With a new administration in Washington, the time is ripe to reconsider some fundamental features of our housing finance system. In recent articles, I focused on three weaknesses of the system, and on how to fix them. The rigidity of the mortgage payment obligation makes the standard mortgage very difficult to manage. The proposed remedy is to replace the minimum payment obligation with a maximum loan balance that declines over time. This would result in faster payoffs and fewer defaults. The second weakness of the standard mortgage is that house purchasers incur a risk of equity decline from sources outside of their control. The proposed remedy is to adjust the loan balance for changes in a broad house price index, but with upward balance adjustments limited to prior declines. This would prevent episodes where large numbers of homes fell underwater. The third weakness is lack of an effective private secondary market. The proposed remedy is to create a new industry of private mortgage banks similar to those in Denmark, while retaining Fannie Mae and Freddie Mac until that new industry matures. This would prevent the drastic decline in activity that would follow a rapid phase-out of the agencies. The fourth weakness, discussed below, is a dysfunctional market structure in which borrowers often overpay, and may not get the type of mortgage that best meets their needs. The sources of dysfunction include the following: Mortgages Are Complicated: Loan officers understand them because that is their day-to-day business, but most borrowers see them only a few times during their lives. Borrowers May Have to Commit Before All the Information That Affects the Price Has Been Verified. Lenders can then use changes in price determinants as a screen that allows them to extract a higher price from the borrower. The most common abuse of this type involves property value, which usually requires an appraisal that takes days or weeks to complete. Borrowers Cannot Depend on Mortgage Price Quotes: Lenders reset their prices every day, and sometimes more frequently. Until the price is locked, the prices quoted to a borrower are supposed to be those the lender would charge if the borrower had been cleared to lock, called the "posted price", but whether it is or not the borrower never knows. Low-balling, the practice of quoting a price well below the posted price, pervades the home mortgage market because lenders being compared to other lenders usually have no other way to distinguish themselves. Low-ballers have many ways to explain the higher price borrowers inevitably face after they are committed. Borrowers Are Subject to Lock Abuse: Lock abuse is a lock price that is above the lender's posted price at that time. Probably the most pervasive lock abuse is ignoring a market price decrease that occurs between the last time a price was quoted to the borrower and the time the price is locked. In that case, borrowers receive the price of the earlier quote, which in most cases is the price they expected, rather than the lower posted price, which is the price they deserve. Note that the mandatory disclosures now administered by the Consumer Financial Protection Bureau prevent none of these abuses. The remedy for market dysfunction is the independent multi-lender web site that allows users to compare posted prices of multiple lenders, uniformly formatted, at one site. While there are no legal barriers to the creation of such facilities now, it is extremely difficult for such a site to distinguish itself from fake versions, and to counter the high-powered merchandising of lenders with name recognition. The need is for certification by a known trustworthy source that a site has the features necessary to provide borrowers with competitive prices and selection guidance. The features required for certification would include the following: Prices Posted Directly to Site: Three or more lenders provide posted prices to the site directly from each lender's internal pricing system, without the intermediation of loan officers. Complete Prices: Prices should cover all lender charges and all price-related features of adjustable rate mortgages. Live Prices: Whenever a participating lender posts new prices on its own site or for its loan officers, prices on the multi-lender site change as well. Fully-Adjusted Prices: The site should have the capacity to adjust prices from each lender for all the transaction characteristics that affect price, employing the adjustment rules specific to the lender. Anonymity: Borrowers should be able to shop prices on the site without revealing contact information to lenders until a lender has been selected. In ot her words, lender contact is initiated only by borrowers. Price Monitoring: Borrowers are able to monitor the posted prices of the lender they select until their price is locked. Lender Selection: Borrowers select the lender, not the site. Product Decision Support: Borrowers have access to guidance in making decisions about the type of mortgage, and the combination of upfront fees and interest rate that best meets their needs. The list is designed to be illustrative. It would have to be fleshed out by the certifying agency, which might be HUD or CFPB. The burden on the agency that does it would be very small, however, while the potential benefits are enormous. For more information on mortgages, or to shop for a mortgage in an unbiased environment, visit my website The Mortgage Professor -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.
Еженедельный анонс главных экономических событий от Insider.proКлючевым отчетом недели будeт предварительная оценка ВВП США в III квартале. Среди других важных отчетов – продажи нового жилья и на вторичном рынке недвижимости.Понедельник, 23 января07:30 Индекс промышленной активности Японии за ноябрь.14:30 Выступление президента ЕЦБ Марио Драги.Вторник, 24 января11:30 Индекс деловой активности Германии за январь.17:00 Статистика о продажах на вторичном рынке недвижимости, подготовленная Национальной ассоциацией риелторов (НАР). В декабре прогнозируется падение продаж с учетом сезонных факторов до 5,54 млн с 5,61 млн месяцем ранее. Ключевым пунктом отчета станет изменение числа домов, выставленных на продажу по сравнению с аналогичным периодом прошлого года. Экономист Том Лоулер в декабре прогнозирует продажи в 5,55 млн с учетом сезонных факторов.18:00 Индекс производственной активности ФРБ Ричмонда за январь.18:00 Безработица и занятость по регионам и штатам за декабрь от Бюро трудовой статистики.Среда, 25 января12:00 Индекс делового климата IFO Германии за январь. Прогнозируется рост с 111,0 до 111,2.15:00 Индекс заявок на покупку домов по ипотеке от Ассоциации ипотечных банкиров (MBA).16:00 Объем розничный продаж в России за декабрь.17:00 Индекс цен на жилье FHFA за ноябрь. Ранее этот индекс строился на основе данных госкорпораций Fannie Mae и Freddie Mac о секьюритизации ипотеки при повторных продажах частных домов. Сейчас также доступен расширенный индекс.19:00 Выступление главы Банка Англии Карни.Четверг, 26 января12:30 Предварительная оценка ВВП Великобритании в IV квартале. Прогнозируется замедление темпов роста с 2,2% до 2,1% в годовом выражении.16:30 Число первичных заявок на пособие по безработице в США. Согласованный прогноз — увеличение показателя до 247 тыс. с 234 тыс. неделей ранее.16:30 Индекс национальной активности ФРБ Чикаго за декабрь. Значение индекса является взвешенным средним 85 различных индикаторов экономической активности в США.17:00 Продажи нового жилья в США в декабре. На графике представлены продажи нового жилья с 1963 года. Согласованный прогноз: сокращение показателя с 592 до 590 тыс. с учетом сезонных факторов. 19:00 Индекс производственной активности ФРБ Канзаса за январь.Пятница, 28 январяВ течение дня: Рынки в Китае закрыты из-за празднования Нового года по Лунному календарю.02:30 Индекс потребительских цен Японии за декабрь. Прогнозируется снижение на 0,3% в годовом исчислении.10:45 Предварительная оценка ВВП Франции в IV квартале.16:30 Предварительная оценка ВВП США в IV квартале. Согласованный прогноз: увеличение реального ВВП на 2,2% в годовом выражении по сравнению с 3,5% в предыдущем периоде.16:30 Заказы на товары длительного пользования за декабрь от Бюро переписи населения. Прогнозируется рост показателя на 3,0%.18:00 Индекс настроений потребителей Мичиганского университета (окончательное значение за январь). Согласованный прогноз: индекс вырастет до 98,2 (предварительная оценка — 98,1 пункта).
In a move that has sparked controversy among some economists, within an hour of being sworn in, Trump undid one of Barack Obama’s last-minute actions, a mortgage-fee cut under a government program catering to first-time home buyers and low-income borrowers. The cut, which would become effective on January 27, would have reduced the annual premium for someone borrowing $200,000 by $500 in the first year, however exposing taxpayers to further losses in case of a spike in defaults. Last week, as part of a scramble of 11th hour actions by the outgoing president, Obama’s Housing and Urban Development secretary, Julian Castro, said the FHA would cut its fees. In addition to the morgage-fee cut, in the last days of Obama's administration, the White House announced new Russia sanctions, a ban on drilling in parts of the Arctic and many other regulations. The administration didn’t consult Trump’s team before any of these announcements. While nominal, Republicans have argued that fee reductions put taxpayers at risk by lowering the funds the FHA has to deal with mortgage defaults even though the net impact of such a fee cut is negligible in the grand scheme of things, once the next housing downturn arrives and the FHA is in need of another bailout. As a result, in addition to his first executive order on Friday night to "ease the burden of Obamacare', the new administration on Friday said it’s canceling this last minute reduction in the Federal Housing Administration’s annual fee for most borrowers, which had not been implemented yet. A letter Friday from HUD to lenders and others in the real-estate industry said, “more analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts.” The reversal was to be expected: at his confirmation hearing last week, Ben Carson, Trump’s nominee to lead HUD, FHA’s parent agency, said was disappointed the cut was announced in Obama’s final days in office. On January 9, House Financial Services Committee Chairman Jeb Hensarling stated Obama ‘Parting Gift’ Puts Taxpayers at Risk of Another FHA Bailout. On the other hand, democrats were quick to use the reversal for political purposes. Chuck Schumer took to the chamber’s floor to denounce the reversal. “It took only an hour after his positive words on the inaugural platform for his actions to ring hollow,” Schumer said. “One hour after talking about helping working people and ending the cabal in Washington that hurts people, he signs a regulation that makes it more expensive for new homeowners to buy mortgages.” Others, such as Mark Calabria, director of financial regulation studies for the libertarian Cato Institute, disagreed: he said it was appropriate for the administration to examine last-minute decisions by its predecessor, “especially when those decisions appear to be purely motivated by politics." Some more background on the now defunct proposal: The FHA sells insurance to protect against defaults and doesn’t issue mortgages. It is a popular program among first-time home buyers because it allows borrowers to make a down payment of as low as 3.5 percent with a credit score of 580, on a scale of 300 to 850. The Obama administration announced last week it would cut the insurance premium by a quarter of a percentage point to 0.60 percent, effective on Jan. 27. Some housing industry groups lauded the change, saying it could increase home buying by offsetting recent rises in mortgage rates. Supporters of the reduction were disappointed that the Trump administration reversed course. Trump's reversal of the late quasi-subsidy by Obama was quickly spun as meant to hurt smaler homebuyers. “This action is completely out of alignment with President Trump’s words about having the government work for the people,” said John Taylor, president of the National Community Reinvestment Coalition, through a spokesman. “Exactly how does raising the cost of buying a home help average people?” Sarah Edelman, director of housing policy for the left-leaning Center for American Progress, in an e-mail wrote, “On Day 1, the president has turned his back on middle-class families -- this decision effectively takes $500 out of the pocketbooks of families that were planning to buy a home in 2017. This is not the way to build a strong economy.” Not really: the decision has zero impact on any homebuyers as the fee cut had not even been implemented before its was overturned, although we would be very concerned about the state of the US housing market if $500/year is all it takes to swing one's decision in favor of buying a house, and as such would be even more concerned about the pain awaiting the FHA, which was already bailed out once after the last financial crisis. As a reminder, following the housing crash, the FHA came under severe stress and in 2013 it received $1.7 billion from the U.S. Treasury, its first bailout in 79 years, due to a wave of defaults. To replenish the FHA’s coffers, the Obama administration several times increased the fees the agency charges. The law requires the FHA’s capital reserve ratio to stay above 2 percent, and the agency hit that level in 2015 for the first time since the bailout. To be sure, during the next crisis the net impact of the $500 fee on the FHA's capitalization levels would likely be nil, as the FHA would require far greater funding; however the Trump decision does point to a potential conflict of interest between public and private interests. Immediate beneficiaries from Trump's decision were private mortgage insurers: shares of MGIC Investment and Radian Group erased earlier losses on Friday, trading up about one percent as of mid-afternoon. They closed little changed from the day before. Private insurers, which back loans guaranteed by mortgage-finance companies Fannie Mae and Freddie Mac, compete with the FHA for market share and have been critics of fee cuts in the past. “It is important to ensure that the FHA fund remains strong to support homeownership in the future while minimizing taxpayer risk,” Teresa Bryce Bazemore, president of Radian Group, said in a statement. It was not immediately clear if Radian has any corporate relations to members of the Trump administration. Some observers, such as Mish Shedlock have called for altogether shutting down the FHA due to various absurdities in the risky system: FHA loans are known as being one the easiest programs to qualify for. Applicants only need a credit score of 580, and downpayments can be as low as 3.5%. FHA loans have some of the lowest mortgage rates available. Rates on FHA loans are consistently lower than similar conventional loans. This makes FHA one of the best loan programs available. FHA loans are also the most likely of any major loan to get approved. As Shedlock adds, "given the FHA approves loans at lower credit scores and lower down payments than the private market, FHA loans ought to reflect that risk and have a higher interest rates than the private market. Taxpayers bear this risk." In other words, another government subsidy. We agree with his conclusion: 'Government ought not be involved in housing at all. The FHA is best shut down."
