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  • Fri, May 22 2009
  • 1:51 PM » The Impact of Global Capital Flows and Foreign Financing on U.S. Mortgage and Treasury Rates
    Published Fri, May 22 2009 1:51 PM by
    The Impact of Global Capital Flows and Foreign Financing on U.S. Mortgage and Treasury Rates
    Click Here to Read the Full Article

  • 1:38 PM » Can't Sell Your House? Some Are Going Online to Swap
    Published Fri, May 22 2009 1:38 PM by CNBC
    Diane Peek and Andrew Bou are part of a small but growing number of homeowners who are turning to the Internet to swap properties.
  • 1:22 PM » Relax. The U.S. isn't a deadbeat
    Published Fri, May 22 2009 1:22 PM by CNN
    It looks like after two months of ignoring the risks that remain for the economy and markets, Wall Street has finally found something else to worry about: the possibility that the United States could lose its AAA credit rating.
  • 11:18 AM » For Wall Street, Quiet Day Ahead of Holiday
    Published Fri, May 22 2009 11:18 AM by NY Times
    Shares were mixed, and trading in a narrow range, at mid-morning ahead of the Memorial Day holiday weekend.
  • 11:18 AM » Freddie Set For $1 Billion Commercial Mortgage Bond
    Published Fri, May 22 2009 11:18 AM by CNBC
  • 11:18 AM » Bond Report: Ten-year Treasury yields reach 7-month highs
    Published Fri, May 22 2009 11:18 AM by Market Watch
    Treasury prices decline, pushing yields on the benchmark 10-year note to the highest since November, as investors prepare for a resumption of U.S. debt issuance next week.
  • 10:52 AM » Credit Suisse:Fed May Slow Pace of MBS Buying
    Published Fri, May 22 2009 10:52 AM by Reuters
    The Federal Reserve will probably slow its rate of mortgage-backed securities purchases this year to make room for private investors balking at the most expensive levels for MBS since 1992, according to Credit Suisse on Thursday.
  • 8:58 AM » Currencies: Euro approaches $1.40 on U.S. bond selling
    Published Fri, May 22 2009 8:58 AM by Market Watch
    The euro approaches $1.40 on Friday, with the shared currency approaching its highest levels since the opening days of 2009.
  • 8:58 AM » BankUnited Collapse Biggest Failure 2009 | Problem Bank List
    Published Fri, May 22 2009 8:58 AM by
    The failure of BankUnited, FSB is the largest banking collapse of 2009 and marks the 34th FDIC insured bank to be added to the Failed Bank List.
    Click Here to Read the Full Article

  • Thu, May 21 2009
  • 9:07 PM » Realty Q&A: Expanding home-buyer tax credit to all is on table
    Published Thu, May 21 2009 9:07 PM by Market Watch
    Is there any possibility that the tax credit for first-time home buyers will be expanded to also include repeat purchasers who already own a house but would like to move up?
  • 9:07 PM » PIMCO's Gross: U.S. at risk of losing top AAA rating
    Published Thu, May 21 2009 9:07 PM by Reuters
    NEW YORK (Reuters) - Bill Gross, manager of the world's biggest bond fund, warned on Thursday the United States will eventually lose its top AAA credit rating, a fear that had already spooked financial markets on Thursday and could keep the dollar, stocks and bonds under heavy selling pressure.
  • 6:48 PM » BankUnited fails; private equity snaps up assets
    Published Thu, May 21 2009 6:48 PM by Market Watch
    BankUnited Financial, the largest lender based in Florida, is shut down by banking regulators and sold to a group of private-equity firms.
  • 5:31 PM » The Persistent Effects of a False News Shock.
    Published Thu, May 21 2009 5:31 PM by NY Fed
    Carlos Carvalho, Nicholas Klagge, and Emanuel Moench. The Persistent Effects of a False News Shock. Federal Reserve Bank of New York Staff Reports Staff Report Number 374, May 2009.
