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  • Mon, May 18 2009
  • 8:12 PM » FASB tightens off-balance-sheet loan rules
    Published Mon, May 18 2009 8:12 PM by
    The board that sets U.S. accounting standards on Monday moved to end companies' use of a device that allowed them to park hundreds of billions of dollars in loans off their balance sheets without capital cushions and has been blamed for helping stoke banks' losses in the housing boom.
    Click Here to Read the Full Article

  • 8:12 PM » Fast-Track Foreclosures in Texas Face Slowdown by Legislators
    Published Mon, May 18 2009 8:12 PM by
    Carlos Perez and Belinda Castillo of El Paso, Texas, were two months behind on their mortgage in January when the lender demanded that they catch up or face foreclosure.
    Click Here to Read the Full Article

  • 4:20 PM » Fannie and Freddie in critical condition
    Published Mon, May 18 2009 4:20 PM by CNN
    Fannie Mae and Freddie Mac, charged with helping lead the nation out of its housing crisis, are facing "critical" financial problems, federal regulators said Monday.
  • 4:04 PM » New Cars, Mortgages, and Race
    Published Mon, May 18 2009 4:04 PM by Seeking Alpha
    submits: By James Kwak Like most forms of hardship in our society, the foreclosure crisis is disproportionately affecting minorities. The New York Times conducted a study of and found, among other things:
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 3:02 PM » U.S. home builder sentiment at 8-month high
    Published Mon, May 18 2009 3:02 PM by Reuters
    WASHINGTON (Reuters) - U.S. homebuilder sentiment jumped to its highest level in eight months in May, a private survey showed on Monday, supporting views that the three-year housing slump might be close to an end.
  • 3:02 PM » Recession in Perspective
    Published Mon, May 18 2009 3:02 PM by WSJ
    The Minneapolis Fed is updating a that compares the current recession to previous postwar downturns. By nearly all measures the recession is moving closer to the worst since World War II, and has already dug deeper than most downturns. One of the best features is a chart that allows the user to compare the unemployment picture to previous recessions in all 50 states. Most states hit hard by the current recession, such as Florida and California, are seeing the deepest hits of a postwar downturn. Michigan, though, with the nation’s highest unemployment rate, experienced deeper job losses in the recessions of the 1960s. In both length and depth, the current recession easily outpaces the median but isn’t yet reaching the levels of the harshest downturn. With economists in the latest saying it won’t end until August this year, there’s still four months to make up the ground.
  • 12:29 PM » NewsWatch: Stock market looks to housing for direction
    Published Mon, May 18 2009 12:29 PM by Market Watch
    U.S. stock investors zero in on the housing market to gauge economic growth, with better-than-anticipated earnings from Lowe's helping boost sentiment.
  • 12:28 PM » Different conceptions of China’s future role in the global financial system
    Published Mon, May 18 2009 12:28 PM by Google News
    Discussions of China’s role in the world that aren’t dominated by economists often end up focusing on China’s willingness to act as a “responsible stakeholder” in the global system. That is diplomatic code for China to do more to support the current international financial and political order that it has — in this view — helped support China’s rapid development. This framing though assumes something that I am not sure is true, namely that there is a deep consensus on what constitutes a stable international financial order and thus consensus on what China needs to do if it wants to integrate more fully into this order. The current order, after all, isn’t really defined just by existing institutions like the IMF; the key questions go far beyond China’s willingness to contribute more to the IMF in exchange for a few more votes. To put it concretely, is a stable international financial order one defined by large-scale Chinese financing of the US, in dollars, to sustain a large US current account deficit – whether one that reflects a large deficit among US households or a large US fiscal deficit? Or is a stable financial order marked by floating exchange rates among the world’s major economies, limited build-up of reserves and modest current account deficits (and surpluses)? In the first conception of global financial order, China should continue to peg to the dollar, adopt policies that restrain domestic demand growth to avoid domestic inflation if the dollar is weak and run up large dollar reserves. That policy mix would produce large current account surpluses – and allow China’s government to continue to provide large amounts of financing to the United States. Call it Bretton Woods 2 bis. China’s current would double over the next four years, to about $3 trillion – and keep on rising after that. The current crisis doesn’t – according to this view – signal that there is anything fundamentally wrong with a world where a poor country like China finances a rich country through...
