- FT: IMF criticizes US stability plan. The Obama administration’s plans to stabilize the financial system lack “essential details” and have left the markets uncertain about how it intends to recapitalize the teetering US banking sector, says the International Monetary Fund. “Critical details concerning the valuation of distressed assets remain unclear,” says the IMF report, which was released in advance of next month’s summit of the Group of 20 countries in London. “The plan also does not address how severely undercapitalized or insolvent banks will be resolved . . . greater clarity on all these issues will be critical to ensure the plan’s effectiveness.” The IMF, which estimates that the G20 has so far delivered an aggregate 1.8 per cent stimulus, also recommends governments provide further demand boosts in 2010. “Given the likely protracted nature of the downturn countries with fiscal room should plan to sustain stimulus in 2010.”
- Fed Gets $4.7 Billion in Loan Requests for Debut of TALF Plan (Bloomberg) — The Federal Reserve’s effort to unfreeze markets for securities backed by loans kicked off with requests for $4.7 billion of financing, a total that officials hope will surge to as much as $1 trillion after investors resolve contract terms with dealers and other concerns. Investors could have used the Term Asset-Backed Securities Loan Facility to finance purchases of as much as $8.3 billion of securities. They asked for $1.9 billion in loans to buy securities backed by auto loans and $2.8 billion for debt linked to credit-card loans, the New York Federal Reserve Bank said yesterday.
- Bonus-Tax Plan Heads to Senate After House Passes 90% Levy (Bloomberg) — The Senate plans to vote next week on steep levies on employee bonuses after the House overwhelmingly approved a 90 percent tax on bonuses at American International Group Inc. and other companies receiving bailout funds. The Senate’s proposal on companies that got the federal money would place a 70 percent tax on the bonuses. Half that amount would be paid by employees, half by the companies.
- NY Times: US plans $5bn in aid for car suppliers. The Obama administration signaled its intent Thursday to provide broad relief to the American auto industry with the creation of a $5 billion fund to aid troubled parts suppliers. The financing from the Treasury Department for suppliers is the initial step by a presidential task force to stabilize the ailing industry, and could be followed by more bailout money for General Motors and Chrysler. Treasury Secretary Timothy F. Geithner said the $5 billion fund, drawn from the Troubled Asset Relief Program, would keep factories running while the industry undergoes a wider restructuring. The auto task force is expected to announce by March 31 whether it will extend more aid to the two Detroit companies, or possibly force them into government-managed bankruptcies.
- The Economist: American banks : Sharing the pain. If American banks were to convert all of their tier-one capital into common equity, then after bearing all losses, the available tangible common equity buffer in three years’ time would trough at between 2% and 5% of assets. Providing profits continue to roll in, that could be just about acceptable, particularly if the government’s plan to buy toxic assets also finally gets off the ground. Some banks may fail the stress tests—and if they do the political climate may demand that more senior creditors suffer. But it looks just about possible that America’s banking system can stagger on without defaulting. In God, and in the squashing of hybrid capital, do senior bank creditors trust.
- WSJ: Under 5%, Mortgages May Be Near The Bottom. The Federal Reserve is going to extraordinary lengths to push down long-term interest rates, including home-mortgage rates. But those hoping mortgage rates will fall sharply from current levels, already historically low, may be disappointed. Mortgage firms Thursday were quoting rates averaging 4.75% on 30-year fixed-rate mortgages, according to Zillow.com, a real-estate information service. That is down from more than 5% two days ago and about 6% in mid-November. But further big declines will be hard to achieve, partly because the mortgage-lending market has grown less competitive in the past year as hundreds of small banks and independent mortgage lenders have collapsed.
- FT: BofA linked to Merrill write downs. Bank of America was directly involved in markdowns that contributed to Merrill Lynch’s $15.3bn loss in the last quarter of 2008, its final reporting period before the Wall Street bank was acquired by BofA, sources familiar with the matter say. People familiar with the matter said BofA had dispatched Neil Cotty, its chief accounting officer, during the fourth quarter to work with Merrill’s finance team. They said Mr Cotty played an active role in preparing accounts, wielding influence with Merrill executives who were set to report to him and other BofA officials after the deal closed.
- Reuters: Senate’s Conrad sees $1.6 trillion in extra deficit. U.S. Senate Budget Committee Chairman Kent Conrad said on Thursday he expects federal deficit spending will be about $1.6 trillion greater over the next ten years than President Barack Obama’s budget plan forecasts. Obama submitted his budget outline to Congress last month which forecast almost $7 trillion in deficits through 2019, however a worsening economic picture is expected to make the budget outlook darker. Conrad told reporters that the additional $1.6 trillion over the next decade was based on projections of the Democratic majority’s budget committee staff.
- WSJ: Three Deals Launched on TALF-Debut Day. The Federal Reserve and Treasury lending program designed to revive consumer and business lending launched Thursday with at least three deals, though not all investors used the government’s financing. Nissan Motor Co. and Ford Motor Credit Co. sold more than $4 billion of bonds backed by auto loans that were eligible for the Fed’s Term Asset-Backed Securities Loan Facility, or TALF. Citigroup sold $3 billion of securities backed by credit-card payments. All the issuers were able to sell at or just below rates where similar types of securities trade in the open market.
- NY Times: House Passes Heavy Tax on Bonuses at Rescued Firms. The House overwhelmingly approved on Thursday a near total tax on bonuses paid this year to employees of the American International Group and other firms that have accepted large amounts of federal bailout funds, rattling Wall Street as lawmakers rushed to respond to populist anger. Despite questions about the legality of the retroactive 90 percent levy, Democrats and some Republicans said the tax on bonuses for traders, executives and bankers earning more than $250,000 was the quickest way to show angry Americans that Congress intended to recoup the extra dollars. Even backers of the measure noted it was an extraordinary step.
- WSJ: Raters See Windfall in Bailout Program. Credit-rating companies, widely assailed for their role in fueling the financial crisis with overly rosy debt ratings, stand to make a billion-dollar windfall in the government’s latest attempt to heal the credit markets. The new rescue effort, run by the Federal Reserve, kicked off Thursday with bond deals totaling more than $7 billion. Each bond issue will need to be blessed by at least two of the three big rating firms: Moody’s Investors Service, Standard & Poor’s Ratings Services and Fitch Ratings. If the ratings companies are wrong this time around, the Federal Reserve and the Treasury — and therefore taxpayers — will be on the hook for some losses.
Forex Overnight News
March 20th, 2009 · No Comments
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