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Author: admin | Category: Car Loan Canada | Date: 21.02.2015

The “toxic culture of greed” on Wall Street was highlighted again last week, when Greg Smith went public with his resignation from Goldman Sachs in a scathing oped published in the New York Times.
Interest rate swaps are less often in the news than credit default swaps, but they are far more important in terms of revenue, composing fully 82% of the derivatives trade.
For more than a decade, banks and insurance companies convinced local governments, hospitals, universities and other non-profits that interest rate swaps would lower interest rates on bonds sold for public projects such as roads, bridges and schools. In an interest-rate swap, two parties exchange payments on an agreed-upon amount of principal. Banks and borrowers were supposed to be paying equal rates: the fat years would balance out the lean.
In a February 2010 article titled “How Big Banks' Interest-Rate Schemes Bankrupt States,” Mike Elk compared the swaps to payday loans. As almost all reasoned economists had predicted in the wake of a deepening recession, the federal government aggressively drove down interest rates to save the big banks. To make matters worse, these state and local governments have no way of getting out of these deals. The most obvious example is the city of Oakland where a chronic budget crisis has led to the shuttering of schools and cuts to elder services, housing, and public safety.
Across the Bay, Goldman Sachs signed an interest rate swap agreement with the San Francisco International Airport in 2007 to hedge $143 million in debt. Greg Smith wrote that at Goldman Sachs, the gullible bureaucrats on the other side of these deals were called “muppets.” But even sophisticated players could have found themselves on the wrong side of this sort of manipulated bet. The windfall of revenue accruing to JP Morgan, Goldman Sachs, and their peers from interest rate swap derivatives is due to nothing other than political decisions that have been made at the federal level to allow these deals to run their course, even while benchmark interest rates, influenced by the Federal Reserve’s rate setting, and determined by many of these same banks (the London Interbank Offered Rate, LIBOR) linger close to zero. How could local governments reduce their borrowing costs and insure against interest rate volatility without putting themselves at the mercy of this Wall Street culture of greed?
The creation of credit has too long been delegated to a cadre of private middlemen who have flagrantly abused the privilege.
Mortgage rates have more or less declined for the past 30 years but most of that can be explained as the reversal of a surge to absurdly high double-digit rates caused by rampant inflation. Lenders raised their rates in reaction to surging Government of Canada (GoC) five-year bond yields, which have now increased by 66 basis points over the last seven weeks.
If you value the stability of fixed rates and believe in the strength and sustainability of the U.S.
If you believe that volatility and fear will remain the watchwords of central bankers and investors for the foreseeable future, then I think the five-year variable rate is a far more compelling option than the five-year fixed rate, especially given the 0.94% gap that now exists between them. Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more. The borrowers pay interest because they must pay a price for gaining the ability to spend now as opposed to having to wait years and years to save up enough money.
Interest rate levels are a factor of the supply and demand of credit: an increase in the demand for credit will raise interest rates, while a decrease in the demand for credit will decrease them. The supply of credit is increased by an increase in the amount of money made available to borrowers. Credit available to the economy is decreased as lenders decide to defer the re-payment of their loans. The federal funds rate, or the rate that institutions charge each other for extremely short-term loans, affects the interest rate that banks set on the money they lend; the rate then eventually trickles down into other short-term lending rates. Of the factors detailed above, supply and demand are, as we implied earlier, the primary forces behind interest rate levels. For government-issued debt securities, there is of course very little risk because the borrower is the government. Finally, some loans that can be converted back into money quickly will lose little if any loss on the principal loaned out. As interest rates are a major factor of the income you can earn by lending money, of bond pricing,and of the amount you will have to pay to borrow money, it is important you understand how prevailing interest rates change: primarily by the forces of supply and demand, which are also affected by inflation and monetary policy. A lot of people spend a great deal of time trying to figure out how the interest rates are going to look tomorrow, next month or 10 years from now, because these rates can have a huge impact on how much it costs to buy a home.
While it's impossible to know exactly what interest rates are going to do, understanding what affects them can help you make smarter financial decisions.