  • 12:28 PM » Foreclosure Resales: Slow in High Priced Areas
    Published Mon, May 18 2009 12:28 PM by Calculated Risk Blog
    From Matt Padilla at the O.C. Register: Banks have seized homes in Orange County at a pace that dwarfs the darkest days of the housing downturn in the 1990s. Yet eager buyers have grabbed those properties, keeping the county's foreclosure inventory in check, according to a special report from MDA DataQuick. Hold the sigh of relief. Some economists see a second wave of foreclosures coming. Click on photo for larger image in new window. This graphic from the O.C. Register shows where foreclosures are selling - and where they are not selling. In the low priced areas, first time homebuyers and cash flow investors are buying the foreclosures. But in the high priced areas, there are far fewer buyers - especially since there are few move up buyers. [F]oreclosure sales appear to be lagging on the coast. Laguna Beach's 92651 had the highest ratio of unsold foreclosures at 53.8 percent – out of 52 foreclosures, just 24 had sold by April 10. San Clemente's 92672 is right behind with an unsold ratio of 43.9 percent, followed by Laguna Woods' 92637 at 42.9 percent. Kerry Vandell, finance professor and director of UCI's real estate center, said high prices along the coast cause properties to sell slowly, whether foreclosure or not. For one thing, mortgage rates are higher on bigger loans, he said. Rates are higher because government-backed mortgages are limited to about $730,000. Anything over that limit is also harder to get. Laura Pephens, a San Clemente-based banking consultant and director with the California Mortgage Bankers Association, said there is another reason why coastal foreclosures are slower to sell. Banks are more reluctant to lower their asking prices, because the loan balances are bigger. Here comes the second wave of foreclosures - mostly in mid-to-high priced areas. And these foreclosures will be much harder to sell. For more: From the San Francisco Chronicle: and
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • 12:28 PM » Treasurys in tug of war
    Published Mon, May 18 2009 12:28 PM by CNN
    Treasury prices traded in a tight range Monday as investors digested a rally on Wall Street ahead of another purchase operation by the government.
  • 12:26 PM » Profile of GSE Purchases from 2005-2007
    Published Mon, May 18 2009 12:26 PM by
    The Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as revised by Section 1126 of the Housing and Economic Recovery Act of 2008, requires that the Department of Housing and Urban Development publicly release data–in forms useful to the public–on mortgages purchased by Fannie Mae and Freddie Mac.
    Click Here to Read the Full Article

  • 11:58 AM » Housing Market Shows Signs Of Recovery: Regional Banks
    Published Mon, May 18 2009 11:58 AM by CNBC
    CEOs from several regional banks around the country told CNBC they are seeing some signs of “green shoots” in the housing market.
  • 11:57 AM » Housing bubbles around the world: looks pretty bad
    Published Mon, May 18 2009 11:57 AM by Google News
    Housing bubbles around the world (click to enlarge): The chart illustrates price-rent ratios for some of the most notorious housing bubbles - Ireland, Spain, the UK, and the US - indexed to 1997. The price-rent ratio can be compared to a price-earnings, or even better a price-dividend, ratio in finance. It measures the relative value of the asset: the price of the asset (purchase price of a home) divided by its flow of fundamental value (rental income earned or the value of having a roof over your head). As the price-rent ratio grows, the market value moves away from its fundamental value. The bubbles have been extreme, and there is probably still some downward price momentum left in the pipeline for many of these markets. Ireland's housing market, while having experienced the biggest relative bubble, has seen its price-rent ratio rise since Q3 2008. Crashing economic fundamentals have driven down rents (the denominator), and likewise the relative value of owning a home. I included the German price-rent ratio to show that housing bubbles are not uniformly the root cause of economic decline. The German housing market saw a bump early during the reunification years; but currently, it's falling exports brought on by anemic global demand (US demand to be sure) that caused the German economy to contract by . And for those of you who think in annualized terms (the European Commission releases the quarter on quarter growth rates), that's a 14.3% decline. Ouch! Originally published at the blog and reproduced here with the author’s permission.