  • 5:00 PM » Market and CAMELS
    Published Thu, May 21 2009 5:00 PM by Calculated Risk Blog
    Here are a couple of market graphs from Doug (the 2nd one is new - the mega bear quartet in real prices), and an excerpt from CFO Magazine There was a significant bond sell-off today - probably because of concerns () credit ratings. Click on graph for larger image in new window. The first graph is from Doug Short of (financial planner): "Four Bad Bears". Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500. The second graph compares four significant bear markets: the Dow during the Great Depression, the NASDAQ, the Nikkei, and the current S&P 500. This is inflation adjusted. See Doug's: "" for a dicussion. Excerpt from CFO Magazine (ht jb) Evaluating a bank's health falls into two parts, says Mark J. Flannery, a finance professor at the University of Florida's Warrington College of Business Administration. One, how well capitalized is the bank — how much loss can it stand without failing? Two, what is the quality of its assets — how much loss risk is the bank exposed to? In the FDIC's eyes, a well-capitalized bank has a ratio of Tier 1 capital to total risk-weighted assets of at least 6% (analysts prefer to see 8%); a ratio of total capital to total risk-weighted assets of at least 10%; and a Tier 1 leverage ratio of at least 5%. ... The trouble is, the risk-based capital ratios "don't work very well," says Frederick Cannon, chief equity strategist at Keefe Bruyette Woods, specialists in financial services. That's because the risk weightings that the government uses are out of date. For example, a mortgage-backed security is weighted at 20%, meaning that it requires one-fifth the capital of whole loans. "But some of those securities have declined in value a lot more than the values of whole loans," says Cannon. The option ARM, which "proved to be an absolutely horrible product in terms of performance," is weighted at 50%; "in hindsight it probably...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 5:00 PM » Freddie Mac Rates Survey for Week ending May 21, 2009
    Published Thu, May 21 2009 5:00 PM by Freddie Mac
    MORTGAGE RATES FLAT THIS WEEK THANKS MAINLY TO ACTIONS BY TREASURY AND THE FED McLean, VA - Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 4.82 percent with an average 0.7 point for the week ending May 21, 2009, down from last week when it averaged 4.86 percent. Last year at this time, the 30-year FRM averaged 5.98 percent. The 15-year FRM this week averaged 4.50 percent with an average 0.7 point, down from last week when it averaged 4.52 percent. A year ago at this time, the 15-year FRM averaged 5.55 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.79 percent this week, with an average 0.6 point, down from last week when it averaged 4.82 percent. A year ago, the 5-year ARM averaged 5.61 percent. One-year Treasury-indexed ARMs averaged 4.82 percent this week with an average 0.6 point, up from last week when it averaged 4.71 percent. At this time last year, the 1-year ARM averaged 5.24 percent. (Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.) "Long-term fixed-rate mortgage rates have remained below 5.0 percent for the past 10 weeks as the U.S. Treasury and Federal Reserve (Fed) act to keep interest rates low through security purchases," said Frank Nothaft, Freddie Mac vice president and chief economist. "The Treasury purchased $136 billion in mortgage-backed securities through April and the Fed bought $740 billion through mid-May. In addition, the Fed purchased $115 billion in Treasury bonds since March of this year. "Housing construction continued to decline, as total starts fell to the lowest level since the Census Bureau began its monthly series in January 1959. While single-family construction appears to be near or at a bottom, multi-unit construction continued to recede. Reflecting the apparent stabilization in...
