How Centralized Finance Rips Off Ordinary Americans

Story #1: The Ellington Money Machine

Recently, Mike Vranos of Ellington Management Group appeared on the podcast Real Vision: Finance, Business & The Global Economy. In the 66th minute of the podcast, there is a fascinating dialog that highlights how wealth creation happens on Wall Street. The interviewer asks, “this kind of basket of private sector loans; what kind of yields are you seeing in that market or even spread and how did it change over the last 12 months?” Vranos replies:

  1. Mortgage lending licensing requirements that are ever-so-slightly different from state to state and extremely costly to set up
  2. Mortgage servicing licensing requirements that are ever-so-slightly different from state to state and extremely costly to set up
  3. Mortgage lending compliance requirements that create significant litigation liability for originators and require massive legal resources to avoid
  4. Consumer privacy laws that only allow guys like Mike to see the loan data needed to bid on loans
  5. Securities laws that make the legal fees for securitization so expensive that only large institutions can participate in such markets
  6. Securitization “risk retention rules” that force issuers to hold 5% of securities that they issue and hence limit participation to investors with a lot of money
  7. Securities regulations that constrain investor participation in such assets to “sophisticated” investors like Mike and his team

Story #2: The FHFA Power Machine

Last week, the Supreme Court ruled on the conservatorship of Fannie Mae and Freddie Mac. In short, the Court ruled that:

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store