Saturday, March 6, 2010
Volcker Says Too Soon to Cut U.S. Monetary, Fiscal Stimulus
White House adviser, and former chairman of the Federal Reserve, Paul Volcker says that it is too early for US policy makers to unwind the stimulus and cut the interest rates. He pointed to unemployment rate which according to the recent report from The Bureau of Labor Statistics is at 9.7%. Based on that he suggests both the Fed and Treasury not to take an aggressive action either fiscally or monetary. He also predicts that the budget deficit will reach $ 1.6 trillion by the end of fiscal year.
China Budget Eases Off Stimulus
China has just announced this year that they will cut government spending by 11% this year. China goal in their stimulus plan was to keep spending within their infrastructure and social programs. China had to slow down the spending because they see dim prospects in he future with that spending. The China's finance ministry says they do not what to over extend themselves, because we can see what problem that has cause Greece, Spain, and the USA.
Outlook Brightens for Jobless
Things are starting to look better for our economy this month. Economists say that they believe that we have seen the unemployment hit what they say is a plateau. Even with the 36,000 jobs lost last month, economists say there would have been job hiring if had not been for those snow storms. There has also been a rise in temporary workers in the private sector, which is proof that some companies are growing again.
Friday, March 5, 2010
Consumer credit rises for first time in a year
According to the report released on Friday by the Federal Reserve, consumer borrowing increased in January for the first time in a year. In contrast with the prediction of Briefing.com, which predicted a decline of $4.5 billion in January, total consumer borrowing rose to $2.456 trillion in January, a seasonally adjusted $5 billion. This news might be an indication that consumers are beginning to feel more confident and, therefore, are starting to spend more. Also, this news might mean that consumers simply cannot afford to pay their debt anymore. It is also reported that except for revolving credit which fell in January by a 2.3% annual rate, the trend of the increase in consumer borrowing is continuing; for example, nonrevolving credit like auto, personal and student loans rises a 5% annual rate in January.
In summary, it is hard to determine what the real endogenous reason for this phenomenon is. As time goes by, economists will draw a clearer conclusion.
In summary, it is hard to determine what the real endogenous reason for this phenomenon is. As time goes by, economists will draw a clearer conclusion.
Extended jobless benefits start ending
The extended jobless benefits are near end. The question is in such circumstance what should be a good resolution to pass now? Whether the unemployment befefits should be extended even further or it should be canceled? With so many problems already hanging in sight, this is going to be a hard decision for the governement. Hope this articles provides some hints on the current job market.
Race to the bottom
This is a good article about the depreciating values of generally strong currencies. It talks about how some governments are not necessarily concerned by this because of the boost they may see in exports. Comments on how the US is doing nothing to try to raise the value of their currency. It also interestingly mentions that countries with relatively strong currencies are trying to devalue their own currencies in reaction to this.
US dollar down? Good for Canadian!
We have learned that currency can have effect on consumers' behavior. For people in countries with high valued currency compared to the currently low US dollars, it is a great opportunity to visit the US. The article above is an example of how great it is for Canadian Hockey Teams in N.H.L when their Canadian dollar value rises strongly compared to the US dollar; how poor and weak teams can turn out to be rich.
"A stronger currency has made it cheaper for the six Canadian teams to pay their players in United States dollars and to reduce debts...
The revenues for the six Canadian clubs helped the entire league earn its highest operating profit in more than a decade, according to Forbes magazine."
Imagine how powerful a change in currency exchange rate can have in society. I expect that the US net export of the coming year will be boosted.
"A stronger currency has made it cheaper for the six Canadian teams to pay their players in United States dollars and to reduce debts...
The revenues for the six Canadian clubs helped the entire league earn its highest operating profit in more than a decade, according to Forbes magazine."
Imagine how powerful a change in currency exchange rate can have in society. I expect that the US net export of the coming year will be boosted.
China Says Economy Still Needs Support
BEIJING -- China's government Friday pledged to keep prices stable this year as it tries to rein in lending and manage consequences of a massive stimulus program, but said it will continue to support the economy.
As widely expected, Chinese Premier Wen Jiabao reaffirmed China's growth target will remain at 8%. China has been seeking annual economic growth of 8% since 2005; it set a 7% target for 2004.
The government, which last year was determined to revive the economy amid the global financial crisis, this year is shifting toward tackling challenges such as surging housing prices and potential bad debt. Gross domestic product expanded 8.7% last year, helped by a credit boom and government investments.
"Latent risks in the banking and public finance sectors are increasing," said Mr. Wen in prepared remarks, adding the government will curb "the precipitous rise of housing prices in some cities."
