The US is starting to pare back its emergency support for banks and financial markets, Treasury secretary Tim Geithner said on Thursday, announcing that the state guarantee for the $2,500bn money market mutual fund industry will expire on schedule this month. Nearly a year after the collapse of Lehman Brothers helped tip the world into recession, Geithner said it was time to move from crisis response to recovery. He also backed a review by the FDIC bank regulator that is likely to end or restrict funding guarantees for banks.
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Showing posts with label FED. Show all posts
Showing posts with label FED. Show all posts
Friday, 11 September 2009
Tuesday, 25 August 2009
Summer(s) in the City...
He wanted Ben Bernanke’s job, but he’s not going to get it.
Reuters:
U.S. President Barack Obama will reappoint Ben Bernanke for a second term as chairman of the Federal Reserve on Tuesday, a senior administration official said on Monday.
Bernanke, whose four-year term as head of the U.S. central bank ends on January 31, 2010, will also be praised by Obama for his handling of the financial crisis, the official said.
If Summers was the only other option on the table, then I’m not so disappointed Bernanke is sticking around. That said, I think Fed policy under Bernanke has been terrible.
U.S. President Barack Obama will reappoint Ben Bernanke for a second term as chairman of the Federal Reserve on Tuesday, a senior administration official said on Monday.
Bernanke, whose four-year term as head of the U.S. central bank ends on January 31, 2010, will also be praised by Obama for his handling of the financial crisis, the official said.
If Summers was the only other option on the table, then I’m not so disappointed Bernanke is sticking around. That said, I think Fed policy under Bernanke has been terrible.
The Greenspan interventions he supported inflated the largest credit bubble in 80 years; the de-leveraging that needs to happen to correct the damage has been delayed indefinitely by Bernanke’s own interventions. (Rolf Winke)
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Wednesday, 12 August 2009
A crowded trade...
Beware of crowds.
Will the FOMC announce new measures tonight in order to reduce the quantitative easing? If they do it will boost the dollar further.
This is a crowded trade where the crowd is/was bearish. So move it in the other direction if you wanna earn some bucks.
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This is a crowded trade where the crowd is/was bearish. So move it in the other direction if you wanna earn some bucks.
Monday, 10 August 2009
Bernanke: my man...
Looking back can be terrible.
Take this guy, Bernanke, and what he said in the recent past.
July 2005
INTERVIEWER: Tell me, what is the worst-case scenario? Sir, we have so many economists coming on our air and saying, "Oh, this is a [housing] bubble, and it's going to burst, and this is going to be a real issue for the economy." Some say it could even cause a recession at some point. What is the worst-case scenario, if in fact we were to see prices come down substantially across the country?
BERNANKE: Well, I guess I don't buy your premise. It's a pretty unlikely possibility. We've never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don't think it's going to drive the economy too far from its full employment path, though.
[FYI: In July 2005, the median price of homes sold in the U.S. was $227,800. The most recent data from the National Association of Realtors indicates that the current median price of homes sold in the U.S. is $170,200, which reflects a decline of more than 25% from when Bernanke gave this interview.]
November 2006
BERNANKE: This scenario envisions that consumer spending, supported by rising incomes and the recent decline in energy prices, will continue to grow near its trend rate and that the drag on the economy from the [inaudible] housing sector will gradually diminish. The motor vehicles sector may already be showing signs of strengthening. After having cut production significantly in recent months, in response to the rise in inventory of unsold vehicles, automakers appear to have boosted the assembly rate a bit in November, and they have scheduled further increases for December. The effects of the housing correction on real economic activity are likely to persist into next year [2007], as I've already noted. But the rate of decline in home construction should slow as the inventory of unsold new homes is gradually worked down.
[FYI: According to data from the National Association of Realtors, home inventory reflected 7.2 months of supply in November 2006. The most recent data shows an inventory equal to 10.2 months of supply, an increase of more than 40%.]
February 2007
BERNANKE: We expect moderate growth going forward. We believe that if the housing sector begins to stabilize, and if some of the inventory corrections still going on in manufacturing begin to be completed, that there's a reasonable possibility that we'll see some strengthening in the economy sometime during the middle of the new year.
Our assessment is that there's not much indication at this point that subprime mortgage issues have spread into the broader mortgage market, which still seems to be healthy. And the lending side of that still seems to be healthy.
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Take this guy, Bernanke, and what he said in the recent past.
