BUSINESS
08/09/2012 08:06 am ET

Banks Heroically Prevent Next Housing Bubble: Seven And A Half Things To Know

Thing One: Banks Prevent Housing Bubble: You have likely heard -- probably in a nightmarish Facebook ad with a one-eyed bearded man dancing a jig -- that mortgage rates are at historic lows. And they are, record lows, dating back to the 1970s, at least.

But did you know that mortgage rates could be much, much lower? That is because every other interest rate in the U.S. economy is at lows not seen since probably FDR was in the White House, because we are living through another depression.

And to homeowners, those super-low rates are gold, and you don't get them. Why? Because to give them to you is just throwing them away. They're for closers. Instead, as documented by Peter Eavis today in The New York Times, banks are making money, hand over robotic Dr. Doom fist, by simply not lowering your mortgage rates to where the market says they should be. After they issue your higher-yielding mortgage, they then bundle that mortgage with a bunch of others and sell them to investors, who are willing to accept the lower market rate because they can't get anything better. Et voila, massive profit for the banks!

The housing market is managing to scratch and claw its way out of its deep grave, helping the fortunes of Fannie Mae and Freddie Mac, the Washington Post writes. That's decent news for the economy. But housing and the economy could be even stronger, with more people refinancing and buying homes, if banks weren't wringing so much cash out of mortgages. The banks claim they need the money, because regulation. And federal regulators retreat to their fainting couches at the mere thought of asking the banks to lower rates. But at least we don't have to worry about another housing bubble forming for the next 100 years or so, hooray?

Thing Two: Standard Chartered Strikes Back, Maybe: The Macy's fireworks display of whining that erupted after New York's top bank regulator accused Standard Chartered of laundering $250 billion in Iranian money is still delighting children and financial journalists this morning. U.S. regulators, Mervyn "Mr. Magoo" King of the Bank of England, Standard Chartered -- you name it, everybody is pig-bitin' mad at Benjamin Lawsky this morning for going rogue and bringing charges before federal regulators were good and ready. In fact, Standard Chartered is considering a counter-suit against Lawsky for damaging its precious reputation, the Financial Times writes. As for the case itself, it is deeply complicated by the existence, prior to 2008, of a gigantic loophole in the U.S. law that made laundering easier, writes The New York Times.

Thing Three: Crime Pays Well For Morgan Stanley: Hmm, wonder why Lawsky might have gone off the reservation and run ahead of his federal counterparts? Maybe because the feds could not possibly be more lame when it comes to punishing banks. Take, please, the $4.8 million fine the Justice Department extracted from Morgan Stanley for law-breaking that cost New York consumers some $300 million. A Justice Department flak said the fine sent "a message" to banks. It sure did, and the message is this: Do whatever you feel like doing, banks, we won't really stand in your way.

Thing Four: Justice's Immunization Program: Also getting out of trouble with the Justice Department are several former employees of the Swiss bank UBS. The Wall Street Journal reports these former lower-level bankers have gotten immunity in exchange for their help in the Libor investigation.

Thing Five: Morgan Stanley Creates Jobs For Robots: Because there are not nearly enough robots running Wall Street currently, Morgan Stanley is replacing its bond traders with computers, the Wall Street Journal reports: "While the effort represents only a part of what the firm is doing to boost low returns in the business, the shift already has reduced the ranks of interest-rate and foreign-exchange traders on some desks by 10% to 20%." Heck, that's more than enough to cover Morgan Stanley's $4.8 million fine.

Thing Six: China To The Rescue: Chinese auto-part maker Wanxiang Group offered $450 million to rescue A123 Systems, a maker of batteries for electric cars. A123 has gotten about $249 million in grants from the U.S. Energy Department, but has nonetheless fallen on hard times, highlighting how difficult it is for the government to encourage clean energy, the Wall Street Journal writes. Unless you're the Chinese government. They don't seem to have a problem with it.

Thing Seven: To Save The Planet, We Had To Destroy It: So here's a little lesson in unintended consequences for you: The New York Times writes about how, in order to get carbon credits for destroying a waste gas produced when making a horrible coolant, manufacturers are making tons of the horrible coolant. That makes the horrible coolant cheaper, which encourages its use, which makes global warming worse. Aaaaand, Armageddon.

Thing Seven And One Half: Why Do You Think They Call It Dope? The defending gold-medalist Olympic speed-walker was kicked out of the games for doping. And we thought you only needed to be high to watch speed-walking (h/t Ben Hallman).

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Calendar Du Jour:

Economic Data:

8:30 a.m. ET: Initial Jobless Claims for 08/04

8:30 a.m. ET: Trade Balance for June

10:00 a.m. ET: Wholesale Inventories for June

Corporate Earnings:

Not much.

Heard On The Tweets:

@zerohedge: All these London banks would be safe if only they bribed US politicians as much as US banks

@morningmoneyben: Of the many names I got today I think the funniest was WSJ's Jon Hilsenrath for Fed chair. My question was why would he want less power?

@crampell: a nice little time-waster here: http://www.hedgefundnamegenerator.com/

@qhardy: When a senior exec leaves Zynga, the company officially wishes him well -- but all his digital corn gets a tragic fungus.

@BorowitzReport: Papa John's CEO says he will raise prices if "Obamacare" stands, which means the pizza is no longer the worst thing about Papa John's.

-- Calendar and tweets rounded up by Khadeeja Safdar.

And you can follow us on Twitter, too: @markgongloff and @byKhadeeja

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