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  • Thu, Jun 11 2009
  • 12:11 PM » Treasury Announces Additional Tax Deductions for New Auto Purchases
    Published Thu, Jun 11 2009 12:11 PM by US Treasury
    June 11, 2009 TG-167 Treasury Announces Additional Tax Deductions for New Auto Purchases New Auto Purchase Tax Deduction Available in States Without Sales Tax WASHINGTON -- The Department of Treasury today announced that a tax deduction for the purchase of new motor vehicles is available in states that do not have a state sales tax. Under the American Recovery and Reinvestment Act of 2009, taxpayers who buy a new motor vehicle this year are entitled to deduct state or local sales or excise taxes paid on the purchase. The Treasury Department has determined that purchases made in states without a sales tax–such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon–can also qualify for the deduction. "Building on the Recovery Act, the Treasury Department is taking steps to make sure every American, in every state qualifies for a tax deduction when purchasing a new car," said Deputy Secretary Neal Wolin. "This tax deduction not only increases support for the auto industry as it seeks to rebuild, but also puts money back into the pockets of hardworking Americans." Taxpayers who purchase a new motor vehicle in states that do not impose state sales or excise taxes are entitled to deduct other fees or taxes imposed by the state or local government that are based on the vehicle's sales price or as a per unit fee. According to the IRS and Treasury, the intent of the provision is that these other fees or taxes could qualify for purposes of the special tax deduction. To qualify for the deduction, the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010. The special deduction is available regardless of whether taxpayers itemize deductions on their returns. Taxpayers can claim this special deduction only on their 2009 tax returns next year. The deduction is limited to the fees or taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home, or motorcycle. The amount of the deduction is phased out...
  • 11:56 AM » Is China Buying Commodities to Stockpile Them?
    Published Thu, Jun 11 2009 11:56 AM by CNBC
  • 11:56 AM » Declaring a pandemic
    Published Thu, Jun 11 2009 11:56 AM by www.economist.com
    The world is suffering from the first flu pandemic in 40 years THE World Health Organisation is poised to raise the threat level for swine flu to pandemic status on Thursday June 11th, the highest possible. This would be the first influenza pandemic since 1968, when Hong Kong flu killed 1m people. Almost 28,000 cases of swine flu and 141 deaths have been confirmed in 74 countries since the A(H1N1) virus was first identified in Mexico in late March. In Australia alone, the number of people infected has jumped from around 500 to 1,200 in one week. However, in a new paper published in Nature on Thursday, researchers suggest that the strain had probably been in existence for months before it was isolated, highlighting the need for good surveillance. ...
    Click Here to Read the Full Article

    Source: www.economist.com
  • 11:56 AM » Economists React: Retail Sales ‘Hardly a Green Shoot’
    Published Thu, Jun 11 2009 11:56 AM by WSJ
    Economists and others weigh in on . Over half of the 0.5% increase increase in U.S. retail sales in May was due to a 3.6% price-related jump in gasoline station sales… Overall, real consumption is unlikely to repeat the increase in the first quarter in either the second or third. A meaningful consumer recovery remains some way off. –Paul Dales, Capital Economics This report is good on its surface and the details are not that bad either. I don’t think anyone expects people to start spending lots of money on everything. But they have started dipping their toes back into the shopping waters and that is a positive development. –Naroff Economic Advisors The consumer is still under severe pressure tied to a weakening labor market, a negative wealth effect and tight credit conditions. Moreover, the support associated with the low level of energy prices versus the year ago period is beginning to fade. And, the near term tax stimulus associated with this year’s stimulus bill is too small to have any noticeable impact (less than $20 billion over the balance of the year). Most importantly, it looks like any stimulus associated with mortgage refi activity will be shortcircuited by the recent spike in mortgage rates. Thus, we look for consumer spending to remain quite weak into the second half of 2009. It’s probably going to take a meaningful improvement in labor market conditions to generate enough income growth to support any sustained pick-up in consumer spending. –David Greenlaw, Morgan Stanley Our measure of core sales , which excludes autos, gas and food, rose only 0.1%, after a 0.1% dip in April. The trend seems to be more or less flat, which is better than a decline but is hardly a green shoot. Consumers are now under pressure from rising gas prices; expect no near-term improvement in core sales. –Ian Shepherdson, High Frequency Economics That non-gasoline retail sales were on balance unchanged in April and May in spite of the tax cut that was implemented starting in April...
