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Chris Whalen on Big Bank Earnings and the Return of Credit Risk

Forward Guidance

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The Risks of Mortgage Servicing Rights

The ideal book is decent portfolio of mortgages, commercial or residential. And then a big servicing book. So the win rates go up and volumes fall. You have cash flow. Banks can hedge their book not just with swaps, but there's also mortgage servicing rights which retain value as interest rates go up because people are refying. I think it's ironic that one of the highest quality cash flowing assets is attacked by the regulators, which are mortgage servicing rights.

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