.8% in April, according to outplacement firm Challenger, Gray and Christmas. Layoffs are at a 7 year high, driven primarily by pain in the energy sector, but also in retail and computers (Intel accounted for 17k of them). Remember, these are announced job cuts – they often either don’t end up materializing or are accomplished by attrition.

We still aren’t seeing evidence of mass layoffs in the initial jobless claims numbers, which are hovering around 40 year lows. Last week, they increased to 274k.

We are starting to see a slowdown in the labor market. The ADP number was a disappointment. The Street is forecasting a 200k print tomorrow.

Consumer comfort fell last week. Increasing gasoline prices aren’t helping.

Soaring compliance costs are going to drive M&A activity in the mortgage banking sector.  The average cost to originate a loan has increased by 18% over the past two years to just over $7,000 from just under $6,000 in 2013, according to the MBA. As banks retreat from the sector, non-banks are growing, especially firms like Quicken and Freedom. This is obviously attracting more regulatory scrutiny.

Mortgage credit availability decreased in April, according to the MBA. Lynn Fisher, MBA’s Vice President of Research and Economics commented, “Mortgage credit became less available in April as a result of two opposing trends, resulting in a net decrease to the index. Investors continued to roll out Fannie Mae and Freddie Mac’s low down payment loan programs, which had a loosening effect on credit availability. However, this was more than offset by tightening among high balance and jumbo loan programs.”

The CFPB is proposing a rule to limit mandatory arbitration clauses in financial contracts, which would make it easier for class-action lawsuits. These are in place for 99% of payday lenders, which the CFPB wants to put out of business.

Filed under: Economy, Morning Report |

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32 Responses

  1. jnc4p, on May 5, 2016 at 11:36 am said:

    If Robert Reich is accurate, it should give progressives a good scare:

    “It’s not enough to talk about good policy. Policy is cheap — at least, policy discussion is cheap. I’m as much of a policy wonk as anybody; I’ve been teaching public policy for 40 years. But it’s becoming increasingly irrelevant, because without political will and political power — and a movement behind that political will and power — no policy is going to be put into effect.

    If you came to the political understanding in the ’60s or ’70s or ’80s … the assumption was that politics was laid out on a long continuum from left to right. Democrats were on the left, Republicans were on the right, and the center was the center — and you wanted to go to the center, because that’s where all the votes were.

    That was the way we thought about politics, but that left out some very important phenomena that have occurred over the last several decades. What it leaves out is this widening inequality — it’s not just economic, it’s also political, and it has to do with political power. The vast majority of Americans, according to almost every study on this issue, feel a high degree of powerlessness. They just feel like they don’t have any say, any control. … The left-right continuum is beside the point. The real interesting divide is establishment versus anti-establishment: Do you feel the game is against you? Or are you among the riggers of the game?”

    http://www.vox.com/2016/5/5/11581940/robert-reich-ezra-klein

    & also this view by some Sanders supporters vis-a-vis Hillary Clinton:

    ““She would cement in place everything we are fighting against.””

    http://www.theatlantic.com/politics/archive/2016/05/hillary-clinton-bernie-sanders/481389/

    Liked by 2 people

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    • ScottC, on May 5, 2016 at 1:26 pm said:

      jnc:

      Reich has a lot of chutzpah.

      He explicitly espouses and supports an ideology that not only relies on concentrating rather than dispersing political power, but which concentrates that power in the least democratic areas of government (the courts and the federal bureaucracy). And then he has the balls to lament the fact that the vast majority of Americans feel increasingly powerless?

      His diagnosis may be right, but he and his fucked up ideology is a primary cause.

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  2. jnc4p, on May 5, 2016 at 12:18 pm said:

    Scott Adams on Clinton’s latest web ad that PL likes so much:

    “Let’s evaluate the ad for its persuasiveness.

    Trump’s proposition is that the establishment is a bunch of useless losers and he can do better. The ad shows Trump being opposed by… a bunch of useless losers on the Republican side. Trump annihilated every one of them. And it wasn’t even hard.

    Here’s what the ad does in terms of forming associations:

    1. The ad lumps Clinton with the losing Republican candidates. They all share a dislike of the presumptive Republican nominee. Do they belong to the same club of establishment politicians who are ruining the country?

    2. The ad shows that Trump is disliked by the Republican establishment. But that is his appeal, not his flaw. Trump already “fired” the losers in the video who are attacking him. Do you believe anything you hear from a disgruntled employee who just got fired?

