Contributing to more general concerns about "the government changing the rules" that persist in the capital markets is uncertainty surrounding the government-sponsored enterprises, according to one expert.
Capital Market Risk Advisors Inc. found in its 2010 Risk Concerns survey of financial institutions that "the government changing the rules" continues to be the No. 1 concern among financial institutions such as banks, insurance companies, pension funds, and asset managers.
"I doubt [the GSE concern is specifically] on the minds of the people answering the survey, but it's part of the overall lack of clarity," Leslie Rahl, managing partner of Capital Market Risk Advisors Inc., told NMN, when asked if the survey reflects any mortgage specific trends. "For any investment, it's a concern if you're not quite sure what the rules are going to be, including the capital requirements."
"I'm almost at the point where I'd rather that they make bad decisions rather than keep the market in suspense," Rahl added. "I'd rather they make good decisions, but I think at this point uncertainty is not good for the market."
In addition to finding the "government changing the rules" to be the No. 1 concern among U.S. financial institutions for the second year in a row, the CMRA 2010 Risk Concerns survey found it to be the No.3 concern for foreign market participants. "Volatility" and "credit losses" were tied for the No. 2 slot among U.S. financial institutions and tied for No. 1 among foreign market participants.
Only 37% of financial institutions thought the U.S. financial reform bill would "make the system safer." Risk due diligence by clients, regulators and rating agencies increased by 54%, 64% and 44%, respectively, according to the survey.