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After yesterday's speech by Janet Yellen which signaled a path of steady interest rate increases and was perceived as hawkish, the dollar rebounded, Asian shares slipped and government bond yields jumped to multi-week highs on Thursday. European, Asian stocks and US equity futures all decline together with commodity metals while oil rises on the API reported drop in crude inventories. The euro rebounded as investors look to Mario Draghi to address quickening inflation that make his stimulative policies look increasingly out of sync, even if the market is confident the ECB won't make any changes to its policy today. That said the ECB may struggle to downplay the recent spike in Eurozone inflation. Top news stories include Netflix reporting its biggest quarter ever, Credit Suisse resolving U.S. mortgage probe, France’s Safran buying Zodiac in $10 billion aviation deal. In markets, the main focus for the past 24 hours has been once again on the fairly large moves across rates and FX, albeit moves which largely ended up being a reversal of the previous day’s price action. 10y Treasury yields closed a shade over 10bps higher yesterday at 2.430% while the USD index rebounded +0.60% and finished higher for the first time in over a week. Those moves were given a late boost by comments from Fed Chair Yellen who said that “it is fair to say the economy is near maximum employment and inflation is moving toward our goal”. She also said that while “it makes sense to gradually reduce the level of monetary policy support” the actual timing of the next Fed rate hike “will depend on how the economy actually evolves over coming months”. So a fairly straight bat approach. As a result, the dollar gained almost one percent from Thursday's lows against a basket of currencies, yields climbed in Europe, catching up with Treasuries which sold off yesterday after Fed chair Janet Yellen said the American economy is strong enough to warrant higher interest rates, bringing the ECB’s quantitative easing into sharper relief as policymakers led by Draghi meet today. Stocks fell, led lower by real estate after an indicator of U.K. house prices fell for the first time in five months in December as values slumped in London. Yellen's hawkishness appeared to be wearing off on Thursday, though, as investors, looking for further details on Trump's plans to boost growth, remained cautious before the President-elect's inauguration on Friday. As a reminder, Yellen will speak again later on Thursday, after European markets close, about the economic outlook and monetary policy. The ECB is set to meet as the euro recovered some of the ground it lost overnight, but with no policy changes expected. However, hints of disagreements among the region's monetary guardians could ruffle markets. European stocks opened a tad higher with some big moves in single stocks, as Zodiac Aerospace surged following a takeover offer, and Moneysupermarket.com jumped after it reported strong results. Asian shares edged down 0.2 percent, knocked back by the dollar. Bucking the trend of weaker Asian shares, Japan's Nikkei stock index ended up 0.9 percent, helped by weaker yen. "Of all the speakers we're getting, either from Davos or from less ostentatious spots, the one I'm going to listen to most for now will probably still be Janet Yellen," Societe Generale's currency strategist Kit Juckes said cited by Reuters. "As the U.S. economy approaches full employment, as wages rise but inflation rises nearly as quickly, how hawkish the Fed dares to be will determine how much the dollar rises." Euro zone government bonds were still moving in the slipstream of Yellen's speech with benchmark German bond yields spiking to one-month highs after U.S. equivalents rose to their highest since Jan. 9. Yields on 10-year German bunds jumped 3 basis points to 0.38 percent by 9:40 a.m. in London. Treasury yields were steady at 2.43 percent. As Reuters adds, and as we previewed overnight, earlier in Asia, short-term funding costs in China shot to their highest in nearly 10 years on fears that liquidity was tightening heading into the Lunar New Year holidays at the end of this month. "The market is typically short of liquidity ahead of the Lunar New Year," said Gu Weiyong, chief investment officer at bond-focused hedge fund Ucom Investment Co, adding that a cash injection by the central bank was insufficient. Crude oil prices regained some ground lost in the previous session when the dollar strengthened as investors turned their attention to upcoming government data on U.S. inventories. A stronger dollar makes dollar-denominated commodities more expensive for those holding other currencies. U.S. crude added 0.8 percent to $51.50 per barrel, after shedding 2.67% on Wednesday. Brent crude rose 0.7 percent to $54.32 after slipping 2.79%. Market Snapshot S&P 500 futures down 0.2% to 2263 Stoxx 600 down 0.3% to 362 FTSE 100 down 0.6% to 7206 DAX down 0.1% to 11585 German 10Yr yield up 2bps to 0.38% Italian 10Yr yield up 3bps to 1.99% Spanish 10Yr yield up 3bps to 1.48% S&P GSCI Index up 0.2% to 395.9 MSCI Asia Pacific down 0.2% to 140 Nikkei 225 up 0.9% to 19072 Hang Seng down 0.2% to 23050 Shanghai Composite down 0.4% to 3101 S&P/ASX 200 up 0.2% to 5692 US 10-yr yield down less than 1bp to 2.42% Dollar Index up 0.18% to 101.11 WTI Crude futures up 0.6% to $51.40 Brent Futures up 0.7% to $54.28 Gold spot down less than 0.1% to $1,204 Silver spot down 0.5% to $16.98 Top Global News Netflix Soars, Esquire Goes Dark as More TV Viewers Move Online: Online video leader beats projections in U.S., foreign markets Credit Suisse Resolves U.S. Mortgage Probe for $5.3 Billion: Bank to pay $2.5 billion fine, $2.8 billion in consumer relief Safran to Buy Zodiac for $10 Billion in All-French Aviation Deal: Struggling seat supplier accepts bid from aero-engine maker Goldman Says Aluminum Poised for Big Gains If China Widens Cuts: China seen widening capacity cuts to aluminum from steel, coal Kremlin Said to Fear Trump Won’t Be a Great Deal After All: Top officials fret furor in U.S. over hacking could hurt thaw Russia Weighs FX Purchases as Strong Ruble Hits Exporters: Russia considers how to cut volatility of real exchange rate Vegemite Heads Back to Australia in $345 Million Bega Deal: Bega Cheese to acquire global trademark rights for Vegemite CSX Jumps on Report Hilal, CP Rail’s Harrison Targeting Company: WSJ reports, citing unidentified people familiar Oclaro Jumps 5.5% After 2Q Preliminary Revenue Tops Estimate Plexus Drops 2.6% Post-Mkt; Sees 2Q Revenue Below Estimates Canadian Pacific Railway 4Q Adj. EPS Misses Est. Looking at regional markets, Asia stocks traded mixed following a similar lacklustre lead from Wall St, although exporters in Japan have been buoyed by a weaker JPY. This saw the Nikkei 225 (+0.9%) outperform with the power sector underpinned by TEPCO plans to resume bond issuances for the 1st time since the 2011 Fukushima disaster, while there were also reports that the nuclear regulator passed safety screenings for 2 Kyushu reactors. Elsewhere, ASX 200 (+0.2%) was marginally positive with healthcare outperforming after CSL upgraded its FY net guidance, while Hang Seng (-0.5%) and Shanghai Comp. (-0.4%) had been dampened following a reduced liquidity operation by the PBoC. Finally, 10yr JGBs saw spill-over selling to track T-notes lower amid heightened risk appetite for Japanese stocks, while a discouraging 5yr auction also pressured in which b/c fell from prior and lowest accepted price missed the consensus. Top Asia News Takata Bidders Said to Favor Japan Bankruptcy; Shares Tumble: Takata says no decision has been made on turnaround plan Asia’s Worst EM Currency Seen Most Resilient in 2017 Survey: Philippine peso is forecast to be the most resilient to external risks this year Toshiba Drops 16 Percent on Reported Writedown Losses: the writedown may exceed 700 billion yen, Kyodo reports Indonesia, Malaysia Hold Rates as Fed Fuels Currency Weakness: Most economists predicted decision by the two central banks China Signals It May Aim Lower on Cleaner-Burning Fuel Target: Natural gas share in total energy mix will be 8.3% to 10% European equities (Euro Stoxx 50: -0.2%) trade modestly in the red after a choppy start to the session. Earnings are beginning to come into focus, with Royal Mail (-5.2%) the notable laggard in the FTSE 100, with the Co.'s shares at 11 month lows. Similarly, Carrefour (1.3%) are among the worst performers in the CAC in the wake of their pre market earnings. Elsewhere, on a sector specific basis, commodities dictate play with materials seeing upside this morning, while energy names weigh on European indices. Fixed income markets have seen pressure throughout the morning, with Bunds back below the 163 level in tandem with some of the softness seen in T-Notes in the wake of comments from Fed's Yellen yesterday, who suggested she sees a few hikes a year as the economy continues to recover. Elsewhere, ahead of today's ECB rate decision and press conference, source reports have emerged that the ECB lacks a deal on how to buy bonds below deposit rate but will do so despite the lack of a deal. Top European News ECB Said to Lack Agreement on How to Buy Debt Below Deposit Rate: Hold-up linked to complexity of $2.4 trillion QE program Goldman May Cut London Staff by 50% on Brexit, Handelsblatt Says: Firm says no decision has been made, doesn’t recognize figures U.K. House Price Gauge Declines for First Time in Five Months: Home prices in London decrease for 10th consecutive month May Says U.K. Must Accept the Road Ahead Will Be Uncertain In currencies, much of the FX price action from Fed chair Yellen's comments late yesterday played out through NY and Asia, while London tried to push USD/JPY towards 115.00, though sellers here have contained the move for now. The limited pullback shows intent on retesting these levels and higher, with higher UST yields recovering well as 'skew' moves to the right of the 2-3 rate hike expectation range for this year. Headwinds for EUR/USD though as the market remains wary of any taper talk at today's ECB meeting. Sellers above 1.0700 will be a little unnerved by the lack of follow through on the downside, as we held off 1.0600 before the latest modest recovery, but this may all change past the press conference later today. The post Brexit speech analysis continues to pull Cable either side of 1.2300 in the meantime, but widespread reports of investment banks transferring some of their operations over to the continent have added some weight, helping to contain the short squeeze in the low 1.2400's. EUR/GBP is now also in consolidation mode, trading the .8600-.8700 range over the last 24 hours. In commodities, oil prices have have staged a modest rebound with no major catalyst seen other than longs perhaps unnerved by the US inauguration ahead. The API report suggested an inventory drawdown, but to little effect, offset by a surge in gasoline stocks, as such WTI maintains a USD51.00 handle. Gold has taken a hit after the USD rallied on Fed Chair Yellen's comments late yesterday alluding to a steeper rate path as she highlighted the dangers of allowing the economy to overheat. Silver is down 1.5% this morning. This does not seem to have done the rest of the commodity complex much harm (the USD rise), with copper more or less flat on the day. Looking at the day ahead, this morning in Europe there’s little in the way of data which instead clears the path to the aforementioned ECB policy meeting outcome at 7.45am ETwith Draghi due at 8.30am ET. Over in the US the data consists of December housing starts and building permits numbers, initial jobless claims and the Philly Fed business outlook. In addition to the data, the corporate reporting calendar today consists of American Express, IBM and Schlumberger, all after the close. Away from that, keep one eye on the apparent press briefing from Trump’s team at 2.15pm GMT. Finally after the US close Fed Chair Yellen will speak again, this time on Thursday evening (8pm) when she speaks to the Stanford Institute for Economic Policy Research. Any reaction to that will come during the Asia session. US Event Calendar 8:30am: Housing starts, Dec., est. 1.188m (prior 1.090m) 8:30am: Building permits, Dec., est. 1.225m (prior 1.201m) 8:30am: Initial jobless claims, Jan. 14, est. 252k (prior 247k) Continuing claims, est. 2.075m (prior 2.087m) 8:30am: Philadelphia Fed Business Outlook, Jan., est. 15.3 (prior 21.5) 9:45am: Bloomberg Consumer Comfort, Jan. 15 (prior 45.1) 10am: Freddie Mac mortgage rates 10:30am: EIA natural-gas storage change 11am: DOE Energy Inventories 8pm: Fed’s Yellen Speaks at Stanford US Government events President-elect Donald Trump inaugural festivities begin 9:30am: Senate Energy and Natural Resources Cmte hearing on nomination of Rick Perry for Energy secretary 10am: Senate Finance Cmte hearing on nomination of Steven Mnuchin for Treasury secretary 1pm: Sen. Patty Murray, top Democrat on Senate Health Cmte, joins Democratic Sens. Debbie Stabenow of Mich. and Elizabeth Warren of Mass. to discuss “who would be hurt” by Obamacare repeal DB's Jim Reid concludes the overnight wrap Today is ECB day and with that it means another Draghi press conference at 1.30pm GMT. Given the big tapering story at the last meeting in December, it’s hard to see this one as being quite as exciting. In terms of the message, our economists are expecting patience to be the key theme today. They don’t think that the ECB will feel challenged by recent strong data but if the current data trends continue, the outright taper decision could accelerate to June rather than September – although the latter remains their baseline for now. The key on this front is whether inflation, especially core, is becoming more likely to exceed ECB forecasts. Yesterday we got confirmation that headline inflation rose to +1.1% yoy in December and +0.9% yoy at the core. Headline CPI could rise to +1.6% yoy and +1.8% yoy in January and February, respectively, according to our colleagues, although the earliest that the core will satisfy the minimum conditions for tightening is likely mid-year. That said the ECB won’t be afraid to change plans if necessary but today seems far too early but we’ll see what Draghi has to say later. Interestingly, Draghi’s press conference coincides with another press briefing from the Trump camp at 2.15pm GMT. That said it appears that it won’t actually feature the President-elect himself and will instead be left to his team to brief the media so it remains to be seen how market moving this will actually be. At this stage there are no details about what is to be discussed but it’s possible that some questions are directed at the recent confusion over both the border tax and about the incoming administrations' views on the dollar. Yesterday’s comments out of the Davos shindig and in particular from commerce secretary nominee, Wilbur Ross, may have also added some spice to proceedings. Ross directed some tough talking at China, saying that the nation is the “the most protectionist country” amongst the large nations. He also said that “they talk much more about free trade than they actually practice” and “we would like to levelize that playing field and bring the realities a bit closer to the rhetoric”. Away from China Ross also said that the NAFTA discussion will happen very soon after Friday’s inauguration while also pitching that his “number one objective will be expanding our exports”. So it’ll be interesting to see if any of this gets brought up too. Over in markets the main focus for the past 24 hours has been once again on the fairly large moves across rates and FX, albeit moves which largely ended up being a reversal of the previous day’s price action. 10y Treasury yields closed a shade over 10bps higher yesterday at 2.430% while the USD index rebounded +0.60% and finished higher for the first time in over a week. Those moves were given a late boost by comments from Fed Chair Yellen who said that “it is fair to say the economy is near maximum employment and inflation is moving toward our goal”. She also said that while “it makes sense to gradually reduce the level of monetary policy support” the actual timing of the next Fed rate hike “will depend on how the economy actually evolves over coming months”. So a fairly straight bat approach. Meanwhile equity markets continue to trudge along in a fairly directionless pattern. The S&P 500 finished +0.18% with gains for financials offset by losses for telecoms and energy stocks. The latter were under pressure after WTI Oil tumbled -2.67% and back to $51/bbl after the IEA Chief warned that OPEC reigning in supply will likely result in a “significant” boost to US shale output. With regards to the gains for financials it was interesting to see that both Goldman Sachs (-0.62%) and Citigroup (-1.70%) closed in the red despite both banks adding to what has been a decent reporting season for US banks. Both reported beats at the profit line with the theme of stronger than expected FICC revenues once again playing out. Over in Europe the Stoxx 600 also closed +0.18% while there was a similar weak theme in rates where 10y Bund yields crept up 3.3bps to close at 0.351%. Staying in Europe, another comment which caught our eye yesterday was that from JP Morgan CEO, Jamie Dimon. Commenting about the impact of Brexit and the potential for further nationalist politicians to come to power, Dimon said that the “eurozone may not survive” in an interview with Bloomberg TV. Quite fascinating for such a high profile banker to doubt it publically. This morning in Asia we’ve seen the US Dollar continue to press on (+0.30%) which is putting some pressure on currencies in the region. Away from that equity bourses have been mixed once again, albeit on limited newsflow. The Nikkei is currently +0.81% with the Yen retreating a touch, while the Hang Seng (-0.59%) has weakened. Bourses in China, Korea and Australia are flat as we type. Moving on. Yesterday’s economic data didn’t sway too much from market expectations. In terms of the US December inflation report, headline CPI was reported as rising +0.3% mom which matched the consensus estimate and helped push the YoY rate up to +2.1% from +1.7%. The core rose +0.2%, also as expected, and helped nudge the YoY rate back up one-tenth to +2.2%. Away from that, industrial production was confirmed as rising +0.8% mom in December following a downwardly revised -0.7% mom in November. Finally the NAHB housing market index was a little softer than consensus, falling 2pts to 67. In the UK the ILO unemployment rate was unchanged at 4.8% in the three months to November, which matched expectations. Before we look at today’s calendar, yesterday we got confirmation that the UK Supreme Court appeal decision about whether or not the UK Government has the authority to trigger Article 50 without parliamentary appeal, will be made next Tuesday (on January 24). One to mark in the diary for next week. Looking at the day ahead, this morning in Europe there’s little in the way of data which instead clears the path to the aforementioned ECB policy meeting outcome at 12.45pm GMTwith Draghi due at 1.30pm GMT. Over in the US the data consists of December housing starts and building permits numbers, initial jobless claims and the Philly Fed business outlook. In addition to the data, the corporate reporting calendar today consists of American Express, IBM and Schlumberger, all after the close. Away from that, keep one eye on the apparent press briefing from Trump’s team at 2.15pm GMT. Finally after the US close Fed Chair Yellen will speak again, this time early on Friday morning (1am GMT) when she speaks to the Stanford Institute for Economic Policy Research. Any reaction to that will come during the Asia session so we’ll have a review on Friday morning.
Steven Mnuchin, who will appear before the Senate Finance Committee Thursday morning, is on the verge of becoming one of the most influential economic policymakers in the world. The Goldman Sachs alumnus, former bank executive and hedge fund founder has a long career in finance but no track record at high levels of government. The hearing will be Mnuchin's first public opportunity to outline his views on the vast responsibilities of Treasury. It will also provide an update on the emerging economic agenda of President-elect Donald Trump."We will work diligently to limit regulations, lower taxes on hardworking Americans and small businesses, and get the engine of economic growth firing on all cylinders once again," Mnuchin said in prepared testimony.Here are the issues expected to come up during his confirmation.His resumé and investmentsSenate Democrats are scrutinizing Mnuchin’s banking career and personal investments. Front and center at his hearing will be his tenure at OneWest, a bank that he and other investors built during the housing crisis from the remains of failed mortgage lender IndyMac. Controversy over OneWest's foreclosure practices has dogged Mnuchin since the IndyMac takeover, and he will devote a big piece of his testimony to defending the bank's record."If we had not bought IndyMac, the bank would likely have been broken up and sold in pieces to private investors, where the outcome for consumers could have been much bleaker," he said in his written remarks. Mnuchin has argued that the takeover "saved a lot of jobs" and was one of the most satisfying moments of his career in finance. His personal investments also will raise questions. The nominee has invested with hedge fund billionaire John Paulson, who has made a long-shot bet on Fannie Mae and Freddie Mac, Treasury-backed mortgage giants whose future rides on Trump administration policy. On the day of his nomination, Mnuchin lifted Fannie and Freddie shares when he told an interviewer that he wanted to release the companies from government control. His hearing is likely to move those share prices again. Mnuchin is expected to face questions about how the incoming administration would approach overhauling the housing finance system.Mnuchin has pledged to divest interests in several major corporations, including some of the country's biggest financial institutions. But questions remain about what he plans to keep, including the title of president at Steven T. Mnuchin Inc., which he uses to manage some investments. Taxes Mnuchin is sure to get questions about the distributional effects of the Trump tax plan, which independent analysts have said would benefit the wealthy the most. The nonpartisan Tax Policy Center found the top 0.1 percent of taxpayers would get a 14 percent cut, compared with a 0.8 percent reduction for the bottom quintile of households. Mnuchin told CNBC in November that “there will be no absolute tax cut for the upper class. There will be a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it.” But he didn’t spell out which deductions he would cut or by how much.Mnuchin would be tasked with working with Congress to shape tax reform — Treasury stewarded the last major tax overhaul — so he’ll probably be asked to weigh in on the most controversial element of the House GOP plan, border adjustability. Trump panned the idea last week, but House Republicans are sticking with the proposal for now. Either way, Mnuchin will get questions about the best way to stop corporate inversions — when companies move their headquarters overseas to cut their tax bills — and give the businesses an incentive to bring foreign earnings back home.Dismantling financial regulationMnuchin, who if confirmed will play a major role in coordinating government oversight of the financial system, has said the Dodd-Frank regulatory overhaul enacted after the 2008 crisis is "way too complicated." The Trump administration is vowing to dismantle the law. Mnuchin has described the approach as "strip[ping] back parts ... that prevent banks from lending." "Sensible regulation is a necessity for healthy markets," he said in this week's Senate testimony. "However, I saw first-hand how regulatory excess can inhibit lending by financial institutions, resulting in a lack of access to capital for small businesses and entrepreneurs."As Treasury secretary, he would chair an interagency group known as the Financial Stability Oversight Council, which also includes the heads of the Federal Reserve, SEC and CFPB. The council plays a coordinating role across regulatory agencies and has the power to impose stricter oversight on firms outside the banking sector.It's an area of finance that Mnuchin knows well thanks to years in the hedge fund industry, which FSOC has been scrutinizing under the leadership of Obama administration appointees. Mnuchin would have the power to decelerate FSOC's activity in general, and a question will be whether the council decides to remove "systemically important" insurance companies from Federal Reserve supervision.'Making America Great Again' through international economicsThe Treasury Department has the potential to play a major role in Trump's plans to reshape the nation's standing in the global economy. Mnuchin will tell the Finance Committee that while traveling with Trump he "heard the pained and heartbreaking stories of many Americans who had lost their jobs to workers in foreign countries."One way Treasury could follow through on Trump's trade agenda is by labeling China a currency manipulator, which the president-elect pledged to do on the campaign trail. Mnuchin would have an opportunity to take action when Treasury releases its next report on international exchange rate practices, expected in April. Another question looming over Treasury is the extent to which the Trump administration would take advantage of economic sanctions capabilities that the department has employed against Russia, Iran and North Korea. Outgoing Treasury Secretary Jack Lew has warned against the overuse of sanctions because of the risk of diluting their impact.Mnuchin said in testimony for Thursday's hearing that he would use Treasury's Office of Terrorism and Financial Intelligence to stop the financing of terrorism.