China, the world's third-largest economy, has already begun to restrain credit growth as the economy has rebounded. Despite such changes in policy, Mr. Wen reiterated in his annual report at the opening of the National People's Congress that the government will continue its "active" fiscal policy and "moderately loose" monetary policy. It will also maintain the "basic stability" of the yuan exchange rate, he said.
Mr. Wen cautioned that "there is insufficient internal impetus driving economic growth," and reiterated the government needs to "consolidate the momentum of the economic turnaround," while restructuring the economy. Beijing wants to rely more on consumption and services to drive growth, and encourage Chinese companies to make more advanced goods.
"Individual countries face difficult choices in phasing out their stimulus policies; larger fluctuations may occur in the prices of major commodities and exchange rates among the major currencies; trade protectionism is clearly reasserting itself," he said.
But the policy wording still gives Beijing room to scale back stimulus; the central bank has twice ordered banks to keep a bigger portion of deposits on reserve this year to curb loan growth, without changing the monetary policy stance. Mr. Wen added: "We need to manage inflation expectations well and keep the overall level of prices stable."
Royal Bank of Canada economist Brian Jackson wrote in a note that Mr. Wen's comments "seem designed to give himself the rhetorical room to adjust policy as and when he sees fit. His speech seems consistent both with keeping policy unchanged for now but also with making some gradual adjustments in the months ahead."
China will aim for around 7.5 trillion yuan (around $1.1 trillion) worth of new local-currency loans this year, lower than the record 9.59 trillion yuan worth of new loans banks extended last year. It will also seek to slow growth in broad money supply, or M2, to around 17% this year from nearly 28% in 2009.
The consumer price index, the country's key inflation gauge, is targeted to rise around 3% this year, Mr. Wen said, after falling 0.7% last year
The government has grown concerned about potential risks to public finances from local governments, which aren't allowed to raise debt. Many, however, set up special investment vehicles that borrowed from banks, helping to drive the economy's recovery. But such forms of financing don't show up in the government's balance sheets and concerns have grown that such debt could turn bad, hurting banks and straining the central government's finances.
"We will strengthen the fiscal management system at and below the provincial level, set up a mechanism to ensure basic funding for county governments and carry forward reforms that place county finances directly under the management of provincial governments," said Mr. Wen.
The Ministry of Finance will issue 200 billion yuan worth of bonds on behalf of local governments, continuing a similar program as last year.
China's economic planning agency, the National Development and Reform Commission, said Friday it is aiming to expand fixed-asset investment this year by 20% while curbing excess and obsolete capacity in certain sectors, continuing Beijing's recent policy goals.
The growth target would represent a marked slowdown from nationwide FAI growth of 30.1% last year, which was boosted by the government's stimulus program.
Still, Mr. Wen said the government plans to run a fiscal deficit of 1.05 trillion yuan this year, or 2.8% of GDP. The budget suggests continued fiscal stimulus this year given earlier data showed the 2009 deficit at 2.2% of GDP, though the finance ministry said last year's deficit was higher, at 950 billion yuan, because of an accounting move.
"The fiscal deficit in 2010 still needs to be of an appropriate size. At the same time, in order to promote the sustainable development of public finances, actively prevent fiscal risk, and leave some leeway to gradually reduce the deficit in future years, we must keep the deficit under 3% of GDP," said the Ministry of Finance.
The central government plans to invest more to support the development of new technologies this year than last year, in line with its goal of restructuring the economy. But it is budgeting a slight slowdown in public spending on health care, social security and education this year, and keeping the share of social spending in its total spending broadly unchanged from last year.
Economists say China could encourage its people to spend more money by improving education, health care and social security.
As widely expected, Chinese Premier Wen Jiabao reaffirmed China's growth target will remain at 8%. China has been seeking annual economic growth of 8% since 2005; it set a 7% target for 2004.
The government, which last year was determined to revive the economy amid the global financial crisis, this year is shifting toward tackling challenges such as surging housing prices and potential bad debt. Gross domestic product expanded 8.7% last year, helped by a credit boom and government investments.
"Latent risks in the banking and public finance sectors are increasing," said Mr. Wen in prepared remarks, adding the government will curb "the precipitous rise of housing prices in some cities."
China, the world's third-largest economy, has already begun to restrain credit growth as the economy has rebounded. Despite such changes in policy, Mr. Wen reiterated in his annual report at the opening of the National People's Congress that the government will continue its "active" fiscal policy and "moderately loose" monetary policy. It will also maintain the "basic stability" of the yuan exchange rate, he said.