  • 9:36 AM » Can Credit Markets Thaw Without Toxic Assets Buyout?
    Published Thu, Jun 11 2009 9:36 AM by The Big Picture
    With banks raising capital, is there still a need for a government-orchestrated effort to get toxic assets off bank books? WSJ economics editor David Wessel explains. 6/10/2009
    Click Here to Read the Full Article

    Source: The Big Picture
  • Wed, Jun 10 2009
  • 5:38 PM » Interim Final Rule on TARP Standards for Compensation and Corporate Governance
    Published Wed, Jun 10 2009 5:38 PM by US Treasury
    To view or print the PDF content on this page, download the free . June 10, 2009 tg-165 Interim Final Rule on TARP Standards for Compensation and Corporate Governance For a copy of the regulations, click . 1. Limits Executive Compensation for Certain Executives and Highly Compensated Employees at Companies Receiving TARP Funds · Limits Bonus Payments to Protect Taxpayer Investments · Curtails the Payment of Golden Parachutes · Imposes a Clawback for Any Bonus Based on Materially Inaccurate Performance Criteria 2. Appoints a Special Master to Review Compensation Plans At Firms Receiving Exceptional Assistance · Responsible for Reviewing Any Compensation for Senior Executive Officers and Most Highly Paid Employees At Firms Receiving Exceptional Assistance – With Authority to Disapprove Plans Where Salary or Other Compensation Is Inappropriate, Unsound or Excessive · Must Approve Compensation Structure for Any Executive Officers and the 100 Most Highly Paid Employees at Those Firms · Possesses Authority to Negotiate Reimbursements on Payments Made Before February 17, 2009 · Makes Determinations Based on A Clear Set of Principles 3. Implements and Expands Upon Key Recovery Act Provisions Consistent With February 4 th Proposals · Extends Required Risk Analysis of Compensation to All Employees of TARP Firms · Requires Luxury Expenditure Policies for All TARP Firms · Institutes "Say on Pay" Requirement for All TARP Firms 4. Sets Additional Compensation and Governance Standards to Improve Accountability and Disclosure · Prohibits Tax Gross-Ups · Requires Additional Perk Disclosure · Mandates Disclosure of Compensation Consultants 1. Limitations on Executive Compensation for Companies Receiving TARP Assistance: The interim final rule establishes certain standards for executive compensation practices at firms receiving TARP assistance, in order to fully protect the interests of taxpayers and mandate compensation practices that maximize the value of the firm for shareholders...
  • 5:38 PM » Another Argument Against IMF Cash
    Published Wed, Jun 10 2009 5:38 PM by WSJ
    House Republicans have been campaigning tirelessly against the White House’s push for a $100 billion loan for the International Monetary Fund . The Republican argument –- taken up by some Democrats– that the White House shouldn’t have tied the IMF bill to a war-spending bill has gotten most of the attention. But there’s another issue at play too. During the Group-of-20 summit in April the U.S. pushed for a $250 billion increase in so-called Special Drawing Rights – an IMF quasi-currency that can be turned into hard currencies, including dollars. The stated goal was to get more money to economically troubled countries. All the IMF’s 185 members would get more SDRs in proportion to their stake in the IMF. Wealthy countries that don’t need the SDRs may be able to lend them to poor nations that do. The SDR allocation doesn’t need Congressional approval and hasn’t gotten much attention. But some Republicans are using the fight over the $100 billion contribution to make hay over the SDR allocation as well , House Minority Whip Eric Cantor of Virginia said the SDRs “could wind up in the hands of state sponsors of terrorism and other rogue states.” Rep. Cantor singles out Iran, Venezuela, Sudan and Syria as SDR winners. As IMF members, those countries would be entitled to more SDRs, as would U.S. allies in eastern Europe, Latin America, Asia and Africa facing economic turmoil. Ted Truman , who recently left a consulting gig at the U.S. Treasury to return to the Peterson Institute for International Economics , said that Iran hasn’t used the SDRs that it already has, so it’s unlikely to use the extra allocation. “Maybe a few billion dollars are going to countries that aren’t favored,” he said. “But $100 billion goes to other emerging and developing countries that we do care about.”
  • 5:38 PM » Quick Take: Trade Deficit, Mortgage Applications
    Published Wed, Jun 10 2009 5:38 PM by Google News
    The U.S. economy is currently in recession, and the export outlook does not appear to provide the stimulus it needs.