Давайте вспомним, с чем Латвия, Литва и Эстония пришли в СССР, с чем ушли, проанализируем, что они имеют сейчас и подумаем, почему они ВСЕГДА недовольны. Сегодня в Латвии, Литве и Эстонии процесс их вхождения в состав СССР в 1940 году модно называть оккупацией. И большинство местных политиков откровенно плевало на то, что Эстонскую, Латвийскую и Литовскую Советские Социалистические республики провозгласили избранные парламенты этих же стран и они же попросили о вхождении в состав СССР. Объясняют свою позицию они довольно просто, мол, во-первых, выборы в каждом из трех государств проходили при наличии на их территориях советских военных, а во-вторых, выборы были сфальсифицированы, потому что победу на них одержали прокоммунистические блоки, которых по определению не могло быть в благополучной европейской Прибалтике, а значит это были "засланцы Москвы". Сильно вдаваться в историю не вижу смысла, но одно подчеркну, как бы сильно кому-то не хотелось, лозунг "Власть Советам!" во всеуслышание в Прибалтике был озвучен даже раньше, чем в Петрограде. Так или иначе, накануне вхождения независимых прибалтийских государств в состав Советского Союза их социально-экономическое положение было весьма плачевно. Например, к 1938 году фабричная промышленность в Латвии составляла лишь 56% от уровня 1913 года. Число рабочих сократилось более чем вдвое от довоенного уровня. В промышленности Эстонии в 30-х годах было занято 17,5 % рабочей силы страны, в Латвии - 13,5%, в Литве - 6%. На фоне существенного падения значения обрабатывающей промышленности в экономике стран практически не сокращалась доля населения, занятая в сельском хозяйстве, и это не смотря на совершенно противоположные общеевропейские показатели. Катастрофическое социально-экономическое положение тогда вынудило жителей Латвии, Литвы и Эстонии массово бежать за границу в поисках лучшей жизни. По официальным данным в период с 1919 года по 1940 только из Литвы в США, Бразилию и Аргентину эмигрировало около 100 тысяч человек. И вот Латвия, Литва и Эстония в составе СССР. Эстонская ССР была чуть ли не на первом месте в Союзе по объему инвестиций в основной капитал на душу населения. В республике активно развивались: пищевая, электро- и радиотехническая и химическая промышленности (производили буквально все: от минеральных удобрений до моющих средств), а также приборостроение и судоремонт. Добывались и перерабатывались горючие сланцы. Так, по состоянию на 1989 год, запасы эстонских горючих сланцев оценивались в 7 миллиардов тонн. Кроме того, на территории Эстонской ССР добывали фосфориты и торф. В 1948 году в Кохтла-Ярве был построен первый в мире газосланцевый комбинат, а также крупнейшие в мире работающие на местных сланцах Прибалтийская и Эстонская ГРЭС, которые полностью обеспечивали потребности республики. Население Эстонской ССР составляло 1 565 000 человек. Сегодня - 1 311 759 человек. Латвийская ССР тоже не отставала. В Союзе она считалась индустриально развитым регионом с очень сильным сельским хозяйством. В республике производились такие товары как пассажирские вагоны, трамваи, дизели и дизель-генераторы, АТС и телефонные аппараты, холодильники, радиоприемники, стиральные машины, мопеды, изделия легкой и пищевой промышленности и многое другое. И, кстати, все они продавались не только в пределах Союза, но и шли на экспорт (о чем так мечтают сегодняшние латвийские шпроты, но увы). Население Латвийской ССР составляло 2 623 000 человек. Сегодня - 1 958 800 человек. Литовская ССР, как и Латвийская, отличалась своими высокими достижениями в области приборостроения, станкостроительного производства, электро- и радиотехническими центрами и производством радиоэлектроники. В республике также развивалось судостроение, машиностроение, легкая, пищевая и химическая промышленность. На ее территории находилась крупнейшая Игналинская атомная станция, которая вырабатывала электроэнергию не только для себя, но и для всех соседей. Население Литовской ССР составляло 3 689 000 человек, сегодня - 2 898 062 человек. Но всему хорошему когда-нибудь приходит конец и прибалтийский социально-экономический подъем тому не исключение. Став независимыми, Латвия, Литва и Эстония умудрились за очень короткое время быстро все растерять. Как посчитали эксперты, после выхода из СССР экономический спад в Эстонии составил 35%, в Литве - 49%, а в Латвии - аж 52%. Согласитесь, упадок существенный и с этим надо было срочно что-то делать. Зарабатывать деньги самим не вариант, ну не привычно, когда тебя столько лет кормили и развивали. Выход оставался один - найти новую дойную корову. И странам Балтии тут можно сказать повезло, корова сама их нашла. В своем стремлении подобраться поближе к России Запад был настолько отчаян, что оказался готов ради этого даже посадить себе на шею откровенных недееспособных прибалтийских политиков. Латвия, Литва и Эстония стали членами Европейского Союза. И тут жизнь как будто даже слегка наладилась. Богатые страны Европы (Германия, Франция, Швеция и другие) начали помогать своим новым и очень бедным товарищам. Для всех трех государств распахнули свои двери европейские рынки. Я не могу сказать, что вливания в Латвию, Литву и Эстонию были от души, но общая политика Евросоюза предполагала выравнивание уровня жизни и экономического развития между преуспевающими странами - членами и новенькими. В итоге за время действия семилетнего бюджета ЕС (2005-2012 гг.) в "новых" вкачали порядка 160 миллиардов евро. Предполагалось, что деньги эти шли на развитие инфраструктуры и подготовки слабых государств к самостоятельному экономическому развитию. Более того Германия, Франция, Швеция и другие страны надеялись, что эти расходы в будущем будут компенсированы, то есть вернутся от "новеньких" в полном объеме обратно. Но прошло 12 лет и чуда не произошло. По результатам аналитического доклада американской аудиторской компании KPMG "Фонды ЕС в Центральной и Восточной Европе", самыми зависимыми от еврофондов оказались Латвия, Литва и Эстония - 18% их совокупного ВВП формируется за счет дотаций из ЕС. И это средняя температура по больнице. Реальность гораздо страшнее. Так, в 2009 году антикризисная помощь Евросоюза вообще стала крупнейшей статьей дохода государственного бюджета Литвы. У Эстонии и Латвии дела шли не лучше. Вот и получается, что, как только ЕС перекроет этим странам финансирование, их экономики сразу рухнут. И, в принципе, все предпосылки на лицо - в проекте бюджета ЕС на 2017 год финансовая поддержка стран Восточной Европы сокращается на 23,9%, а к 2020 году вообще может быть прекращена. На этом фоне латвийский эксперт Дмитрий Смирнов предрек Латвии скорую неминуемую экономическую катастрофу, сравнимую с кризисом 2008 года. Понятно, что Литва и Эстония с ней в одном котле. Что интересно, "плакаться в жилетку" уже не прокатит, и даже раздутая Прибалтикой до небес тема "российской агрессии" больше не поможет, в Европе кризис и отныне она будет думать о себе и только о себе. Как, в принципе, и Америка, новоизбранный президент которой уже заявил о том, что кормить и опекать кого ни попадя она больше не будет. Вот и получается - с Россией отношения испортили, потеряв транзит, рынок и много чего еще, с европейского финансирования слетели, скоро еще сбегут последние налогоплательщики в поисках сытой жизни, и наступит настоящий коллапс. Единственное, что в итоге останется у "европейских" режимов Латвии, Литвы и Эстонии - это ненависть к России, но ее, как говорится, в карман не положишь и на хлеб не намажешь. Ну а я Латвии, Литве и Эстонии хочу сказать только одно - вы держитесь там! экономика Wed, 18 Jan 2017 16:51:13 +0600 Sinderella3 512088 Deutsche Bank выплатит $7,2 млрд по иску минюста США о манипуляциях ценными бумагами http://news2.ru/story/512087/ Как отмечается, Deutsche Bank в обмен на снятие всех претензий согласился выплатить штраф в размере $3,1 млрд. Договоренность также подразумевает возмещение убытков американским клиентам банка в размере $4,1 млрд. Как сообщила министр юстиции США Лоретта Линч, Deutsche Bank "несет ответственность за незаконные операции и безответственные практики кредитования, которые нанесли серьезный и продолжительный ущерб инвесторам и американским гражданам". "Deutsche Bank не просто вводил в заблуждение инвесторов, его действия способствовали наступлению международного финансового кризиса", - отметила она. До этого власти США добились выплаты шестью банками штрафов в размере более $46 млрд в рамках урегулирования претензий связанных с крахом рынка субстандартных ценных бумаг, обеспеченных ипотечными закладными, который стал причиной возникновения мирового финансового кризиса. По данным регуляторов США, ряд крупных банков в течение нескольких лет до наступления кризиса занижали оценки рисков по ценным бумагам, которые были в итоге проданы американским ипотечным компаниям Fannie Mae и Freddie Mac, тесно связанным с правительством США.(http://tass.ru/ekonomika/...)
Для урегулирования судебного иска германский Deutsche Bank выплатит американским властям $7,2 млрд.
While one can argue that both JPM and Bank of America posted results that were ok, with some aspects doing better than expected offset by weakness elsewhere, even if moments ago JPM stock just hit an all time high, there was little to redeem the report from the scandal-ridden largest mortgage lender in America, Wells Fargo. Not only did the company miss revenues significantly, reported $21.6bn in Q4 topline, nearly $1 bn below the $22.4bn consensus, but it had to reach deep into its non-GAAP adjustment bag to convert the $0.96 EPS miss into a $1.03 EPS beat (net of "accounting effect"), but the details of its core business were, well, deplorable, which perhaps was to be expected following the recent drop in new credit card and bank account growth, following last year's fake account scandal. Incidentally, Wells Fargo reported its latest customer metrics alongside 4Q earnings, and in December the bank said that the retail public continued to shy away, as new checking accounts plunged 40%Y/Y while new credit card applications tumbled 43%. On the other hand, deposit balances debit card transactions continued growing which probably is not a good sign, if only for the Keynesians in the administration: it means that consumers are saving. But back to Wells results, which revealed that in Q4, the bank's ROE, one of Buffett's favorite indicators, fell to 10.94%. which was the lowest quarterly level posted in years accordint to the WSJ. "While the return had been grinding lower for some time, largely due to the declining interest-rate environment, the fourth quarter also marked the first, full reporting period since the bank’s sales-tactics scandal erupted in September." More troubling however, was that in Q4, Wells overall profit fell to $5.27 billion, or 96 cents a share (excluding the various non-GAAP addbacks), down from $5.58 billion, or EPS of $1 in Q4 2015. So back to Wells Fargo's retail banking business. Here the bank reported that while credit card outstandings rose 5% compared to $33.14 billion last quarter and jumped 8% from $34.04 billion in the year-earlier period, new accounts tumbled 52% to 319,000 from 667,000 last quarter and fell 47% from 597,355 in the year-earlier period, once again this is a reflection of the bank's ongoing legal scandals. But it was the bank's bread and butter, mortgage lending, that was the biggest alarm because as a result of rising rates, Wells' residential mortgage applications and pipelines both tumbled, and after hitting multi-year highs in the third quarter when mortgage rates were likewise hugging multi-year lows, in Q4 Wells' mortgage applications plunged by $25bn from the prior quarter to $75bn, while the mortgage origination pipeline plunged by nearly half to just $30 billion, and just shy of all time lows recorded in late 2013 and 2014. Moynihan's explanation was redundant: "the pipeline is weaker because of fewer refi loans." This should not come as a surprise: just one month ago, Freddie Mac warned that as mortgage rates continue to surge, "expect mortgage activity to be significantly subdued in 2017." Wells Fargo did not even have to wait that long, and as shown in the chart below, the biggest US mortgage lender is already suffering. Expect even greater declines in the coming quarters should rates continue to rise.
Steve Mnuchin, Trump's Treasury Pick, Investment Could Benefit From Fannie And Freddie Restoration
Wiki Commons Should Fannie Mae and Freddie Mac be removed from government control, Steve Mnuchin — President-elect Donald Trump’s pick for Treasury Secretary — could benefit as an investor. The Goldman Sachs veteran outlined a proposal to privatize the two mortgage behemoths following his nomination, a move that could greatly benefit a [...]