Mr. Wen cautioned that "there is insufficient internal impetus driving economic growth," and reiterated the government needs to "consolidate the momentum of the economic turnaround," while restructuring the economy. Beijing wants to rely more on consumption and services to drive growth, and encourage Chinese companies to make more advanced goods.
"Individual countries face difficult choices in phasing out their stimulus policies; larger fluctuations may occur in the prices of major commodities and exchange rates among the major currencies; trade protectionism is clearly reasserting itself," he said.
But the policy wording still gives Beijing room to scale back stimulus; the central bank has twice ordered banks to keep a bigger portion of deposits on reserve this year to curb loan growth, without changing the monetary policy stance. Mr. Wen added: "We need to manage inflation expectations well and keep the overall level of prices stable."
Royal Bank of Canada economist Brian Jackson wrote in a note that Mr. Wen's comments "seem designed to give himself the rhetorical room to adjust policy as and when he sees fit. His speech seems consistent both with keeping policy unchanged for now but also with making some gradual adjustments in the months ahead."
China will aim for around 7.5 trillion yuan (around $1.1 trillion) worth of new local-currency loans this year, lower than the record 9.59 trillion yuan worth of new loans banks extended last year. It will also seek to slow growth in broad money supply, or M2, to around 17% this year from nearly 28% in 2009.
The consumer price index, the country's key inflation gauge, is targeted to rise around 3% this year, Mr. Wen said, after falling 0.7% last year
The government has grown concerned about potential risks to public finances from local governments, which aren't allowed to raise debt. Many, however, set up special investment vehicles that borrowed from banks, helping to drive the economy's recovery. But such forms of financing don't show up in the government's balance sheets and concerns have grown that such debt could turn bad, hurting banks and straining the central government's finances.
"We will strengthen the fiscal management system at and below the provincial level, set up a mechanism to ensure basic funding for county governments and carry forward reforms that place county finances directly under the management of provincial governments," said Mr. Wen.
The Ministry of Finance will issue 200 billion yuan worth of bonds on behalf of local governments, continuing a similar program as last year.
China's economic planning agency, the National Development and Reform Commission, said Friday it is aiming to expand fixed-asset investment this year by 20% while curbing excess and obsolete capacity in certain sectors, continuing Beijing's recent policy goals.
The growth target would represent a marked slowdown from nationwide FAI growth of 30.1% last year, which was boosted by the government's stimulus program.
Still, Mr. Wen said the government plans to run a fiscal deficit of 1.05 trillion yuan this year, or 2.8% of GDP. The budget suggests continued fiscal stimulus this year given earlier data showed the 2009 deficit at 2.2% of GDP, though the finance ministry said last year's deficit was higher, at 950 billion yuan, because of an accounting move.
"The fiscal deficit in 2010 still needs to be of an appropriate size. At the same time, in order to promote the sustainable development of public finances, actively prevent fiscal risk, and leave some leeway to gradually reduce the deficit in future years, we must keep the deficit under 3% of GDP," said the Ministry of Finance.
The central government plans to invest more to support the development of new technologies this year than last year, in line with its goal of restructuring the economy. But it is budgeting a slight slowdown in public spending on health care, social security and education this year, and keeping the share of social spending in its total spending broadly unchanged from last year.
Economists say China could encourage its people to spend more money by improving education, health care and social security.
Thursday, March 4, 2010
$238 billion loss for U.S. mail; Saturday delivery may end
The article is about the loss US postal service has made over the last year. In such circumstance should it compromise on it's service and take care of losses or should it shed 30000 jobs to cover up the losses.
In the current economic condition the decision of shedding 30000 people might not sound feasible but it is true that the loss has to be met by the government and eventually by the people. Hope the article is useful.
In the current economic condition the decision of shedding 30000 people might not sound feasible but it is true that the loss has to be met by the government and eventually by the people. Hope the article is useful.
The Oracle's Tips for the Rest of Us
Something relatable...Warren Buffet provides his advise to us on investment. Warren Buffet time again and again has made predictions, and critics are quick to judge. This time, Buffet's advice is proven right. Here are 7 tips to help us out with investing.
China Overtakes U.S. in Attracting Most Property Investment
This article further illustrates the transition of economic power away from the United States to China as they recently overtook the US for most property investments. Stringent bank lending and a slow recovery from the sub-prime mortgage crisis have caused confidence in the United States real estate market to fall heavily. Interestingly enough, eight of the world's 20 largest property markets last year were located in the Asian Pacific region and it appears that developing countries are the current hotspots for investment.
In the mean time though, it appears that real estate investments in the United States are still low however moving in the right direction as they are estimated to rise 50% this year on falling prices and an increase on distress sales.
