Posts Tagged USA
Big Banks Easing Terms on Loans Deemed as Risks
Posted by Oksana Grebenjuk in Banks, Favourites on Июль 6th, 2011
As millions of Americans struggle in foreclosure with little hope of relief, big banks are going to borrowers who are not even in default and cutting their debt or easing the mortgage terms, sometimes with no questions asked.
Two of the nation’s biggest lenders, JPMorgan Chase and Bank of America, are quietly modifying loans for tens of thousands of borrowers who have not asked for help but whom the banks deem to be at special risk.
Rula Giosmas is one of the beneficiaries. Last year she received a letter from Chase saying it was cutting in half the amount she owed on her condominium.
Ms. Giosmas, who lives in Miami, was not in default on her $300,000 loan. She did not understand why she would receive this gift — although she wasted no time in taking it.
Banks are proactively overhauling loans for borrowers like Ms. Giosmas who have so-called pay option adjustable rate mortgages, which were popular in the wild late stages of the housing boom but which banks now view as potentially troublesome.
Before Chase shaved $150,000 off her mortgage, Ms. Giosmas owed much more on her place than it was worth. It was a fate she shared with a quarter of all homeowners with mortgages across the nation. Being underwater, as it is called, can prevent these owners from moving and taking new jobs, and places the households at greater risk of foreclosure. Read the rest of this entry »
Standardizing AAA
Posted by Oksana Grebenjuk in Investing on Июль 1st, 2011
For many years, a AA-rated municipal bond did not have the same risk of default as a AA-rated corporate bond. In fact, the corporate bond was about 6 times more likely to default.
Over the last two years, credit rating agencies have standardized the municipal and corporate rating scales. This was a substantial change for the municipal bond market and had the effect of raising the credit rating of thousands of municipal issues. Many don’t understand why this large structural change was made, so I thought it would be helpful to share the history.
Many professionals within muniland have said that a substantial amount of “granularity” was lost in the municipal rating scale when it was equalized with the corporate bond scale. A municipal bond previously rated A2 was likely moved four notches up the rating scale to Aa1. This has the effect of “bunching” municipal ratings into a tighter band than they had previously been in, and it obscured the prior “granularity” that the muni scale had.
In May 2009 Congressman Michael Capuano, a Democrat representing the Eighth Congressional District of Massachusetts, introduced H.R. 2549 the Municipal Bond Fairness Act. Prior to joining Congress, Mr. Capuano served as mayor and alderman of Somerville, Massachusetts. Read the rest of this entry »
Americans may hit gas again after reserve release
Posted by Oksana Grebenjuk in Favourites, Trading Markets on Июнь 29th, 2011
Going lightly on the gas pedal, getting a few dollars of gas rather than filling up, cutting out the cruising, and swapping the BMW for a Dodge Caliber — those are ways Americans are coping with gasoline prices well above $3 a gallon.
But people pumping gas on Friday from Miami to San Francisco saw prospects for lower prices thanks to President Barack Obama’s decision on Thursday to tap the country’s emergency petroleum stockpile as part of a global effort to bolster tight oil supplies.
The release of 30 million barrels from the U.S. Strategic Petroleum Reserve may not make people reschedule long summer road trips but could spell welcome relief for household budgets crimped by an anemic economic recovery.
While it might be a political move by Obama to help his re-election bid for 2012, as some speculate, most drivers seemed happy to get a break, even a small one. Jonathan Sifuentes, a 26-year-old power company employee, called the decision «the right thing to do» as he fueled up a Toyota Camry sedan on Miami’s outskirts.
«Everyone is hurting, with the economy, and unfortunately we do need gas to maintain our lifestyle, to go to work, to get groceries, to pick up our kids,» he said. Read the rest of this entry »
Obama takes flak for tapping emergency oil reserves
Posted by Oksana Grebenjuk in Favourites, Trading Markets on Июнь 28th, 2011
President Barack Obama took withering fire from the oil industry and Republicans for agreeing to release the nation’s emergency oil supplies, a decision that senior officials said was prompted by the need to prop up the ailing economy.
Critics blasted the release of 30 million barrels of oil — half of a global injection coordinated by the International Energy Agency — as an ill-timed misuse of reserves at a time when U.S. supplies are relatively high, despite the loss of Libya’s exports for the past three months.
Some OPEC officials went further, calling it a political ploy that ignored Saudi Arabia’s promise to step up production and the fact that oil prices had already fallen sharply. But the move fueled questions about the timing and catalyst for releasing the stocks, which in the past have been reserved to address abrupt disruptions like natural disasters.
The Obama administration was also concerned about tight markets ahead of peak demand in the summer, when many Americans take to the roads for vacations. The jump in gasoline prices earlier this year was hurting Obama’s support as the White House was gearing up for its re-election campaign. Read the rest of this entry »
Wall St higher as investors bet on Greece plan
Posted by Oksana Grebenjuk in Fund Markets on Июнь 27th, 2011
Stocks rebounded from three days of losses on Monday as investors bet there would be a near-term resolution to some of the uncertainty over Greece’s fiscal crisis, but the absence of a firm plan could limit the market’s upside.