  • 4:20 PM » Economists' Commentary: June Market Forecast
    Published Wed, Jun 10 2009 4:20 PM by Google News
    Lawrence Yun gives insight on what we can expect from the economy in June and for the rest of 2009.
  • 3:34 PM » Politics of debt: Seeing red
    Published Wed, Jun 10 2009 3:34 PM by Google News
    America's debt is Barack Obama's biggest weakness “PAYING for what you spend is basic common sense. Perhaps that’s why, here in Washington, it’s been so elusive,” said Barack Obama on Tuesday June 9th. He was urging Congress to pass a new “pay-as-you-go” (PAYGO) plan that would oblige it to pay for new spending either by raising taxes or by cutting outlays. By following the same principles that guide “responsible families managing a budget”, he said, Americans could dig the country out of the “very deep hole” that “the reckless fiscal policies of the past have left us in.” Republicans marvel at his skill in stealing their clothes. Democrats retort that, under George Bush, Republicans left their clothes unguarded while they cavorted in a hot tub of borrowed cash. Sure, they talked about fiscal responsibility. But instead of choosing between tax cuts, wars and social spending, they chose all three—and left the bill for future generations. ...
  • 2:43 PM » U.S. Commercial Real Estate May Get Relief
    Published Wed, Jun 10 2009 2:43 PM by Seeking Alpha
    submits: The reports today that the US Treasury is considering issuing rules that will make it easier for property developers and investors and their loan servicers to restructure commercial real estate debt.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 1:24 PM » Statement by Treasury Secretary Tim Geithner on Compensation
    Published Wed, Jun 10 2009 1:24 PM by US Treasury
    To view or print the PDF content on this page, download the free . June 10, 2009 TG-163 Statement by Treasury Secretary Tim Geithner on Compensation WASHINGTON – Our financial system is built on trust and confidence. It requires rules and practices that encourage sound risk management and align the benefits for market participants with long-term growth and value creation – not only at individual firms, but for our financial system and the economy as a whole. This financial crisis had many significant causes, but executive compensation practices were a contributing factor. Incentives for short-term gains overwhelmed the checks and balances meant to mitigate against the risk of excess leverage. Today, I met with SEC Chairwoman Mary Schapiro, Federal Reserve Governor Dan Tarullo, and top experts to examine how we can better align compensation practices – particularly in the financial sector – with sound risk management and long-term growth. In considering these reforms, we start with a set of broad-based principles that – with the help of experts like those we assembled today – we expect to evolve over time. By outlining these principles now, we begin the process of bringing compensation practices more tightly in line with the interests of shareholders and reinforcing the stability of firms and the financial system. First, compensation plans should properly measure and reward performance. Compensation should be tied to performance in order to link the incentives of executives and other employees with long-term value creation. Incentive-based pay can be undermined by compensation practices that set the performance bar too low, or that rely on benchmarks that trigger bonuses even when a firm's performance is subpar relative to its peers. To align with long-term value creation, performance based-pay should be conditioned on a wide range of internal and external metrics, not just stock price. Various measurements can be used to distinguish a firm's results relative...
  • 1:24 PM » Federal Reserve issues first monthly report on its credit and liquidity programs
    Published Wed, Jun 10 2009 1:24 PM by Federal Reserve
    Federal Reserve issues first monthly report on its credit and liquidity programs
    Click Here to Read the Full Article

    Source: Federal Reserve
  • 1:24 PM » Lacker: No Rate Increases Until Growth Signals Clearer
    Published Wed, Jun 10 2009 1:24 PM by WSJ
    Don’t look for the Federal Reserve to raise rates until signs of growth are clearer, Richmond Federal Reserve Bank President Jeffrey Lacker suggested in remarks to reporters Wednesday after addressing the North Carolina Senate Appropriations Committee . Lacker “I think growth is likely to warrant rates as low as they are now for some time. We’ll just have to wait to see how the growth process unfolds for some time,” Lacker said in a question and answer session with reporters. The U.S. central bank has kept short-term interest rates near zero, an approach it said it will stick with for an “extended period.” Lacker told reporters that the phrase is a central bank term of art and “is not specific.” Once growth turns positive, Lacker said the Fed has to begin considering tightening monetary policy, even if the unemployment level is still rising. While it might not move immediately, he said, “when the growth gets positive enough, you need to raise rates.” “I think the growth process needs to govern our rate decisions and I think the growth process is more important in governing our rate decisions than the unemployment rate per se,” Lacker added. In response to questions from North Carolina lawmakers, Lacker noted that credit markets anticipate a Fed rate hike sometime between year-end and the end of 2011, a broad range that he said reflects a sense that change isn’t likely until the economy perks up. In addition to raising interest rates once the economy begins rebounding, Lacker said he thinks the Fed will need to reduce the size of its balance sheet, in effect unwinding investments in financial assets intended to stimulate the economy. Lacker reiterated his opposition to proposals for the Fed to issue its own securities to drain liquidity from the market, saying, “I worry about the Fed bills’ proposal, I worry about giving the Fed the ability to use debt finance” or take on new powers in that area. The Richmond Fed president also expressed concern about the Fed’s holdings...