  • 4:14 PM » New York Fed purchases $7.398 billion in Treasury coupons
    Published Thu, May 21 2009 4:14 PM by
    New York Fed purchases $7.398 billion in Treasury coupons
  • 3:59 PM » U.S. Treasury Secretary Geithner to Attend G-8 Meeting
    Published Thu, May 21 2009 3:59 PM by US Treasury
    May 21, 2009 TG-142 U.S. Treasury Secretary Geithner to Attend G-8 Meeting of Finance Ministers in Lecce, Italy, June 12 -13 WASHINGTON – The U.S. Department of the Treasury today announced that Treasury Secretary Geithner will travel to Lecce, Italy to attend the G-8 Meeting of Finance Ministers June 12 – 13, 2009. Additional details regarding Secretary Geithner's schedule will be available in the days ahead. Media requesting to travel with Secretary Geithner must send the following information to Frances Anderson in the Office of Public Affairs at : full name, news organization, passport number and country of issue. Requests to travel with the Secretary must be submitted via email by NOON ET on Friday, May 29, 2009. Space is extremely limited; Treasury cannot guarantee that all requests will be accommodated. Currently, press opportunities are scheduled for Saturday, June 13, 2009 only, including pooled media opportunities for the meeting and a press conference to follow. Additional details will be announced by the Government of Italy. Hotel accommodations will be made through the Office of Public Affairs in conjunction with the U.S. consulate in Naples; costs will be incurred by each media organization. Please include name(s), credit card information and anticipated dates of travel with your request. Media credentials : Online registration is available at . PLEASE NOTE: THE APPLICATION DEADLINE IS MONDAY, JUNE 1, 2009. ###
  • 3:59 PM » California Bay Area Home Sales: "Robust" and "Anemic"
    Published Thu, May 21 2009 3:59 PM by Calculated Risk Blog
    The tale of two cities continues ... From DataQuick: Bay Area home sales posted a year-over-year gain for the eighth consecutive month in April, with robust sales in lower-cost inland areas once again compensating for anemic sales on the coast . ... A total of 7,139 new and resale houses and condos closed escrow in the nine-county Bay Area last month. That was up 12.9 percent from 6,325 in March and up 13.1 percent from 6,310 in April 2008, according to MDA DataQuick of San Diego. Last month’s sales were the second-lowest for an April since 1995 and were 23.2 percent below the average April sales total back to 1988, when DataQuick’s statistics begin. Foreclosure resales – homes sold in April that had been foreclosed on in the prior 12 months – accounted for 47.4 percent of Bay Area resales. That was down from 50.2 percent in March and 52.0 percent in February. Last month’s figure was the lowest since foreclosure resales were 46.8 percent of existing home sales last November. A lower concentration of discounted foreclosure resales in the statistics is one reason the median sale price has recently begun to more or less flatten, or at least erode more slowly, in many markets. ... Home sales in many high-end areas, especially on the coast, remain at record or near-record-low levels. In lower-cost communities, first-time buyers have turned to government-insured FHA mortgages, which represented a record 26 percent of all Bay Area home purchase loans in April, up from 3.2 percent a year ago. The combination of FHA financing, steep home price declines and low mortgage rates have fueled record or near-record-high sales this spring in many of the Bay Area’s most affordable, foreclosure-heavy communities. ... Foreclosure activity remains at historically high levels ... emphasis added Key points (worth repeating): Ignore median price. The mix changes the median price too much. Sales at the low end are "robust". Record or near record sales in the "affordable, foreclosure...
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 2:26 PM » CBO: GDP Shortfall to Remain Until 2013
    Published Thu, May 21 2009 2:26 PM by WSJ
    Congressional Budget Office director Douglas Elmendorf , in , backs the most pessimistic forecasts for joblessness — expecting the unemployment rate to top 10% next year. While the economy will resume growth in the second half of this year, “the hardships caused by the recession will persist for some time,” he says. The GDP gap is the difference between real (inflation-adjusted) gross domestic product and its estimated potential level (which corresponds to a high level of use of labor and capital resources). How much time is some time? The CBO’s most recent forecast shows that the economy’s output gap — the difference between its actual and potential output — will average 7% of gross domestic product (about $1 trillion) this year and next year. And that output gap will not close until 2013. The current recession, already the longest since World War II, isn’t quite as deep as some the severe downturns since the Great Depression when measured by the sharpest declines in GDP. But when the CBO releases its next forecast in August, Elmendorf says, it’s likely to show even larger shortfalls in output in the coming years than previously estimated. “By this measure, the current recession and its aftermath will be the most severe economic downturn of the postwar period.”