The Greek parliament will begin to debate a deeply unpopular austerity program that must be approved in order to get the next bailout payment. A Greek minister warned of «catastrophe» if the measure is not passed in a vote later this week.
French President Nicolas Sarkozy said his government had an agreement with French banks on rolling over Greek debt into new 30-year bonds, which helped ease tensions around the region.
Traders see a Greek sovereign default as unlikely, and the S&P 500 holding its 200-day moving average was viewed as a sign of technical support following two months of heavy selling that brought the index down about 7 percent.
«There’s still a lot of fear out there, but the absence of bad news over the past few days, coupled with the selloff late Friday, is creating a bounce now,» said Mitch Rubin, chief investment officer at RiverPark Advisors in New York. Read the rest of this entry »
Medicare’s Soviet Label
Posted by Oksana Grebenjuk in Insurance on Июнь 10th, 2011
Joseph Antos, the widely respected Wilson H. Taylor Scholar in Health Care and Retirement Policy at the American Enterprise Institute, agrees with the Soviet label. “Medicare ignores the market, setting prices for physician services based on an academic theory with its roots in the Soviet Union,” he wrote in his “Confessions of a Price Controller.”
Dr. Antos writes with authority on this issue. As he acknowledges in the piece, he oversaw both the academic study leading to this pricing system for physicians and its subsequent implementation.
I find it hard to disagree with Dr. Antos. Medicare fees are administered prices, set by a central government for the entire country. And that is Soviet economics.
So naturally one is led to ask: Who imported this fiendish Soviet pricing theory to the United States and imposed it on Medicare?
It was the administration of President Ronald Reagan, with the concurrence of a Congress controlled by the Democrats.
The Reagan administration acted after it became alarmed at the inflationary force inherent in a payment mechanism adopted by Medicare at its inception, at the behest of the hospital industry: retrospective, full-cost reimbursement of each hospital for its reported costs. Read the rest of this entry »
Are Taxes in the U.S. High or Low?
Posted by Oksana Grebenjuk in Budget, Favourites on Июнь 9th, 2011
Historically, the term “tax rate” has meant the average or effective tax rate — that is, taxes as a share of income. The broadest measure of the tax rate is total federal revenues divided by the gross domestic product.
By this measure, federal taxes are at their lowest level in more than 60 years. The Congressional Budget Office estimated that federal taxes would consume just 14.8 percent of G.D.P. this year. The last year in which revenues were lower was 1950, according to the Office of Management and Budget.
The postwar annual average is about 18.5 percent of G.D.P. Revenues averaged 18.2 percent of G.D.P. during Ronald Reagan’s administration; the lowest percentage during that administration was 17.3 percent of G.D.P. in 1984.
In short, by the broadest measure of the tax rate, the current level is unusually low and has been for some time. Revenues were 14.9 percent of G.D.P. in both 2009 and 2010.
Yet if one listens to Republicans, one would think that taxes have never been higher, that an excessive tax burden is the most important constraint holding back economic growth and that a big tax cut is exactly what the economy needs to get growing again. Read the rest of this entry »
G.M. Is Still Hopeful for Payback to Government
Posted by Oksana Grebenjuk in Business on Июнь 7th, 2011
The chief executive of General Motors said on Tuesday that he hoped the federal government would be able to sell its stake in the automaker soon, and expressed concern about the country’s economic recovery.
The executive, Daniel F. Akerson, said that G.M. was working to maximize its payback to taxpayers, but that the government did not make a bad investment even if it did not recover the full amount given to the company.
“At some level, the government’s got to decide: are they an investor or were they trying to save the industry?” Mr. Akerson told reporters ahead of G.M.’s first annual stockholder meeting since its 2009 government-financed bankruptcy.
A report last week by the White House National Economic Council concluded that the government would probably have to write off about $14 billion of the $80 billion spent rescuing the auto industry by the Bush and Obama administrations.
Mr. Akerson said that a G.M. liquidation would have saddled taxpayers with more than $17 billion in pension liabilities. G.M. has cut its pension shortfall in half since 2009, he said, adding that he wanted the plan to be fully financed during his tenure as chief executive. Read the rest of this entry »
Falling Home Prices Hit Big Banks, Fannie, Freddie
Posted by Oksana Grebenjuk in Trading Markets on Июнь 1st, 2011
Home prices began double-dipping months ago, but now that S&P/Case Shiller has chimed in, it really must be so. This report is the most widely-followed home price index, equally quoted in bank boardrooms, Treasury Department back rooms, and Congressional Committees.
The report finds home prices in Q1 of this year are now 2.9 percent below the previous quarterly bottom in Q1 of 2009, effectively giving up all the gains of the past few years, which were of course fueled by the home buyer tax credit.
«Just about everybody agrees we’re going to miss the seasonally strong period in 2011, which we should be at the very beginning of right now with May, but nobody thinks that will make any difference,» says S&P’s David Blitzer. «Everybody’s now keeping their fingers crossed for 2012 and wondering whether people just don’t want to own homes anymore.»
Keeping your fingers crossed for the housing market is just the tip of the iceberg. Prices have now fallen, on this index, more than they did during the Great Depression. «On that occasion, the peak in prices was not regained until 19 years after they first fell,» notes Paul Dales at Capital Economics. Read the rest of this entry »
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