  • 11:57 AM » How NO credit can be worse than BAD credit
    Published Mon, May 18 2009 11:57 AM by
    My husband and I have been married for three years now. We're both on our second marriage.
    Click Here to Read the Full Article

  • 11:57 AM » More Homeowners Getting Aid, but Demand Keeps Rising
    Published Mon, May 18 2009 11:57 AM by
    In the two months since it launched, the Obama administration's foreclosure prevention plan has outperformed the government's previous attempts, offering more than 50,000 homeowners lower-cost mortgages.
    Click Here to Read the Full Article

  • 11:17 AM » Stocks point to higher open ahead of housing data
    Published Mon, May 18 2009 11:17 AM by Washington Post
    NEW YORK -- U.S. stocks signaled a moderately higher open Monday as investors look for bargains after last week's pullback.
    Click Here to Read the Full Article

    Source: Washington Post
  • 11:17 AM » Lowe's: "Pressures on consumers remain intense"
    Published Mon, May 18 2009 11:17 AM by Calculated Risk Blog
    Press Release: "The economic pressures on consumers remain intense, and bigger ticket projects continue to be postponed as wary home improvement consumers watch the economic climate and housing market dynamics very closely," [Robert A. Niblock, Lowe's chairman and CEO said] "But, as spring arrived, we saw relative strength in smaller, outdoor projects." From the WSJ: [Lowe's] now sees [fiscal-year] revenue ranging from down 2% to up 1%, from February's view of down 2% to up 2%. It still sees same-store sales down 4% to 8%. A 4% to 8% decline in same store sales is a very difficult environment and indicates that home improvement remains very weak.
    Click Here to Read the Full Article

    Source: Calculated Risk Blog
  • Sun, May 17 2009
  • 11:34 AM » Bank Chiefs Will Be Replaced in Next Few Months, Bair Predicts
    Published Sun, May 17 2009 11:34 AM by Bloomberg
    Bank chief executives will be replaced in the next couple of months as the U.S. scrutinizes financially troubled lenders, Federal Deposit Insurance Corp. Chairman predicted. “Management needs to be evaluated,” Bair said yesterday on Bloomberg Television’s “Political Capital with Al Hunt,” being broadcast this weekend. “Have they been doing a good job? Are there people who can do a better job?”
  • Fri, May 15 2009
  • 5:41 PM » Global Financial Crisis 2008
    Published Fri, May 15 2009 5:41 PM by Google News
    ABSTRACT The global financial crisis, brewing for a while, really started to show its effects in the middle of 2007 and into 2008. Around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. On the one hand many people are concerned that those responsible for the financial problems are the ones being bailed out, while on the other hand, a global financial meltdown will affect the livelihoods of almost everyone in an increasingly inter-connected world. The problem could have been avoided, if ideologues supporting the current economics models weren’t so vocal, influential and inconsiderate of others’ viewpoints and concerns. Keywords: Crisis Management, Global Financial Crisis, Market scenario, subprime mortgage crisis, Reduced Growth Rate and Responses. Introduction The current financial crisis has evolved differently from other major crises that have hit the developing world in recent decades. Not only is it occurring in a world of unprecedented financial globalization, where the financial sector plays a historically large role in economic activity, but it is also an “imported” crisis, with origins outside the developing world. The crisis also comes on the heels of a major global shock from high food and fuel prices that has imposed a heavy economic burden on many countries and significantly increased the incidence of poverty and vulnerability. The uniqueness of the current configuration of economic challenges has important implications for the nature and effectiveness of the policy options available to developing country governments. It implies that the policy responses of individual developing countries are unlikely to measurably affect the depth and length of the global crisis. However, their actions can affect the impact of the crisis on their own economies. Policymakers need to be ready to react...
  • 3:07 PM » FDIC's Bair says bank CEOs will be replaced: report
    Published Fri, May 15 2009 3:07 PM by Reuters
    NEW YORK (Reuters) - Federal Deposit Insurance Corp chairman Sheila Bair said some U.S. bank chief executives will be replaced in the next couple of months as regulators assess lenders' financial strength, Bloomberg News said on Friday, citing a television interview to be broadcast this weekend.
