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Wednesday, August 12, 2009


Obama administration sends derivatives proposal to Congress
The Obama administration sent its proposal to overhaul the over-the-counter derivatives market to legislators on Capitol Hill. The sweeping plan involves forcing many derivatives products to trade on exchanges or alternative trading platforms to boost transparency. Reaction to the proposal has been cautious. SIFMA supports "regulatory reform of these markets, including additional regulatory transparency, while ensuring that derivatives continue to play a vital role in risk management as well as expanding the availability and lowering the cost of credit for borrowers," said Cory Strupp, managing director of government affairs at SIFMA. The Wall Street Journal (8/12)

*isn't it too bad that banks won't have consumers to kick around anymore with their bailouts for their risk taking?
Derivatives overhaul would cut into profitable market for banks: If the Obama administration's proposal for revamping the derivatives market is approved, hedge funds, JPMorgan Chase, Goldman Sachs and other banks will see pressure on their bottom line. The sweeping plan encourages derivatives users to use standardized derivatives rather than customized contracts, which would have increased capital and margin requirements. "The big broker-dealers make a lot of money trading these customized derivatives," said Paul Miller, a banking analyst at FBR Capital Markets. Bloomberg (8/12)

*oh yeah this is a good idea, use pensioners money to start an insurance fund to insure those toxic assets that pension funds shouldn't be investing in in the first place. IJIOTS
New York might form bond insurer with pension funds
New York Lt. Gov. Richard Ravitch and Comptroller Thomas DiNapoli are discussing plans to create a bond insurer. In an interview, Ravitch said the state would use pension funds to create the entity. Ravitch formulated the plan last year after watching Ambac Assurance and MBIA be downgraded. The Bond Buyer (free content) (8/12)

Feinberg's pay guidelines could become industry template
Kenneth Feinberg, the "special master" on executive compensation for the Obama administration, is responsible for establishing pay guidelines for senior executives at companies rescued by the U.S. government. Some expect Feinberg's decisions to become a template for the industry. "He's really the administration's spokesperson for what's acceptable compensation," said Mark Borges, a principal at pay consultancy Compensia. "Companies will have to pay attention to what he says." Bloomberg (12 Aug.)

*I guess if we don't have a job or a better quality of life then we don't care that we're no longer in a recession?
Statistics signal U.S. recovery with no new jobs, pay hikes
Economic indicators suggesting the U.S. recession is ending are increasing by the day, but those same indicators point to the likelihood that recovery will not mean good times for many Americans. The statistics indicate a recovery with no new jobs, no pay increases, and no growth in tax receipts for cash-strapped state and local governments. "It's going to be a recovery only a statistician can love," said Mark Vitner, senior economist at Wells Fargo. The Washington Post (12 Aug.)


China is not tightening credit, economists say
Although loan growth in China cooled during the past month, economists said the slowdown should not hinder the country's economy. "We do not think that the rapid credit expansion since early 2009 is sustainable and expect normalization for the remainder of the year," said Qing Wang, China economist at Morgan Stanley. "This slowdown in loan growth, therefore, should not be interpreted as policy tightening." (12 Aug.)

Analysis: Central banks can learn something from Australia
As the global recession runs out of steam and governments start wondering how to wind down their economic-stimulus programs, they might be able to learn a few things from Australia's central bank. The Reserve Bank of Australia took early action to cool off what could have become a housing bubble, and it managed to do it without catastrophe. Reuters (12 Aug.)

Wholesale prices in Japan record biggest annual decline
Japan raised the specter of sliding into deflation as wholesale prices dropped 8.5% for the year that ended in July, setting a record. "We're going to see increasing downward price pressure from weak demand," said Takeshi Minami, chief economist at Norinchukin Research Institute. Forbes/Reuters (11 Aug.)

Despite oil-price recovery, Russia's GDP plunges 11% in Q2
Russia's economy contracted 11% in the second quarter, prompting President Dmitry Medvedev to lash out against continued dependence on exports of energy and commodities. "We can't develop like this any further," he said. "It's a dead end. ... We will have to make decisions on changing the structure of the economy." Telegraph (London) (11 Aug.)

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