  • 2:26 PM » Housing: Playing Games with Appraisals and Value
    Published Thu, May 21 2009 2:26 PM by Seeking Alpha
    Tom Lindmark submits: I’m starting to see a lot of this, so I thought it worth a short blog at least. Now that houses are starting to sell, at least at the cheap end, there’s a lot of talk about value and how foreclosure sales are not representative of the true value of a house. It’s couched in lots of different ways but that’s the snake oil that people are trying to peddle.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 1:24 PM » Credit cards in America: Knocked off balance
    Published Thu, May 21 2009 1:24 PM by
    A once-glittering business loses its shine CREDIT-CARD borrowers who roll over a portion of their balance each month are known as revolvers. These days lenders are in a spin as they struggle to cope with write-offs, a regulatory crackdown and changes in consumer behaviour. On May 18th American Express, a credit- and charge-card giant, announced a second round of job cuts (bringing the total to 11,000), slashed its marketing and business-development budgets and offered a “very cautious” outlook. A few days earlier Advanta, a provider of cards to small businesses, froze all existing accounts after charge-offs (uncollectable debt) reached a dizzying 20%. The shutdown sent a shiver through the market for bonds backed by credit-card debt, which is only now starting to recover from the ravaging securitised assets took last year. ...
    Click Here to Read the Full Article

  • 1:24 PM » The world's best banks: A short list
    Published Thu, May 21 2009 1:24 PM by
    As the dust starts to settle, which banks deserve the most plaudits? TRYING to work out which banks are the world’s best is a bit like awarding the prize for prettiest war-torn village. It is a title that carries little kudos. It is also likely to prompt further shelling. Winners of industry awards in the past three years include Ken Lewis, the chief executive of Bank of America, for banker of the year (2008); Societe Generale for its risk management; and Angelo Mozilo of Countrywide, a failed mortgage lender, for a “lifetime of achievement”. Still, the question is becoming more pertinent. After months of indiscriminate fear, widespread losses and government hand-holding, the banking industry is gradually stabilising. Money markets are steadily calming. American banks that got a clean bill of health in this month’s stress tests are queuing up to repay government money. A first wave of escapees is likely to include Goldman Sachs, Morgan Stanley and JPMorgan Chase. Those banks that emerge from this crisis with reputations and franchises strengthened will find it increasingly easy to raise funds, win clients, attract employees and buy assets. ...
    Click Here to Read the Full Article

  • 12:22 PM » Future Fed Debt Buying Not a Foregone Conclusion
    Published Thu, May 21 2009 12:22 PM by WSJ
    Economists are warning bond investors not to get carried away by news the Federal Reserve is thinking about boosting its future purchases of Treasury and mortgage debt. Right now, the central bank is embarked on a radical effort to lower borrowing costs in mortgages and other lending markets by purchasing $300 billion in Treasury debt. It’s buying considerably more in the mortgage and agency markets. These large purchases of debt have forced yields and mortgage lending rates down and have largely done what policy makers wanted. But investors hope the Fed would do even more, especially as Treasury yields, facing massive government borrowing, have ground higher over recent months. Some investors saw in the meeting minutes for the late April gathering, released Wednesday, signs their hopes will be soon realized. The document said some FOMC members “noted that a further increase in the total amount of purchases might well be warranted.” That said, for now “all members concurred with waiting to see how the economy and financial conditions respond” before shifting policy. Bond yields moved lower on the news, with longer-term yields sliding by around six basis points, as investors cheered the possibility of additional Fed intervention in the future. Fed watchers countered that should be about all investors do with the Fed minutes. Whether the central bank will or won’t be buying Treasurys beyond what it’s already committed to is a decision that will be made some time from now, on conditions that will be hard to know. The current program runs until September. To be sure, some think it’s a good idea. Ward McCarthy , a bond strategist with Stone & McCarthy Research Associates , said more purchases is “something they should consider” because what’s been done so far has been “helpful.” The evidence for success is strongest in mortgage related buying, because borrowing rates for homes have indeed come down, McCarthy said. He calls success in Treasurys more “elusive” but notes...
  • 11:43 AM » Freddie Mac Purchases $37.5 Million Loan from CBRE
    Published Thu, May 21 2009 11:43 AM by Freddie Mac
    Through CME, Freddie Mac buys conventional mortgages backed by stabilized apartment buildings from its lender network. Depending on market conditions, Freddie Mac will either pool the loans, securitize them through a broker/dealer and sell them in the commercial mortgage-backed securities market; or securitize them and hold them in its portfolio for future sale.