    3. When you remind viewers how many big-name politicians Trump has defeated, it makes him seem stronger.

    4. Democrats, independents, and even some Republicans will see that Trump is an “enemy of their enemy” and bond to him.”

    http://blog.dilbert.com/post/143898615346/how-not-to-make-a-campaign-ad

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    • novahockey, on May 5, 2016 at 12:34 pm said:

      the schadenfreude would be yuuge!

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    • jnc4p, on May 5, 2016 at 12:47 pm said:

      From Adams blog comments:

      “Scott, Is $1 billion still your price for helping Hillary defeat Trump.

      • ScottAdams925 Mod

      My price increases with Trump’s success. Current price is $1.8 billion.”

      Liked by 1 person

      Reply
  3. jnc4p, on May 5, 2016 at 12:48 pm said:

    Can’t believe I missed this Onion piece from last year:

    “‘This Will Be The End Of Trump’s Campaign,’ Says Increasingly Nervous Man For Seventh Time This Year
    December 8, 2015”

    http://www.theonion.com/article/will-be-end-trumps-campaign-says-increasingly-nerv-52002

    Liked by 1 person

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  4. jnc4p, on May 5, 2016 at 12:58 pm said:

    Because this is how democracy is supposed to work, agencies just decide to take over entire sections of the economy on their own initiative:

    “The Family Smoking Prevention and Tobacco Control Act of 2009 gave the Food and Drug Administration the power to regulate the tobacco industry. But e-cigarettes — along with other tobacco-related merchandise such as cigars and nicotine gels — were left out.

    In April 2011, the FDA announced it was going to address this gap because of health concerns about the products. In April 2014, the agency proposed a draft rule that will redefine e-cigarettes as “tobacco products.” That rule, published in this 499-page document, has just been finalized, which means all tobacco products will now be FDA-regulated under the Tobacco Control Act.”

    http://www.vox.com/2016/5/5/11595784/fda-rule-e-cigarettes-tobacco

    Never mind that e-cigarettes don’t use tobacco at all. But hey, it’s just as fluid a term as gender is apparently.

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  5. Let the mutherfuker burn!, on May 5, 2016 at 7:28 pm said:

    That Franks’ keeps going back to Trump is a racist is hilarious, he’s virtue sugnalling to his friends.

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    • markinaustin, on May 5, 2016 at 9:55 pm said:

      George and Scott – I posted the redstate piece because it was interesting.

      I would independently pose the strategy, but not because I think the Ds will win the Presidency – I have no feel for that whatsoever and do not trust polls at this early stage.

      Because I am sure the only person Trump would take advice from on a nominee is his big sister, now a retired 3rd Circuit law-and-order Judge, I believe Trump would nominate someone on the spectrum from Alito to Garland, and someone credible, at that. So I would not worry about Trump’s appointee, either.

      No. If I were a R I would fear losing the Senate majority, and either having a young liberal Justice appointed by HRC, or have any Trump appointee stonewalled in the endless retaliation loop.

      But I would carefully weigh the argument Scott’s link makes – and if I thought holding hearings on Garland would lose the Senate for sure, then I would advise continued stonewalling by the Rs.

      I would rather see the Borking wars stop, as a retired lawyer, but that ship sailed.

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      • ScottC, on May 6, 2016 at 8:27 am said:

        Mark:

        I would rather see the Borking wars stop, as a retired lawyer, but that ship sailed.

        Indeed. The court is a political body now. I don’t see how that reality changes in the absence of a complete repudiation of the living constitution theory inside of law schools. And as long as it remains a political body, appointment to the court will, of necessity, be a process fraught with politics.

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    • Kevin S. Willis, on May 6, 2016 at 11:34 am said:

      “That Franks’ keeps going back to Trump is a racist is hilarious”

      Yup. Got let all the liberals know, repeatedly, that he understands that Trump is a racist demagogue. Because he knows as well as anybody that if he doesn’t emphasize that enough, he’ll be accused of giving Donald a pass on his racism and xenophobia. And being a racist xenophobe himself.

      It seems a little of a shift for Franks, though. When I read “What’s the Matter With Kansas”, he came off as largely clueless as to why anybody but the super-wealthy evil business people of the world would ever vote for a Republican. And that was pre-Tea Party, in the midst of the big-government, aisle-crossing Dubya admin.

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      • jnc4p, on May 6, 2016 at 12:37 pm said:

        He gave an interview recently with Bill Maher over the same thesis of the Democrats as the party of rich liberals.

        “FRANK: [overlapping]—absolutely. And, today’s breed, it’s, you know, these Ivy League guys doing favors for other Ivy League guys. Look at the Obama Administration, the revolving door with Wall Street. Look at the Clinton Administration, same kind of thing. And, if it’s not Wall Street, it’s Silicon Valley, it’s big pharma. I mean, so, yeah, it’s a liberalism of the rich. This is a liberalism of the winners, of the new economy winners.