  • 3:07 PM » After Hours: Bank of America, life insurers may see late action
    Published Fri, May 15 2009 3:07 PM by Market Watch
    Shares of life insurance providers could see further active trading in the wake of preliminary approval by the government for some insurers to receive bailout money.
  • 2:36 PM » Treasury Department Statement on GM Dealer Consolidation Announcement
    Published Fri, May 15 2009 2:36 PM by US Treasury
    May 15, 2009 TG-134 Treasury Department Statement on GM Dealer Consolidation Announcement WASHINGTON – Today, General Motors initiated the dealer consolidation plan it laid out in its interim plan on April 27, 2009. GM's announcement is part of the company's larger effort to restructure to achieve financial viability. The Task Force is continuing to work with GM and all its stakeholders and will stand behind GM during this process to ensure that it emerges as a more competitive, viable business in the long-term. As was the case with Chrysler's dealer consolidation plan, the Task Force was not involved in deciding which dealers, or how many dealers, were part of GM's announcement today. As difficult as these announcements are for the dealers that will no longer be selling GM and Chrysler cars and the communities in which they operate, without the President's intervention , the entire GM and Chrysler dealer networks could have been lost. The Administration's commitment to this industry has given both companies a new lease on life. By supporting a restructuring that results in stronger car companies – supported by efficient and effective dealer networks – this process will not only provide more stability and certainty for current employees but the prospect for future employment growth. In addition, the Administration is committed to continuing its significant efforts to help ensure that financing is available to creditworthy dealers and to pursuing efforts to help boost domestic demand for cars. These steps will help auto dealers, the auto industry, and the American economy. ###
  • 2:30 PM » Fannie Mae: New Second Lien Program, Foreclosure Alternatives, Home Price Decline Protection Incentives
    Published Fri, May 15 2009 2:30 PM by
    Making Home Affordable Updates: New Second Lien Program, Foreclosure Alternatives, Home Price Decline Protection Incentives
    Click Here to Read the Full Article

  • 1:34 PM » Quick Take: Mortgage Rates, Oil Prices
    Published Fri, May 15 2009 1:34 PM by Google News
    If oil prices rise to $70 or $80 per barrel, then mortgage rates could also rise.
  • 1:34 PM » Did You Know: Amount Spent on Home Improvement
    Published Fri, May 15 2009 1:34 PM by Google News
    Did you know that the typical buyer spends $4,350 on home improvement projects within the first three months of purchasing a home?
  • 1:34 PM » Did You Know: Types of Home Improvement
    Published Fri, May 15 2009 1:34 PM by Google News
    Did you know that the remodeling priorities were similar among first-time buyers, repeat buyers, and those who purchased previously owned residences?
  • 12:48 PM » Reviving Lending to Small Businesses and Families and the Impact of the TALF
    Published Fri, May 15 2009 12:48 PM by
    The COP May Oversight Report is called Reviving Lending to Small Businesses and Families and the Impact of the TALF. This report looks at the state of lending for small businesses and families and then examines the Term Asset-Backed Securities Loan Facility (TALF), which Treasury and the Federal Reserve established to improve access to credit for families and small businesses by supporting the issuance of asset-backed securities collateralized by credit card loans, student loans, auto loans and loans guaranteed by the Small Business Administration (SBA). Credit has tightened for families and small businesses. Over 40 percent of banks report tightening lending standards for small businesses. In February, 2009, consumer lending fell by an annual rate of 3.5 percent. If successful, TALF could improve access to lending for families and small businesses. The report raises two critical questions about the TALF: Is the TALF program well-designed to help market participants meet the credit needs of households and small businesses? Even if the program is well-designed, is it likely to have a significant impact on access to credit? The report finds that there is reason for caution in predicting the ultimate impact of TALF, though the program may succeed in improving investor demand for asset-backed securities. Read Watch
    Click Here to Read the Full Article

  • 12:48 PM » Can the Coming Mortgage Reset Bubble Be Absorbed?