  • 9:03 AM » Treasury prices edge higher
    Published Thu, May 21 2009 9:03 AM by CNN
    Government debt prices rose Thursday as investors await the next buyback by the Federal Reserve and digested the central bank's gloomy economic outlook.
  • 9:02 AM » FHA Now Has 100% Plus Financing | Mortgaged Future
    Published Thu, May 21 2009 9:02 AM by
    The American Recovery and Reinvestment Act of 2009 , passed early this year, provides up to an $8,000 tax credit for first time home buyers. The tax credit refund would be given to the home buyer after filing the 2008 or 2009 tax return.
    Click Here to Read the Full Article

  • 9:01 AM » Is the Time REIT for Real Estate ETFs?
    Published Thu, May 21 2009 9:01 AM by Seeking Alpha
    submits: As a result of the seemingly endless decline in the U.S. housing market (we're nearing the three year mark for the current downturn), most on the market have been posted huge losses since 2007, with many still down more than 50% from their record highs despite recent rallies. But as any shrewd investor knows, crisis begets opportunity. With real estate ETFs reaching new lows, the time may finally be right to snatch up some funds at bargain prices.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:01 AM » Realty Income: Prudent Management, Justified Premium?
    Published Thu, May 21 2009 9:01 AM by Seeking Alpha
    submits: Business Summary: Realty Income Corporation (O) is an REIT that focuses on sale-leaseback deals. This is where a business, such as a restaurant or convenience store chain, raises capital by selling the land and buildings used to conduct the firm’s business, but retains the use of the property through a long-term lease.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 9:01 AM » Secondary Sources: Greenspan and Banks, Mortgage Recasts, CAFE
    Published Thu, May 21 2009 9:01 AM by WSJ
    A roundup of economic news from around the Web. Yves Smith comments on former Fed Chairman Alan Greenspan’s that banks will need large amounts of capital. “You have to give former Fed chairman Alan Greenspan credit for having no shame. Well, he did once look a bit rattled before Congress for about five minutes and ‘fessed up it never occurred to him that people would be so greedy as to pull so much cash out of companies so as to leave burned hulks in their wake. Did he utterly miss reading the news during Enron and the 2002 accounting scandals? Greenspan also made life difficult for Bernanke in early 2007 more than once. Indeed, prior to Greenspan, no former Fed chairman made frequent pronouncements. This is unseemly, but having a sense of propriety went out of fashion in America some time ago. Now Greenspan is saying the banks are not OK (if they need a lot more capital, then by definition, they are undercapitalized now) when the powers that be have a full court press on to present precisely that image. And whose responsibility might it be that the banks are in such sorry shape? Might the Greenspan Fed’s extreme laissez faire stance have had a wee bit to do with it?” Via , Matthew Padilla of the OC Register looks at new estimate for mortgage recasts. “The older chart shows a big peak in 2010 — about $40 to $45 billion a month in loans around September/October 2010. The newer chart pushes that peak about one year into the future into late 2011/beginning 2012. Some borrowers will hold on a little longer. Maybe the housing market will recover by 2012 and they can sell to avoid foreclosure. But if any of these borrowers are deferring principal and interest owed, reaching say a maximum of 125% on a loan amount on 2005 to 2007 prices, then it is much less likely home prices will have rebounded enough to save them by 2011 or 2012.” On her blog, Megan McArdle has some quick comments about the changes to the CAFE standards. “What to say, beyond the obvious, about the administration...
  • 7:40 AM » BofA seeks to repay $45 billion by year-end: report
    Published Thu, May 21 2009 7:40 AM by Reuters
    NEW YORK (Reuters) - Bank of America Corp wants to pay back $45 billion in bail-out funds by the end of the year, accelerated by a program to raise capital, the Financial Times reported on its website late on Wednesday.