1 in 5 Working-Age American Men Don't Have A Job
One in five working-age American men does not have a job, according to the latest federal employment numbers, an all-time high that illustrates the extraordinary toll this recession has taken on male-dominated professions in particular.
Men are more likely to work in sectors such as manufacturing and construction which have been terribly hit by the recession.
Only 80.3 percent of men age 25-54 had jobs in December -- the lowest since the Bureau of Labor Statistics started collecting that data in 1948 -- at which point the figure was 94.4 percent. When the recession began in December 2007, less than 13 percent of men in this age bracket were out of work.
Growth Slowed by Snow
According to the Federal Reserve's Beige Book, this year has seen a slight improvement on consumer spending. It found that the growth has been slower due to many snowstorms throughout the country. Labor markets are still weak but there has been a growth in the manufacturing sector as well as an increase in the demand for services.
Wednesday, March 3, 2010
Entrepreneurs Prefer to Keep Staffs Lean
This article is about a firm who originally cut 20% of their workers in 2008 due to the economic crisis. Though demand has picked up, Wendy Goldstein of the small company has said she has no plans to hire back to the same level. Companies such as hers had previously cut workers and are learning to do without all the help.
This trend is very common right now amongst smaller companies. They are becoming more efficient using the employees they have. Reasons for this is being weary about the future financial position, consumer spending, and pending government rulings. After "cutting the fat" from these smaller companies, employers have given current employees more job responsibilities and additional training.
Job Hunting Firms Struggle
We recently learned and talked about unemployment in class. One thing we never talked about is that there is a business behind employment and unemployment. There are firms whose purpose is to find jobs for their clients. The problem with these firms right now is that the job market is very complicated due to the recession so these job finder firms and their clients are going through a hard time.
Through our understanding of unemployment we can look at this situation as outsiders and see an investment opportunity. We know that sooner or later the unemployment rate will start moving towards its natural rate. This means that these job finder firms will have an increase in business activities in the near future. A well-timed investment in the job finder firms could be significantly profitable in the near future.
Through our understanding of unemployment we can look at this situation as outsiders and see an investment opportunity. We know that sooner or later the unemployment rate will start moving towards its natural rate. This means that these job finder firms will have an increase in business activities in the near future. A well-timed investment in the job finder firms could be significantly profitable in the near future.
Growth in U.S. Services Sector Tops Forecast
The article mainly talked about the fact that growth in the service sector accelerated in February to its fastest pace in recent two years. According to Institute of Supply Management, its index measuring service industry activity rose to 53 from 50.5 in the January. Since service sector accounts for nearly 80% of jobs in US, its growth will lead to growth of the whole economy. This news is also very encouraging given that retail and construction sectors were affected by the severe winter storms. Although the recovery is still disappointing at this point, the fast growth of service sector indicates that the economy is getting better at a faster pace. At the same time, the article pointed out that February is the 26th consecutive month of shrinking jobs. But this is maybe the point that the companies could begin to hire people again.
Jobs cuts slow
Here is a bit of good news:
In February, the pace of job cuts continued to slow, marking the fewest number of job losses since February 2008. The service sector had job growth for the third month in a row and the manufacturing sector added around 3,000 jobs. Employment still falls short in the goods-producing sector. Monthly job cuts have steadily been on the decline. Many economists agree that companies are now switching gears from downsizing to hiring more workers.
In February, the pace of job cuts continued to slow, marking the fewest number of job losses since February 2008. The service sector had job growth for the third month in a row and the manufacturing sector added around 3,000 jobs. Employment still falls short in the goods-producing sector. Monthly job cuts have steadily been on the decline. Many economists agree that companies are now switching gears from downsizing to hiring more workers.
Tuesday, March 2, 2010
Obama proposes rebates for energy-saving home improvements
President Obama said Tuesday that he plans on offering government rebates to home retrofitting, saying that this would create more jobs and save energy. Rebates as much as $3,000 could be offered to energy-saving home renovations. The idea is based off of last years “Cash for Clunkers” program. If the program passes it is said to cost around $6 billion and entice as many as 3 million homeowners.
Malaysia May Reduce Monetary Stimulus as Indonesia Holds Steady
As you may already know, Asian countries are leading the world economy out of the worst slowdown since World War II. With the economies strengthened, it is not surprising that policy makers in China, Australia, Vietnam and India have started to tighten monetary policy to combat inflationary pressure and reduce the risk of asset bubble. There are increasingly clear signs that the global economy is strongly recovering and heading towards prosperity.