    Published Fri, May 15 2009 12:48 PM by Seeking Alpha
    submits: The American Bankers Association has that there will be approximately $2.78 trillion in mortgages written in the U.S. in 2009. Of this number, 80% are expected to be refinancing of existing mortgages (refis). What does this imply for the impending bubble of variable mortgage resets? Credit Suisse has estimated a of mortgage resets for the period of 2009 through the first half of 2012 of approximately $1 trillion. The expected refis in 2009 will be approximately $2.2 trillion. This is more than double the size of the projected reset bubble for 2009 and the following 2 1/2 years. So, if 50% of the refis in 2009 are for resets in this time frame (2009 to mid-2012), the entire bubble can be absorbed.
    Click Here to Read the Full Article

    Source: Seeking Alpha
  • 12:32 PM » Bank Liquidity, Interbank Markets and Monetary Policy.
    Published Fri, May 15 2009 12:32 PM by NY Fed
    Xavier Freixas, Antoine Martin, and David R. Skeie. Bank Liquidity, Interbank Markets and Monetary Policy. Federal Reserve Bank of New York Staff Reports Staff Report Number 371, May 2009.
  • 12:17 PM » Can The US Save The World? (House Testimony)
    Published Fri, May 15 2009 12:17 PM by Google News
    Yesterday I testified to the House Subcommittee on International Monetary Policy and Trade (part of the House Financial Services Committee). The hearing’s title was “Implications of the G-20 Leaders Summit for Low Income Countries and the Global Economy,” and the main topic was whether Congress should support that the Obama Administration agreed at the G20 summit in early April (). The committee was mostly in favor of the US continuing to play a leading role in supporting the IMF, but to explain whether the IMF could lose this money (highly unlikely), how this would protect American jobs (definitely, but hard to quantify precisely), and if the broader package of IMF reform should also be supported (e.g., the are being reassessed, to see they could generate more resources for aid to developing countries). that US funding for the IMF is likely to be attached to the war supplemental spending bill. The subcommittee’s chairman, Gregory Meeks, seemed positive – as did all the Democrats who spoke, along with Gary Miller, the Ranking Member/Senior Republican. But, based on remarks made by at least two Republican members of the subcommittee, there is likely to be a big public fight at some point. My guess is that the Democratic side will press hard for President Obama to more publicly explain why supporting the IMF (and the G20) is very much in the US interest. The main points from my written testimony are below. While Treasury represents the US vis-a-vis the IMF and traditionally has considerable scope for action, the views of Congress on IMF details are very important as both guidance and constraints. In our advice on the wide range of IMF-related issues below, both I and the other witnesses laid out broadly similar views with varying emphasis – there was actually much more disagreement among committee members than at the witness table. Main points Low income countries have been severely affected by the global economic downturn. Many of the worst consequences, including on...
  • 12:17 PM » US Cities With Most Underwater Mortgages
    Published Fri, May 15 2009 12:17 PM by CNBC
  • 12:17 PM » The Resilience (?) of the American Consumer
    Published Fri, May 15 2009 12:17 PM by Google News
    With all the hype about green shoots, “reassuring” stress tests and stock markets rallies, not to mention the fabulous New York weather, I felt a sudden urge to go shopping! Yet, except from a birthday present and the obligatory ticket to Star Trek *The Movie*, I couldn’t do it… I still have trouble convincing myself to splurge on anything that I can’t eat. Just to double-check I don’t suffer from some kind of acute post-crisis hoarding syndrome, I had a look at the data to see how far (or not) I stand from the average American consumer. In fact, the point of the exercise went beyond my own syndrome-check: The green shoot story rests partly on the view that the liquidation of inventories we have been witnessing for the past year and a half will have to give way to a re-building of stocks—read production! I mean, there are only so many times you can go to BestBuy and look for your favorite laptop in vain, before you start screaming at management. But here is the catch… for this to work, you must want to buy a new laptop in the first place! In other words, demand must remain robust enough to encourage inventory re-building. And consumption is a big part of demand. So how resilient is the American consumer? The data are actually pretty mixed. After consumers’ effective “abstinence” from anything and everything in the last months of 2008, first-quarter personal consumption increased 2.2% in real terms, stirring optimism about the ability of the American consumer to steer us out of the crisis. But the optimism may have been premature. Indeed, speaking of laptops, part of the growth was due to a 9.4% increase in the consumption of durable goods—electronics, refrigerators and the like. While this might have reflected pent-up demand “post-abstinence”, some (cynics, surely!) pointed out that the surge in durables consumption could actually be related to the liquidation of Circuit City back in January. The bears (sorry, cynics) got another boost today, after disappointing retail...