Risk assets declined across the globe, with European, Asian shares and S&P 500 futures all falling, while the dollar slumped against most currencies after a news conference by President-elect Donald Trump disappointed investors with limited details of his economic-stimulus plans, and the Trumpflation/reflation trade was said to be unwinding. "The risk was always that a president like Trump would end up upsetting that consensus (of faster U.S. growth, stronger dollar) view by introducing more political uncertainty," said asset manager GAM's head of multi-asset portfolios Larry Hatheway. The biggest mover, and perhaps the key driver of risk since the election, was the dollar which tumbled as much as 0.8%, falling below its 50DMA for the first time since the election, and back to where it was during the December 14 Fed rate hike announcement, while Treasuries gained alongside commodities, as Donald Trump’s press conference sent a wake-up call to the market about exalted expectations for fiscal stimulus in the U.S. "Overall, investors are wary ahead of Trump's inauguration – a case of buy the talk (Trumpflation), but sell the news," analysts at Societe Generale said in a note. However while negative for the US, that Trump did not mention possible tariffs against Chinese exports, was a relief for Asian share markets that have feared the outbreak of a global trade war. The lack of detail about a potential stimulus also put safety plays such as bonds and gold back in favor, cooling bets that have built in recent months on significantly higher global inflation and series of U.S. interest rate hikes. It was enough to send the dollar tumbling back below 114 yen for the first time in five weeks and brought some welcome relief to Brexit-bruised sterling and Turkey's lira, which has been badly beaten up this year. The USD/JPY broke below the prior session low of 114.25 to reach its weakest level in a month as broad assets position adjustments after recent rally continues to lower the pair’s range, said Satoshi Okagawa, senior global market analyst at Sumitomo Mitsui Banking Corp. in Singapore. Eventually the pair slid as low as 113.77 shortly after the European open before rebounding to just above 114. The euro was back at $1.0650 for the first time in a month, shaky sterling climbed above $1.22 and Sweden's crown hit a four-month high and cracked its 200-day moving average against the euro after pacy inflation data. It was also bliss for bond markets that have been in reverse since Trump's election fuel led bets on higher U.S. interest rates that tend to set the bar for global borrowing costs. Gold spiked on the weak dollar, rising above $1,200 since November 23, and at the 38.2% Fibonacci of the Trump-Led slide. With all eyes on the dollar, the U.S. currency slumped against most major and the 10-year Treasury yield touched the lowest since November as Trump’s first press conference since his election victory gave no details on policy. European stocks headed for their lowest close since the end of 2016 and drugmakers across the globe sold off. Turkey’s currency climbed for the first time in six days as the nation’s central bank tightened lira liquidity. Gold advanced to a seven-week high and industrial metals rallied. The Stoxx Europe 600 Index lost 0.5 percent and the FTSE 100 fell 0.2 percent, halting a record streak of gains. Health-care shares headed for their biggest drop since November, deepening losses that began late yesterday. As Bloomberg, and virtually everyone else has pointed out many times already, Trump’s press conference left investors with few specifics on the timing and scope of planned policies from infrastructure spending to trade pacts. Since his victory, the dollar and global equities have rallied, while bonds sold off, on bets inflation would pick up with growth. Health-care stocks were pressured Thursday as Trump said he’d force the pharmaceutical industry to bid for government business in the world’s largest drug market. “Markets are disappointed by a lack of detail around the much touted stimulus plans,” said Michael McCarthy, Sydney-based chief market strategist at CMC Markets Plc. “There is a growing fear that recent positive moves are based on bombast, and could unravel very quickly.” "The news conference was a far cry from the market friendly, pro-growth "presidential" comments that Trump delivered at his acceptance speech," wrote analysts at Westpac, adding it left a "veritable laundry list" of questions unanswered. Futures on the S&P 500 Index fell 0.3 percent. The underlying gauge increased 0.3 percent on Wednesday, staging an afternoon rally and recouping losses of as much as 0.4 percent. In rates, the benchmark 10-year Treasury yield fell five basis points to 2.32 percent, touching the lowest level since Nov. 30. German 10-year yields dropped three basis points to 0.29 percent, while those in the U.K. slid five basis points to 1.29 percent. Bulletin Headline Summary from RanSquawk European equities trade in the red, albeit modestly so as Europe continues to digest the fallout from Trump's press conference Some sweeping moves in the USD this morning, and all spurred by the lack of substance in yesterday's press conference by president elect Trump Looking ahead, highlights include ECB meeting minutes, US import and export prices, Fed's Yellen, Bullard and Kaplan Market Snapshot S&P 500 futures down 0.3% to 2264 Stoxx 600 down 0.2% to 364 FTSE 100 down 0.2% to 7273 DAX down 0.5% to 11582 German 10Yr yield down 1bp to 0.32% Italian 10Yr yield up 1bp to 1.88% Spanish 10Yr yield up less than 1bp to 1.42% S&P GSCI Index up 0.8% to 398 Nikkei 225 down 1.2% to 19135 Hang Seng down 0.5% to 22829 Shanghai Composite down 0.6% to 3119 S&P/ASX 200 down less than 0.1% to 5767 US 10-yr yield down 5bps to 2.32% Dollar Index down 0.62% to 101.15 WTI Crude futures up 0.6% to $52.55 Brent Futures up 0.9% to $55.58 Gold spot up 1% to $1,204 Silver spot up 1.2% to $16.93 Top News Obamacare Repeal Effort Clears First Big Hurdle in U.S. Senate: the U.S. Senate took the first step toward repealing Obamacare in a razor-thin vote early Thursday U.S. Said to Prepare WTO Complaint Against China on Aluminum: case focusing on loans said to be unveiled as soon as Thursday; global glut of aluminum threatening remaining U.S. capacity Alphabet Says It Shut Down Titan Drone Internet Project: similar project pursued by Facebook has also faced setback Blackstone Said to Vie With Warburg, Chinese Group for GLP: Blackstone considering offer for GLP, potentially pitting it against Warburg Pincus and a separate Chinese group J&J, Actelion Said to Reach Tentative Agreement on Price: discussions now said to focus on valuing separated R&D unit; companies could reach a final deal as soon as this month VW Officials Destroyed Files, E-Mails as Diesel Scheme Unraveled: co. pleads guilty, 5 more charged in emissions cheat Tillerson Says China Can’t Have Access to South China Sea Isles: U.S. Secretary of State nominee says China must be denied access to artificial islands built in disputed water U.S. Intelligence Chief Tells Trump He’s Dismayed by Leaks: Clapper said leak likely didn’t originate from spy agencies HSBC to Pay $45 Million to Settle Euribor Price-Fixing Case Floor & Decor Said to Revive IPO With >$1b Valuation: Reuters Jawbone Said to Be Looking for Funds After Fitbit Approach: FT CVC Capital Said in Advanced Talks to Buy MSC Software: Reuters Apax Partners Sells 48% Stake in GlobalLogic For $1.5b: ET Looking at regional markets, we start in Asia where stock markets traded lower across the board to shrug off the positive lead from Wall Street as Trump's press conference led USD lower and as the surge in oil markets lifted the energy names. Nikkei 225 (-1.2%) underperformed on a firmer JPY as USD/JPY broke below 115.00, while comments in the US session from Trump criticising the healthcare sector led the pharmaceutical sector lower by around 3%. ASX 200 (-0.1%) pared early gains despite higher commodity prices, as a second day of double digit loss for Bellamy's and near 2% declined in the health care sector weighed the index. In China, Shanghai Comp (-0.6%) and Hang Seng (-0.4%) were lower amid a lack of news-flow and yet another reserved liquidity operation by the PBoC. 10yr JGBs traded marginally higher amid the risk averse tone in the region, while the curve flattened amid outperformance in the long end. Top Asian NEws China Credit Growth Exceeds Estimates as Lending Remains Robust: aggregate financing was 1.63 trillion yuan in December; Broad M2 money supply increased by 11.3% percent, PBOC says Macau Casinos Lead Declines in Hong Kong Amid Revenue Concerns: Casino stocks dragged Hong Kong’s benchmark equity index lower by the most in three weeks Pimco Says China’s Next Big Shock May Be a Yuan Free Float: It would lead to a knee-jerk tumble, exacerbating capital outflows and sending shockwaves through global markets All of the major European bourses trade in the red this morning with many analysts stating that President elect Trumps failure to mention any fiscal spending plans could be the main reason for the subdued sentiment. In company specific news, Tesco (-2.3%) shares are trading soft after broad sector strength earlier in the week. Elsewhere, Healthcare shares have been hit this morning after Trump stated that healthcare companies should be allowed to get away with charging extortionate prices. Luxury names have been trading well with Burberry (+1.3%) trading higher in sympathy with Richemont (7.6%) who reported a strong set of earnings pre-market. In Fixed income markets, Bunds opened higher in tandem with their US counterparts performance overnight, although prices have pulled away from best levels as markets take the opportunity to book profits. Elsewhere, supply from Europe has come in the form of Italian BTPs and a UK 2025 Gilt auction with UK paper relatively unfazed by a firm b/c of 2.52 and small yield tail. Top European News German Economic Growth Accelerated in 2016 on Domestic Spending: German economic growth accelerated more than analysts forecast in 2016 to its fastest pace in 5 years Richemont Reports Unexpected Sales Gain as Watches Improve: 3Q sales +5% after falling 12% in 1H; better own-store watch sales good sign for wholesale: analysts Swatch Gains; Positive Read-Across from Richemont, Short Squeeze European Broadcasters Hook Up in Web Push as Viewers Move Online: Mediaset, TF1 invest in ProSiebenSat.1’s Studio71 unit UBI Climbs After Offering 1 Euro to Buy 3 Rescued Small Banks; UBI plans to raise as much as EU400m through a rights offer to purchase three “good banks” at a symbolic price Tesco Falls as Sales Growth Fails to Satisfy Investors; investor hopes had been raised by Wm Morrison Supermarkets’ results earlier in week In currencies, there have been some sweeping moves in the USD this morning, and all spurred by the lack of substance in yesterday's press conference by president elect Trump. This is all the talk at the moment, so there is everything to suggest that this may continue to a modest degree, with USD dip buyers likely to limit and significant moves from current pullback levels. USD/JPY has taken out 114.00, but still looks vulnerable to a deeper correction which sees the potential for 113.00 base on the charts. Support from here stretches down to 111.45-50 before we can start talking of a reversal. This is very much the case in EUR/USD, where sellers have come in around 1.0650-60, but the risk for a move to 1.0700-1.0800 remains as rising EU inflation raises the prospect on greater consideration of (ECB) tapering. GBP has also benefitted from the turn in the USD as we have seen 1.2300 tipped in Cable this morning. Brexit related fears will keep a lid on any major recoveries — especially against the USD — as yield differentials also dictate. EUR/GBP price action will also reflect a clearer picture, but sentiment USD based for now. USD/CAD is now threatening a move on 1.3000 on the downside, with Oil prices having held up well over the last 24 hours. The Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, fell 0.8 percent at 10:01 a.m. London time. It’s flat since the Fed’s rate decision on Dec. 14. In commodities, the big mover in the commodity complex is Gold, taking out USD 1,200 as the USD was hit hard during president elect Trump's ineffective press conference yesterday. Resistance levels here into the mid USD1200's worth noting as USD dip buyers likely. Oil prices have performed well in the last 24 hours, and indeed over last night's key events. WTI above USD50.00 looks comfortable for now. Base metals mixed, but stable despite the lack of focus on infrastructure spending in the US. Anticipated China demand supports Copper which added 2.2% to $5,842 a metric ton, the highest in a month after Indonesia confirmed a halt to concentrate exports. Zinc rose 2.1 percent and nickel gained 1.5 percent. U.S. natural gas rose 3% to $3.32 per million British thermal units as a Bloomberg survey showed inventories probably fell by 141 billion cubic feet last week. U.K. natural gas rose 1.3 percent to 56.70 pence a therm, a fourth day of gains amid forecasts for cold weather. Looking at today’s calendar, in the US the data docket contains the import price index reading for last month, last week’s initial jobless claims and the December monthly budget statement. Away from the data we’ll get the latest ECB minutes from last month’s policy meeting as well as a number of Fed speakers including Harker, Evans and Lockhart at 8.30am GMT, Bullard at 1.15pm and Kaplan at 1.45pm. * * * US Event Calendar 8:30am: Import Price Index MoM, Dec., est. 0.7% (prior -0.3%) 8:30am: Initial Jobless Claims, Jan. 7, est. 255k (prior 235k) 8:30am: Fed’s Harker Speaks in Malvern, Pennsylvania 8:30am: Fed’s Evans and Lockhart Take Part in Panel in Naples, Florida 9:45am: Bloomberg Consumer Comfort, Jan. 8 (prior 45.5) 10am: Freddie Mac mortgage rates 10:30am: EIA natural-gas storage change 12pm: Monthly World Agriculture Supply and Demand Estimates 1:15pm: Fed’s Bullard Speaks in New York on U.S. Outlook 1:45pm: Fed’s Kaplan Speaks at Dallas Regional Chamber Event 2pm: Monthly Budget Statement, Dec., est. -$26.0b (prior - $136.7b) Government Calendar 9:30am: Senate Armed Services Cmte hearing on nomination of retired Gen. James Mattis for defense secretary 10am: Senate Banking, Housing and Urban Affairs Cmte hearing on nomination of Ben Carson for HUD secretary 10am: Senate Foreign Relations Cmte second hearing on nomination of former Exxon Mobil CEO Rex Tillerson for sec. of state 10am: Senate Intelligence Cmte hearing nomination of Mike Pompeo for CIA director 2pm: House Armed Services Cmte holds mark up of waiver measure DB's Jim Reid concludes the overnight wrap Morning from Zurich. I listened to President-elect Trump's press conference on Bloomberg radio yesterday while on the tarmac waiting to take off from Oslo to Copenhagen. I must admit that whilst there was nothing much of substance for financial markets to take from it there's no doubting it was compelling stuff and it was one of the rare times I really didn't want a flight to take off and lose signal. I've never known anything like it from an incoming or sitting leader anywhere in the world. For a start you don't often have cheering and clapping at a press conference which came from a contingent of Mr Trump's supporters at the event. We also had a fierce exchange between the future President and a CNN reporter who was refused a question due to his organisation's reporting of Trump's alleged relationship with Russia. We also learnt that Mr Trump turned down $2 billion last week from a Dubai developer and also a discussion over his trip to Russia to work on Miss Universe. Not the everyday stuff of governmental press conferences but when you see some of the bland stage managed versions around the world who is to say it's the wrong approach. There was also a very brief mention of a “major border tax on companies leaving the US” and that Obamacare will be repealed and replaced “almost simultaneously” but overall markets were disappointed at the lack of substance around policy in particular. This was most apparent in FX where the US Dollar index finished the day -0.23% (and is down another -0.22% this morning) but was actually down as much as -1.62% from the intraday high at one stage. Over in rates 10y Treasury yields were down close to 5bps at one point, touching an intraday low in yield of 2.327%, before paring that move late into the close to finish more or less unchanged around 2.373%. Meanwhile equity markets posted modest gains but in reality were propped up by the +2.81% rebound for WTI Oil – despite some bearish inventory data - which helped the energy sector to outperform. Indeed the S&P 500 closed +0.28% and the Dow +0.50% but healthcare names took a bit of hit with Trump critical of drug pricing and saying that the industry needs “more competitive drug bidding” and that its currently “getting away with murder”. The Nasdaq Biotech index tumbled -2.96% as a result and had its worst day since October 11th. Elsewhere Gold (+0.31%) notched up yet another gain however base metals generally eased off following the recent strong run. The European session had been a bit of a sideshow prior to Trump but markets still generally closed a touch firmer with the Stoxx 600 finishing +0.23%. The FTSE 100 (+0.21%) also notched up another gain and in doing so marked the first time the index has ever closed higher for 12 days in a row. That also coincided with Sterling at one stage touching a new 3-month low of $1.2039, before bouncing back into the close. The latest leg lower came as Governor Carney spoke and warned that Brexit could “amplify” four other dangers to the UK economy including the current account deficit, further weakness in Sterling, mounting consumer credit and a weaker commercial property market. On a related note, Scotland’s Nicola Sturgeon was dealt a bit of a blow yesterday after senior Norwegian politicians argued that it would be impossible for Scotland to move to a ‘Norway-style’ model for staying in the single market while also remaining part of the UK. This morning in Asia it’s been another mixed start for markets. Most notable has been the decline for Japanese equities with the Nikkei (-1.26%) and Topix (-1.22%) tumbling with the healthcare sector and particularly those names with revenue exposure in the US notably underperforming following Trump’s comments about the sector. The Yen has also rallied about 2% since Trump spoke, which is also weighing. Meanwhile the Hang Seng (-0.33%) is also weaker, while the Shanghai Comp (+0.20%) and Kospi (+0.12%) are posting modest gains. The ASX is little changed. Moving on. Yesterday we published our first Euro HY strategy monthly of the year. Since we published our 2017 Credit Outlook in late November we have seen some fairly impressive moves for EUR HY credit spreads. At this time we have no intention of changing our FY spread forecasts but given the strength of these moves we assess the implications for potential returns in 2017. At the time of the outlook our spread and default rate forecasts indicated that, whilst low, both excess and total returns should still be positive for 2017. Unsurprisingly given the positive performance in December and at the start of January we are now at a starting point where returns are likely to be negative for the coming year. Around -0.4% in terms of excess returns and -1.3% in total returns. We continue to think the intra-year range could be large for spreads and think there will be a better entry point into EUR HY than current levels even if this is not immediate. Please email [email protected] if you haven't received it. Also yesterday we published a Credit Bite "Moody's Default Rates Tracker" (https://goo.gl/gCc5pU) detailing the agencies' latest 12-month-trailing high-yield default rates and their forecasts for the next 12 months. The default rate was 2.08% in Europe, 5.65% in the US and 4.41% globally. The baseline forecast for the next 12 months is 2.1% for Europe, 3.8% for the US and 3% globally In our 2017 Outlook, we forecast 2.5% for Europe (https://goo.gl/BkHYrJ) and our US colleagues predict 5% for the US having revised down their earlier 7.25% forecast (https://goo.gl/3tWmf4). This is broadly in line with Moody’s view of a continued benign default environment in Europe and peaking of US defaults in the course of the year, although our US colleagues remain more cautious. Before we wrap up, in terms of the economic data yesterday the only releases of note came from the UK. Both industrial production (+2.1% mom vs. +1.0% expected) and manufacturing production (+1.3% mom vs. +0.5% expected) surprised to the upside, while the November trade deficit was reported as widening a little bit more than expected (to £12.2bn vs. £11.1bn expected). Carney also acknowledged yesterday that “the recent data would be consistent with a further upgrade of the forecasts” of the Bank. Meanwhile over in Italy the Italian Constitutional Court rejected a request by the largest Italian union to force a referendum to overturn the core of the labour reform introduced by Renzi’s government in 2015, including the rejecting of the easing of redundancy rules for new hires. The ruling should come as some relief to new PM Gentiloni. Looking at today’s calendar the only notable data due out in Europe this morning is the final revision to the December CPI report in France, Euro area industrial production in November and Germany’s first estimate of calendar year 2016 GDP growth. Over in the US the data docket contains the import price index reading for last month, last week’s initial jobless claims and the December monthly budget statement. Away from the data we’ll get the latest ECB minutes from last month’s policy meeting as well as a number of Fed speakers including Harker, Evans and Lockhart at 1.30pm GMT, Bullard at 6.15pm GMT and Kaplan at 6.45pm GMT.