Many economists surveyed by Bloomberg News expect that Malaysia will be the next Asian country to implement contractionary monetary policy as its recovery strengthens, either raising the interest rate or the reserve requirement. Meanwhile, with inflation still in check, perhaps Indonesia will simply keep the interest rate unchanged since it does not want to curb lending at this point.
Many economists surveyed by Bloomberg News expect that Malaysia will be the next Asian country to implement contractionary monetary policy as its recovery strengthens, either raising the interest rate or the reserve requirement. Meanwhile, with inflation still in check, perhaps Indonesia will simply keep the interest rate unchanged since it does not want to curb lending at this point.
$238 billion loss for U.S. mail; Saturday delivery may end
http://money.cnn.com/2010/03/02/news/economy/usps/index.htm
The cash-strapped U.S. Postal Service announced Tuesday that it will incur about $238 billion in losses in the next 10 years if Congress doesn't permit it to revamp its outdated business model.
The agency is proposing an adjusted mail service schedule, which will likely cut Saturday delivery, and eliminating its prepaid retiree health benefits.
Looks like U.S. Postal Service is having a hard time. Hopefully they can make the necessary changes and continue to provide universal service.
The cash-strapped U.S. Postal Service announced Tuesday that it will incur about $238 billion in losses in the next 10 years if Congress doesn't permit it to revamp its outdated business model.
The agency is proposing an adjusted mail service schedule, which will likely cut Saturday delivery, and eliminating its prepaid retiree health benefits.
Looks like U.S. Postal Service is having a hard time. Hopefully they can make the necessary changes and continue to provide universal service.
Less junk mail: Good for you, bad for economy
Less junk mail: Good for you, bad for economy
http://money.cnn.com/2009/08/13/news/economy/junk_mail/index.htm?postversion=2009081813
The volume of junk mail, or direct mail, is getting smaller. But this may not be a good sign. Less junk mails mean there are less companies wanting to sell you their services--which reflects the problem in our economy. The credit card industry and the mortgage industry both slowed down in mailing out direct mails. Others, like charities and politicians, have also decreased the volume of the direct mail since consumers no longer have the funds to make contributions.
The overall decline in direct mails also pained the US Postal Service, which is already in billions of dollars in debt.
One reason for the decline in the direct mails, besides the economy, may be the increase in the use of the internet.
Surely we are glad that we are receiving less junk mails, but if it is an indicator of the downturn economy, I don't think I'll be as happy.
http://money.cnn.com/2009/08/13/news/economy/junk_mail/index.htm?postversion=2009081813
The volume of junk mail, or direct mail, is getting smaller. But this may not be a good sign. Less junk mails mean there are less companies wanting to sell you their services--which reflects the problem in our economy. The credit card industry and the mortgage industry both slowed down in mailing out direct mails. Others, like charities and politicians, have also decreased the volume of the direct mail since consumers no longer have the funds to make contributions.
The overall decline in direct mails also pained the US Postal Service, which is already in billions of dollars in debt.
One reason for the decline in the direct mails, besides the economy, may be the increase in the use of the internet.
Surely we are glad that we are receiving less junk mails, but if it is an indicator of the downturn economy, I don't think I'll be as happy.
Toyota Problems Don't Lead to Big Auto Sales Lift for Rivals
For the past couple of weeks we continue to hear the mass recall of many of Toyota's models, which has led to a 9% drop in U.S. sales in February. However, many of Toyota's competitors didn't gain as much from Toyota's problems as expected. Nonetheless, Ford Motor recorded a 43% increase in U.S. sales in February, which is positive news for the domestic automaker. GM, on the other hand, continue to suffer from post-bankruptcy syndrome with sales only increasing 12%. Many of Toyota's competitors believe many traditional Toyota customers sat on the sidelines instead of switching over and buying one of their models.
Deal Near on Banking Rules Senators Outline Plan to Create New Consumer-Protection Unit Within the Fed
Deal Near on Banking Rules
Senators Outline Plan to Create New Consumer-Protection Unit Within the Fed
By DAMIAN PALETTA
WASHINGTON–Key senators were close to a deal on legislation to overhaul financial regulations, people familiar with the matter said, bringing the U.S. a step closer to sweeping changes to the way banks interact with consumers and the markets alike.
Top senators from each party were near a breakthrough agreement to create a new consumer-protection division within the Federal Reserve. This has been a contentious point due to heavy criticism of the Fed's past handling of its consumer-protection powers.
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Bloomberg News
Senator Christopher Dodd, a Democrat from Connecticut and chairman of the Senate Banking Committee listens to Ben S. Bernanke, chairman of the U.S. Federal Reserve, speak during his semiannual monetary report in Washington, D.C. on Thursday, Feb. 25, 2010.
winddown
winddown
Senators Christopher Dodd (D., Conn.) and Bob Corker (R. Tenn.) were conferring with other members of their parties last night in an effort to sell that agreement to them, Senate aides said.