  • 11:33 AM » Countrywide Exec Warned the Fed About Toxic Mortgages
    Published Wed, Jun 10 2009 11:33 AM by Seeking Alpha
    Tom Lindmark submits: Well, this is interesting. If you’ve read the SEC complaint against Countrywide’s Angelo Mozillo and other executives you probably noticed the name John P. McMurray popping up several times. He was the chief risk manager at Countrywide (CFC) who saw the problems coming, alerted management and was promptly ignored. It turns out that Countrywide wasn’t the only concern that had the benefit of his analysis and chose to believe in the tooth fairy instead. In 2006 he offered some of the same advice to the Fed.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 11:33 AM » Fed's Lacker: Yield curve up on optimism
    Published Wed, Jun 10 2009 11:33 AM by CNN
    Read full story for latest details.
  • 11:33 AM » Guest post: Is the GM section 363 bankruptcy plan really a stealth re-organization plan?
    Published Wed, Jun 10 2009 11:33 AM by Google News
    Submitted by Edward Harrison of the site . We have just learned that Fiat has . This means that the bankrupt ‘Old Chrysler’ will now have far fewer cash and assets available for creditors and that it will be liquidated with large or total losses likely for creditors. Dissident creditors tried to get their case heard by the Supreme Court. But , paving the way for the Fiat deal. Key to why things turned out as they did is the use of section 363 of the bankruptcy code, which allows a company to sell assets without creditor approval and before a re-organization plan can be submitted. The sale produces cash available to creditors in the eventual liquidation of the company. The sold assets can continue to operate as before, but in a re-organized fashion. This is exactly what the Obama Administration wanted for Chrysler. So, in the case of the government versus bondholders count round one to the government. Now, it’s time to turn to General Motors. This is a very important case because GM is such a big player in so many arenas. Think of Chrysler as a test run of GM, . A bankrupt GM that does not receive the same quick section 363 treatment that Chrysler received would be a very nasty shock to the U.S. and global economy. The problem is that General Motors is a whole different case altogether. And I am not so sure the government is going to be successful here. Here’s why. While the Chrysler deal involved a sale of the principal assets, the GM bankruptcy looks more like a stealth re-organization which violates the spirit of section 363. Back in 2004, Daniel Glosband, a bankruptcy expert at the law firm Goodwin Proctor . (emphasis added below) Advantages of a Section 363 sale include speed, transfer of assets free and clear of encumbrances and interests, transfer of restricted contracts and avoidance of exposure to claims under fraudulent transfer laws. For a seller, the Section 363 process eliminates director and officer exposure for the sale and limits exposure for breach of...
  • 10:15 AM » Guest Post: Price, Demand, and Money Supply as They Relate to Inflation and Deflation
    Published Wed, Jun 10 2009 10:15 AM by Google News
    Served by Jesse of There are three basic inputs to the market price of a product or service: 1. Level of Aggregate Supply 2. Level of Aggregate Demand 3. Relative Value (purchasing power) of the Medium of Exchange Let's consider supply and demand first, since they are the most intuitively obvious. The market presents an overall demand, and within that demand for individual products in particular. Supply is the second key component to price. We are not going to go into more detail on it since what we are facing now is a decrease in Aggregate Demand. It can seem a little confusing perhaps. Just keep in mind that if the aggregate demand decreases for goods and services for whatever reasons, such as severe unemployment, and supply remains available then prices will drop overall, with some variance across products because of their differing elasticity to price changes. This is known as the Law of Supply and Demand. How we do know when aggregate Demand is decreasing? Gross Domestic Product = Consumption + Investment + Government spending + (exports − imports), or the famous economic equation GDP = C + I + G + (X − M). Consumption, or Aggregate Demand, is a measurable and key component of our GDP figures. Given the huge slump in GDP, it should be obvious that we are in a demand driven price deflation on many goods and services. People are saving more and consuming less. Now, that covers supply and demand as components of price, but what about money? Money Notice in the above examples we talk about Price as a value without a label. Money is a medium of exchange. It is the label which we apply to give a meaning to our economic transactions. If you are in England, or France, or Argentina, or China, the value label you apply to Price is going to be different according to local laws and customs. Money is the predominant medium of exchange that a group of people have agreed to use when engaging in economic transactions that are not based on pure trading of goods, known as barter...