By Michael Burge For the first time in almost a year, mortgage rates are above 4%. While still low by historic standards -- the annual average rate on a 30-year mortgage in 1981 was 16.63%, according to Freddie Mac -- most observers expect rates to keep climbing in 2017. The increase, which is likely to be slow and steady for most of the year, will be driven by fiscal stimulus resulting from President Donald Trump's policies, higher official rates as the Federal Reserve boosts the cost of borrowing in the face of faster economic growth, and rising bond market yields, experts say. Market rates spiked after Trump won the election, surprising many observers and forcing a rethink of expectations for the economy and markets. Then, the Fed raised rates Dec. 14, a widely expected move that reflected improved economic conditions and prospects for stronger growth next year. The 0.25 percentage point hike was the first increase in short-term interest rates in almost a year, and only the second time within the past 10 years. How high will mortgage rates go? The good news is, economists, analysts and housing experts don't expect an extreme spike in mortgage rates over the next year. Danielle Hale, managing director of housing research at the National Association of Realtors, predicts rates won't rise too dramatically because expected potential gross domestic product growth in the future is still lower than what we've seen since the end of World War II. "Most economists expect right around 2, maybe a little higher than 2% growth," Hale says, "whereas typically through most of that postwar period the average was 3%. The new normal is underperformance relative to the old normal. That should help keep rates lower than in the past. But I don't think they'll stay quite as low as they are now." Rates are predicted to climb steadily this year, with three more bumps from the Fed as the economy keeps growing. Hale says that NAR expects to see rates averaging 4.6% for the fourth quarter of 2017. "But that means by the end of the year they could be as high as 4.7 or 4.8%, somewhere in that 4.5-to-5% range by the end of the year," Hale says. Here are four things that could happen under a Trump presidency that could keep rates heading in that direction. 1. Fiscal stimulus Tax cuts and government spending are two Trump proposals that could lead to bigger deficits and a bigger debt load. This fiscal stimulus, paired with the stable employment we're already seeing, could mean stronger economic growth, which could lead to higher mortgage rates. "If rates were to rise rapidly," Hale says, "that probably indicates that inflation is coming in higher than expected, and that probably means that the Federal Reserve will act to move short-term rates higher even faster. That would spur long-term rates to move up a little bit faster." "That could be OK if incomes are also rising, to help offset some of that increase," she says. "But I don't think that's an ideal scenario. An ideal scenario would be continued moderate economic expansion, and rates that are stable to slightly higher." 2. Privatizing government-sponsored enterprises The odds of reforming government-sponsored enterprises like Fannie Mae and Freddie Mac to bring them out of government ownership have risen post-election, says Moody's Analytics chief economist, Mark Zandi. He gives such reform a 50% chance. "It will be tough to get reform through Congress," he says. "If there is reform, it will probably result in higher rates." Jordan Levine, an economist with the California Association of Realtors, says it's safe to say that privatizing Fannie and Freddie will increase rates because right now, with government ownership, the implicit guarantee that Uncle Sam stands behind the mortgage bonds they issue reduces the cost of capital for the private sector. "I can say with a pretty good level of confidence that it [privatizing Fannie and Freddie] will increase the cost of borrowing because there's going to be more risk from those pools being borne by the private sector," Levine says, "and they're going to want to be compensated for that additional risk that they're bearing." 3. Deregulation The Trump administration could ease up on tighter lending standards that have been the norm since the financial crisis. That would entail either minor changes to Dodd-Frank, a piece of legislation passed in response to the Great Recession, or a complete dismantling of it. Zandi thinks it's unlikely the Consumer Financial Protection Bureau, which was created by the Dodd-Frank act, will be completely dismantled. Doing away with Dodd-Frank altogether is even more unlikely, according to Zandi. "Killing Dodd-Frank would mean getting rid of higher capital standards that the banks face." Experts like Zandi and Levine say deregulation has less impact on mortgage rates than it does on the number of people who have access to credit. 4. Change at the Fed Federal Reserve Chair Janet Yellen's term ends in January 2018, giving Trump the opportunity to make a new appointment. But according to Zandi, a new Fed chair isn't that important to mortgage rates. "For most borrowers, what matters is the 30-year fixed-rate mortgage," he says. "That's tied to long-term rates, and the Fed has less control over that." Hale says there's a consensus at the Fed on the best way to approach making monetary policy, and she doesn't expect a new chair to cause drastic change. "By the end of [Yellen's] term, the Fed should be well on its way to a more normal monetary policy," Hale says. "A new chair could come in and change that, but it's not very likely." What should you do about rising rates? "Higher rates could have more of an effect than people think on the housing market," Zandi says. Over the last 30 years, when people bought a home, they could get a mortgage rate that was lower than their existing mortgage, which helped increase home sales, he says. "Going forward, it's going to be the reverse," he says. "Mortgage rates are going to be higher on the home they want to buy relative to their current mortgage. That will make it less attractive for them to buy and sell. That probably means that housing activity will be less buoyant than it has been," Zandi says. Levine, of the California Association of Realtors, suggests those who are thinking seriously about buying a home consider making a move sooner rather than later, if possible. "If you're thinking about getting into the market, it's a good time to lock in rates before they go up higher," Levine says. "If you're thinking about selling 12 months from now, you might consider going a little bit early so that you can get locked in to a low rate on your new home." If you're on the fence about refinancing, it wouldn't hurt to make a decision faster. If you have a floating rate mortgage, consider refinancing into a fixed-rate loan. You don't want your ARM set much higher, unless you can financially handle an increase over the next year. If you have a home equity line of credit, which tends to come with adjustable rates, think about refinancing into a home equity loan with a fixed rate. And if you want to buy a home and can afford it, Zandi recommends you make sure you have a good credit score, that you're managing your current debts well, and that you have enough money for a down payment. He says these factors are key to being able to apply for a mortgage and getting a reasonably good rate, regardless of where rates are heading. "That's what's in your control, that's what you need to focus on," Zandi says. Michael Burge is a staff writer at NerdWallet, a personal finance website. Email: [email protected] -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.
In September 2008, Fannie Mae and Freddie Mac were placed in a Federal Governmental conservatorship. The crisis-induced rise in mortgage defaults had eroded their capital, and made it impossible for them to continue operations without support from the US Treasury. The conservatorship also eroded the agencies' political support. Their continuing existence is an embarrassment to the liberals in Congress responsible for the agencies heavy involvement in sub-prime mortgages, which was a major cause of their downfall. Conservatives opposed to government intrusions in the market as a matter of principle, who were never more than ambivalent toward the agencies, now relish the opportunity to get rid of them altogether. Yet despite the loss of virtually all of their political support, we are now into the ninth year of conservatorship and the agencies are still with us. The reason is an entirely plausible concern that terminating them would depress the mortgage market and new housing construction. While the prevailing political sentiment is hostile to the agencies continued existence, it is also fearful of the consequences of their demise. The result has been a policy paralysis. But the paralysis won't last forever, at some point it will give way to a plan to phase out the agencies by progressively narrowing the segment of the market that they can serve. William M. Isaac and Richard M. Kovacevich in a recent Wall Street Journal article proposed a 7-year phase out. The phase-out approach assumes that within the specified time frame, the private system will evolve to fill the gap. In my view, that will not happen without a well-developed Federal plan to make it happen. Without such a plan, our existing system of private financial institutions will not create a viable private secondary mortgage market that would replace Fannie and Freddie. The private market that was the vehicle used to fund sub-prime mortgages employed a house-of-cards structure that completely collapsed during the financial crisis. Unlike the mortgage securities issued in Denmark, which are full faith liabilities of the institutions issuing them, the US securities were no one's liability. Each security carried its own "credit enhancement" as a back-up to cover potential losses, and if losses exceeded the back-up, the security would default. Redundant credit enhancement on other securities, even if they had the same issuer, was not available to support the security with a deficiency. That market collapsed, and good riddance. As a point of comparison, not a single mortgage security issued by Danish mortgage banks defaulted during the crisis - or any other time! Existing private institutions in the US are not going to develop full-liability mortgage-backed securities, even if all legal roadblocks were removed. Commercial banks have never been interested, and even less so now following the heavy losses they have sustained from being held legally liable for misdeeds committed prior to the crisis. Home mortgages are now viewed as carrying high political risk. The existing mortgage banks in the US are loan originators and don't have the capital to become security issuers. The one industry for which mortgage security issuance might have made sense because of its focus on home mortgages was the savings and loans, but that industry is long gone. What is needed is a new industry of mortgage banks that fund themselves with mortgage-backed securities, similar to those in Denmark. They could be regulated by the Federal Housing Finance Agency, which currently regulates Fannie and Freddie. Depository institutions would be encouraged to charter mortgage bank affiliates, and existing mortgage banking companies would be encouraged to convert. But it will take time for a new industry to evolve, and in the meantime, Fannie and Freddie should be moved out of conservatorship purgatory. Over the years the agencies have accumulated enormous intellectual capital that is embedded in well-honed secondary market systems and processes, some of which could be used by an emerging mortgage banking industry. The agencies also could be involved in helping new mortgage banks raise capital. Phasing out the agencies would destroy much or all of their intellectual capital - for no good purpose other than achieving a political catharsis. The wiser plan is to establish the legal foundations for a new mortgage banking industry, and retain the agencies until the new structure makes them redundant. For more information on mortgage or to shop for a mortgage in a fair, unbiased environment, vist my website The Mortgage Professor -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.
Me, at MoneyWatch: Here's what really caused the housing crisis: One story of the housing crisis goes like this: Government programs that helped low-income households purchase houses led to widespread defaults on the subprime loans they held, sparking the entire...
By Hal Bundrick, CFP Donald Trump, the real estate tycoon, will be our nation's 45th president. That's good news for the housing industry, right? Well, there's a lot to consider. Here's how the Trump presidency may impact housing and homeownership in 2017. A 'responsibly aggressive' marketplace A unified call for less government regulation is coming from the Trump camp as well as Republicans in Congress. On the deregulation radar: the Consumer Financial Protection Bureau and other elements of Dodd-Frank, the Wall Street reform act that President Obama signed into law in 2010. "Since the elections, there has been much discussion of how expected changes under a Trump administration are likely to reduce the [CFPB's] impact, particularly in the enforcement arena," says Rob Chrisman, a senior advisor for the Stratmor Group, a mortgage industry consultancy. "Dodd-Frank will not be eliminated. It will be refined -- which is a good thing." Jeff Taylor is managing partner of Digital Risk, a mortgage processing company. He also says trimming Dodd-Frank would be a good thing for potential homeowners. "If Dodd-Frank is streamlined, I think you could have banks be more responsibly aggressive in the marketplace, as far as making mortgages," he says. "And I think that will open up more product for first-time homebuyers ... in the next couple of years." Taylor says less stringent regulations on lenders might lower the costs of compliance and allow more small community banks to compete with big banks, "boosting bank profits -- all of which are likely to increase credit availability." However, critics like Noah Smith, former assistant professor of finance at Stony Brook University, worry that deregulation will dial banking risk back up and, perhaps more importantly, put taxpayers back on the hook to bail out the bad actors. Just as during the housing crisis of 10 years ago, it would be another "race to the bottom," Smith wrote in a Bloomberg analysis. But a reduction in federal regulations won't transform the housing industry, Chrisman says. "Trump may mean less federal enforcement, but the states will remain aggressive. Politicians in California, Illinois and New York, primarily Democratic states, have already mentioned a stepped-up regulatory atmosphere," he says. Getting Fannie and Freddie 'out of government ownership' Another item on the Republican agenda is to reduce the government footprint in the mortgage industry. That means moving Fannie Mae and Freddie Mac into the private sector. The two government-sponsored companies back a majority of mortgages and were bailed out with taxpayer dollars during the housing crash. Fannie and Freddie buy home loans from lenders and then package and sell those loans in large bundles of bonds. The quarterly profits that Fannie and Freddie earn are now funneled to the U.S. Treasury, which has been paid back $60 billion more than it provided in bailout funding to the companies. Investors in Fannie and Freddie want to see that money move back into the private sector. In November, Trump's Treasury secretary nominee, Steven Mnuchin, told Fox Business Network, "We gotta get Fannie and Freddie out of government ownership." "I think there are models that could work," Taylor says regarding Fannie and Freddie privatization. "What I don't think you could see is a model [where] the U.S. government doesn't stand 100% explicitly behind the bonds that Fannie and Freddie issue." He says removing that federal guarantee would reduce the global demand for the mortgage-backed securities that the two quasi-government agencies issue. Those bonds are instrumental in freeing up capital for lenders to make more loans. Homebuilders and a Trump economy A lack of skilled labor has been one of the biggest constraints to the housing industry for the past couple of years, and Taylor worries that the Trump administration may not help matters in that regard. "Mr. Trump's plan to spend money on infrastructure projects around the country could result in more laborers taking those jobs and leaving homebuilders short-handed," Taylor says. "Also, his immigration stance is likely to keep immigrants out of the country and out of the workforce -- a blow to homebuilders who rely on immigrants for many construction jobs." Labor shortages also contribute to rising wages for construction workers, which in turn keep new home prices high, he adds. However, Robert Dietz, chief economist for the National Association of Home Builders, says he expects the Trump administration to take action on some labor rules that could benefit the homebuilding industry. That will almost certainly include the Obama overtime rule "that would've affected a lot of construction site managers," Dietz says. That rule, blocked by a federal judge on Nov. 22, aimed to double the maximum income a worker could earn and still be eligible for mandatory overtime pay. The new limit of $47,500 would have given 4.2 million more Americans the opportunity to earn overtime, according to the Obama administration. Dietz also is looking for a Trump administration to help lower building costs. "Just under 25% of the cost of a newly built home is due to regulatory burdens," he says. "I think it's reasonable that the new administration can address a lot of them." How Trump might affect home affordability Mortgage rates have soared since Trump won the election. That's part of a good news/bad news scenario. "One could argue that the Trump victory has driven up interest rates due to the fear of future inflation, given his tax and infrastructure build proposals," Chrisman says. "This increase in rates certainly negatively impacts homeownership for first-time buyers. Increasing interest rates, however, often signal a strengthening economy, and if that is the case, more first-time borrowers will qualify." Taylor also says home affordability could suffer but offers another factor in the equation. "On the positive side, [higher mortgage rates] could also slow price appreciation, which would help buyers. The housing market has lacked first-time buyers and move-up buyers. Slower price appreciation could benefit move-up buyers who have regained value in their home and want to move up before prices rise again," he says. "I'll tell you, if I'm looking to buy a house for the first time or to sell my house and move into a different house, I really am looking at this next year as probably a moving year because rates still in the 4s are very, very attractive," Taylor adds. Will Trump eliminate the mortgage interest deduction? And then there's the most sacred cow of all: the mortgage interest deduction. It is frequently mentioned as an important factor in the "buy or rent?" conversation. The Trump administration and Republicans have floated the idea of putting a cap on the amount of allowed interest that you could deduct from your tax bill. The thing is, an analysis by the Tax Policy Center of the Urban Institute and Brookings Institution says only about one-fifth of households actually use the deduction. And of those that do, most are way above middle-class taxpayers. "The Tax Policy Center finds that in 2017, Trump's cap would affect only about 160,000 singles, a tiny fraction of the 89 million single taxpayers, and about 230,000 couples out of 59 million joint filers," Howard Gleckman, senior fellow with the Tax Policy Center, writes on Forbes.com. "The vast majority of the taxpayers who would face the cap are high-income." Homeownership rates under a Trump presidency Chrisman is looking for little change in the rate of homeownership in the coming years. From a percentage perspective, homeownership in the U.S. reached its peak during the Clinton/Bush presidential terms, he says. But that's when banks relaxed underwriting guidelines to such an extent that "people who shouldn't have been buying houses were." The housing crash changed everything. Underwriting, loan documentation and appraisal requirements have strengthened since then. "Marginal borrowers are not borrowing money, and investors feel more secure with investing in mortgage-backed securities," Chrisman says. He says that America's need for housing is just as great as ever and that Trump's policies won't move the dial on homeownership rates one way or the other. "Internal population growth hasn't stopped, nor has immigration. Nor has the desire for a new generation to want a home for their children," he says. "I think that from what we know so far, the Trump presidency will have little or no direct impact on homeownership rates." A positive outlook for the New Year All in all, the experts we spoke with are optimistic about 2017. Lenders are using better technology to streamline the mortgage process, and the housing market is "healthy" and "robust," in their words. "Builders are excited," Dietz says. He says reductions in regulatory costs could help homebuilders provide housing to the tightest segment of the market, the entry-level buyer. "If we do get an administration that's taking a look at various kinds of regulatory policies -- where they've grown too large or too expensive -- that will certainly be a help [to] the supply side of the market. And I think that's good news, not just for builders, but it's good news for renters and prospective homebuyers because adding supply is the way that you address housing affordability issues." Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: [email protected] Twitter: @halmbundrick. -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.
