The meeting of G20 nations concluded this weekend in Toronto with communiqués reflecting a strong support for the US financial reform, called the Dodd-Frank bill.

Indeed, information released from the summit show a mix of ambitious plans for growth, mixed with further calls to reduce spending, especially among countries with higher debt burdens.

Citing the recovery as moving faster than anticipated, the G20 members say that improvements are uneven across sectors and, therefore, indicative of a level of fragility.

"If we chose a more ambitious path of reforms, over the medium term, global output would be higher by almost $4trn; tens of millions of jobs would be created; even more people would be lifted out of poverty; and global imbalances would be significantly reduced," said one report (access here).

The G20 is promising "growth friendly fiscal consolidation plans" in order to achieve a stronger and more sustainable lift to the world economies.

The EU decision to stress test banks and publish those results is also a welcome development. The G20 financial reform comes in the form of the oft-criticized Basel Accords (II and III), currently being updated by the Bank of International Settlements.

"The big question has been one of the timeframe: the more capital the banks are holding, the greater the limit on what they can lend," said British Bankers Association chief executive Angela Knight. "The G20 statement clearly recognizes, as we all do, that the new measures be phased in over a time frame which safeguards economic recovery and the ability of markets to provide funding to individuals and business customers."

The G20 is also committed to increasing capital to under developed areas by 85%. Before the crisis $37bn went to development banks, that number will increase to $71bn.

Write to Jacob Gaffney.

[Update 1: adds Barclays Capital commentary]

The Federal Reserve Bank of New York plans to engage this week in mortgage-backed security (MBS) coupon swap operations.

The operations, which will go through the Fed's trading desk, are part of a move to settle billions of dollars in agency MBS purchases. The Fed concluded its $1.25trn in purchases of agency MBS in at the end of March.

A coupon swap, as the Fed explains in a policy statement, is a standard market transaction involving an agreement to purchase one agency MBS and a simultaneous agreement to sell a different agency MBS. The Fed's trading desk plans to swap unsettled Fannie Mae (FNM: 0.00 N/A) 30-year 5.5% coupon securities (Fannie Mae 5.5) for other agency MBS available for settlement.

The Fed expects operations to begin tomorrow, with coupon swaps not expected to exceed the unsettled amount of $9.2bn in the Fannie Mae 5.5. The Fed also said the trading desk might continue to arrange dollar roll transactions as needed to facilitate settlement.

The rationale behind pursuing coupon swaps is a "relatively short supply" of Fannie Mae 5.5s, according to securitization research by Barclays Capital mortgage strategist Nichlas Strand. The Fed may have run into difficultly taking physical delivery of these bonds. For example, BarCap noted, according to the Fed's data, $11.2bn of Fannie 5.5s were scheduled for April settlement.

"However, based on their CUSIP-level data, it appears that counterparties have been failing to deliver these securities and have forced the fed to roll [Fannie] 5.5s," Strand said in commentary today. "By selling [Fannie] 5.5s into the market and moving into other coupons, the Fed should be able to more easily take delivery of all of their outstanding purchases."

The Fed’s exit from agency MBS sparked investor fears MBS bond yield spreads to Treasuries may blow out again from recent historic tights, when the government withdraws its significant demand for securities. But the sky did not fall in the wake of the Fed's exit, as HousingWire's Linda Lowell recently noted.

About a month after the Fed's program ended, spreads were up by about 45 basis points (bps), partially due to a flight-to-quality unrelated to the Fed's program, according to recent market commentary. But a coordinating rise in triple-A corporate spreads — which rose about 25 bps over the same period — indicates forces other than the end of the Fed's MBS demand are driving spreads higher.

Write to Diana Golobay.

Disclosure: the author holds no relevant investments.

A look at stories across HousingWire’s weekend desk…with more coverage to come on bigger issues:

Will financial reform pass by July 4?

The House Financial Services Committee issued a statement Sunday urging "bold action" on the Dodd-Frank bill, the reconciled financial reform bill agreed to by a Congressional committee last week and named after Sen Christopher Dodd (D-CT) and Rep Barney Frank (D-MA). The final bill now travels to separate House and Senate votes and then, upon passage by Congress, to a Presidential signature into law.