  • 8:58 AM » How Trillion-Dollar Deficits Were Created
    Published Wed, Jun 10 2009 8:58 AM by The Big Picture
    Today’s must read article is a front page by David Leonhardt. It looks at the process by which boom time surpluses were turned into boom time deficits, and then even greater crash deficits. The two economic takeaways from the piece fits into some of the nonsense I have been criticizing here: 1) President Obama budgets are “responsible for only a sliver of the deficits” (despite what GOP critics say); and 2) Team Obama has no realistic plan to deal with the deficit (despite what DEM supporters say). This is simply the reality of the past 10 years. Note that I am not a blind defender of this administration, and was named one of the of the Obama economic policies. My favorite part of the article was the ginormous graphic that accompanied it. Chart courtesy of > Attention partisans: Try to be aware of your own selective perception here. Very dumb comments of a partisan nature on both sides will be deleted. > Previously: (April 30th, 2009) http://www.ritholtz.com/blog/2009/04/the-14-most-strident-critics-of-obama/ Source: DAVID LEONHARDT NYT, June 9, 2009 http://www.nytimes.com/2009/06/10/business/economy/10leonhardt.html
    Click Here to Read the Full Article

    Source: The Big Picture
  • 8:58 AM » Russia to Sell US Treasurys, Buy IMF Bonds
    Published Wed, Jun 10 2009 8:58 AM by CNBC
  • Tue, Jun 9 2009
  • 7:32 PM » California Worries About Fate of Loan-Repayment Aid for Teachers
    Published Tue, Jun 09 2009 7:32 PM by NY Times
    Cash-flow problems have already delayed the arrival of this year’s checks to help repay student loans, and the future looks dire.
  • 4:56 PM » Market’s Rate Hike Bets at Odds With Likely Fed Path
    Published Tue, Jun 09 2009 4:56 PM by WSJ
    Financial markets’ recent move to price interest rate hikes into the outlook is at odds with what economists and Federal Reserve Board officials think is likely. Short-term fixed income markets have placed increased odds that the U.S. central bank will see enough positive economic momentum to lift the funds rate to half a percentage point by year’s end, from its current range of zero to 0.25%. The shift is driven by a string of recent economic data that have indeed looked better — better enough that investors, economists and Fed officials alike agree the worst of the economy’s slide is probably over. They all hope the stabilization will turn to growth later this year, albeit of a modest sort. But markets have gone even further with the enthusiasm. Futures investors were cheered on Friday when the U.S. government released a hiring report that showed the number of jobs lost in May was clearly less than the horrible numbers seen over recent months. The market’s initial enthusiasm at the headline softened somewhat as the day went on, but the jobs number was still seen as another of the so-called “green shoots” heralding a recovery, and a justification for changing the Fed outlook. Another aspect of the market’s new expectation is the persistent worry the Fed’s flood of liquidity will cause an inflation problem further down the road. Fed officials have promised they won’t let that happen. They’ve also said they’ll likely have to start tightening before a recovery is fully in train, so some market participants have concluded the central bank will have to start raising rates this year. The problem is, what the market now thinks could happen doesn’t appear to be in the Fed’s playbook. Officials at the center of decision-making have shown no signs of moving toward raising rates. They also suggest the likely sequencing of a tightening may look a bit different than what markets now foresee. Fed officials see tightening — in its broadest form — as a far more complex decision than...