Asian stocks rose, led by Hong Kong, while European shares and U.S. equity-index futures are little changed. Euro, yen climb as the dollar posted an unexpected loss following some serious fireworks out of China, which intervened in funding market to crush offshore Yuan shorts. Top news stories include Macy’s and Kohl’s cutting their outlook after weak holiday season, Deutsche Bank exploring lending money to PE firms buying distressed loans, Apple planning to invest $1b in SoftBank’s new technology fund. Declines in the USD outweighed major peers in the past week as traders interpreted minutes from the last Fed meeting to indicate a slower path to interest-rate increases, boosting demand for bonds and assets of developing nations. The offshore yuan surged the most on record after the government encouraged companies to stock up on the currency before the week of lunar New Year celebrations. Gold climbed to the highest in a month. As Bloomberg notes, the growing backlash against the dollar coincides with more-sober outlooks on whether President-elect Donald Trump’s plans to boost fiscal spending will achieve rapid reflation. The Fed reiterated that a “gradual” pace of rate hikes over the coming years would likely remain appropriate, damping speculation officials will step in to counter inflation with higher rates. Stocks have rallied with the dollar, while Treasuries have plunged since Trump’s election. While the Dow continues to flirt with 20,000, world stocks hit their highest level since mid-2015 on Thursday after strong Chinese data added to the optimism about global growth and inflation that has been driving markets since the start of the new year. The MSCI world equity index was up 0.4% at one stage to hit its highest level since July 2015. At that level it was up over 1.5 percent for the year so far. The index was pushed up by Asian shares, which rose for the eighth consecutive day on Thursday . Growth in China's services sector accelerated to a 17-month high in December, a private sector survey showed, adding to upbeat factory and service sector surveys out of the United States, Europe and Asia released this week. In addition, minutes from the U.S. Federal Reserve's December meeting showed that many of the central bank's policy makers are expecting a pick-up in economic growth and inflation in the world's biggest economy as a result of fiscal, regulatory or other policies, although most expressed concern that the pace of Trump fiscal stimuli could end up overpowering the economy, and pushing inflation (and the dollar) too high. "Recent economic data is pretty good so markets are in risk-on mode overall," said Yukio Ishizuki, currency strategist at Daiwa Securities. "But U.S. bond yields are being capped so the dollar is losing the driver behind its rally." Stocks and bond yields have been rising ever since the election of Republican Donald Trump as U.S. president on expectations that fiscal stimulus will boost growth and inflation. Trump's inauguration takes place on Jan. 20. "The FOMC's minutes to its Dec meeting released post yesterday's European close could best be characterized as perhaps tilted toward the hawkish side but tempered by a heavy dose of uncertainty," said Rabobank strategist Richard McGuire. "All the policymakers emphasized the uncertainty of the outlook, reminding investors that the outlook is more nuanced than the market seems to think," he said. With just two weeks to go before Trump takes over, investors and policymakers are waiting to see if his actions match his rhetoric and if his policies will be approved by Republican lawmakers. The dollar extended its losses on Thursday, falling 0.42% against a basket of six major currencies - though still near the 14-year high hit on Tuesday - following losses against the Chinese yuan, which soared after Beijing stepped into both its onshore and offshore yuan markets to shore up the faltering yuan for a second day on Wednesday, sparking speculation that it wants a firm grip on the currency ahead of Trump's inauguration. “In the past two months it’s really been the U.S. versus the rest of the world,” said Simon Quijano-Evans, a strategist at Legal & General Group Plc in London. “Maybe there will be some wind taken out of the sails. As we move towards the end of January and the lunar new year holidays, the Chinese authorities are being overly cautious to prevent a rout.” Maybe, but not today as the DJIA is about to try once again to cross the long-awaited 20,000 barrier. * * * Markets Snapshot S&P 500 futures down less than 0.1% to 2264 Stoxx 600 down less than 0.1% to 365 FTSE 100 down less than 0.1% to 7186 DAX down 0.2% to 11560 German 10Yr yield up less than 1bp to 0.28% Italian 10Yr yield up 4bps to 1.91% Spanish 10Yr yield up 5bps to 1.48% S&P GSCI Index down less than 0.1% to 396 MSCI Asia Pacific up 1% to 138 Nikkei 225 down 0.4% to 19521 Hang Seng up 1.5% to 22457 Shanghai Composite up 0.2% to 3165 S&P/ASX 200 up 0.3% to 5753 US 10-yr yield down less than 1bp to 2.43% Dollar Index down 0.42% to 102.27 WTI Crude futures down less than 0.1% to $53.25 Brent Futures down less than 0.1% to $56.41 Gold spot up 0.8% to $1,173 Silver spot up 1% to $16.60 Global Headline News Macy’s Declines After Reducing Outlook, Moving to Cut 6,200 Jobs: Holiday sales came in at low end of company’s projections Kohl’s Tumbles After Cutting Its Fiscal 2016 Profit Forecast: ‘Sales were volatile throughout the holiday season,’ CEO says Deutsche Bank Said to Eye Private Equity Help in Settlement: Bank looking to make loans to PE funds buying distressed loans Apple to Invest $1 Billion in SoftBank Fund to Support Tech: Qualcomm says it also will invest undisclosed amount in fund VW Ordered to Face Investor Suit in U.S. Over Diesel Cheating: Ex-Chairman Winterkorn also loses bid to toss shareholder case Barclays Flags ‘Black Swan Threats’ to Commodities This Year: There is ‘a high likelihood of disruption risk,’ bank says Amazon and Forever 21 Said to Mull Bidding for American Apparel: Troubled retailer filed for second bankruptcy in November Looking at Asian markets, stocks here traded mostly higher following the upbeat lead from Wall Street where all 3 major indices closed positive with the consumer discretionary sector underpinned by strong auto sales and the DJIA finished within 60 points of the 20,000 level. ASX 200 (+0.3%) was supported by miners and energy names after a pullback in USD buoyed the commodities complex, while Nikkei 225 (-0.4%) was dampened by a firmer JPY and as the index took a breather from yesterday's stellar gains. Elsewhere, Hang Seng (+1.5%) outperformed following encouraging Chinese Caixin Services and Composite PMIs, although the Shanghai Comp (+0.2%) lagged amid continuing liquidity concerns and surges in money market rates after the PBoC only conducted a paltry CNY 10bIn open market operation today. Finally, 10-yr JGBs were relatively flat with minimal gains seen amid a slightly cautious tone in Japan, while today's 10yr JGB auction later also failed to spur demand with the b/c and lowest accepted prices weaker than prior. Top Asian News Bears Scramble for Yuan as China Chokes Flows, Aids Currency: Offshore yuan set for biggest two-day gain on record Chinese Media Say ‘Big Sticks’ Await Trump If He Seeks Trade War: The Communist Party’s Global Times newspaper writes in an editorial Thursday Philippines’ Duterte Open to Joint Maritime Drills With Russia: Russian ships could exacerbate tensions in South China Sea Xiaomi’s India Sales Pass $1 Billion as Chinese Brands Hold Sway: Shipments grow by almost 150% in 2016 JPMorgan Lashing by Indonesia Signals Global Threat to Analysts: More governments are seeking to stifle negative market views European equities rebounded from some early downside, into rose into mid-morning trade relatively flat (Euro Stoxx 50: +0.1%), with the FTSE 100 reaching fresh record highs and printing above 7200 for the first time. The FTSE 100 benefitted from GBP softness, with material names among the best performers while Homebuilders also led the way higher after Persimmon (+4.8%) reported earnings pre-market. In a similar fashion to equity markets, fixed income has seen the entirety of the opening moves retraced, with Bunds opening around the 163.50 before closing the opening gap to trade around 163.20. Of note, today we are looking out for the potential pricing of the French 50Y, while participants will also be keeping an eye on the quantity of corporate issuance, given the significant slate so far this week. Finally, Italian yields remain in focus with the short end of curve underperforming significantly while the GE/IT 10Y spread back above 160bps. Top European News U.K. Economy Maintains Solid Growth Momentum as Services Surge: Markit surveys point to 0.5% quarterly economic growth Lansdowne’s $9 Billion Hedge Fund Suffers First Loss Since 2012: Lansdowne’s main hedge fund lost almost 15% in 2016 Ericsson Deepens Cisco Tie-Up to Combine Wi-Fi, Mobile Networks: Partnership to broaden Swedish network builder’s offering In currencies, the offshore yuan surged 0.6 percent to 6.8913 per dollar as of 11:25 a.m. in London after surging 1.4 percent Wednesday, putting it on track for a record two-day gain. The Bloomberg Dollar Index extended losses, declining 0.2 percent, after touching its highest level since its 2004 inception 4.5 percent since Nov. 9. It fell against The euro was little changed at $1.0490. Overall, it has been a busy session for FX, with the USD finally seeing a little more flexibility after the strong post US election gains seen. In USD/JPY, the pair dropped as low as 115.60, before rebounding 100 pipe higher. Yesterday's FOMC minutes added to the Dollar pullback, which was largely a function of over-extended levels, but with some Fed members incorporating Trump's expansionary policy intentions into their forecasts and rate outlook (accordingly), cause for some 'uncertainty' to be re-factored into the USD has since taken place. EUR/USD has pushed back through 1.0500 as a result, and with German and EU inflation rises also bolstering. Firmer commodity prices are helping to lift the related FX pairs, with AUD pushing up to fresh highs around .7325-30. NZD has been dragged higher accordingly as we tipped .7000 here also. CAD has been leading the way however, outpacing Oil price gains over the past week or so and reinforcing the resistance seen ahead of 1.3600. In commodities, crude slipped 0.4% to $53.45 a barrel in New York as investors weighed rising Libyan supply against signs OPEC output began slipping. Gold rose 0.7 percent to the the highest level in almost a month. Aluminum led base metals higher with a 0.7 percent gain. Nickel rose 0.3 percent and zinc was up 0.4 percent. Looking at the day ahead, the early data print in the US is the ADP employment change reading for last month which should help anchor expectations for tomorrow’s payrolls. Market consensus for the ADP print is currently 175k which compares to 216k in November. Also due out is the latest weekly initial jobless claims reading while the final services and composite PMI’s will also be confirmed. Also of note is the ISM non-manufacturing reading for last month which will come hot on the heels of the strong manufacturing print earlier this week. Market consensus for this is 56.8. Away from the data we’re due to hear from BoE Chief Economist Andy Haldane this afternoon when he speaks at an event in London. US Event Calendar 7:30am: Challenger Job Cuts y/y, Dec. (prior -13.0%) 8:15am: ADP Employment Change, Dec., est. 175k (prior 216k) 8:30am: Initial Jobless Claims, Dec. 31, est. 260k (prior 265k) 9:45am: Markit US Services PMI, Dec. F, est. 53.4 (prior 53.4) 10am: Bloomberg Consumer Comfort, Jan. 1 (prior 46.0) 10am: Freddie Mac mortgage rates 10:30am: EIA natural-gas storage change 11am: DOE Energy Inventories DB's Jim Reid concludes the overnight wrap A quick scan through last night’s FOMC minutes will reveal no mention of President-elect Trump’s name but it’s pretty clear where the debates and discussions at the Fed now lie. In a nutshell “almost all” officials made mention of upside risks to their growth forecasts as a result of prospects for more expansionary fiscal policies while interestingly “about half” of the Fed officials incorporated fiscal policy into their forecasts. The caveat though is that the outlook is distinctly uncertain. Indeed the minutes acknowledged that “participants emphasized their considerable uncertainty about the timing, size and composition of any future fiscal and other economic policy initiatives as well as about how those policies might affect aggregate demand and supply”. Officials also acknowledged that this “made it more challenging to communicate to the public about the likely path of the federal funds rate”. The minutes also acknowledged that the staff’s forecasts for higher real GDP growth over the next few years “were substantially counterbalanced by the restraint from the higher assumed paths for longer-term interest rates and the foreign exchange value of the dollar”. Away from Trump the rest of the minutes didn’t offer a whole lot of new information with officials seemingly a bit more confident about the balance of risks. That said there was a subtle change to the number of officials concerned about a sizable undershooting of the longerrun normal unemployment rate from “a few members” in November to “several members” in December. So the overall tone fits in with Yellen’s post-meeting statement last month where she said that the Fed is “operating under a cloud of uncertainty at the moment”. So every Trump move will continue to be closely watched and scrutinized. With that in mind it’s worth circling the 11th January in your diary as it’s when Trump is due to hold a ‘general news conference’. It’s his first since the election victory and comes just 9 days before his official inauguration so it should be a closely watched event. Evaluating Trump’s administration appointments in the mean time will continue to be a focus for now though. One which stands out is the appointment of Robert Lighthizer as his new trade representative. Lighthizer is seen as a longstanding advocate of greater protectionism and was formerly a trade official under Ronald Reagan. The WSJ also notes that Lighthizer has three decades of experience arguing for punitive tariffs on overseas companies. So it appears that the appointment confirms what is likely to be a major shift in trade policy under a Trump presidency. Meanwhile markets turned a fairly blind eye to the minutes yesterday. 10y Treasury yields were hovering around 2.450% leading into the minutes before closing the day at 2.440% and 0.5bps lower on the day. 2y yields finished flat at 1.216% while the USD index, which had struggled as the session wore on, closed -0.67% but again with little reaction post the minutes. It’s been nothing but good news for risk assets in the US so far this year though. The S&P 500 finished +0.57% and so taking the 2017 YTD gain to +1.43%. That’s the best start to the year since 2013. Consumer names were a big driver yesterday although it’s worth noting that both Macy’s and Kohl’s tumbled after market (by -8% and -9% respectively) after both lowered earnings guidance following softer holiday season sales. The MSCI EM equity index also returned +0.35% and has now gained in 7 of the last 8 sessions. The rally in Europe had earlier stalled however with the Stoxx 600 closing down a fairly modest -0.12%. Elsewhere credit has also gotten off to a flier, particularly across the pond and yesterday we saw CDX IG tighten just over 2bps to take the index to the tightest level since May 2015. The new issue market hasn’t taken any time to warm up either with Bloomberg reporting that US IG primary issuance is over $45bn in the first two trading days of the year already and so overtaking that for the first week in 2016 and 2015. As we refresh our screens this morning it’s been a bit of a mixed performance in Asia so far. While the Hang Seng (+1.30%) has risen strongly led by gains for the energy sector, bourses in China are little changed while the Nikkei is -0.24%. The Kospi (-0.09%) is also a shade lower while the ASX (+0.29%) is up a touch. US equity index futures are also slightly in the red. There was also some data in China this morning where the Caixin services PMI was confirmed as rising 0.3pts to 53.4 in December. That’s helped push the composite reading up to 53.5 from 52.9 and to the highest level in 45 months. Moving on. Away from the minutes, yesterday’s economic data was also generally supportive. In the US we learned that total vehicles sales increased to an annualized rate of 18.3m in December (vs. 17.7m) from 17.8m in the month prior. Over in Europe it was revealed that the estimate of headline Euro area CPI had risen more than expected in December after printing at +1.1% (vs. +1.0% expected) from +0.6% in November. That puts headline inflation at the highest level since September 2013 and encouragingly while higher energy prices led, the increase was actually relatively broad based. The core was also up after rising one-tenth to +0.9% yoy. Meanwhile the remaining PMI’s were also out in Europe yesterday. The final composite PMI for the Euro area in December was revised up to 54.4 from 53.9 after the services reading was revised up 0.6pts to 53.7. That is the highest PMI reading since 2011, just beating the 54.3 seen in August and December 2015. Our European economists also noted that at the same time, a number of the sub-indices, including the composite input and output prices and the backlog of orders, were confirmed at new cyclical highs. Across countries the news was broadly positive across the EMU countries while Italy was the relative disappointment with the composite down 0.5pts to 52.9, although this came after a 2.2pt rise in November. Our colleagues go on to say that at 53.8 on average in Q4 the composite PMI was back to in line with its 2015 levels, a year in which Euro area GDP grew on average by 0.5% qoq. Wrapping up the remaining news yesterday. Over in France National Front presidential candidate Marine Le Pen confirmed that she wanted to remove France from the Euro and also redenominate French overnment debt in a new national currency. Le Pen confirmed that she wanted “a national currency with the euro as a common currency” and as the FT made mention to, suggests some softening in her views in favour of a looser form of currency sharing rather than a hard return to a national French currency. Meanwhile in the UK, PM Theresa May moved quickly and decisively to replace Sir Ivan Rogers as the UK Ambassador to the EU by appointing Tim Barrow to the role. He was previously the political director of the government’s Foreign and Commonwealth Office. Looking at the day ahead, the diary is a bit thinner in Europe this morning with the only notable data due out being the remaining December PMI’s in the UK (services and composite) and the PPI print for the Euro area. This afternoon in the US the early data print is the ADP employment change reading for last month which should help anchor expectations for tomorrow’s payrolls. Market consensus for the ADP print is currently 175k which compares to 216k in November. Also due out is the latest weekly initial jobless claims reading while the final services and composite PMI’s will also be confirmed. Also of note is the ISM non-manufacturing reading for last month which will come hot on the heels of the strong manufacturing print earlier this week. Market consensus for this is 56.8. Away from the data we’re due to hear from BoE Chief Economist Andy Haldane this afternoon when he speaks at an event in London.