However, when the economy is stronger, unemployment is down and many people are ready to go house shopping and are looking for a loan, so lenders can return their rates to a more profitable percentage. Because of the balance struck between lenders and borrowers, supply and demand keep interest rates moving and adjusting constantly. So, while the Fed does not have the ability to directly set rates, it can certainly have a huge impact on where these rates are headed.
In an effort to stabilize interest rates, mortgage lenders may tie their current mortgage rates to the 10-year Treasury yield, which is considered a good gauge of how interest rates will look long term. While this does not have an effect on mortgage rates at large, how strong your credit and financial situations are will have a large impact on the kind of interest rate you will receive. Despite the recent Federal Reserve rate hike, home loan rates are still extremely low but there is no guarantee they will stay that way going forward.
I wanted to thank you for all the extra effort you put in on my loan, I really appreciate it! My loan officer was very supportive and able to explain and educate me through the process.
My refinancing experience was a real education, everything was explained thoroughly and the process was simple and finished within weeks. I'm just writing to say Alex Park and Veronica Ramirez really know what they're doing and that we felt well taken care of. In an era where customer service excellence has virtually disappeared, the work done by my team at loanDepot is very very much appreciated. My team at loanDepot took care of me, they took a personal interest in my situation and kept me informed all of the way. Thank you loanDepot for your care and patience with all of those little extra things that had to be done with my VA loan. Unsecured Personal Loans are issued by Cross River Bank; an FDIC insured New Jersey-charted commercial bank located in Teaneck, New Jersey, Equal Housing Lender. All loans to Connecticut residents must qualify for an annual percentage rate (APR) of less than 12% to be considered for approval. All loans to New Hampshire residents equal to or less than $10,000 must qualify for Interest Rate of 10% or less to be considered for approval. All loans to New York residents must qualify for an annual percentage rate (APR) of less than 16% to be considered for approval. All loans to Vermont residents must qualify for an annual percentage rate (APR) of less than 12% to be considered for approval.

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Yesterday’s post on jobs made some interesting points about the relative performance of the economy today and in previous decades, highlighting both strengths and weaknesses of the current recovery. A look at financial figures over the same time periods offers a different but equally interesting set of observations.
I lined up interest rates and stock values and valuations because financial assets are inextricably linked.
Stocks are typically valued with respect to interest rates; at lower interest rates, stocks are worth more.
The difference is explained by the rise in stock valuations, from about 16 to around 20 times earnings.
Arguably, with interest rates dropping by about 6.5 percent, you might even have expected valuations to increase by much more, and we saw just that in 2000. The fact that two very different asset classes showed the same behavior, for essentially the same reasons, indicates that interest rates are indeed a fundamental determinant of market behavior, in accord with what theory would suggest. If rates were to increase—which at some point is very probable, verging on certain depending on the time frame—valuations could reasonably be expected to adjust back down to make earnings-based returns more consistent with the higher rates. There is no reason to expect this will happen immediately, as rates may remain low for some time.
Bank Rate 1830–1972 and 2006–09, Minimum Lending Rate 1972–81, London clearing banks’ base rate 1981–97, repo rate 1997–2006.  End year observation.
The highest period of interest rates was in the late 1970s, when the government were fighting high inflation caused by oil prices and rising wages. Interest rates were also increased to 15% at the beginning of the 1990s when the UK was trying to keep the value of Pound fixed in the ERM and reduce inflation. It’s definitely a time when you have to be especially interested in how your money and investments are working for you. About the AuthorTejvan studied PPE at LMH, Oxford University and works as an economics teacher and writer. In other recent eyebrow-raisers, LIBOR rates—the benchmark interest rates involved in interest rate swaps—were shown to be manipulated by the banks that would have to pay up; and the objectivity of the ISDA (International Swaps and Derivatives Association) was called into question, when a 50% haircut for creditors was not declared a “default” requiring counterparties to pay on credit default swaps on Greek sovereign debt. In February, JP Morgan Chase revealed that it had cleared $1.4 billion in revenue on trading interest rate swaps in 2011, making them one of the bank’s biggest sources of profit. The notional amount outstanding as of June 2009 in OTC interest rate swaps was $342 trillion, up from $310 trillion in Dec 2007. The swaps were entered into to insure against a rise in interest rates; but instead, interest rates fell to historically low levels.
