Searching for foreclosures’ root cause

June 23, 2010 8:33 pm by Simone Baribeau

What’s causing the foreclosure crisis? Is it the correction in home prices across the US from bubble-induced highs or is it, as many claim, a result of lax lending standards and predatory subprime loans?

The distinction isn’t just splitting hairs. Governors of the Federal Reserve and other policy makers have put quite a bit of effort into blaming failures of mortgage regulation (rather than market failures) for the crisis. But are no-income McMansion moms really the ones feeding the foreclosures? Or are otherwise credit-worthy homebuyers defaulting as they realise they owe hundreds of thousands more than their home is worth? After all – I can afford to pay back a loan of $500, but if I’ve used it to buy a tulip bulb that’s now worth $1.50, I might just decide to cut my losses and give it to the bank to garden.

Crunching the numbers leads to some interesting, if inconclusive, results.

Continue reading: “Searching for foreclosures’ root cause”

Tags: asset bubbles, bubble, home prices, New York Fed, North America
Posted in Federal Reserve | Permalink

Financial conditions less supportive of growth

June 23, 2010 7:29 pm by Simone Baribeau

No change in the Fed funds rate. And no change in the extended period language. But, lest readers begin seeing monthly Fed funds meetings as uneventful, there has been a relatively interesting change in the Fed’s view of financial conditions.

From today’s statement:

Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad.

From the last statement:

While bank lending continues to contract, financial market conditions remain supportive of economic growth.

No big surprise, with the European debt crisis raging, but still a step back from the recently improving tone of the statement. And if that weren’t enough, today’s FOMC statement said information since the last meeting suggests only that “the economic recovery is proceeding.” The last statement had the economic recovery has “continued to strengthen.”

Tags: interest rates, North America
Posted in Federal Reserve | Permalink

Too-soon-to-address Too-big-to-fail?

June 16, 2010 10:18 pm by Simone Baribeau

Charles Plosser, president of the Philadelphia Fed, today gave a quite interesting speech on developing regulation to address too-big-to-fail financial institutions. His comments (well worth a read) on the Squam Lake Group’s recommendations (also worth a read) come after a lull in the too-big-to-fail discussion. A few months back, living wills, robust resolution mechanisms, and early intervention were at the forefront of the public policy debate. But as the european debt crisis has captured headlines, officials have been quieter on their plans to address the TBTF problem (until today’s conference), with the notable exception of St Louis Fed president James Bullard, who’s been explicitly stating the implicit guarantee still holds.

Continue reading: “Too-soon-to-address Too-big-to-fail?”

Tags: banking, financial reform, North America
Posted in Federal Reserve | Permalink

Calling the China bubble

June 14, 2010 11:12 pm by Simone Baribeau

If we are indeed facing a double dip downturn, James Bullard’s comments today on the strength of the global recovery will be long remembered.

Apparently unconcerned that the Fed (after missing the US housing bubble) would have lost credibility in its ‘no bubble!’ declarations, the St Louis Fed president said today:

While I am sympathetic to the possibility of ‘bubble’ phenomena in macroeconomics generally speaking, I do not think that we should interpret China in this light at the current juncture.
Continue reading: “Calling the China bubble”

Tags: Asia, asset bubbles, china, Global, North America
Posted in Federal Reserve | Permalink

Greece downgraded – again

June 14, 2010 6:28 pm by Simone Baribeau

Moody’s just slashed Greece’s rating to Ba1 from A3, a whopping four notches, bringing the ratings agency in line with its peers and the country’s debt squarely into junk territory. Moody’s, along with Standard and Poor’s and Fitch, had already downgraded the debt-laden nation in April, but by fewer notches.

From the release:

Moody’s Investors Service has today downgraded Greece’s government bond ratings by four notches to Ba1 from A3, reflecting its view of the country’s medium-term credit fundamentals.
Today’s rating action concludes the review for possible downgrade, which Moody’s initiated on 22 April 2010. Moody’s has also downgraded Greece’s short-term issuer rating to Not-Prime from Prime-1. Greece’s country ceilings for bonds and bank deposits are unaffected by the review and remain at Aaa (in line with the Eurozone’s rating). The outlook on all ratings is stable.
Continue reading: “Greece downgraded – again”

Tags: debt, eurozone, eurozone crisis, greece, rating, ratings
Posted in Uncategorized | Permalink

Fact-based fears?