  • 4:11 PM » New York Fed issues revised TALF documents: FAQs, Forms, Investor's Guid
    Published Tue, Jun 09 2009 4:11 PM by NY Fed
    New York Fed issues revised TALF documents: FAQs, Forms, Investor's Guid
  • 4:10 PM » Bank of America Stuck with Mozilo's Legal Fees
    Published Tue, Jun 09 2009 4:10 PM by Seeking Alpha
    submits: Just when people were wondering why Bank Of Countrywide Lynch wasn't paying back the TARP (well, that, and a several hundred billion in toxic assets) that the legal fees of , who was recently charged by the SEC with fraud and insider trading, will be paid for by TARP-for-life member BofA. Taxpayers must feel privileged that their hard earned cash is getting funneled back into the US of A so that it, in turn, can give it to Ken Lewis, so that the latter can make sure the Moz gets a few more Hollywood Tans sessions before he shares a cell (20W incandescent illumination, no UVA/UVB) with Bernie. "Under the agreement that he had when Countrywide was an independent company, Countrywide continued to be responsible for his legal expenses for actions taken while he was an employee," Bank of America spokesman Robert Stickler said.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 4:10 PM » Did You Know: Most Desired Home Features
    Published Tue, Jun 09 2009 4:10 PM by Google News
    Did you know that the most desired home feature is central air conditioning?
  • 4:10 PM » Quick Take: Rising Mortgage Rates, Future Federal Reserve Chairman
    Published Tue, Jun 09 2009 4:10 PM by Google News
    Mortgage rates are almost certain to be higher this time next year, but the path is never a smooth line.
  • 3:56 PM » Be It Resolved: There is No Credit Market
    Published Tue, Jun 09 2009 3:56 PM by Google News
    Interesting musing from John Carney follows from a of his refereeing the contretemps between Niall Ferguson and Paul Krugman: We’ve broken the credit markets. Where once we could learn a lot about investor sentiment and expectations from the credit markets—including the markets for treasuries—the signaling function now is by and large useless. That’s because there are now way too many debt instruments that are the functional equivalent of treasuries. We have a lot of bank debt floating around that is backed by the FDIC explicitly, for example. And even the new debt that banks are issuing without explicit government guarantees is backed by a semi-explicit guarantee voiced by politicians who have promised “no more Lehmans.” In other words, every large, complex systemically important financial institution is a government sponsored entity these days. Why buy treasuries when you get a better return from bank debt that is just as safe? In short, the short term fluctuations in treasury yields now result from way more factors than they once did, and the signals about market expectations they through off are far less transparent. Thoughts? Agree? It's a thought-provoking take. Originally published at and reproduced here with the author's permission.
  • 3:55 PM » Policy Complications Ahead?
    Published Tue, Jun 09 2009 3:55 PM by Google News
    Submitted by Rob Parenteau, CFA, and sole proprietor of MacroStrategy Edge and editor of The Richebacher Letter. He also serves as a research assistant to the Levy Institute of Economics. A combination of falling asset prices and falling nominal incomes against the back drop of high private debt loads tends to pose a serious challenge to the ability of market economies to self adjust. In response to a financial crisis, the private sector tries to net save and favors liquid assets in the face of large losses of wealth and income uncertainty. Unless some other sector is willing to net deficit spend, nominal incomes will fall, reducing the ability of the private sector to service existing debt commitments. Spending will drop even as final product prices drop, profits will dry up, and delinquencies and defaults will spread. In addition, unless some other sector is willing to accumulate risky assets or increase the stock of money, asset prices will fall, reducing collateral values and net worth. Bankruptcy and attempts to deleverage, with all their ensuing contagion effects, will spread. Along the way, as markets adjust along these paths, history suggests that societies can experience substantial dislocations. Hy Minsky traced out many of these dynamics decades ago based in part on the contributions of J.M. Keynes and Irving Fisher, but his work was mainly ignored or forgotten by professional investors and mainstream economists favoring the self-equilibrating properties of markets. The response to recent dislocations in many countries has been to a) increase fiscal deficit spending to both meet the surge in desired private net saving and reduce solvency uncertainty for key financial institutions, while b) reducing policy rates to near zero and expanding central bank balance sheets through purchases of privately held assets (quantitative easing). Market self-adjustment mechanisms that can otherwise lead to market self-destruction are thereby believed to have been short circuited...