Most of the swaps Wall Street sold in the municipal market required borrowers to issue long-term securities with interest rates that changed every week or month. This created opportunity for banks – whose variable payments on the derivative deals were tied to interest rates set largely by the Federal Reserve and Government – to profit excessively at the expense of state and local governments. Banks are demanding that state and local governments pay tens or hundreds of millions of dollars in fees to exit these deals.
Today this agreement has a negative value to the Airport of about $22 million, even though its terms were much better than those Oakland agreed to. Satyajit Das gives the example of Harvard University’s bad swap deals under the presidency of Larry Summers, who had fought against derivatives regulation as Treasury Secretary in 1999.
Bond-Graham maintains that capitalism as it functions today is completely dependent upon derivatives. We can avoid the derivatives trap by cutting out the middlemen and creating our own credit, following the precedent of the Bank of North Dakota and many other public banks abroad.
In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back.
Or, on the other side of the coin, it is the compensation for the service and risk of lending money.
For example, a person or family may take out a mortgage for a house for which they cannot presently pay in full, but the loan allows them to become homeowners now instead of far into the future. Interest is the opportunity cost of keeping your money as cash under your mattress as opposed to lending.
Conversely, an increase in the supply of credit will reduce interest rates while a decrease in the supply of credit will increase them. For instance, when you decide to postpone paying this month\’s credit card bill until next month or even later, you are not only increasing the amount of interest you will have to pay, but also decreasing the amount of credit available in the market.
The interest rate on each different type of loan, however, depends on the credit risk (which is discussed in detail in the articles What Is A Corporate Credit Rating?
The bigger the chance of the loan not being repaid will lead to higher interest rate levels. For this reason and because the interest is tax-free, the rate on treasury securities tends to be relatively low. Long-term loans have a greater chance of not being repaid because there is more time for adversity that leads to default. Of course, when you are deciding on investing in a debt security, it is important you understand how its characteristics determine what kind of interest rate you can receive. If someone suspects that interest rates are about to spike, they'll want to apply for their loan as quickly as possible to lock in the low rate.
When the economy is struggling, fewer people are interested in or can afford purchasing a new home. Even rumors that the Fed may rein in a bond-buying program can send interest rates shooting up. By attaching their rates to a 10-year Treasury bond, lenders can protect themselves against interest rate changes that may hurt their profits.
If you have a spotty credit history you are considered a higher-risk borrower, so the lender is going to charge you a higher interest rate. They are very professional and informative, and made me feel confident in my decision to refinance. I understand that loanDepot may contact me through the use of an automatic telephone dialing system. The changes can provide some useful information about how normal (or not) current figures are, and what that might mean over the next couple of decades. We can conclude that the decline in interest rates should have helped push stock prices higher, and we see exactly that. Equally, if rates adjust while earnings continue to rise, we may see the valuation adjustment occur without a stock market correction. This was not a flood, earthquake, or other insurable risk due to environmental unknowns or “acts of God.” It was a deliberate, manipulated move by the Fed, acting to save the banks from their own folly in precipitating the credit crisis of 2008.

The borrowers would then exchange payments, leaving them paying a fixed-rate to a bank or insurance company and receiving a variable rate in return. After the credit crisis broke out, borrowers had to continue selling adjustable-rate securities at auction under the deals.
While banks are still collecting fixed rates of from 4 percent to 6 percent, they are now regularly paying state and local governments as little as a tenth of one percent on the outstanding bonds – with no end to the low rates in sight. In some cases, banks are forcing termination of the deals against the will of state and local governments, using obscure contract provisions written in the fine print.
If rates start to rise in a major way, the second five years could be a lot more important than the first five years.
