Stocks are rallying after a surprisingly (very surprisingly) strong manufacturing report, which added fuel to what was already a fire. But beware, September (and most months, really,) has a tendency to start off strong – and end very weakly. We break it all down on this morning’s Markets Hub.
Dow Jones Industrials, Economic Indicators, Economy, Markets, S&P 500, Unemployment / 1 Comment
Everybody in Washington’s all fired up about this proposed consumer-finance protection agency and where it will be housed. Will it be independent? Will it be inside the Treasury? Or will it be inside the Fed? If you said, the Fed, you may win a t-shirt, because the latest reports have the new agency being housed within the central bank.
The Journal says lawmakers are close to a deal on that front, as well as new powers for the federal government to take the power to break up, large “systemically dangerous” institutions. “That plan tackles one of the most politically thorny flashpoints of the economic crisis: What powers should the government have to break up firms so it doesn’t have to resort to taxpayer-funded bailouts?” according to the Journal.
Watching this debate from a distance, I’m laughing so hard I just want to cry. This is what they’ve come up with? A Consumer Reports with the power to slap bankers on the wrist? The entire financial edifice came within hours of utter collapse, according to more than one account, and this is the response from Washington?
It still is not clear to me how any of these proposals will solve the problems that caused the financial crisis. Somebody tell me there will be rules preventing investment banking and prop desk operations from being under the government umbrella. That derivatives are going to be regulated. That capital ratios are going to be addressed. That accounting rules are going to be tightened.
If lawmakers feel they have enough agreement, Mr. Dodd could introduce his bill later this week and potentially hold a vote in his committee later in the month. If other lawmakers balk at agreements between Messrs. Dodd and Corker, it could make it tougher for them to pass legislation this year.
With any luck, this proposal will fall apart amid partisan wrangling, and a new bill that actually address the root causes will emerge. What is needed is a framework that ensures no bank gets too large to take down the system, that ensures the best way for banks to profit is by honest means, that restrains the worst impulses of individuals, and ensures they alone suffer the consequences if they stray.
But it will take a lot of luck.
Banks, Bonds, Credit Crisis, Economy, europe, Markets / 1 Comment
Thanksgiving may be our biggest secular holiday here in America (just ahead of Independence Day and the Super Bowl,) but for the rest of the world, it’s just Thursday. But, apparently, today’s not just another Thursday. From the it’s-probably-nothing-but department, Dubai has roiled markets with news it’s seeking a six-month “standstill” on debt payments for its Dubai World development. The Journal has the details:
DUBAI — This debt-laden city-state said Wednesday it would restructure its largest corporate entity, Dubai World, a conglomerate spanning real estate and ports, and announced a six-month standstill on the group’s debt.
The surprise move quickly sapped investor confidence in Dubai ‘s ability to pay down its large debt load, sharply increasing the price of insuring against a default. It also represents the most significant fallout so far in the city-state’s yearlong economic crisis, triggered by a collapse in its once-booming real-estate sector late last year.
Now, there must be something wrong with me, because I turned off “The Godfather” (AMC’s running all three today) to check the headlines and see what Fox Business was running, and imagine my surprise to see the futures down sharply. The markets have a lot of time to digest the Dubai news before they open here tomorrow morning, but the Dubai surprise was a real blast to European markets, whose banks are far more exposed to Dubai World than their U.S. counterparts, and Asian markets.
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Ever since then-Treasury Secretary Hank Paulson came up with the idea of buying impaired assets directly from banks, the plan has met with waves of opposition that have forced its proponents to back off, retool it, and present it under a new light.
But the plan could never get past the fact that its main component involved overpaying banks for depreciated assets. It’s latest incarnation, the Private-Public Investment Partnership, or PPIP, still hasn’t. But now, it seems, it may not matter so much.
The Journal reports today that at least one part of the plan, the FDIC’s program to buy loans, “is stalling and may soon be put on hold.”