| At the end of this month, the US Federal Reserve is due to freeze its programme to purchase Fannie and Freddie agency MBS that it implemented in the wake of the financial crisis. Logic might suggest that could potentially deliver a jolt to the market. |
| he degree of assistance that the Fed has provided has been eye-poppingly large: right now it is holding some $1,200bn of MBS |
| in the past couple of years, the Fed (and others) have poured so much money into the system, that this has made it painfully hard for mainstream fixed income investors to get returns, without taking very wild risks. |
| During the past two years, the full impact of the collapse of the securitisation market has been largely concealed from most investors – let alone American politicians – because of the sheer scale of government assistance on offer. |
| investors have been lulled into something of a false sense of security |
Arms manufacturing and dealing is the most successful growth industry. | In the area of durable goods, only about 4.4% of them, on average, were purchased by the pentagon over the last 17 years. But since the beginning of the financial crisis, durable spending by private industry decreased…while pentagon spending went up. The most recent figures show that 8% of durable orders are now bought by the military. |
| The numbers may show an increase in durable goods sold, but tanks and armored personnel carriers don’t lead to genuine growth. They lead to Soviet-style zombie growth…by the government, of the government, and for the government. The rest of the economy shrinks. |
| Fannie Mae guarantees almost a third of the $12 trillion home mortgage market – or about $4 trillion. And guess who guarantees Fannie Mae? You do!Read more at dailyreckoning.com |
Sometimes, there’s no way out. If you know you are going to fall of the bicycle, the best thing to do is to relax completely. If you tense up, you are certain to break bones. There are 27 different nations in the European Union. And guess how many languages? Two-hundred and thirty. That surprised us too. Spain alone has 6 official languages. |
But without doing any real research on the subject, we have discovered one word which is common to all these languages: bailout. |
| Who do you think the Greeks owe money to? That’s right, the big banks are behind this. They’ve got hundreds of billions at stake in Greece. If the Greeks can’t pay, the banks take a hit. Since no one wants the bankers to take a loss – except for us – once again, the feds are coming to the rescue. |
| Instead of letting the bad credit risks default, the feds weaken all credit. They’re giving debt a bad name, in other words. The risk of default for the particular country goes down; the risk of default of the entire system increases. After all, the debt doesn’t disappear. It has to be paid by someone. Sooner or later. Guess who that will be?Read more at dailyreckoning.com |
Credit Suisse says Greece must
raise €30bn (£26bn) in debt by mid-year, mostly in April and May. Greek
banks have been shut out of Europe’s inter-dealer markets, forcing them to
raise money at killer rates. They are suffering an erosion of deposits as
rich Greeks shift money abroad. This could come to a head long before April.
“Economically, we are in a very risky situation. Greece is close to
default. We face systemic risk like the Lehman collapse and unless there is
a bail-out for Greece, there will have to be a bail-out for the whole
European banking system within two or three months,” he said.
|
Yet they are damned if they don’t, and damned if they do. “A Greek
bail-out increases the risk of EMU break-up, because monetary union can only
work if everybody sticks to the rules,” Mr Felsenheimer said.
|
“Greek government would have to agree to a “long list” of demands to reform the Greek state”. From a Greek perspective that looks like loss of sovereignty to German diktat - an extremely volatile mixture given horrifying memories of the German war time occupation.
Germany and other eurozone partners are prepared to lend Greece money or to buy its sovereign bonds should the debt-laden Athens government run into trouble funding itself on the financial markets, according to officials in Berlin. |
A senior government official told the Financial Times on Wednesday: “Both are conceivable options, which will have to be decided on a case-by-case basis”, although he said it was “open” whether EU leaders would formally agree the plan at a summit on Thursday. |
Gordon Brown, UK prime minister, suggested on Wednesday that Britain would only get involved in a bail-out of Greece as part of an operation led by the IMF.
|
Buy your tickets for Bailout 2.0, coming to an economy near you. | U.S. stocks rose, recouping yesterday’s losses, as a European Union official held out the prospect of bailing out Greece in return for progress in reducing its budget deficit. |
| The Standard & Poor’s 500 Index climbed to its highest level of the session after Olli Rehn, who takes over as EU economic affairs commissioner tomorrow |
| The Dow Jones Industrial Average increased 185.39 points, or 1.9 percent, |
Austria is also reported to be engulfed in bank debt, not to mention Sweden and the Baltic States. Social unrest and an increasingly authoritarian States are liable to be the consequence, for the short term at least. Who knows after that? | Last night the European Commision used new EU treaty powers to impose strict measures upon the Greek government and economy. Greece has vowed to reduce its deficit from 13% of GDP to 3% by 2012 |
| The new socialist government is already meeting opposition from its trade union support base and a general strike has been planned. The EU is under pressure from the ECB and from dominant member Germany to bring a profligate Greece into line. |
| The measures are intended to prevent money flowing out of Greek government bonds for fear that Greece may not be able to meet its interest payment obligations. |
| It is the nature of such default risk episodes that contagion is a feature. |
| the attention has turned to Portugal |
| Spain is considered to be the next domino, and beyond Spain even the larger Italian economy is drawing attention. |
| Germans are renowned for being a nation of strict savers unlike their frivolous Club Med peers. Why should Germans have to stump for Mediterranean profligacy?Read more at money.ninemsn.com.au |
Trend-turning event, spotted by Elle d’Coda, Thanks.
Too bad I have had to re-clip it to include it in our classified collection. If only Amplifiers could elect to share categorisation and tagging functions …. That would be much more useful than “autogenerated tags” which simply repeat words in the text which are search-able anyway. Don’t look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system. A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits. Instead of helping to finance the rest of the government, as it has done for decades, our nation’s biggest social program needs help from the Treasury to keep benefit checks from bouncing — in other words, a taxpayer bailout. |
| Social Security hasn’t been cash-negative since the early 1980s, when it came so close to running out of money that it was making plans to stop sending out benefit checks. That led to the famous Greenspan Commission report, which recommended trimming benefits and raising taxes, which Congress did. |
| . Now, years earlier than projected, Social Security is adding to the government’s borrowing needs, even though the program still shows a surplus on paper.Read more at finance.yahoo.com |
So, from where will the money come for the next wave of bailouts? Too bad some of those billions in bonuses was not re-invested in building banks’ balance sheets. Still, it probably would not have been enough to make much difference, and bankers don’t believe in going down with the ship. Sauve qui peut is their motto. (Rough translation - every man for himself.) | Banks must raise billions to fend off crisis, says IMF |
The world’s biggest banks face an impending funding crisis, with a “wall
of maturities” fast approaching, and must raise billions more in
capital in the coming years, the International Monetary Fund (IMF) has
warned.
|
In comments which will reignite fears of a relapse into a second financial
crisis, the IMF said that
banks have yet to bolster their balance sheets sufficiently and could be
vulnerable to a whole range of shocks in the coming months.
|
It also indicated that with governments including the UK and the US borrowing
so much in the next few years, there was an increasing chance of a sovereign
debt crisis, something which could trigger chaos for public and private
sectors alike.
|
The Obama administration’s $75 billion program to protect homeowners from foreclosure has been widely pronounced a disappointment, and some economists and real estate experts now contend it has done more harm than good. |
| Critics increasingly argue that the program, Making Home Affordable, has raised false hopes among people who simply cannot afford their homes. |
| As a result, desperate homeowners have sent payments to banks in often-futile efforts to keep their homes, which some see as wasting dollars they could have saved in preparation for moving to cheaper rental residences. |
| “We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway.” |
| banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. |
| In 2008, more than 1.7 million homes were “lost” |
|
Is this the lull before the storm for US mortgages?