The two senators have also reached a deal that would let the federal government break up large, failing financial companies.
That plan tackles one of the most politically thorny flashpoints of the economic crisis: What powers should the government have to break up firms so it doesn't have to resort to taxpayer-funded bailouts?
Agreements on these details are expected to shape a bill that Sen. Dodd, chairman of the Banking Committee, plans to introduce in the Senate. The House of Representatives passed a bill overhauling financial-market rules in December. Differences between the two packages would have to be reconciled before any final agreement could be signed into law by President Barack Obama.
It is unclear whether White House officials would accept the idea to create a new consumer-regulation unit within the Fed. "The president remains strongly committed to an independent agency whose singular focus is advocacy for consumers," an administration official said.
The deals are the closest the bitterly divided Senate has come to an agreement on new financial rules. Mr. Dodd will likely have to make a hard sell on any plan to give the Fed new powers to police the way mortgages and other products are offered to consumers. He has been one of the Fed's biggest critics and routinely blasted the central bank for failing to enforce the consumer-protection powers it already has.
"Senator Dodd is keeping members informed on how things are progressing as he has throughout this process," his spokeswoman said. "We do not have an agreement yet. He hopes to have a consensus bill in the coming days."
If lawmakers feel they have enough agreement, Mr. Dodd could introduce his bill later this week and potentially hold a vote in his committee later in the month. If other lawmakers balk at agreements between Messrs. Dodd and Corker, it could make it tougher for them to pass legislation this year.
Democrats and Republicans have remained bitterly divided over how best to rework consumer-protection rules.
President Obama has called for the creation of an independent Consumer Financial Protection Agency, which would write and enforce rules for any financial product, from mortgages to credit cards to payday loans.
Many Republicans criticized that idea, saying it would freeze up access to credit and create an unwieldy bureaucracy. Many Republicans said new consumer rules would be best placed within the regulator that oversees nationally chartered banks.
Mr. Dodd, in an effort to get a deal, last week suggested the creation of a new division within the Treasury Department, but Mr. Corker rejected that.
Instead, he proposed creating a new division within the Fed. The division would be led by a White House appointee, have the ability to write and enforce rules, and have a separate budget. It would also give the Fed a more direct mandate to focus on consumer-protection issues.
This could dramatically reshape the focus of the Federal Reserve. For years, it has primarily been focused on monetary policy over bank supervision and often made consumer protection an afterthought.
Republicans might be more supportive of the Fed option because they might see having Fed officials involved could lead to more bank-friendly policies than an independent regulator.
But it could also reignite an anti-Fed sentiment that has rocked the central bank in the past year, at one point threatening the reconfirmation of Fed Chairman Ben Bernanke.
While the consumer-protection piece has been the most divisive for Senate lawmakers, creating powers within the government to take over and break up failing firms is seen as a vital piece to White House and Treasury officials.
They have complained that the government was handcuffed during the 2008 bankruptcy of Lehman Brothers and the near-collapse of American International Group Inc. Existing law lets the Federal Deposit Insurance Corp. take over failing banks, but its powers don't extend to other types of financial companies.
Sen. Mark Warner (D., Va.) and Sen. Corker agreed to details of that arrangement on Feb. 23 after months of meetings, but details of the deal hadn't been announced.
The new arrangement, if adopted into law, would create a type of bankruptcy process for failing financial companies that aren't banks, such as bank-holding companies or bank subsidiaries that don't have insured deposits. Regulators would have the option to force any financial company into an FDIC-controlled dissolution if they believed market chaos required such an extreme step.
Under the proposal, this step could take place only after the agreement of the Federal Reserve's board, a council of regulators, and the Treasury secretary, in consultation with the president.
Messrs. Warner and Corker have said they wanted to create a process that was so painful for investors and management that no one would intentionally steer their company toward such a break-up and the government wouldn't be seen as a fail-safe for reckless behavior.
The new deal would wipe out shareholders and give the FDIC the power to remove management. Creditors would be guaranteed only the liquidation value of their claims in bankruptcy, though they could receive more under some circumstances.
Lawmakers debated for months how to pay for such a system. Treasury officials argued the government should be able to provide a bridge loan to unwind the company. Critics of that arrangement said it equated to a taxpayer-funded bailout.
Senators Outline Plan to Create New Consumer-Protection Unit Within the Fed
By DAMIAN PALETTA
WASHINGTON–Key senators were close to a deal on legislation to overhaul financial regulations, people familiar with the matter said, bringing the U.S. a step closer to sweeping changes to the way banks interact with consumers and the markets alike.