        The people who are left behind, of course, organized labor, working people, you and me.”

        http://www.hbo.com/real-time-with-bill-maher/episodes/14/386-episode/article/ep-386-transcript.html

        That “working people, you and me” to Bill Maher is hilarious.

        Liked by 1 person

        Reply
  7. jnc4p, on May 6, 2016 at 10:36 am said:

    Trump advocates for deficit financed stimulus. Progressives freak out.

    http://www.vox.com/2016/5/6/11607464/trump-haircut-default-debt

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    • Kevin S. Willis, on May 6, 2016 at 11:30 am said:

      He’s flip-flopping! He’s a hypocrite!

      PL folks insist he’s a “true conservative”. And will continue to do so, not because he advances any actual conservative policies, should he be elected, but because he’s said mean things about illegal immigrants and doesn’t speak the correct PC-lingo.

      “I would borrow, knowing that if the economy crashed, you could make a deal,” Trump said. “And if the economy was good, it was good. So therefore, you can’t lose.”

      This is different from TARP and the stimulus that started under Bush but Obama magically blessed, thus creating the best economy evah, but it’s bad because Trump is suggesting it? Huh.

      but also offered a brilliant case study in the profound risks of attempting to apply the logic of a private business enterprise to the task of running the United States of America.

      Because the braintrust at Vox is the omniscient repository of all wisdom as to what makes the USA work.

      They can’t stand a guy who shoots from the hip and hasn’t read all the white papers. Also, the complaint about Puerto Rico declaring bankruptcy being illegal . . . well, who has taught us that the law is amorphous and fluid and should only mean what we, in our contemporary collective wisdom, thinks it means? He’s just being a good liberal. Sheesh.

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      • ScottC, on May 6, 2016 at 12:44 pm said:

        KW:

        This is different from TARP and the stimulus that started under Bush but Obama magically blessed, thus creating the best economy evah, but it’s bad because Trump is suggesting it?

        I think you are misunderstanding the criticism, which is actually a reasonable one. The criticism isn’t that he might use debt to stimulate the economy. The criticism is of the notion that it doesn’t matter how much debt you have because if things go bad and you can’t pay it back, you can just “negotiate” a good deal to pay pack less than you owe. This might be a reasonable calculation with regard to a private business, but it betrays a large amount of ignorance with regard to sovereign debt. First, the calculation is entirely different with sovereign debt because of the wider economic ramifications of a sovereign debt default that don’t exist with regard to a private default. And second, a sovereign actually has access to other, more preferable methods of managing a debt crisis than simply “negotiating” a deal with creditors.

        Vox’s criticisms of what Trump says is pretty much on target. The idea that a spiraling national debt can and should be approached in the same way that a private business might approach spiraling debt is actually pretty stupid.

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        • Kevin S. Willis, on May 6, 2016 at 1:03 pm said:

          A: That outcome seems unlikely, given the amount of deficit spending we do already. Presumably, Trump would be advised he couldn’t do it. Not sure how serious he is, but okay. Not sure it matters much as HRC is likely to win unless unexpected things happen, I’m guessing.

          Unless Trump is expecting on spending more than TARP, the stimulus, etc. Which I suppose he might. I doubt even he knows.

          B: If this were being proposed by Obama or HRC I’m not sure Vox would be so critical.

          Like

        • ScottC, on May 6, 2016 at 1:21 pm said:

          KW:

          Not sure how serious he is, but okay.

          That is actually implicit in the criticism…from a policy point of view he is not a person to be taken seriously. I always thought the Obama presidency was a perfect demonstration of the truism that the skills required to be an successful presidential candidate are entirely different from the skills required to be a successful president. Trump could well be an even better demonstration.

          If this were being proposed by Obama or HRC I’m not sure Vox would be so critical.

          I’m pretty sure you are correct.

          Like

        • jnc4p, on May 6, 2016 at 1:27 pm said:

          “but it betrays a large amount of ignorance with regard to sovereign debt.”

          Or, Trump is simply telling an uncomfortable truth that most people prefer to wish away. Greece isn’t going to ever pay back what it owes.

          Now, you can make the case that Trump shouldn’t be explicitly adopting the sovereign debt management tactics of say Argentina and Russia, but that gets uncomfortably close to an argument that deficits and debt levels actually matter which is anathema for good Keynesians & MMT’ers.

          Like

        • ScottC, on May 6, 2016 at 2:09 pm said:

          jnc:

          Or, Trump is simply telling an uncomfortable truth that most people prefer to wish away. Greece isn’t going to ever pay back what it owes.