July 2005
INTERVIEWER: Tell me, what is the worst-case scenario? Sir, we have so many economists coming on our air and saying, "Oh, this is a [housing] bubble, and it's going to burst, and this is going to be a real issue for the economy." Some say it could even cause a recession at some point. What is the worst-case scenario, if in fact we were to see prices come down substantially across the country?
BERNANKE: Well, I guess I don't buy your premise. It's a pretty unlikely possibility. We've never had a decline in house prices on a nationwide basis. So what I think is more likely is that house prices will slow, maybe stabilize: might slow consumption spending a bit. I don't think it's going to drive the economy too far from its full employment path, though.
[FYI: In July 2005, the median price of homes sold in the U.S. was $227,800. The most recent data from the National Association of Realtors indicates that the current median price of homes sold in the U.S. is $170,200, which reflects a decline of more than 25% from when Bernanke gave this interview.]
November 2006
BERNANKE: This scenario envisions that consumer spending, supported by rising incomes and the recent decline in energy prices, will continue to grow near its trend rate and that the drag on the economy from the [inaudible] housing sector will gradually diminish. The motor vehicles sector may already be showing signs of strengthening. After having cut production significantly in recent months, in response to the rise in inventory of unsold vehicles, automakers appear to have boosted the assembly rate a bit in November, and they have scheduled further increases for December. The effects of the housing correction on real economic activity are likely to persist into next year [2007], as I've already noted. But the rate of decline in home construction should slow as the inventory of unsold new homes is gradually worked down.
[FYI: According to data from the National Association of Realtors, home inventory reflected 7.2 months of supply in November 2006. The most recent data shows an inventory equal to 10.2 months of supply, an increase of more than 40%.]
February 2007
BERNANKE: We expect moderate growth going forward. We believe that if the housing sector begins to stabilize, and if some of the inventory corrections still going on in manufacturing begin to be completed, that there's a reasonable possibility that we'll see some strengthening in the economy sometime during the middle of the new year.
Our assessment is that there's not much indication at this point that subprime mortgage issues have spread into the broader mortgage market, which still seems to be healthy. And the lending side of that still seems to be healthy.
Thursday, 16 July 2009
The sky is no limit... for Goldman
Lately Goldman Sachs moves more and more in the spotlights. Record earnings… sure.
But at whose expense?
A transfer from the average American into the pockets of the thiefs of Wall Street?
Less and less people are buying this success.
It is Felix Salmon, the blogicon of Reuters, reminding us of the promises of GS back in September.
It had become increasingly clear to Fed officials in recent days that the investment-banking model couldn’t function in these markets…
Goldman — and to a lesser extent, Morgan Stanley — has maneuvered through the credit crisis better than other investment banks. But its business model, which relies on short-term funding, is under attack. Some stockholders worry that its strategy of making big investments with borrowed money will go wrong someday, which would make it more difficult for the firm to get favorable borrowing terms…
The most fundamental problem is how to generate profit growth in a world that no longer tolerates high leverage.
Since Goldman has to report as a commercial bank to the FED concerning their derivatives positions, we learn that the leverage is 1000 times their capitalbase.
In term of VaR (value at risk) this enormous leverage is showing up as follows:
But at whose expense?
A transfer from the average American into the pockets of the thiefs of Wall Street?
Less and less people are buying this success.
It is Felix Salmon, the blogicon of Reuters, reminding us of the promises of GS back in September.
It had become increasingly clear to Fed officials in recent days that the investment-banking model couldn’t function in these markets…
Goldman — and to a lesser extent, Morgan Stanley — has maneuvered through the credit crisis better than other investment banks. But its business model, which relies on short-term funding, is under attack. Some stockholders worry that its strategy of making big investments with borrowed money will go wrong someday, which would make it more difficult for the firm to get favorable borrowing terms…
The most fundamental problem is how to generate profit growth in a world that no longer tolerates high leverage.
Since Goldman has to report as a commercial bank to the FED concerning their derivatives positions, we learn that the leverage is 1000 times their capitalbase.
In term of VaR (value at risk) this enormous leverage is showing up as follows:
Now, it’s too easy to blame Goldman for this and their bonuses. The first to blame in this story is the American Government. They took the risk that money would be used by healthy firms to make more money. They bailed out AIG without restrictions and/or control. In return, the feds did approve that AIG bailed out GS almost instantly.
The same FED granted GS an exception on the common VaR model applied by all other commercial banks.
How come?
Friday, 26 June 2009
Too big to fail...
Is there something rotten in the Kingdom of the US ?