Top senators from each party were near a breakthrough agreement to create a new consumer-protection division within the Federal Reserve. This has been a contentious point due to heavy criticism of the Fed's past handling of its consumer-protection powers.
View Full Image
winddown
Bloomberg News
Senator Christopher Dodd, a Democrat from Connecticut and chairman of the Senate Banking Committee listens to Ben S. Bernanke, chairman of the U.S. Federal Reserve, speak during his semiannual monetary report in Washington, D.C. on Thursday, Feb. 25, 2010.
winddown
winddown
Senators Christopher Dodd (D., Conn.) and Bob Corker (R. Tenn.) were conferring with other members of their parties last night in an effort to sell that agreement to them, Senate aides said.
The two senators have also reached a deal that would let the federal government break up large, failing financial companies.
That plan tackles one of the most politically thorny flashpoints of the economic crisis: What powers should the government have to break up firms so it doesn't have to resort to taxpayer-funded bailouts?
Agreements on these details are expected to shape a bill that Sen. Dodd, chairman of the Banking Committee, plans to introduce in the Senate. The House of Representatives passed a bill overhauling financial-market rules in December. Differences between the two packages would have to be reconciled before any final agreement could be signed into law by President Barack Obama.
It is unclear whether White House officials would accept the idea to create a new consumer-regulation unit within the Fed. "The president remains strongly committed to an independent agency whose singular focus is advocacy for consumers," an administration official said.
The deals are the closest the bitterly divided Senate has come to an agreement on new financial rules. Mr. Dodd will likely have to make a hard sell on any plan to give the Fed new powers to police the way mortgages and other products are offered to consumers. He has been one of the Fed's biggest critics and routinely blasted the central bank for failing to enforce the consumer-protection powers it already has.
"Senator Dodd is keeping members informed on how things are progressing as he has throughout this process," his spokeswoman said. "We do not have an agreement yet. He hopes to have a consensus bill in the coming days."
If lawmakers feel they have enough agreement, Mr. Dodd could introduce his bill later this week and potentially hold a vote in his committee later in the month. If other lawmakers balk at agreements between Messrs. Dodd and Corker, it could make it tougher for them to pass legislation this year.
Democrats and Republicans have remained bitterly divided over how best to rework consumer-protection rules.
President Obama has called for the creation of an independent Consumer Financial Protection Agency, which would write and enforce rules for any financial product, from mortgages to credit cards to payday loans.
Many Republicans criticized that idea, saying it would freeze up access to credit and create an unwieldy bureaucracy. Many Republicans said new consumer rules would be best placed within the regulator that oversees nationally chartered banks.
Mr. Dodd, in an effort to get a deal, last week suggested the creation of a new division within the Treasury Department, but Mr. Corker rejected that.
Instead, he proposed creating a new division within the Fed. The division would be led by a White House appointee, have the ability to write and enforce rules, and have a separate budget. It would also give the Fed a more direct mandate to focus on consumer-protection issues.
This could dramatically reshape the focus of the Federal Reserve. For years, it has primarily been focused on monetary policy over bank supervision and often made consumer protection an afterthought.
Republicans might be more supportive of the Fed option because they might see having Fed officials involved could lead to more bank-friendly policies than an independent regulator.
But it could also reignite an anti-Fed sentiment that has rocked the central bank in the past year, at one point threatening the reconfirmation of Fed Chairman Ben Bernanke.
While the consumer-protection piece has been the most divisive for Senate lawmakers, creating powers within the government to take over and break up failing firms is seen as a vital piece to White House and Treasury officials.
They have complained that the government was handcuffed during the 2008 bankruptcy of Lehman Brothers and the near-collapse of American International Group Inc. Existing law lets the Federal Deposit Insurance Corp. take over failing banks, but its powers don't extend to other types of financial companies.
Sen. Mark Warner (D., Va.) and Sen. Corker agreed to details of that arrangement on Feb. 23 after months of meetings, but details of the deal hadn't been announced.
The new arrangement, if adopted into law, would create a type of bankruptcy process for failing financial companies that aren't banks, such as bank-holding companies or bank subsidiaries that don't have insured deposits. Regulators would have the option to force any financial company into an FDIC-controlled dissolution if they believed market chaos required such an extreme step.
Under the proposal, this step could take place only after the agreement of the Federal Reserve's board, a council of regulators, and the Treasury secretary, in consultation with the president.