Without it, people would not be willing to lend or even save their cash, both of which require a deferment of the opportunity to give up spending in the present. If you borrow money, then the interest you have to pay is less than the cost of forgoing the opportunity to have the money in the present. Depending on the kind of account you open (a certificate of deposit will render a higher interest rate than a checking account, with which you have the ability to access the funds at anytime), the bank can use that money for its business and investment activities. This occurs because lenders will demand higher interest rates as compensation for the decrease in the purchasing power of the money they will be repaid in the future. Federal Reserve (the Fed) often comes with out announcements about how monetary policy will affect interest rates.
Also, the face value of a long-term loan, compared to that of a short-term loan, is more vulnerable to the effects of inflation. If they think it's about to drop, they might hold off on buying or refinancing for now or choose an adjustable rate mortgage to take advantage of falling rates. We are committed to delivering accurate lending information, competitive mortgage interest rates, easy loan processing and best in class home loan financing. Mortgage rates and housing offer a similar and supporting look at interest rates and asset prices. You can see the consistency of this change in the 2005–2015 numbers as compared with the 1990 and 1995 numbers. We saw the same behavior in mortgage rates and housing prices, with declining rates pushing up prices to very high levels, and then to a collapse, and then back up. Either way, this is another pending headwind for the market, highlighted by the still very favorable interest rate conditions we now have.
The banks got in trouble, and the Federal Reserve and federal government rushed in to bail them out, rewarding them for their misdeeds at the expense of the taxpayers.
Auction interest rates soared when bond insurers’ ratings were downgraded because of subprime mortgage losses; but the periodic payments that banks made to borrowers as part of the swaps plunged, because they were linked to benchmarks such as Federal Reserve lending rates, which were slashed to almost zero. But then who could have anticipated, when the Fed funds rate was at 5%, that the Fed would push it nearly to zero?
There is no stable ground on which to anchor the economic ship, so financial products for “hedging against risk” have been sold to governments and corporations as essentials of business and trade.
But prevailing interest rates are always changing and different types of loans will offer various interest rates.
When you lend money now, the prices of goods and services may go up by the time you are paid back your money, whose original purchasing power would have decreased.
When the government buys more securities, banks are injected with more money than they can use for lending, and the interest rates then decrease.
Therefore, the longer the borrower has to repay the loan, the more interest the lender should receive.
This supplies banks with more money to be loaned out, thus lowering the interest rates they offer. Depending on how well the bond market is doing, mortgage securities may become more or less popular, thus changing how much money lenders have available to loan out to borrowers. The significantly lower interest rates of the past 10 years should result in higher valuation levels than in the 1990s, and that is what we see. So it would have been clear that this was not going to be a good deal over the life of the contracts. North Carolina paid $59.8 million in August, enough to cover the annual salaries of about 1,400 full-time state employees. But this “financial engineering” is sold, not by disinterested third parties, but by the very sharks who stand to profit from their counterparties’ loss. If you are a lender, a borrower or both, it’s important you understand the reasons for these changes and differences. Banks also borrow in order to increase their activities, whether lending or investing, and pay interest to clients for this service.
When the government sells securities, money from the banks is drained for the transaction, rendering less funds at the banks\’ disposal for lending, forcing a rise in interest rates.
Mortgage rates have dropped almost as much, in terms of percentage points, but only to just over a third, rather than less than a quarter, of 1990 levels.
So the states and municipalities were entering into these long maturity swaps out of necessity. Reading, Pennsylvania, which sought protection in the state’s fiscally distressed communities program, got caught on the wrong end of the deals, costing it $21 million, equal to more than a year’s worth of real-estate taxes.
You must fully qualify for the selected refinance and meet all the requirements of the loan program you select at the time you apply for the refinance. Offered loan terms depend upon credit score, requested amount, requested loan term, and credit usage and history. They were desperate, if not naive, and couldn't look to the Federal Government or Congress and had to turn themselves over to the banks. There must be a full appraisal of your home when the new refinance is requested and the property value at that time must be acceptable for the program and loan terms you request. Appraisal fees will be reimbursed at the closing of the refinance transaction and no lender fees will be charged. And custom essay writing going have also try a around to business plan writing services cost hair just number seems I write my paper and quality Not hands a back-ups.
You will have to qualify for the loan requested and will be quoted the interest rates in effect at the time of your next refinance..

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