FED president had to testify before Congress on the mater of Bank of Amercia’s acquisition of Merrill Lynch and whether or not the Federal Reserve pressured BofA CEO Ken Lewis into going through with the deal once due diligence showed up much bigger than expected losses at Merrill.
If you want to read this testimony, you can find it here.
What really happened is that BofA wanted to dump the Merrill deal and was then told by the FED not to do it. Even if this would cause problems for the bank.
The emails relating to the specific intention to not tell the SEC what was going on by senior Fed officials was very damning. Bernanke's pathetic response that he didn't know what this senior Fed official was doing, and that he was operating on his own in his stated intention to keep the SEC in the dark is either an admission of a complete failure of leadership.
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FED president had to testify before Congress on the mater of Bank of Amercia’s acquisition of Merrill Lynch and whether or not the Federal Reserve pressured BofA CEO Ken Lewis into going through with the deal once due diligence showed up much bigger than expected losses at Merrill.
If you want to read this testimony, you can find it here.
What really happened is that BofA wanted to dump the Merrill deal and was then told by the FED not to do it. Even if this would cause problems for the bank.
The emails relating to the specific intention to not tell the SEC what was going on by senior Fed officials was very damning. Bernanke's pathetic response that he didn't know what this senior Fed official was doing, and that he was operating on his own in his stated intention to keep the SEC in the dark is either an admission of a complete failure of leadership.
Friday, 12 June 2009
Hunting the FED
Earlier this week the House Committee on Oversight and Government Reform asked the FED to turn over documents including emails to and from Big Ben as well as some notes from meetings and conversations involving Bernanke; Hank Paulson and Ken Lewis, CEO de la Bank of America.
Congressional investigators are looking for details concerning the acquisition of BoA of Merrill Lynch.
But more is underway.
Ron Paul, member of Congress wants to propose bill HR1207 to audit the FED. For the moment ‘The Federal Reserve Transparancy Act’ has 206 co-sponers. Only 12 more are needed to introduce the bill in Congress.
For your info: the FED has 45 bln USD in capital and 2.1 trln USD in assets. And is not audited.
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Congressional investigators are looking for details concerning the acquisition of BoA of Merrill Lynch.
But more is underway.
Ron Paul, member of Congress wants to propose bill HR1207 to audit the FED. For the moment ‘The Federal Reserve Transparancy Act’ has 206 co-sponers. Only 12 more are needed to introduce the bill in Congress.
For your info: the FED has 45 bln USD in capital and 2.1 trln USD in assets. And is not audited.
Monday, 25 May 2009
Hey dad, I am off to do some shopping...
This one comes from Trader Mark:
Of course mall based REITs are among the best performers of the past few months as everything (and the sun) is "priced in". And the Federal Reserve is now expanding TALF to allow nearly every loan under the sun to be shielded from reality.
Commercial real estate is saved by the FED and the analysts, upgrading all REITS were they can lay their hands on.
In the mean time malls – the real American Idol – are emptying faster than I can hand out pocket money to my children. And believe me, they have a hole in both hands.
Tenants are fleeing, the industry’s woes are worsening and consumers are changing their spending practices.
What will the future bring? Sphere: Related Content
Of course mall based REITs are among the best performers of the past few months as everything (and the sun) is "priced in". And the Federal Reserve is now expanding TALF to allow nearly every loan under the sun to be shielded from reality.
Commercial real estate is saved by the FED and the analysts, upgrading all REITS were they can lay their hands on.
In the mean time malls – the real American Idol – are emptying faster than I can hand out pocket money to my children. And believe me, they have a hole in both hands.
Tenants are fleeing, the industry’s woes are worsening and consumers are changing their spending practices.
What will the future bring? Sphere: Related Content
Thursday, 21 May 2009
Let's bail everybody out
Good news for the commercial property industry. They will be saved too as the FED announced they will provide loans to finance the purchase of CMBS and other structures from July onward. The Fed is also evaluating the terms on which it could extend financing for investors to buy bubble-era subprime and jumbo mortgage-backed securities.
This crisis is unwinding as a fairy tale: we will all be saved in the end.
Elsewhere we mention that Congress is working on the Federal Reserve Transparency Act or known as HR 1207. As you know is the Federal Reserve Bank not really a central bank. They act as a central bank but they are a private company with shareholders as The Rotschilds, Goldman Sachs and many other names working in the shadow. They are not regulated and don’t have to report.
This crisis is unwinding as a fairy tale: we will all be saved in the end.