Treasury Secretary Lew's Exit Memo: Eight Years of Progress at Treasury and a Look to the Future of American Financial Prosperity
WASHINGTON –U.S. Treasury Secretary Jacob J. Lew has authored a departure memorandum that recounts the progress and work of the U.S. Department of the Treasury over the last eight years. The memo then outlines Secretary Lew’s visions and goals for the future of the Treasury Department. The Secretary closes his departure memorandum with personal reflections on the importance of bipartisan cooperation, his optimism about America’s future, and his hope that future policymakers will take careful stock of the successes of this Administration as they consider the next steps forward. Please see the memo attached. Treasury Exit Memo.pdf The full text of the memo is below: Department of the Treasury Exit Memo Secretary Jacob J. Lew Cabinet Exit Memo │January 5, 2017 Introduction The Department of the Treasury (Treasury) is the executive agency responsible for promoting economic prosperity and ensuring the financial security of the United States. This role encompasses a broad range of activities, such as advising the President on economic and financial issues, encouraging sustainable economic growth, and fostering improved governance in financial institutions. Treasury’s mission was challenged like few times before in our nation’s history during the 2008 financial crisis. As few of us can forget, signs of trouble first emerged in the housing market, which set off a cascade of shocks in 2007 and 2008, including the collapse of Bear Stearns and Lehman Brothers, the freezing of credit markets, and the loss of trillions of dollars of wealth held by Americans in their homes, other assets, and businesses. By the time President Obama took office, the United States was in the midst of the worst recession since the Great Depression. The economy was shrinking at its fastest rate in 50 years and shedding more than 800,000 private-sector jobs per month. Unemployment peaked at 10 percent in 2009, a level not seen in over 25 years. The auto industry, an embodiment of American ingenuity and economic strength, was teetering on the edge of collapse; the deficit had hit a post-World War II high; and homes in neighborhoods across the United States faced foreclosure. Though the financial crisis was perhaps the most pressing challenge the country faced in 2008, it was far from the only one. Health care spending was on an unsustainable path, and millions of Americans lived in fear of facing a significant medical problem without insurance. Middle-class and working family incomes had stagnated for much of the previous three decades. Wealth disparities had grown to levels not seen since the 1920s. And after two major wars in the Middle East and strained relationships in many parts of the world, the standing of the United States around the world was in need of significant repair. We have come a long way as a country since 2008. In the following pages, I will recount the Administration’s record of progress, with a specific focus on the role Treasury has played. I will also articulate a vision for the future, and recommend steps to be taken in the coming years to make progress towards that vision. Finally, I will end with some personal reflections. Eight Years of Progress Economic Recovery Over the eight years since President Obama took office amidst the worst financial crisis of our lifetimes, we have seen a sustained economic recovery and a significant decline in the federal budget deficit. We have cut the unemployment rate in half. Our economy is more than 10 percent larger than its pre-recession peak. U.S. businesses have added a total of 15.6 million jobs since private-sector job growth turned positive in early 2010. Household incomes are rising, with 2015 seeing the fastest one-year growth since the Census Bureau began reporting on household income in 1967. And our financial system is more stable, safe, and resilient, providing the critical underpinnings for broad-based, inclusive, long-term growth. There are many factors that explain why the United States was able to bounce back so strongly from the recession. First and foremost, I credit the resilience of the American people. In addition, our policy response to the crisis was immediate and robust. Led by my predecessor, Treasury Secretary Tim Geithner, policymakers put in place a wide-ranging strategy to restore economic growth, unlock credit, and return private capital to the financial system, thereby providing broad and vital support to the economy. In February 2009, just 28 days after taking office, President Obama signed the American Recovery and Reinvestment Act, which provided powerful fiscal stimulus that resulted in a less severe recession and stronger recovery than we otherwise would have seen. Investments made through our Troubled Asset Relief Program (TARP) provided stability to our financial system, and the Automotive Industry Financing Program helped prevent the collapse of the U.S. auto industry. TARP also included housing initiatives that helped millions of struggling homeowners avoid foreclosure and lower their monthly payments. These efforts bolstered the housing market and strengthened consumer finances more broadly. And funds expended under TARP have been repaid in full, at a profit to taxpayers: in total, TARP invested $412 billion in financial institutions, large and small, during the financial crisis, and as of October 2016, these investments have returned $442 billion total cash back to taxpayers. Critically, we also acted quickly to reform our financial system, working with Congress to enact the most far-reaching and comprehensive set of financial reforms since the Great Depression: the Dodd-Frank Wall Street Reform and Consumer Protection Act. Wall Street Reform transformed the way the financial system operates, and Treasury and the financial regulators have continued to work together since its passage to implement important reforms such as the Volcker Rule, risk retention, and resolution planning for large, complex financial institutions. Because of these efforts, our system today is more stable, more transparent, and more consumer-focused. Wall Street Reform also created the Financial Stability Oversight Council, a body that looks across the entire financial system to identify future threats to financial stability, and the Consumer Financial Protection Bureau, a watchdog agency that is working hard to protect Americans from unfair, deceptive, or abusive financial practices. The progress we have made on implementing reform has resulted in a safer, stronger, and more stable American financial system—one better positioned to support growth rather than work against it, more likely for consumers to get fair treatment in their interactions with financial institutions, and less prone to major failures of financial firms that can harm Americans on Main Street. This progress must be sustained through continued follow-through, to avoid allowing a return to the recklessness and abuse that predated the worst global financial crisis of the last 80 years. A More Inclusive Economy Beyond working to bring our economy back from the brink and to spur growth, we also undertook efforts to ensure that more citizens have a fair shot at sharing in our nation’s prosperity. One of the Administration’s most significant achievements was the 2010 passage of the Affordable Care Act (ACA), which extended health insurance to millions of Americans who had not previously had it, allowed young adults to stay on the health plans of their parents, barred insurance companies from denying coverage to people with preexisting conditions, and strengthened Medicare’s solvency. Once the legislation was signed into law, Treasury implemented the law’s many new tax provisions. Beyond the ACA, the Administration made a number of other key changes to the tax code that has made our tax system significantly fairer and more equitable. Through programs like the Community Development Financial Institution Fund and myRA, and through extensive stakeholder engagement, Treasury has worked to promote access to the financial system for underserved and vulnerable populations. We also successfully worked with Congress to pass bipartisan legislation to enable Puerto Rico to undergo a financial restructuring. With continued commitment from policymakers in both the Commonwealth and the United States, this legislation will begin to put Puerto Rico on a fiscally sustainable path so that the 3.5 million Americans living there are not denied essential services and economic opportunity. Leading in the Global Economy As we put into place the financial regulatory framework to prevent future crises in the United States, we also led the international response to the crisis. We worked through the G-20 to help mobilize $5 trillion in fiscal stimulus, expand the resources of the international financial institutions by $1 trillion, and establish new institutions like the Financial Stability Board to prevent future crises. Our approach elevated the G-20 as the premier platform for international economic cooperation and put in place a demonstrated mechanism for international response. Following the financial crisis, many countries turned to policies of fiscal austerity, and Treasury vigorously advocated for a more balanced use of policy levers. Over the next several years, Treasury engaged closely with our partners and through the G-20 and other multilateral bodies to emphasize the need for short-term growth and longer-term structural reforms to put the global economy on stronger footing. Through our sustained engagement, we achieved a number of commitments from the G-20, including moving away from austerity-only fiscal policy and avoiding competitive currency devaluation. We have used the G-20 to advance a global growth agenda, and the U.S.-China Strategic & Economic Dialogue to foster increased bilateral economic coordination and engagement with China. Our sustained engagement with China has allowed us to exert positive pressure on Chinese exchange rate policy—whereas China once intervened in foreign exchange markets to drive down the value of its currency, in the past year, we have seen China intervene to prevent a rapid depreciation in the renminbi, which would have had negative consequences for the Chinese and global economies. Treasury also worked to solidify U.S. leadership by modernizing the international economic architecture to ensure that it would remain relevant in a changing world. In particular, securing the passage of International Monetary Fund (IMF) quota reform sustained U.S. leadership on the global stage. Our leadership in the IMF in turn enabled us to work through it to promote policies that supported U.S. economic and security objectives, such as economic stability in Ukraine and Greece. Promoting a Safer World Treasury has also continued to use its unique financial capabilities to address a variety of national security and foreign policy threats posed by terrorists, criminals and other bad actors. To address the changing threat posed by terrorism, including the threat posed by ISIL, we have worked with our international partners to deny terrorist financiers, fundraisers, and facilitators access to the international financial system with financial measures and targeted actions. Treasury’s sanctions against Iran played a critical role in forcing Iran to the table to negotiate a deal that cuts off the country’s pathways to a nuclear weapon. To hold Russia accountable for its aggression in eastern Ukraine and its occupation and attempted annexation of Crimea, we imposed sanctions that led to tighter financial conditions, weaker confidence, and lower investment in Russia. We also secured new domestic and multilateral sanctions measures against North Korea in the face of Pyongyang’s continued provocative behavior with regard to nuclear weapons and weapons of mass destruction. All the while, we have worked to craft a cohesive vision for the use of sanctions, in which sanctions are informed by financial intelligence, strategically designed, and implemented with our public and private partners to focus pressure on bad actors and create clear incentives to end malign behavior, while limiting collateral impact. In the face of emerging cyber threats, we have also made significant progress in coordinating cybersecurity efforts among financial regulators and the private sector, both domestically and internationally, to improve the financial sector’s resilience and to establish best practices for industry and government. A Vision for the Future Looking across the next five years, 10 years, and beyond, I see four major goals that mirror the progress above. Treasury should focus on: (i) continuing to promote more inclusive growth; (ii) moving from recovery to long-term fiscal health, (iii) remaining a leader in the global economy; and (iv) adjusting to the new threats in our world. Each of these goals brings with it major challenges that we must collectively overcome in order to reach them. Continuing to Promote Inclusive Growth Through the work of this Administration, the U.S. economy is growing again. But working families have not shared fully in the benefits of economic growth over the past decade, and there is evidence that our society has undergone structural changes that have fundamentally altered the basic social compact. It is crucial that the next Administration builds on the work already done to ensure that our prosperity is broadly shared. There are many aspects to inclusive growth, including: investing in infrastructure to create good middle-class jobs and lay the foundation for future growth, giving workers a stronger voice, enacting progressive tax policies, making quality education more available and affordable, and investing in retraining programs for those who have lost their jobs. One component most directly within Treasury’s purview is increasing access to the financial system; currently, many low-income and minority families are effectively locked out, operating without a credit card or banking history. Finding creative ways to increase access to the financial system—such as fostering new technologies—will help individuals and families transfer money and make payments safely and affordably. Financial inclusion allows people to manage life’s unexpected financial shocks, build long-term financial security, and take advantage of economic opportunities, like starting a business. Our inclusive growth agenda should not, however, be limited to domestic issues: more than 2.6 billion people live in poverty around the world, and more than two billion people rely solely on cash transactions. Moving underserved populations from a cash economy to formal banking not only increases their economic opportunity but also strengthens our ability to combat illicit and dangerous finance. Moving from Recovery to Long Term Fiscal Health The actions of this Administration, and the economic recovery those actions helped support, have sharply reduced deficits since 2009. However, both the Administration and the Congressional Budget Office project that, absent any changes in policy, the deficit will rise steadily over the next decade and beyond. Thus, while the actions of this Administration have put the country on a solid fiscal footing today, we must also focus on the long-term fiscal health of our nation. In recent years, the Administration has proposed a combination of smart investments and policy reforms that would keep the deficit under three percent of GDP for the next 10 years and nearly eliminate the fiscal gap over the next 25 years. Tax reform to curb inefficient tax breaks for the wealthy, close loopholes, and reform the taxation of capital income and financial institutions would make the tax system fairer and lower the deficit. Comprehensive immigration reform would boost labor force participation, productivity, and ultimately growth, directly addressing key fiscal challenges. Continued focus on health policy to further improve health care quality and control cost growth remains critical. This policy vision shows that investments in growth and opportunity are fully compatible with putting the nation’s finances on a strong and sustainable path. It also shows that responsible deficit reduction can be achieved without endangering vital support to poor Americans or undermining commitments to seniors and workers. Under President Obama’s leadership, there has been substantial economic and fiscal progress, showing what is possible when strategic investment to grow the economy is paired with smart reforms that address the true drivers of long-term fiscal challenges. While there is some scope for additional borrowing to finance smart investments in the next few years, ever-increasing borrowing is not sustainable as a long-run strategy, particularly when used to finance spending that does not generate higher growth or improvements for the middle class and in the case of deficit-increasing tax cuts, which deepen income and wealth disparities that are already a serious concern. Instead, the long-term fiscal health of the nation depends on smart investments in the middle class, tax reforms that close loopholes for the wealthy and ensure that everyone plays by the same set of rules, comprehensive immigration reform, and health reforms that build on our progress to date without sacrificing coverage or quality. Remaining a Leader in the Global Economy The United States must continue its long history of international economic leadership. Such leadership benefits American workers and families and enables the United States to project its values abroad to achieve its larger foreign policy objectives. Of course, the world has changed since the creation of our international financial architecture after World War II, and we must change with it. Perhaps somewhat counterintuitively, our influence internationally will increase if we share the benefits, as well as the responsibilities, of managing the global economic and financial system with emerging economies, such as China. Our influence, however, cannot be sustained if we either back away or insist on protecting the status quo. But we face a host of challenges. Our relationship with China is one of the most important in the world. While we have made much progress over the past eight years, the degree to which China is willing to takes the steps necessary to follow through on commitments to reorient its economy toward more sustainable growth, open up to foreign businesses, and be a partner in global governance, remains to be seen. As we saw from the example of Chinese exchange rate policy, engagement between the United States and China is an important means of maintaining pressure for China to implement policies that are necessary for China’s own medium and long-term economic health and to create a level playing field for the world economy. The UK’s decision to leave the European Union sent shockwaves through Europe and the world, and we must closely monitor the situation and continue to argue for the benefits of continued integration post-Brexit. Japan’s economy faces the ongoing challenges of an aging population and high public debt hampering the government’s ability to foster growth. We must also keep a