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NEW YORK — Connecticut Attorney General Richard Blumenthal Monday said he has opened an investigation into why a Federal Reserve bailout program will steer up to $400 million to the three largest credit rating agencies, which have been widely criticized for their role in the current financial crisis.
The firms, Standard & Poor's, Moody's and Fitch Ratings, are expected to benefit from fees generated from rating securities related to the government's $1 trillion Term Asset-Backed Securities Loan Facility, or TALF. The Fed's program was created in November to unclog frozen credit markets by purchasing new securities backed by loans such as student, auto and credit cards.
The securities have to be rated by two or more "nationally recognized rating agencies," according to Fed rules. However, all three top agencies have come under a lot of fire for assigning top ratings to complex financial instruments based on subprime mortgages, only to later downgrade them, which caused havoc in the credit markets last year.
"It is outrageous that the very firms which facilitated the credit debacle are now being rewarded for their ineptitude," says Sean Egan, managing director of Egan-Jones, a small ratings agency.
Blumenthal sent a letter to Federal Reserve chief Ben Bernanke, asking him to revise the program. Blumenthal said the process "contradicts and undermines Congress' intent to enhance competition," and "rewards the very incompetence … that helped cause our current financial crisis."
Toxic debts could reach $4 trillion, IMF to warn
Toxic debts racked up by banks and insurers could spiral to $4 trillion (£2.7 trillion), new forecasts from the International Monetary Fund (IMF) are set to suggest.
The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia.
Banks and insurers, which so far have owned up to $1.29 trillion in toxic assets, are facing increasing losses as the deepening recession takes a toll, adding to the debts racked up from sub-prime mortgages. The IMF's new forecast, which could be revised again before the end of the month, will come as a blow to governments that have already pumped billions into the banking system.
Paul Ashworth, senior US economist at Capital Economics, said: “The first losses were asset writedowns based on sub-prime mortgages and associated instruments. But now, banks are selling ‘plain vanilla' losses from mortgages, commercial loans and credit cards. For this reason, the housing market will play a crucial part in how big the bad debt toll is over the next year or two.”
In its January report, the IMF said: “Degradation is also occurring in the loan books of banks, reflecting the weakening outlook for the economy. Going forward, banks will need even more capital as expected losses continue to mount.” At the same time, there is a clear shift in congressional attitudes in the United States about simply pumping money into the system, Mr Ashworth said. The British Government is also under pressure to repair its tattered finances. Injecting more money into the banks could further undermine its fiscal position.
The IMF's jump will come as little surprise to economists who have suggested that the bad debts will be much higher than anticipated. Nouriel Roubini, chairman of RGE Monitor, expects bad debts from US-originated assets to reach $3.6 billion by the middle of next year. This figure is expected to rise when bad debts from assets elsewhere are calculated, he said.
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Fannie, Freddie Quietly Lift Moratorium on Foreclosures
A ban on foreclosure sales and evictions from houses owned by mortgage giants Fannie Mae and Freddie Mac, which began as a high-profile effort just before the holidays to keep people in their homes as the government tried to come up with homeowner rescue plans, is over.
Spokesmen for Fannie Mae and Freddie Mac confirmed the ban ended March 31, in a response to an inquiry from TWI. The agencies made a major announcement in November to roll out the ban, garnering headlines and extensive news coverage. Freddie Mac CEO David Moffett issued a statement at the time, saying the ban “provides a new measure of certainty” to families facing foreclosures during the holidays.
But its expiration didn’t seem to merit the same level of fanfare, with some housing advocates caught by surprise, scrambling for information today and Wednesday on listservs and in phone calls.
Danilo Pelletiere, research director for the National Low Income Housing Coalition, said the ban’s eventual expiration wasn’t unexpected - but it also wasn’t clear specifically when it was supposed to end. Some housing attorneys and advocates were confused because they were in the middle of cases that would be affected by the expiration. Fannie and Freddie have repeatedly extended the ban, which was originally expected to expire on Jan. 9.
Fannie Mae said in a brief statement from spokesman Brian Faith that “Fannie Mae’s suspension of foreclosure-related evictions concludes as of March 31, 2009. The company has in place special foreclosure sale requirements that take into account the Making Home Affordable program. A foreclosure sale may not occur on any Fannie Mae loan until the loan servicer verifies that the borrower is ineligible for a Home Affordable Modification and all other foreclosure prevention alternatives have been exhausted.”
Quarter of companies globally set to freeze pay: survey
HONG KONG (Reuters) - A quarter of the world's companies, and 40 percent in the United States, plan to freeze salaries this year, but employees in South America and India can look forward to robust rises, a global survey shows on Tuesday.
Employees in Japan, Lithuania and Ireland will see the lowest pay rises, according to the survey of 53 countries by London-based research company ECA International. In recession-hit Japan, half of companies plan to freeze salaries.
"I think the dollar is now under question and I think the system will need to be reformed, so that the United States will be subject to the same discipline as is imposed on other countries," said Soros, whose famous bet against the British pound earned his Quantum Fund $1 billion in 1992.
Soros also said the U.S. dollar is under selling pressure and may eventually be replaced as a world reserve currency, possibly by the IMF's Special Drawing Rights, a synthetic currency basket comprised of dollars, euros, yen and sterling.
then the crisis will entail a « general geopolitical dislocation » by the end of the year, affecting the international system as well as the very structure of large political entities such as the United States, Russia, China or the EU. Any chance for you to control the fate of the 6 billion inhabitants of the world will then be over.
Originally posted by disgustedbyhumanity
They are tired of being wrong and know it will only continue. I give it a few more weeks and I think this thread will be dead for good. This market will not rest until about 10,500 on the dow. Shortly after it gets there people will realize the economy has improved and they will take it up even higher. It all comes down to how much you will you pay for a dollar cash flow. Thats the true measure of a companie's worth. Pretend you were going to buy a business that gave you income of $100,000 a year. How much would you pay for that income given the 10 year treasury is below 3%? Be honest.
Originally posted by pluckynoonez
Since when did unicorns start pooping Skittles? That is perplexing.
"All the markets have risen sharply in last the few weeks and the markets are overbought," said Peter Lai, investment manager at DBS Vicker in Hong Kong. "Many people are now waiting for news or economic figures as an excuse to take profits, and some of smart funds are already selling."
Yes, you can break that 8k piggy bank.
It's getting more difficult to find decent living accommodation these days.
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U.S. apartment market worsens with economy: research firm
NEW YORK (Reuters) - The vacancy rate for U.S. apartments hit a three-year high in the first quarter and asking rents dropped the most in at least 10 years as the number of excess apartments on the market ballooned, according to real estate research firm Reis Inc.
And the figures are forecast to get even worse as more apartment buildings are expected to open this year, increasing supply, and as the U.S. employment picture gets uglier, Reis said.
Job creation is the No. 1 driver of demand for apartments.
"Given that things are weakening right now, any new buildings that come on will add additional pressure to landlords," Victor Calanog, Reis director of research, said.
The national apartment vacancy rate rose to 7.2 percent in the first quarter, up 0.60 percentage points from the prior quarter and 1.1 percentage points from a year earlier, according to the report, released on Tuesday.
Since reaching a cyclical low of 5.5 percent in the third quarter of 2008, the U.S. apartment vacancy rate has surged 1.7 percentage points, Reis said.
It was the highest vacancy rate since the first quarter of 2002. That was right before the last downturn bottomed out, but Reis expects the picture to get a lot darker as "we are arguably only at the beginning of the current downturn."
Where in the world are people going???