Elsewhere we mention that Congress is working on the Federal Reserve Transparency Act or known as HR 1207. As you know is the Federal Reserve Bank not really a central bank. They act as a central bank but they are a private company with shareholders as The Rotschilds, Goldman Sachs and many other names working in the shadow. They are not regulated and don’t have to report.
Since 2008, the Federal Reserve has loaned trillions of dollars in bailout money but refuses to tell Congress where it went. Legislative action is needed.
The Federal Reserve Transparency Act would give the GAO the authority to audit the Federal Reserve and report its findings to Congress. The bill was written by Rep. Ron Paul and has 165 cosponsors, mostly Republicans.
Democratic Congressman Alan Grayson is now working to get Democratic cosponsors for this bill (see Grayson's letter here).
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The Federal Reserve Transparency Act would give the GAO the authority to audit the Federal Reserve and report its findings to Congress. The bill was written by Rep. Ron Paul and has 165 cosponsors, mostly Republicans.
Democratic Congressman Alan Grayson is now working to get Democratic cosponsors for this bill (see Grayson's letter here).
Wednesday, 29 April 2009
Bull run - part 1
FED Day.
Nobody pays attention anymore, these days, to the FED action. Rates are zero… so what. However it’s worth to mention that the last three FOMC sessions, stocks performed very well every time.
So, come on FED, throw us some quantitative easing.
The hourly renko chart of the Standard & Poors 500 seems ready for another break-out in the early trading hours. Nothing can hold these markets back. Signed: Goldman Sachs who takes as a liquidity provider more than 20% of the daily volume for his own account….
Nobody pays attention anymore, these days, to the FED action. Rates are zero… so what. However it’s worth to mention that the last three FOMC sessions, stocks performed very well every time.
So, come on FED, throw us some quantitative easing.
The hourly renko chart of the Standard & Poors 500 seems ready for another break-out in the early trading hours. Nothing can hold these markets back. Signed: Goldman Sachs who takes as a liquidity provider more than 20% of the daily volume for his own account….
Wednesday, 25 March 2009
PPIP, Goldman Sachs and my bonus
Some news items are catching our attention.
Stress Test + PPIP + CAP = getting banks to recognize losses
In the FT we read:
"The government’s toxic assets plan will force banks such as Citigroup, Bank of America and Wells Fargo to take large writedowns on their loans, requiring them to raise more capital from taxpayers or investors, executives and analysts have warned. Senior bankers say the authorities’ latest drive, announced on Monday, to cleanse financial groups’ balance sheets by encouraging investors to buy troubled residential and commercial mortgages will prompt banks to record losses on those portfolios. “The unspoken fear here is that selling off loan portfolios would lead to more government capital injections into major banks,” said an executive at a large bank."
Goldman Sachs is going to repay 10 bln of funds received from the government’s TARP recapitalization plan. Bonuses are more important than anything else, it seems, for the greedy boys of GS. Some smaller banks have already signaled plans to repay TARP money, citing concern over changes in terms of the scheme and compensation restrictions. Marin Bancorp, IberiaBank, Signature Bank, Sun Bancorp and TCF Financial have all applied to repay a combined $689m of TARP funds.
The rally in equities, fixed income, the $ selloff… all seemed to be losing momentum yesterday, although some deceleration/pullback is to be expected after the 50 bps move in treasuries post-FOMC and the historic rally in US shares on Monday.
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Stress Test + PPIP + CAP = getting banks to recognize losses
In the FT we read:
"The government’s toxic assets plan will force banks such as Citigroup, Bank of America and Wells Fargo to take large writedowns on their loans, requiring them to raise more capital from taxpayers or investors, executives and analysts have warned. Senior bankers say the authorities’ latest drive, announced on Monday, to cleanse financial groups’ balance sheets by encouraging investors to buy troubled residential and commercial mortgages will prompt banks to record losses on those portfolios. “The unspoken fear here is that selling off loan portfolios would lead to more government capital injections into major banks,” said an executive at a large bank."
Goldman Sachs is going to repay 10 bln of funds received from the government’s TARP recapitalization plan. Bonuses are more important than anything else, it seems, for the greedy boys of GS. Some smaller banks have already signaled plans to repay TARP money, citing concern over changes in terms of the scheme and compensation restrictions. Marin Bancorp, IberiaBank, Signature Bank, Sun Bancorp and TCF Financial have all applied to repay a combined $689m of TARP funds.