  • Wed, May 20 2009
  • 5:19 PM » Retail REITs: Tough but Stabilizing
    Published Wed, May 20 2009 5:19 PM by Seeking Alpha
    submits: In his first note released in the post Sakwa world, Craig Schmidt continues to attempt to restore confidence in retail REITs. It would, after all, seem prudent to bang clients' heads into their desks until they see the light at the end of the tunnel (oncoming bullet train?) at a time when the only cash, and equity value, REITs can create is by raising expensive, dilutive equity in order to repay the cheapest form of capital (that of secured loans previously held by Mr. Schmidt uber parent, Bank of America). This is especially true, after these same clients have plunked down about $20 billion in new equity in companies that at this point exist on fumes of hope, speculation and short covering. not surprisingly, the report comes just prior to Realtors's release which indicates that Commercial Real Estate activity in Q1 fell 4.8% from Q4 of 2008 and 12.9% year over year, while vacancy rates are poised to rise to 12.1% from 9.7% last year. While the title is expected, even Mr. Schmidt is at a loss to present the REIT "green shoots" that would substantiate his note. Amsuingly, Schmidt quotes favorable restaurant trends to back up the stabilization thesis:
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 4:01 PM » New Economic Data: Commercial Leading Indicator
    Published Wed, May 20 2009 4:01 PM by Google News
    The general economic downturn, complicated by a severe credit crunch in commercial real estate, is dampening commercial real estate activity.
  • 3:49 PM » Federal Reserve Summary of Economic Projections
    Published Wed, May 20 2009 3:49 PM by Federal Reserve
    In conjunction with the April 28-29, 2009, FOMC meeting, the members of the Board of Governors and the presidents of the Federal Reserve Banks, all of whom participate in deliberations of the FOMC, submitted projections for output growth, unemployment, and inflation in 2009, 2010, 2011, and over the longer run
    Click Here to Read the Full Article

    Source: Federal Reserve
  • 2:44 PM » Minutes of Federal Open Market Committee, April 28-29, 2009
    Published Wed, May 20 2009 2:44 PM by Federal Reserve
    Minutes of Federal Open Market Committee, April 28-29, 2009
    Click Here to Read the Full Article

    Source: Federal Reserve
  • 2:44 PM » FOMC Forecasts: The Pessimism Worsens
    Published Wed, May 20 2009 2:44 PM by WSJ
    There may be green shoots appearing for the economy, but to much of the Federal Reserve they appeared to be light green. Central bank officials in recent months grew more pessimistic about their prospects for the economy, expecting a worse 2009 and 2010 than they forecast in January. , provided for the April 28-29 Federal Open Market Committee meeting, show central bankers getting closer to private economists’ expectations for the unemployment rate. The central tendency of the forecasts (excluding the three highest and three lowest among 17 policymakers) puts the unemployment rate at between 9.2% and 9.6% in the fourth quarter, down from the earlier projection of 8.5% to 8.8% made in January. The fourth-quarter 2010 forecast worsened to 9% to 9.5%, compared with a projection of 8% to 8.3% submitted in January. Even the 2011 forecast went up a full percentage point to between 7.7% and 8.5% in the fourth quarter of that year. Fed officials still expect a recovery in sales and production to begin in the second half of this year, but the forces weighing on the economy were “likely to abate only slowly,” a summary released with the minutes said. Gross domestic product was projected to decline by 1.3% to 2% in the fourth quarter of 2009 from the year-earlier period, worse than the January projection of a decline between 0.5% and 1.3%. The forecast for 2010 was also downgraded a bit: the central tendency projection is now 2% to 3% growth, down from the January forecast of 2.5% to 3.3% for 2010. The Fed said officials expected that “recoveries in consumer spending and residential investment initially would be damped by further deterioration in labor markets, still-tight credit conditions, and a continuing, if less pronounced, decline in house prices. Moreover, they anticipated that very low capacity utilization, sluggish growth in sales, and the high cost and limited availability of financing would contribute to further weakness in business fixed investment this year.” Projections...
