Daily Archives: August 9, 2010

Freddie Mac, the second largest US mortgage finance company, said on Monday that it would need an additional $1.8bn from the US Treasury Department, as souring home loans continue to saddle it with losses. The company said it lost $6bn, or $1.85 a share, in the second quarter. That marked a sharp increase from the same period a year ago, when it lost $840m, but was improved from the first three months of the year.

Charles Hadelman, Freddie chief executive said, that the company “continues to support the still-fragile housing market by providing America’s families with access to affordable home financing and foreclosure alternatives” but that the market still faces real challenges. Read more

European economists at the Bank of America have set back the date they expect the ECB to start raising rates – to Q4 2011. Slow growth and muted inflation explains the change in forecast:

Our forecast of slower growth around the turn of the year implies that the output gap will not close as rapidly as we initially thought. With the economy operating beneath its potential, we argue that inflation pressures will stay muted over the forecast horizon. Accordingly, we are cutting our HICP inflation forecast by 0.1ppt to 1.4% for 2010 and by 0.2ppt to 1.6% for 2011. With inflation persistently below the ECB’s target of “less than, but close to 2%”, we have postponed the first ECB rate hike to December 2011, when we see a 25bp increase. If this forecast proves accurate, the ECB would have been on hold for 31 months – the last 25bp rate cut was announced on 13 May 2009. [emphasis ours] Read more

Three years ago, on August 9 2007, the European Central Bank shocked the world. As the global financial crisis first blew up, it acted quickly to provide emergency liquidity, pumping in €95bn. The surprise was not so much that rescue action was needed, but that the Frankfurt-based ECB had taken the global lead. Stuffy European institutions were not supposed to be as nimble.

With Europe’s banks already then in the eye of the storm, the ECB was fortunate to have an experienced crisis manager as president. Jean-Claude Trichet had handled financial market turmoil since his days as a French treasury official in the 1980s. Trained initially in mathematics and physics, and with a passion for poetry, Mr Trichet has since that fateful day overseen undreamt-of steps by the ECB to shore up the eurozone’s banks and economies. Read more

Posts will be thin on the ground this week, as Chris, Ralph and Robin are all on holiday.