  • 3:54 PM » Job Market Curse Lifts for One Recent Grad
    Published Tue, Jun 09 2009 3:54 PM by WSJ
    The labor market is still tough for college graduates but one has seen his luck turn around. Andrew Friedson , one of the young people featured in our look at college graduates, , landed a job last week. And not a job tending bar or flipping burgers – a job in his career field. Andrew Friedson, 23, exits his parents’ house. He’s looking forward to moving out now that he’s landed a job. (Dominic Bracco II for The Wall Street Journal) Today is Friedson’s first day at CivicUS , a Rockville, Md.-based research company that advises state and local governments. “It’s actually a great fit for me because it’s kind of at the cross-section between government and policy,” Friedson says. The 23-year-old University of Maryland government and politics graduate has been scraping together part-time jobs since November to make a little money. And after months of applying to jobs with little or no feedback, the floodgates seemed to open. “It was really funny, basically last week I woke up on Wednesday and had nothing and by the end of the day Wednesday I had a lot of possibilities,” Friedson says. By the end of the week he had two job offers, multiple interviews and some initial contact with companies that seemed interested. On Friday he accepted the job with CivicUS. “I don’t feel like I took a job because I needed to take a job,” he says. “I feel like I had a great opportunity that was offered, and I jumped on it.” Next on the agenda: Moving out of his parents’ house. Friedson says he plans to tackle that task in the next couple weeks.
  • 3:54 PM » How TARP Paybacks Expose Weakest Banks
    Published Tue, Jun 09 2009 3:54 PM by Seeking Alpha
    submits: The government has finally acknowledged something it wanted to keep secret six months ago: Which banks are in the worst financial health. It’s now obvious that Citigroup (C), GMAC, Bank of America (BAC) and perhaps a dozen other large banks are in rough shape, but when the Troubled Assets Relief Program went into effect last October, the idea was to mask problems at sick banks by flooding the whole financial system with liquidity. President Bush’s Treasury Secretary, Henry Paulson, famously imposed TARP bailout funds on big banks like Goldman Sachs (GS) and JPMorgan Chase (JPM), which took the money even though they said they didn’t need it.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 1:48 PM » Less wobbly now
    Published Tue, Jun 09 2009 1:48 PM by www.economist.com
    The process of returning banks to private ownership begins WILL there be smiles all around, as ten banks in America begin to repay government capital that had been received during the depths of the financial crisis at the end of 2008? On Tuesday June 9th the Treasury gave approval to ten big banks, nine of which had earlier passed “stress tests” set by regulators, to allow them to repay money to the government’s Troubled Asset Relief Programme (TARP). That should see a combined repayment of $68 billion: welcome funds for the government coffers, and also an encouraging indication that some banks, at least, are growing less wobbly. Although the Treasury did not immediately identify which banks would start repayments, it is clear that those which passed the stress tests, including JPMorgan Chase, Goldman Sachs and Bank of New York Mellon, will be jostling forward in the queue to hand their money back. Such banks are keen to do so quickly, and loudly. By lowering the government’s ownership of them they hope to reduce its influence over them. Paying back the state is also a way of advertising their regained strength. ...
    Click Here to Read the Full Article

    Source: www.economist.com
  • 1:47 PM » The Technical Indicator: S&P and the Dow, undaunted by 200-day averages
    Published Tue, Jun 09 2009 1:47 PM by Market Watch
    For a move that was initially greeted with skepticism, the S&P 500 has sustained a break atop its 200-day across six straight sessions now -- a bullish development that lends credibility to the view that U.S. stocks' path of least resistance remains higher until proven otherwise.
  • 1:47 PM » More stress tests urged for banks
    Published Tue, Jun 09 2009 1:47 PM by Market Watch
    Even as banks start to repay to the government $68 billion in bailout funds, a key financial rescue oversight panel raises questions about the Treasury’s program and calls on regulators to conduct additional stress tests.