The rally in equities, fixed income, the $ selloff… all seemed to be losing momentum yesterday, although some deceleration/pullback is to be expected after the 50 bps move in treasuries post-FOMC and the historic rally in US shares on Monday.
Friday, 20 March 2009
Bookkeeping
The FOMC remains very concerned about the economic and financial outlook. The Fed's balance sheet recently has shrunk modestly, but that does not reflect any deliberate actions. The Fed's support of commercial paper has unwound as activity in that market has declined. The Fed's balance sheet should start to grow again as the TALF program ramps up. Moreover, the decision to boost purchases of agency debt and mortgages, and to start directly buying Treasuries, suggests that the Fed's balance sheet will mushroom in the months ahead. The key point is that monetary policy will remain highly accommodative and proactive until there are signs that financial intermediation is working more effectively. The Fed's actions should be positive for both stocks and bonds.
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Thursday, 19 March 2009
Monday, 12 January 2009
Stealing wealth from the future
During the Second World War the FED drove the 10-year bond to yield 2.25%. It helped America win the war but it ended in teas for bondholders as inflation in 1946 jumped to 18%. Are we observing the same thing now?
Difficult to tell.
Fresh data suggest that economies all over the world are imploding. Japan’s economy seems to be contracted in the 4th quarter with 12% on an annual basis, the US, France and Germany shrank with 6% and Britain is following suit.
Difficult to tell.
Fresh data suggest that economies all over the world are imploding. Japan’s economy seems to be contracted in the 4th quarter with 12% on an annual basis, the US, France and Germany shrank with 6% and Britain is following suit.
The BRIC countries - and others – are bleeding as exports collapse. Russia has lost 27% of their 600 USD bln reserves since august and had to devalue their currency two times in two days. Capital flight is looming for these countries. And China’s 1.9 trln USD holdings of foreign bonds in order to hold down the yuan to boost exports are not longer necessary as the currency is weakening. Beijing needs to bring the money home to prop up their local economy. This will result ultimately in a sell-off of their holdings.
No wonder that the FED has to ‘monetize’ their debt in order to keep USD rates low. Printing money looks easy, but maybe it isn’t that simple: if these actions lose traction you have a big problem.
But that is for later.
On this very moment the FED started to buy 600 bln of mortgage bonds in order to force home loans down to 4.5%. US mortgage rates dropped 150 basis points in 2 months.
In expanding the FED’s balance sheet from 800 bln USD to 3 trln USD, the bank will find themselves with an overhang of bonds that must be sold again.
To whom?
That’s exactly the meaning of the phrase: ‘stealing wealth from the future’.
Tuesday, 6 January 2009
Danger ahead?
Something dangerous is going on in the markets. Very sudden we see people flocking to risky assets. This goes very fast. Prudence is out. Risk is in. With interest rates at zero, Treasury bills close to zero, the FED mispricing assets of Fannie Mae/Freddy Mac, MBS-paper and municipal bonds, investors and fund managers are forced to hunt for far more risky assets in order to realize a decent return.
This deliberate plan to funnel money into risk can be dangerous if a situation is created where the fundamentals are ignored.
Unemployment is rising, tax receipts are going down, the bond market –except the artificially supported part – is still very illiquid, earnings will be tumbling and all economic statistics are imploding.
Once the flush of last year will be digested and the buyers buying the dip, the question arises: where will money come from to keep the momentum going.
Or as Bennett Sedacca, president of Atlantic Advisors, is writing:
Forcing money into risky assets is perhaps the most dangerous experiment ever done, and is so large in scale and so unprecedented that we have no idea how it will end. I expect it to end poorly and with hyper-inflation.
Having said this: it would be rather painful to miss the boat for the next couple of weeks/months, but the buyer beware … jump off when appropriate.
Sphere: Related Content
This deliberate plan to funnel money into risk can be dangerous if a situation is created where the fundamentals are ignored.
Unemployment is rising, tax receipts are going down, the bond market –except the artificially supported part – is still very illiquid, earnings will be tumbling and all economic statistics are imploding.
Once the flush of last year will be digested and the buyers buying the dip, the question arises: where will money come from to keep the momentum going.
Or as Bennett Sedacca, president of Atlantic Advisors, is writing:
Forcing money into risky assets is perhaps the most dangerous experiment ever done, and is so large in scale and so unprecedented that we have no idea how it will end. I expect it to end poorly and with hyper-inflation.
Having said this: it would be rather painful to miss the boat for the next couple of weeks/months, but the buyer beware … jump off when appropriate.
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