Several prominent policy makers rallied Tuesday to support the creation of an independent Consumer Financial Protection Agency , as anticipation mounts over the details of legislation that Senate Banking Committee Chairman Christopher Dodd (D., Conn.) is drafting to overhaul financial regulation. 1) Harvard’s Elizabeth Warren , whom many credit with coming up with the idea of an independent CFPA, penned an editorial in The Wall Street Journal. She blasted the banking industry for lobbying so aggressively to kill the creation of an independent consumer agency: “This generation of Wall Street CEOs could be the ones to forfeit America’s trust. When the history of the Great Recession is written, they can be singled out as the bonus babies who were so short-sighted that they put the economy at risk and contributed to the destruction of their own companies. Or they can acknowledge how Americans’ trust has been lost and take the first steps to earn it back.” 2) Several state attorneys general, Tom Miller of Iowa, Lisa Madigan of Illinois, and Blumenthal of Connecticut, held a conference call and pushed for the creation of an independent CFPA. “A vote against a strong and independent CFPA is a vote for the big banks and Wall Street and a vote against consumers,” Mr. Miller said. “Americans are rightfully concerned and angry about the near-collapse of the economy largely caused by irresponsible banks, Wall Street and other financial firms.” 3) House Financial Services Committee Chairman Barney Frank (D., Mass.) followed up with his own harsh words for those in the banking industry lobbying against the creation of a CFPA. “Those who cite safety and soundness as a major reason to oppose increased consumer protection have it exactly backwards,” Mr. Frank said. “In fact, the inability to protect consumers from abuse was a major cause of the financial crisis from which we are just emerging. Professor Warren importantly notes the example of Citigroup’s unsuccessful and unilateral attempt...

U.S. prime jumbo loan performance continued to weaken in January, according to a report by the Fitch Rating agency in New York. Overall delinquencies of 60+ days on prime jumbo loans increased to 9.6% in January, up from 9.2% in December, and 3.7% a year earlier. FR: “The new year has brought...

From the BLS: There were 2.5 million job openings on the last business day of December 2009, the U.S. Bureau of Labor Statistics reported today. The job openings rate was little changed over the month at 1.9 percent. The job openings rate has held relatively steady since March 2009. The hires rate (3.1 percent) and the separations rate (3.2 percent) were essentially unchanged in December. Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. Remember the CES (Current Employment Statistics, payroll survey) is for positions, the CPS (Current Population Survey, commonly called the household survey) is for people. The following graph shows job openings (yellow line), hires (purple Line), Quits (light blue bars) and Layoff, Discharges and other (red bars) from the JOLTS. Red and light blue added together equals total separations. Unfortunately this is a new series and only started in December 2000. Click on graph for larger image in new window. Notice that hires (purple line) and separations (red and light blue together) are pretty close each month. When the purple line is above total separations, the economy is adding net jobs, when the purple line is below total separations, the economy is losing net jobs. According to the JOLTS report, there were 4.073 million hires in December, and 4.238 million separations, or 165 thousand net jobs lost. The comparable CES report showed a loss of 150 thousand jobs in December (after revisions). Separations have declined sharply from earlier in 2009, but hiring has not picked up. Quits (light blue on graph) are at a new low too. Usually "quits" are employees who have already found a new job (as opposed to layoffs and other discharges). The low turnover rate is another indicator of a very weak labor market.

Johannes Stroebel , John Taylor , 27 January 2010 Should the Fed scale back its ownership of mortgage-backed securities? This column analyses the effect of the programme on mortgage interest rates. Controlling for prepayment and default risk suggests the programme has had little or no impact, and that the Fed could gradually cut the size of its portfolio without a significant impact on the mortgage market. Full Article:

The auto maker is recalling 437,000 hybrid vehicles world-wide, including the Prius, due to problems with their antilock braking systems.

For years, researchers have known that there’s a link between children’s participation in high school sports and success later in life. Problem is, they haven’t understood exactly what that link is. Sports participation is linked to economic success. (Getty Images) That’s because children who participate in athletics may have other things going for them before they lace up their cleats. If they’re already aggressive, goal-oriented extroverts with physical attributes, such as height, that improve their chances of doing well later, the effect of sports may be negligible. But Wharton economist Betsey Stevenson to untangle the lines of cause and effect. She examined what happened after Title IX — the 1972 law that banned gender discrimination at federally-funded schools. Title IX’s most pronounced effect was on athletics. Girls’ participation in high school sports went from 1 in 27 in 1972 to 1 in 4 in 1978. But it’s effect wasn’t uniform because states where boys’ participation in athletics was high were forced to increase girls’ participation the most. Ms. Stevenson was able to use the variation between states to tease out the effect of girls participation in sports from other factors. That allowed her to see how playing sports affected girls’ success later in life. Her conclusion: A 10 percentage-point rise in girls’ participation in high school sports leads to a 1 percentage point increase in female college attendance and a 1 to 2 percentage point increase in female labor-force participation. Maybe athletics should be added to reading, writing and arithmetic.

submits: In the lead-up to the credit crisis, I really didn’t write a considerable amount about second mortgages despite my focus on credit writedowns. At that time, I was more focused on writedowns from securitized mortgage paper (and later construction loans and commercial real estate because of the stress these loan types put on regional financials). However, second liens are a very big deal and I believe they will loom that much larger in 2010 because of the rise in strategic defaults in prime and Alt-A categories. When the crisis first developed, in February of 2007, it was subprime where the worries were , with the lion’s share of writedowns coming from mark-to-market losses in the securitisation market. However, subprime was a relatively small part of the overall market , making up 14% of loans outstanding at that time. Alt-A loans were 27% and prime loans were 57% respectively of loans outstanding .

The Federal Reserve is preparing to talk publicly about its strategy for withdrawing liquidity from the U.S. --