  • 10:29 AM » Senate Vote on Credit-Card Bill Slated for Tuesday
    Published Fri, May 15 2009 10:29 AM by CNBC
  • 10:17 AM » Phoenix: Home Strippers Beware
    Published Fri, May 15 2009 10:17 AM by
    So you are going into foreclosure and are thinking of selling everything to the bare walls- and the bare walls, and the pipes? We’ve seen , but [ Hat tip to both M and L for this one! ] The Northeast Valley’s battered real-estate market is getting a federal bailout of sorts from an unusual source. FBI agents and local law-enforcement personnel have arrested five people in the past month for stripping their foreclosed homes of appliances, cabinets, countertops and plumbing fixtures. That includes cases in Fountain Hills, Anthem, Phoenix and Surprise of some of the more egregious violators who are taking everything they can out of homes, said Julie Halferty, a supervising special agent who oversees the FBI Mortgage Task Force. "It has a huge effect on the current housing market," she said. "Yes, the bank is a victim, but it’s also the neighboring community that has to live with a house left in shambles." How do people justify this sort of vandalism? Desierae Tolhurst, an FBI special agent on the task force, said some of the homeowners in default are desperate for cash and justify stripping the home as a way of getting back some of the money they invested in the property. But that is after they have lived in the home for nine to 12 months without paying the mortgage, she said. Banks typically take that long to initiate foreclosure on a defaulted loan and sometimes even longer in the current housing crisis. Our house is in the foreclosure process, and we won’t be leaving until April 19, 2008. So anything that is of everyday use i.e. the appliances or A/C or the hot water heater will not be removed until after that date. The bank has rejected 6 solid offers that have been made by potential buyers for our home. I have well over $60,000 in upgrades thru out my house; house is less than 1 year old, as is all the appliances and fixtures. If these house strippers would read the terms of their home loan, they would see that removal of things like the AC or the...
    Click Here to Read the Full Article

  • 10:09 AM » The Banking Industry, Three trillion dollars later...
    Published Fri, May 15 2009 10:09 AM by
    COULD there be a better time to be a bank? If you have capital and courage, the markets are packed with opportunities—as they well understand at Goldman Sachs, which is once again filling its boots with risk. Governments are endorsing high leverage and guaranteeing huge parts of the financial system, so you get to keep the profits and palm off the losses on the taxpayer. The threat of nationalisation has receded, reinvigorating the banks’ share prices. Money is cheap, deposits plentiful and borrowers desperate, so new lending promises handsome margins. Back before the crash, banks’ profits just looked big; today they might even be real.
    Click Here to Read the Full Article

  • 9:27 AM » Treasury International Capital (TIC) Data for March
    Published Fri, May 15 2009 9:27 AM by US Treasury
    To view or print the PDF content on this page, download the free . May 15, 2009 tg-133 Treasury International Capital (TIC) Data for March – The U.S. Department of the Treasury today released Treasury International Capital (TIC) data for March 2009. The next release, which will report on data for April 2009, is scheduled for June 15, 2009. Net foreign purchases of long-term securities were $55.8 billion. Net foreign purchases of long-term U.S. securities were $56.4 billion. Of this, net purchases by private foreign investors were $30.0 billion, and net purchases by foreign official institutions were $26.4 billion. U.S. residents purchased a net $0.6 billion of long-term foreign securities. Net foreign acquisition of long-term securities, taking into account adjustments, is estimated to have been $36.9 billion. Foreign holdings of dollar-denominated short-term U.S. securities, including Treasury bills, and other custody liabilities increased $26.7 billion. Foreign holdings of Treasury bills increased $47.9 billion. Banks' own net dollar-denominated liabilities to foreign residents decreased $40.5 billion. Monthly net TIC flows were $23.2 billion. Of this, net foreign private flows were $9.8 billion, and net foreign official flows were $13.5 billion. Complete data are available on the Treasury website at . REPORTS
  • 8:40 AM » Treasury Dept. is giving 'cash-for-keys'
    Published Fri, May 15 2009 8:40 AM by CNN
    When all else fails, the Treasury Department is now willing to cough up cash to get homeowners to move on and to get loan servicers to forgive mortgage debt.