  • 1:47 PM » Commercial Mortgage Defaults Seen Rising to 17 Year High
    Published Tue, Jun 09 2009 1:47 PM by Calculated Risk Blog
    From Bloomberg: (ht Brian) The default rate on commercial mortgages held by U.S. banks may rise to the highest in 17 years in the fourth quarter as debt for refinancing remains scarce and the recession drags down rents. The rate is likely to reach 4.1 percent by year-end, Real Estate Econometrics LLC ... said in a report today. ... Commercial defaults already are at a 15-year high after climbing to 2.3 percent in the first quarter ... from 1.6 percent at the end of 2008 ... The projection for this year would match the 4.1 percent rate seen in 1993 and be the highest since defaults reached 4.6 percent in 1992 during the savings and loan crisis ... The company projects the default rate on commercial mortgages will reach 5.2 percent by the end of 2010 and peak at 5.3 percent in 2011 before starting to decline. Earlier this morning, TARP panel chair Elizabeth Warren recommended running the stress tests again on US banks, but using a higher unemployment rate and for more years (including 2011 through 2013). This would include these higher commercial real estate defaults that everyone now sees coming.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 9:21 AM » The Still Over-Leveraged Consumer
    Published Tue, Jun 09 2009 9:21 AM by The Big Picture
    One of the primary reasons I am not a big believer in the green shoots thesis is due to the fragile financial condition of the Consumer. Despite spending less time at the mall, throttling back consumption, and increasing their savings rate, the US consumer still finds themselves with too much debt and too little savings. Even worse (at least for the economy), they lack the income or the equity to fund their previous lifestyles. In my opinion, consumer spending remains an unhealthy ~68% of the economy. While this is down from a peak of ~71%, it is way up from the 63% of the 1950s. The difference over that period has been the massive increase in revolving credit and accessible secure lending (2nd mortgages, HELOCs, etc.). “Despite recent frugality, consumers have barely dented their debt load. The Federal Reserve will offer a fresh peek at that mountain on Thursday, when it releases its “flow of funds” data for the first quarter. By the end of 2008, households were on the hook for $13.8 trillion in debt — nearly matching the $14.3 trillion output of the entire U.S. economy, not adjusted for inflation, that year. Households are shedding debt; they’re just not doing it very quickly. They owed roughly 130% of disposable income at the end of 2008, down only slightly from a record 133% in the first quarter of 2008.” I am not sure that really puts this into the proper context of indebtedness. Let’s go to ’s recent charts on the same subject: > HOUSEHOLD DEBT-TO-NET WORTH AT AN ALL TIME HIGH Source: Haver Analytics, Gluskin Sheff > HOUSEHOLD DEBT-TO-ASSETS RATIO Source: Haver Analytics, Gluskin Sheff > Other than the scales, these two charts look identical. The bottom line remains: Two thirds of the economy is dependent upon consumer spending, Oil is now ~$70 a barrel (gasoline coming up on $3), and the consumer’s ability to borrow, tap equity, or otherwise live a profligate, unfunded lifestyle has been radically crimped. > Source : Federal Reserve, June 5, 2009 http...
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    Source: The Big Picture
  • 9:21 AM » Agencies release list of distressed or underserved nonmetropolitan middle-income geographies
    Published Tue, Jun 09 2009 9:21 AM by Federal Reserve
    Agencies release list of distressed or underserved nonmetropolitan middle-income geographies
    Click Here to Read the Full Article

    Source: Federal Reserve
  • 8:50 AM » Treasurys edge up
    Published Tue, Jun 09 2009 8:50 AM by CNN
    Government bond prices edged higher Tuesday morning in a week when the government is both buying and selling debt.
  • 8:50 AM » PPIP RIP: A Brief Eulogy
    Published Tue, Jun 09 2009 8:50 AM by Seeking Alpha
    submits: Another last week thing I missed: The PPIP Plan is dead. Good riddance. A quick eulogy: In case we forget, the PPIP was a nasty little plan, a move by Treasury to sidestep the Legislative Branch’s power of purse, in order to shove more taxpayer money into the failing banking system ( click on chart to enlarge ).
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • Mon, Jun 8 2009
  • 3:44 PM » Commercial Loans to Bear Brunt of Future U.S. Bank Losses
    Published Mon, Jun 08 2009 3:44 PM by Seeking Alpha
    submits: McKinsey expects the US banking and securities industry to incur losses averaging $125 billion per quarter through 2010, with the bulk of it concentrated in commercial banking loans. McKinsey research estimates that total credit losses on US-originated debt from mid-2007 through the end of 2010 will probably be in the range of $2.5 trillion to $3 trillion, given the severity of the current recession. Some $1 trillion of these losses has already been realized, McKinsey says in a
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 3:13 PM » Loans Versus Bonds Relative Value: Week of June 4
    Published Mon, Jun 08 2009 3:13 PM by Google News
    Total short capitulation: that's the best way to describe what happened in the loan/bond universe during the last week. The only bond that widened was that of Aeroflex. Continued tightening in retailers and auto names has gone on beyond stupid-pill levels and officially entered the bizarro twilight zone: TRW bonds tighter by 400 bps, with both Sealy and Neiman Marcus tighter by roughly 300 bps. Fixed income fund managers merely looking at what is not tighter than comparable Treasuries and buying it without regard for rating, underlying fundamentals or how much time a company has before it files for bankruptcy. As all bubbles, this one too will end very badly. Originally published at and reproduced here with the author's permission.
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