watchful eye on emerging economies and the unique challenges they face. In particular, in recent years, we have made progress in our relations with Latin America, particularly with Mexico and Argentina, and we should build on that progress. Adjusting to the New Threats in Our World With the rise of state-sponsored and lone wolf terrorism, rogue nations, and international strongmen, we must address the reality that we live in a dangerous world. Making it safer means using every tool available—including the financial tools available to Treasury—to defeat and degrade terrorist organizations like ISIL. We must continue to leverage our ability to impose crippling sanctions on states and individuals to change behavior. We must seek to eliminate the proliferation of nuclear weapons. Cyber attacks on our financial system represent a real threat to our economic and national security, and maintaining vigilant and coordinated efforts to keep pace with and respond to these threats has been and will remain a crucial piece of Treasury’s work. And we must recognize global climate change for the economic and existential threat that it is and band together with the rest of the world to avert catastrophe. How to Make Our Vision a Reality How do we accomplish the goals laid out above? To be sure, there are a host of paths policymakers might take to do so, but I believe the following steps, which range from specific policy prescriptions to more general advice, are the most immediate. Infrastructure Spending Moving forward, we must redouble our efforts to make investments in our country’s transportation infrastructure, which help create middle-class jobs in the short term and drive broad-based economic growth in the long term. Indeed, by fixing our aging roads, bridges, and ports, we will help lay a foundation for widely shared economic expansion. The President’s business tax reform framework, discussed in more detail below, would generate substantial one-time revenues to fund new infrastructure investments. Paying for these investments by taxing overseas business profits would both be fiscally responsible and would help fix the perception that our tax system is not a level playing field. Continuing to come up with fresh, new ways to deploy capital will help the country achieve these goals. Effective partnerships between government and the private sector can play an important role in developing innovative solutions that efficiently leverage resources. And taking advantage of historically low interest rates to fund high-return public investments is simply smart fiscal policy. This Administration has long advocated for the creation of a national infrastructure bank, which would provide critical financing and technical support to foster public-private partnerships in U.S. infrastructure and establish a predictable source of long-term financing that would allow U.S. infrastructure to be consistently improved. Business Tax Reform Over the last eight years, Congress and the Administration have taken important steps to make the tax code fairer, support working families, and roll back unnecessary and unaffordable tax cuts for high-income families. In addition, using its administrative tools, the Administration has made substantial progress over the past eight years in combatting abusive tax practices. However, our business tax system remains in need of reform. As I have emphasized repeatedly throughout my time as Treasury Secretary, only Congress can enact business tax reform, which is necessary to remove incentives for businesses to relocate overseas, raise one-time revenues to promote infrastructure spending, and simplify tax compliance for smaller businesses. President Obama’s proposed plan for business tax reform sets out a framework for modernizing our business tax system. Among other elements, it would prevent companies from using excessive leverage in the United States to reduce their tax burden, impose a minimum tax abroad to help fight the global race to the bottom, impose a one-time tax on unrepatriated foreign profits, and reform the taxation of financial and insurance industry products. It also would close loopholes and special credits and deductions to lower rates without shifting the tax burden to individuals. Enacting such a plan would enhance our competitiveness and create an environment in which business rather than tax considerations drive decision-making. The President’s framework is also fiscally responsible, ensuring that business tax reform does not add to deficits over the long-term. I am hopeful that this framework will help to equip the new Congress to take responsible action on business tax reform. Housing Finance Reform Fixing our housing finance system remains the major unfinished work of post-financial crisis reform. Though the housing market has made significant strides thanks to efforts on the part of the Administration to help struggling homeowners, stabilize the housing finance system, and restore broader economic growth, many homeowners and neighborhoods continue to struggle. Fannie Mae and Freddie Mac remain in conservatorship and continue to rely on taxpayer support. Only legislation can comprehensively address the ongoing shortcomings of the housing finance system. A starting point for such legislation should be the principles President Obama laid out in 2013, which stressed a clearly-defined role for the government to promote broad access to consumer-friendly mortgages in good times and bad. While private capital should bear the majority of the risks in mortgage lending, reform also must provide more American households with greater and more sustainable access to affordable homes to rent or own. Global Economic Integration Global economic integration, including high-standards trade, leads to better economic outcomes than isolation and protectionism. High-standard trade agreements such as the Trans-Pacific Partnership can expand U.S. economic growth, open markets for American exports, and strengthen labor and environmental safeguards so that American workers can compete on a level playing field. But economic uncertainty, both domestically and abroad, threatens this framework. Whether driven by trade, technological advances, or the changing structure of the markets for labor and capital, these anxieties are real and deeply felt. In order to continue to enjoy the benefits of an integrated world, we need to focus on policies that address the real issues of inequality, such as slowing wage growth and increasing disparities in pay, to ensure that the benefits of trade are broadly felt. Strengthening the rules, alone, is not enough. To preserve this important engine of economic growth and international integration the United States and other advanced economies must also design and implement policies—including fiscal and tax policies—that advance the cause of inclusive, sustainable, and broad-based growth. Not all countries have the fiscal space sufficient to meet these needs, but after years of urging by the United States, policies of austerity are one-by-one giving way to policies designed to grow demand and improve incomes. The United States must continue to be an active voice in the global discussion of these issues. The United States must also maintain its leadership in the international financial architecture and ensure that the U.S.-led international financial system is adapting to best preserve U.S. interest in a changing world. This includes continued governance reforms of the IMF and multilateral development banks to reflect a changing world. Clear global rules create opportunities and incentives for innovation, invest, and work, which are critical to the United States and drive economic progress in other regions of the world. Continued Engagement with Challenging Partners Just as global economic integration has fueled economic growth, that integration—and our economic strength—provides us with additional tools to advance our priorities on the international stage. We should continue to use these tools judiciously to maintain pressure on those countries that take aggressive and destabilizing actions, such as Russia and North Korea, and provide sanctions relief when the targeted malign behavior changes, as with Iran and Burma. And, as we chart new courses with other countries, such as Cuba, we should be mindful of how we can use our economic tools to create the conditions for a changed relationship. We must always take care to avoid the overuse of sanctions, particularly our most unilateral tools like secondary sanctions that extend to non-U.S. persons. If we overuse these powerful tools, we risk lessening their impact when they are most needed and ultimately threaten our central role in the global financial system. Looking Forward with Optimism We have learned the hard way that deadlock does not produce good results—government shutdowns and near default on our debt cost the United States both economically and in standing around the world. It did not work in the 1990s, and it did not work over these past eight years. What has worked is finding opportunities in the sometimes quiet periods when bipartisan cooperation can lead to honorable compromise. In recent years, we have seen that targeted budget agreements could pave the way for more orderly and economically beneficial outcomes. We have seen that, on issues like creating a path forward for Puerto Rico and multi-year funding for our surface transportation programs, bipartisan compromise is still possible. But there is much more that requires this kind of progress. Treasury plays a critical role in finding areas where bipartisan solutions are possible. In a period when many thought little could be accomplished legislatively, we reached agreement on IMF Quota Reform, an approach to deal with Puerto Rico, and a permanent extension of expansions to the earned income tax credit and child tax credits that will reduce the extent or severity of poverty for millions of families with children. We have also used our existing authorities to limit corporate tax inversions, shed greater light on beneficial ownership to limit tax avoidance, realize tax parity for same-sex spouses, and opened relations with Cuba. And we have used our sanctions authorities to bring Iran to the negotiating table and limit the resources available to terrorist regimes and groups. I am proud of the record we have built over the past eight years. But during calmer economic times, policy makers are often tempted to roll back regulations, weaken reforms, and reduce oversight. I hope that future policymakers will take careful stock of the successes of this Administration as they consider the next steps forward. I remain an optimist about America’s future and wish the next team entrusted with responsibility for governing much success as it tackles the many challenges that remain and the new challenges that will present themselves over the coming years. Margaret Mulkerrin is the Press Assistant at the U.S. Department of Treasury. ###
Профицит бюджета США в декабре стал рекордным на фоне более высоких налогов на заработную плату, выплат со стороны Fannie Mae и Freddie Mac, а также снижения уровня безработицы. Доходы превысили расходы в прошлом месяце на $53,2 млрд по сравнению с дефицитом на уровне $1,19 млрд в декабре 2012 г., свидетельствуют данные Минфина США. Экономисты, опрошенные Bloomberg, ожидали показатель на уровне $44 млрд. В 2013 г. безработица в стране сократилась на 1,2 процентного пункта до 6,7%, и это самое сильное падение в годовом выражении с 1983 г. Укрепление экономики и увеличение налоговых поступлений позволили сократить дефицит страны в прошлом финансовом году, закончившемся 30 сентября, более чем наполовину: до $680,3 млрд по сравнению с рекордным показателем в $1,42 трлн в 2009 г. "Мы продолжаем видеть улучшение экономических условий, которое в настоящее время отражено в сокращении бюджетного дефицита", - отметил экономист Wells Fargo Securities LLC Майкл Браун. Доходность 10-летних казначейских облигаций снизилась до 2,83%, приблизившись к самому низкому уровню за месяц. Доходы бюджета составили $283,2 млрд в прошлом месяце по сравнению с $269,5 млрд в декабре 2012 г. Расходы составил $230 млрд по сравнению с $270,7 млрд в прошлом году. В течение первых трех месяцев текущего финансового года дефицит составил $176,3 млрд, тогда как с октября по декабрь 2012 г. показатель составлял $293,3 млрд. Платежи в казну от Fannie Mae и Freddie Mac выросли за год примерно на $34 млрд.
Мы совсем как то эту тему забросили, а зря. Все же на этот рынок много завязано. О каких суммах идет речь? Объем ипотечных кредитов (для жилой недвижимости, коммерческой, сельскохозяйственной) составляет 13.1 трлн долл на конец 2012 года. Из этих 13.1 трлн более 9.4 трлн записано на домохозяйства. Под эти кредиты выпускали тоннами всякого MBS’осного шлака, процесс полностью остановился в 2008 году. Сейчас совокупный объем MBS составляет 7.54 трлн, т.е. почти 58% всех ипотечных кредитов было секьюритизировано. На пике зверства было под 70%. Из 7.54 трлн около 80% эмитировано Government-sponsored enterprises (GSE) всякие там fannie mae и freddie mac, остальное остальное на частные структуры. Причем стоит обратить внимание на то, что в 2009 году более 4.4 трлн дефолтных бумаг (!) было изъято из частных структур в пользу государственных. Не будь этого, то все рухнуло. Программа TARP, кредитование ФРС и QE здесь не учитываются.Как это было...Чтобы оценить тенденции и масштабы, то лучше всего на графике.Как видно, процесс сокращения ипотечных кредитов продолжается. Низкие процентные ставки не помогают, кредиты не берут. А выкуп MBS не помогает тем более, т.к. сам процесс выкупа не имеет ни малейшего отношения к способностям и желаниям заемщиков получать кредит. Все, к чему имеет отношение ФРС - это стимуляция дальнейшей активности бангстеров по секьюритизации ипотечных кредитов, но если нет роста кредитов, то и чисто теоретически не может быть никакого роста активности в MBS. Поэтому проблема не в предложении кредитов, т.е не в банках, а в спросе (заемщиках). Нет спроса на кредиты, а банки бы рады опять шарманку запустить.Максимум, что может получиться из этой безумной затеи ФРС - так это провоцирование отрыва башни у бангстеров . С тем, чтобы условия получения займов были столь простыми, что получить займ мог бы любой, кто имеет в активах хотя бы один чупа чупс и половину недопитой банки коки. Возврат к тому, от чего пришли. Ничего этих людей не исправит.Кто держит весь этот мусор?Разумеется больше всех у ФРС – 1 трлн на конец 2012 и 1.15 трлн в настоящий момент. Ни одна структура единолично столько не держит. Это 15% рынка на 2012, к концу 2013 будет держать все 20% рынка. Тем самым это означает, что ценообразование на этом рынке под полным контролем ФРС и дилеров. Проще говоря, вторичного рынка больше не существует.Почти 4.5 трлн у финансовых структур (1.6 трлн коммерческие банки, 350 млрд ипотечные трасты, 347 млрд страховые фонды, 223 млрд пенсионные фонды, 170 млрд у брокеров и так далее).Частный сектор (домохозяйства и корпорации) сократили вложения почти в ноль. Причем домохозяйства по каким то загадочным причинам начали скупать MBS тогда, когда они наиболее активно падали в цене. На тот момент (2007-2008) они были самым крупным покупателем на рынке, нарастив всего за 1.5 года объем MBS на 500 млрд до 1.02 трлн, а потом в период с 2009 по 2010 все продали, когда ФРС запустил QE1Я раньше вам говорил, но повторю. Эта операция была похожа на хорошо спланированный инсайд. Группа лиц инсайдеров и аффилированных лиц с ФРС примерно в конце 2007-середине 2008 знала, что будет неизбежный выкуп MBS со стороны ФРС для поддержания рынка и примерно тогда готовился план по банкротству Лемана. Учитывая, что бумаги продавались с дисконтом, то предположительно через частные счета и некоммерческие организации был проведен выкуп на 300-400 млрд бумаг, которые по рыночной цене не стоили и половину от номинала. А потом продавали по номиналу ФРС, заработав сотни процентов чистой прибыли. Также поступали и дилеры, но в отличие от юридических лиц, физиков и НКО никто проверять не будет, т.к. об этом никто даже не догадывается. Т.е. более, чем вероятно, что на инсайде смогли отмыть через мошеннические схемы более 150 млрд чистой прибыли.Основные выводы1. Роста кредитования нет.2. Эмиссии MBS нет, т.к. нет роста кредитования.3. Рынок MBS под полным контролем ФРС и дилеров. Еще никогда в истории одна структура не держала такую долю рынка. 15% на 2012 и 20% на конец 2013. Вторичного рынка больше не существует в свободном формате. Цены регулируются ФРС.4. ФРС частная лавочка бангстеров и инсайдеров, которая действует прежде всего в интересах бангстеров и инсайдеров.5. По множеству косвенных и прямых признаков, инсайд о вероятном запуске QE1 был еще в начале 2008 года. Много подозрительных теневых операций по переброски средств в НКО. Откуда у НКО пол триллиона баксов, которые выкупали это говно в момент острой паники и краха. По моим оценка отмыли не менее 150 млрд чистой прибыли.6. Когда MBS в объеме не увеличиваются, а ФРС выкупает под 40 млрд в месяц + когда ФРС монетизирует гос.долг США, то избыточная ликвидность абсорбируется на рынке акций. Реципиентом являются дилеры – те, кто работает с ФРС и получает ликвидность от ФРС. НЕ нужно питать иллюзий, что рост фондового рынка чем то фундаментально обоснован. Очередная гнусная операция по перекачки ликвидности и поддержанию рентабельности фин.сектора в условиях, когда активность клиентов спала на рекордно низкий уровень. Не будет QE = не будет роста рынка.7. Единственной хорошей новостью является то, что этот бардак выходит на финишную прямую. Когда они сосредоточили в руках почти всю возможную власть и активы, то прорыв этого чуда-юда неизбежен. Учитывая то, насколько все ухудшилось за последний год, то ждать осталось не так и долго. Еще никогда контроль над активыми не был столь тотальным и всеобъемлющим.Более детальная таблица держателей MBS
Федеральная резервная система может увеличить объемы и расширить список активов, выкупаемых в рамках проведения третей программы количественного смягчения. Об этом заявил президент Федерального резервного банка Сан-Франциско Джон Уильямс.Такие действия возможны в ответ на слабую реакцию экономики США на текущий формат стимулирования экономики."В отличие от наших прошлых программ по выкупу активов у этой нет заранее определенной даты завершения. Вместо этого она напрямую привязана к тому, что происходит с экономикой. Мы можем даже расширить наши покупки, с тем чтобы включить в них другие активы", - заявил Уильямс.Уильямс также отметил, что хоть и согласно мандату ФРС список бумаг, который может быть на балансе регулятора, ограничен, однако все еще есть возможность выкупа казначейских облигаций всех сроков обращения, долговых обязательств ипотечных агентств Freddie Mac и Fannie Mae.Помимо этого, Уильямс также ожидает продления сроков программы "Твист". "Я ожидаю, что мы продолжим эту программу в 2013 году, и я также думаю, что существуют сильные предпосылки для увеличения объемов или продолжения выкупа других активов в 2013 году, включая Treasuries с более длительными сроками обращения", - отметил Уильямс.По прогнозам представителя регулятора, ФРС удастся добиться снижения безработицы до 7,25% уже в 2014 г., поэтому программа выкупа активов будет завершена до конца 2014 г.