          This was the quote: “I would borrow, knowing that if the economy crashed, you could make a deal. And if the economy was good, it was good. So therefore, you can’t lose.”

          I’m not sure what there is about this to suggest that Trump was trying to instruct us all on what is likely to happen in Greece. But even if he was, it seems counter intuitive to me to have buried the “uncomfortable truth” that Greece is never going to pay back its debt inside the idea that “you can’t lose”. And if Trump is trying to convince people that by doing what it has done, Greece (whose problems, BTW, are somewhat unique among bankrupt nations in that it cannot print its own currency, and so not exactly a good exemplar as a generalization) “can’t lose”, he’s an even bigger charlatan than I have already taken him for.

          I think you are trying much too hard to find a nugget of Gumpian wisdom in what Trump says. Sometimes when something sounds stupid, it is because it is stupid.

          Now, you can make the case that Trump shouldn’t be explicitly adopting the sovereign debt management tactics of say Argentina and Russia, but that gets uncomfortably close to an argument that deficits and debt levels actually matter which is anathema for good Keynesians & MMT’ers.

          I would make that case, and I am happy to acknowledge the hypocrisies of Vox. But the inconsistencies and contradictions of Keynsians who would criticize Trump for saying what he said don’t make what he said any less worthy of criticism.

          Like

        • jnc4p, on May 6, 2016 at 2:30 pm said:

          “and I am happy to acknowledge the hypocrisies of Vox.”

          That’s my point. Trump is saying all this and the fact that it’s causing consternation to the “the US should borrow as much as it can because interest rates are low” crowd is hilarious, and telling.

          What do they think the options are going to be if the US to goes to Japan like debt to GDP ratios and rates then go up?

          Like

  8. jnc4p, on May 6, 2016 at 11:00 am said:

    This is awesome:

    “By all indications, Clinton does not have a trained persuader on her staff. I’ve publicly offered to help for $1.8 billion, which is a bargain, since according to many pundits, defeating Trump would save the entire world. And I have a no-payment guarantee if Trump is elected despite my efforts. What do the anti-Trump folks have to lose?”

    http://blog.dilbert.com/post/143944074406/a-few-observations-on-clinton-trump-persuasion

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    • ScottC, on May 6, 2016 at 11:11 am said:

      jnc:

      This is awesome:

      Has he offered a no-payment guarantee to help defeat Clinton? I would be willing to contribute to a pool for that.

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  9. ScottC, on May 6, 2016 at 12:30 pm said:

    Worth a read. Provides some insight into how the Obama admin cynically uses an ignorant, inexperienced and credulous press corp to create the impression of widespread support for its policies.

    As Malley and representatives of the State Department, including Wendy Sherman and Secretary of State John Kerry, engaged in formal negotiations with the Iranians, to ratify details of a framework that had already been agreed upon, Rhodes’s war room did its work on Capitol Hill and with reporters. In the spring of last year, legions of arms-control experts began popping up at think tanks and on social media, and then became key sources for hundreds of often-clueless reporters. “We created an echo chamber,” he admitted, when I asked him to explain the onslaught of freshly minted experts cheerleading for the deal. “They were saying things that validated what we had given them to say.”

    When I suggested that all this dark metafictional play seemed a bit removed from rational debate over America’s future role in the world, Rhodes nodded. “In the absence of rational discourse, we are going to discourse the [expletive] out of this,” he said. “We had test drives to know who was going to be able to carry our message effectively, and how to use outside groups like Ploughshares, the Iran Project and whomever else. So we knew the tactics that worked.” He is proud of the way he sold the Iran deal. “We drove them crazy,” he said of the deal’s opponents.

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  10. Kevin S. Willis, on May 6, 2016 at 1:05 pm said:

    Sheesh. Ironically, the NYTimes affirms in the most direct way yet that the American press corpse is worthless.

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  11. Kevin S. Willis, on May 6, 2016 at 1:17 pm said:

    RCP has Clinton by 6.5 points.

    Wonder if there’s enough traditional non-voters to overcome that. There did seem to be a narrowing of the gap going on in the April trends.

    http://www.realclearpolitics.com/epolls/2016/president/us/general_election_trump_vs_clinton-5491.html

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  12. jnc4p, on May 6, 2016 at 1:38 pm said:

    On a nicer note:

    “Optimus Prime and Me

    As a young girl in a new country, I looked to the leader of the Autobots for lessons in fitting in.

    Juleyka Lantigua-Williams 12:11 PM ET ”

    http://www.theatlantic.com/entertainment/archive/2016/05/optimus-prime-and-me/481626/

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