  • Thu, May 14 2009
  • 7:34 PM » Additional Reflections on the March Trade Release
    Published Thu, May 14 2009 7:34 PM by Google News
    My views on the short term prospects for GDP growth at home and abroad were little changed (relative to ) by the information in the March . Goods imports are collapsing, albeit at a slower but still substantial rate, and goods exports are declining, with high volatility. First consider the growth rates of real goods imports ex.-oil and real goods exports. Figure 1: Month-on-month annualized growth of real goods imports ex.-oil (bold red), and of real goods exports (bold blue); and year-on-year growth rates (respectively teal, purple); all in Ch.2000$, calculated as log differences. NBER defined recession dates shaded gray, assuming recession has not ended by May 2009. Source: BEA/Census, March trade release, NBER, and author's calculations. Note that imports seem to be recovering. But it's important to look closely at the vertical axis; month-on-month annualized growth rate is minus 10.9%, and the year-on-year growth rate is minus 24.8%. Goods exports month-on-month annualized growth rates have dropped back into negative territory -- at minus 22.3%. But even the year-on-year rate is -15.4%. So here, I'm in agreement with Brad Setser's observations , -- trade has collapsed and there's little evidence that there's an incipient recovery. Now, turning to the implications for future growth -- I believe that a recorded decline in imports implies (conditional on observing other data) an increase in contemporaneous GDP, but a decrease in future growth prospects (holding all else constant). It turns out that updating the advance release figures for imports with the actual March import numbers changes the implied GDP for 2009Q1 (to -5.9% SAAR, as opposed to -6.1% ), but does not change the overall picture regarding imports in a perceptible manner (see for instance Figure 1 in this ). Figure 2: Log GDP (blue, left scale), log goods import ex.-oil from NIPA (red, right scale), estimated from trade release (purple, right scale), all in Ch.2000$, SAAR. 2009q1...
  • 7:34 PM » The Truth Behind the Social Security and Medicare Alarm Bells
    Published Thu, May 14 2009 7:34 PM by Google News
    What are we to make of yesterday's report from the trustees of the Social Security and Medicare trust funds that Social Security will run out of assets in 2037, four years sooner than previously forecast, and Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago? Reports of these two funds' demise are not new. Fifteen years ago, when I was a trustee of the Social Security and the Medicare trust funds (which meant, essentially, that I and a few others met periodically with the official actuary of the funds, received his report, asked a few questions, and signed some papers) both funds were supposedly in trouble. But as I learned, the timing and magnitude of the trouble depended a great deal on what assumptions the actuary used in his models. As I recall, he then assumed that the economy would grow by about 2.6 percent a year over the next seventy-five years. But go back into American history all the way to the Civil War -- including the Great Depression and the severe depressions of the late 19th century -- and the economy's average annual growth is closer to 3 percent. Use a 3 percent assumption and Social Security is flush for the next seventy-five years. Yes, I know, the post-war Baby Boom is moving through the population like a pig through a python. The number of retirees eligible for benefits will almost double to 79.5 million in 2045 from 40.5 million this year. But we knew that the Boomers were coming then, too. What we didn't know then was the surge in immigration. Yet immigrants are mostly young. Rather than being a drain on Social Security when the Boomers need it, most immigrants will be contributing to the system during these years, which should take more of the pressure off. Even if you assume Social Security is a problem, it's not a big problem. Raise the ceiling slightly on yearly wages subject to Social Security payroll taxes (now a bit over $100,000), and the problem vanishes under harsher...
  • 4:17 PM » Fed Purchases $27.2bn Agency MBS
    Published Thu, May 14 2009 4:17 PM by NY Fed
    Purchases in agency MBS by investment managers acting as agents for the System Open Market Account (SOMA).
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