"Americans have faced the worst financial crisis since the Great Depression," the Committee said in a statement. "Millions have lost their jobs, businesses have failed, housing prices have dropped, and savings were wiped out."

The statement added: "We must restore responsibility and accountability in our financial system to give Americans confidence that there is a system in place that works for and protects them. We must create a sound foundation to grow the economy and create jobs."

Treasury Department secretary Timothy Geithner commented on the reform bill while in Toronto on Saturday at the G-20 summit

"The United States is on the verge of enacting the strongest set of financial reforms since those that followed the Great Depression," he said, according to prepared statements. "These reforms, which embrace the broad principles set out by the G-20, will reduce the risk of future crises and help make sure our financial system can better serve the interests of Main Street America. And these reforms will help make sure the United States is a source of strength rather than instability for the world economy in the future."

He noted three elements in the Obama Administration's strategy to bringing financial stability: emergency efforts "to support demand and fix what was broken in the financial system"; stimulus efforts to invest in education, health care, research, etc.; and efforts to reduce deficits as a share of the economy by half over the next four years.

Part of financial reform will involve ultimately winding down government support of Freddie Mac (FRE: 0.00 N/A) and Fannie Mae (FNM: 0.00 N/A), which are still in conservatorship. Speculation remains as to how the mortgage finance industry will look post-conservatorship.

The Royal Bank of Scotland, in commentary Friday, noted that conservatorship will likely end as financial reform is extended to government-sponsored entities (GSEs) Fannie and Freddie.

"In this case, if the GSEs are cast as something new, then the debt would be issued under this new entity," RBS said. "Regardless of the ultimate outcome for the GSEs, we expect all agency debt currently outstanding and issued under congressionally chartered GSE status to remain related to the government. Reducing support is contrary to all of the actions taken by the Administration and Treasury."

Regulators shut down three depository banks on Friday, bringing the running 2010 total to 86 banks shuttered so far. By the same time last year, 45 banks had failed. Friday's failures, located in Florida, Georgia and New Mexico, are estimated to cost the Federal Deposit Insurance Corp. (FDIC) a combined $284.6m.

The Florida Division of Financial Institutions shut down Peninsula Bank. The FDIC entered a purchase and assumption agreement with Premier American Bank, which will buy essentially all $644.3m of assets and assumes all $580.1m of deposits. The FDIC and Premier American entered a loss-share transaction on $437.6m of Peninsula Bank's assets. The failure is expected to cost the FDIC's Deposit Insurance Fund (DIF) $194.8m.

The Office of the Comptroller of the Currency (OCC) shut down First National Bank of Savannah, Georgia. The FDIC entered a purchase agreement with The Savannah Bank, which will purchase "some" of the failed bank's $252.5m of assets, and will pay the FDIC a 0.11% premium to assume all $231.9m of deposits. The FDIC expects to retain most of First National Bank's assets for later disposition. The failure is expected to cost the DIF $68.9m.

"The OCC acted after finding that [First National Bank] had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices," the OCC said in a statement. "The OCC also found that the bank incurred losses that depleted its capital, the bank is critically undercapitalized, and there is no reasonable prospect that the bank will become adequately capitalized without Federal assistance."

The New Mexico Financial Institutions Division shut down High Desert State Bank. The FDIC entered a purchase agreement with First American Bank, which will purchase essentially all $80.3m of assets and all $81m of deposits. The FDIC and First American Bank will share losses on $67.6m of High Desert State Bank's assets. The failure is expected to cost the DIF $20.9m.

The FDIC on Friday also issued several financial institution letters to member banks in Puerto Rico and West Virginia, which are affected by recent flooding, severe storms, mudslides and landslides.

"The FDIC is encouraging banks to work constructively with borrowers experiencing difficulties beyond their control because of damage caused by the severe weather," the FDIC said in a statement. "Extending repayment terms, restructuring existing loans or easing terms for new loans, if done in a manner consistent with sound banking practices, can contribute to the health of the community and serve the long-term interests of the lending institution."

Federal disasters were declared on June 24 for some municipalities in Puerto Rico where flooding occurred in late May, and for selected counties in West Virginia where mudslides and landslides began on June 12.

The financial institution letter to West Virginian banks can be downloaded here and the letter to Puerto Rican banks can be downloaded here.

Write to Diana Golobay.

Disclosure: the author holds no relevant investments.