Messrs. Warner and Corker have said they wanted to create a process that was so painful for investors and management that no one would intentionally steer their company toward such a break-up and the government wouldn't be seen as a fail-safe for reckless behavior.
The new deal would wipe out shareholders and give the FDIC the power to remove management. Creditors would be guaranteed only the liquidation value of their claims in bankruptcy, though they could receive more under some circumstances.
Lawmakers debated for months how to pay for such a system. Treasury officials argued the government should be able to provide a bridge loan to unwind the company. Critics of that arrangement said it equated to a taxpayer-funded bailout.
Still Burning?
Who doesn't love a little spice in their food? Who doesn't recognize Tabasco as an essential ingredient to any important meal? I certainly do and I couldn't be any happier that Tabasco might own 25-30% of the hot sauce market and this will certainly secure the future Tabasco especially when they produce 750,000 bottles a day! As well as selling 120 countries, no wonder they have been able to survive this long! I'm sure the flame for this company will last a long time.
Monday, March 1, 2010
Spending more, saving less. Uh-oh.
So people are spending more and saving less. But is this a bad thing? The increase in spending is a good indicator that consumer confidence is up. And the new rise in consumption could lead us into a self-sustaining recovery. Maybe not so bad after all.
~Cassie
~Cassie
Chilean Stocks Post World's Biggest Drop as Quake Closes Roads
In response to the devastating 8.8 magnitude earthquake that struck Chile over the weekend, Chile stocks fell the most in almost a month, the biggest drop among the world's 50 largest markets. Due to the severe damage to Chile's infrastructure, especially power lines, it has halted many of Chile's manufacturing sectors. For example mining operations of Copper (Chile is the world's largest producer) were completely halted. The total economic impact may be as much as $30 billion, or about 15% of the South American country's GDP. However, Chile's $11.3 billion saving funds should provide the nation with some stability as it attempts to rebuild and recover from this earthquake, which was the world's fifth strongest since 1900.
Sunday, February 28, 2010
Greece Bailout Plan Takes Shape
Germany and France plan to spend as much as 60 billion euros, equivalent to $41 billion, to bailout Greece. The deal should be finalized by Friday. Germany wants to ensure that Greece fully is able to handle their deficit before giving up any leverage. During this whole process, the United States continues to support the European Union.
Jobless claims up 12% in past 2 weeks
The number of unemployed Americans climbed more than 12% over the last two weeks. This may be contributed to the adverse weather conditions in the eastern part of the country. On Wednesday the Senate passed a 15 billion bill to spur job creation, and give businesses tax breaks fro hiring unemployed, but it does not extend unemployment benefits. If the application deadline is not extended more than 1 million people will run out of unemployment benefits by February 28th. Richard dye believes that with the improvement of weather in March, however, the rate of joblessness will improve (decrease).
Discouraged College Graduates Dropping Out of Workforce 'In Droves,' Says Study
This article says that young people looking for jobs face about 19 percent unemployment. College graduates are facing a time where there is just no room for them in the job market. College graduates are faced with doing odd jobs and babysitting to keep up with bills. This is causing great discouragement among these young workers: "Since the recession began 25 months ago, EPI says 1.3 million young workers have dropped out of the job hunt." This will cause problems in these individuals wages and occupational paths.
Jobless benefits start ending on Sunday
by Tami Luhby
The senate failed to push back the Feb. 28 deadline for application for unemployment benefits, so more than one million people will be without benefits and many more will be affected. The senate chose not to push back the deadline because they do not have the money to do so, and would just be building more debt. This is a big deal because nearly 11.5 million people are currently depend on jobless benefits. All of this is due to Congress' inefficiency and a gridlock between the two parties, while millions of people are out there waiting for a bill to be passed.
The senate failed to push back the Feb. 28 deadline for application for unemployment benefits, so more than one million people will be without benefits and many more will be affected. The senate chose not to push back the deadline because they do not have the money to do so, and would just be building more debt. This is a big deal because nearly 11.5 million people are currently depend on jobless benefits. All of this is due to Congress' inefficiency and a gridlock between the two parties, while millions of people are out there waiting for a bill to be passed.
Europe Union Moves Toward a Bailout of Greece
The European Union is moving toward the first bailout in the history of its common currency. It is expected to involve loan guarantees from the German and French governments to encourage their banks to buy Greek debt. With no structure in place for dealing with a threatened default within the 16-nation euro zone, officials are making up the rules as they go along. This would be the worst crisis that involves the Euro which was established a decade ago. Since Germany knows that they will be covering most of the costs, they are reluctant to go along with the bailout plan. The Greeks have agreed to freeze wages, cut bonus, crackdown on tax evasion and raise the official retirement age.
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