June 11, 2010 7:56 pm by Simone Baribeau

The terror of bad economic policy.

Some 79 per cent of Americans think the budget deficit is an extremely or very serious threat to the future of the country: the same percentage as for terrorism, according to a USA Today/Gallup poll.

US residents also tend to prefer Republicans to Democrats when dealing with these issues.

Is this preference fact-based? Are Republicans, in fact, better than Democrats at keeping America’s shores safe and its budget in line?

There’s no easy way to measure terrorism, but budget deficits are quantifiable. So who’s done a better job balancing them?

Here’s the chart for the last 40 years.

Continue reading: “Fact-based fears?”

Tags: government spending, North America, politics, unemployment, US
Posted in Federal Reserve | Permalink

Not quitting just yet

June 11, 2010 3:59 pm by Simone Baribeau

Fans of Donald Kohn, second in command at the Federal Reserve, have a temporary reprieve today. Mr Kohn, who was slated to leave the Fed in a couple weeks, will now stay on perhaps until September.

Here’s the Fed’s statement:

Vice Chairman Donald L. Kohn announced on Friday that, at the request of Federal Reserve Chairman Ben S. Bernanke, he plans to remain on the Board until a new Governor is appointed but to leave no later than September 1. He had announced in March that he intended to resign at the expiration of his term as Vice Chairman on June 23, 2010. While he remains on the Board as a Governor, he will continue to participate in all Board and Federal Open Market Committee meetings.

Janet Yellen, now San Francisco Fed president, was nominated by President Barack Obama back in April to fill the soon-to-be vacant slot, but so far, there have been few visible moves to get the Senate confirmation process in motion – and Republicans have been actively obstructionist in confirming Obama picks to any government post.

Continue reading: “Not quitting just yet”

Tags: Donald Kohn, janet yellen, nomination, North America, politics
Posted in Federal Reserve | Permalink

Beige Book bullets

June 9, 2010 10:14 pm by Simone Baribeau

The Beige book backs Bernanke. The economy’s improving, albeit modestly, according to the aggregation of anecdotal evidence of economic activity in the 12 Federal Reserve districts. No big shockers in the report, but a few interesting items:

BP spill. Tourism’s up almost across the board, but the oil spill may be a drag. Atlanta reported “that the Gulf oil spill and Tennessee floods had already resulted in some vacation lodging cancellations. The potential exists for a much greater impact, although contacts are quite uncertain as to the ultimate effects.”
Continue reading: “Beige Book bullets”

Tags: beige book, ben bernanke, GDP, North America
Posted in Federal Reserve | Permalink

US job winners and losers

June 4, 2010 8:30 pm by Simone Baribeau

Today’s jobs numbers, which showed only 41,000 private sector jobs gained, were a disappointment. And where there are disappointments, there are losers. But where there are gains, there are winners! So, without further ado, this month’s list of job market winners and losers.

Winners

Continue reading: “US job winners and losers”

Tags: North America, unemployment, US
Posted in Uncategorized | Permalink

High wage job seekers

June 4, 2010 6:28 pm by Simone Baribeau

Well that was disappointing. The private sector in the US added only 41,000 jobs in May, compared with a 218,000 gain in April, and well below economists expectations.

But, hey, gains are gains. And among those over 25, the only group for whom the unemployment rate fell were people with who had at least a bachelor’s degree. Which implies that at least some of the gains were among high-wage job seekers (or, if you like, the working rich).

So where are people who earn over $100,000 getting jobs? According to a survey from TheLadders.com, a job searching service for high-income professionals, the five cities with the strongest job markets were Seattle, San Francisco, San Diego, Washington DC and Boston. The top sectors, the group says, were aerospace and defence, biotech, e-commerce, engineering, financial services, IT and software.

Continue reading: “High wage job seekers”

Tags: North America, unemployment, US
Posted in Uncategorized | Permalink

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