  • 2:44 PM » St. Louis Fed Paper Rebuts Bernanke’s Treasury-Purchase Views
    Published Wed, May 20 2009 2:44 PM by WSJ
    Is Ben Bernanke wrong about the potential effects of the Federal Reserve ’s purchases of longer-term Treasurys on yields? released this week by the St. Louis Fed suggests he might be. Bernanke “seems to suggest that the purchase of a large quantity of longer-term government securities might reduce longer-term rates,” St. Louis Fed economist Daniel Thornton wrote in a research note posted on the St. Louis Fed’s Web site. And with short-term rates near zero, the yield curve would presumably flatten under that hypothesis, Thornton observed. That, however, is “inconsistent” with the “commonly held view” that long-term rates are influenced by what’s known as the expectations hypothesis, Thornton wrote. “Under the expectations hypothesis, long-term rates are equal to the market’s expectation of the short-term rate over the term of the long-term asset plus a risk premium,” Thornton wrote. Therefore, the Fed “cannot permanently affect the shape of the yield curve by purchasing securities in one end of the market,” he wrote. In March, the Fed announced that it would buy up to $300 billion in longer-term Treasury securities in addition to more than $1 trillion in agency and agency-backed mortgage backed securities. The announcement, on March 18, led to a stunning rally in Treasurys and flattening of the yield curve that appeared to support Bernanke’s statement in December 2008 that buying longer-term Treasurys or agencies in large quantities “might influence the yields on these securities, thus helping to spur aggregate demand.” But the yield-curve flattening, Thornton noted, “has vanished” since March. So while the Fed has boosted longer-term Treasury purchases and expanded its balance sheet, “these actions appear to have had no permanent effect on the yield curve,” he wrote.
  • 12:10 PM » Dollar falls to 5-month low on euro
    Published Wed, May 20 2009 12:10 PM by CNN
    Read full story for latest details.
  • 12:10 PM » WaMu asks bankruptcy court to rule on dispute with JPMorgan
    Published Wed, May 20 2009 12:10 PM by Reuters
    NEW YORK (Reuters) - Washington Mutual Inc has asked a bankruptcy court to rule on its dispute with JPMorgan Chase & Co over more than $4 billion in deposits, according to court documents on Wednesday.
  • 12:10 PM » A Portrait of the Mortgage Ax, Not Falling
    Published Wed, May 20 2009 12:10 PM by Seeking Alpha
    submits: Edmund Andrews’ in the NYT ended with the following line: Eight months after my last payment to the bank, I am still waiting for the ax to fall.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 10:53 AM » Where Is TARP Money Going? How Much Is Left?
    Published Wed, May 20 2009 10:53 AM by WSJ
    In congressional this morning, Treasury Secretary Tim Geithner outlined where TARP money has been allocated and how much is left. Here is Treasury’s estimate: Projected Use of TARP/Financial Stability Plan Funds by Administration as of May 18, 2009 Programs Announced Under Previous Administration AIG $40 billion Citi/Bank of America (TIP and Guarantees) $52.5 billion Autos $24.9 billion Capital Purchase Program $218 billion TALF 1.0 $20 billion Subtotal $355.4 billion Programs Announced Under Obama Administration Housing $50 billion AIG (Second Investment) $30 billion Auto Suppliers $5 billion Additional Autos $10.9 billion Expansion of Consumer and Business Lending Initiative * TALF Asset Expansion (New Issuance) * TALF for Legacy Securities $25 billion Other PPIP Programs for Legacy Assets $75 billion Subtotal $245.9 billion Total Committed (Without Potential Repayments) $601.3 billion Total Remaining (Without Potential Repayments) $98.7 billion Conservative Estimate of Potential Repayments $25 billion Total Committed (Including Potential Repayments) $576.3 billion Total Remaining (Including Potential Repayments) $123.7 billion Additional Funding Additional Support for the Auto Industry Capital Assistance Program * The Consumer and Business Lending Initiative also includes the $20 billion committed to TALF under the previous administration and the $25 billion committed to TALF for legacy securities under the PPIP, amounting to an overall total of $80 billion under TALF and $95 billion under the CBLI. * The Public-Private Investment Program was announced at a level of $75 to $100 billion, which includes $75 billion in additional resources for the PPIP program on top of $25 billion devoted to TALF for Legacy Securities.
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