Why Fannie Mae and Freddie Mac survived - (www.washingtonpost.com) One of the most interesting and uncovered stories these days is the survival of Fannie Mae and Freddie Mac — the giant housing entities created by the government and known collectively as the GSEs (government-sponsored enterprises). On Sept. 6, 2008, nine days before the Lehman Brothers bankruptcy, Treasury Secretary Henry Paulson put the GSEs into “conservatorship.” This meant that the government would cover their costs because they were bankrupt. The government’s aid ultimately totaled$187 billion. Even in Washington, that’s serious money, and it fostered an informal consensus: Fannie and Freddie had to go; taxpayers’ exposure was too great. “This is an opportunity to get rid of institutions that shouldn’t exist,” former Federal Reserve chairman Paul Volcker said. The GSEs had been — it was widely assumed — “consigned to the dustbin of history,” as financial writer Bethany McLean says in her new book, “Shaky Ground: The Strange Saga of the U.S. Mortgage Giants.” Well, not yet — and possibly never. Remarkably, their importance today is unparalleled. In 2013, President Obama said that “our housing system should operate where there’s a limited government role and private lending should be the backbone.” Just the opposite applies now: Government dominates housing finance.
Black Market For Black Gold Ignites As Jobless Roughnecks Resort To Oil Theft – (www.zerohedge.com) The allure of ill-gotten oil money remains strong. The lull in drilling has given oil companies more time to scrutinize their operations -- and their losses. As Bloomberg reports, during booms "they are moving at such a rapid pace there’s not a lot of auditing and inventorying going on," said Gary Painter, sheriff in Midland County, Texas, in the oil-rich Permian Basin; but "whenever it slows down, they start looking for stuff and find out it never got delivered or it got delivered and it’s gone." From raw crude sucked from wells to expensive machinery that disappears out the back door, drillers from Texas to Colorado are struggling to stop theft that has only worsened amid tens of thousands of lost roughneck jobs.
Debt Market Distortions Go Global as Nothing Makes Sense Anymore - (www.bloomberg.com) Something very strange is happening in the world of fixed income. Across developed markets, the conventional relationship between government debt -- long considered the risk-free benchmark -- and other assets has been turned upside-down. Nowhere is that more evident than in the U.S., where lending to the government should be far safer than speculating on the direction of interest rates with Wall Street banks. But these days, it’s just the opposite as a growing number of Treasuries yield more than interest-rate swaps. The same phenomenon has emerged in the U.K., while the “swap spread” as it’s known among bond-market types, has shrunk to the smallest on record in Australia.
The 5,000-year history of interest rates shows just how historically low US rates are right now - (www.businessinsider.com) The Federal Reserve continues to keep its benchmark interest rate target pegged to a range of 0% to 0.25%, which is where it has been since December 2008. That's low. Interestingly, rates aren't just low within the context of American history. They also happen to be at the lowest levels in the 5,000 years of civilization. Citing a speech by Bank of England chief economist Andy Haldane, Bank of America Merrill Lynch's Michael Hartnett and his team in a recent note to clients shared the following chart, which shows just how low today's rates are relative to other times in history:
The Next Chicago? Houston Faces Pension Crisis In Latest Example Of Local Government Fiscal Folly - (www.zerohedge.com) When it comes to state and local government crises, Illinois and Chicago, respectively, have become the poster children for what not to do if you want to be considered fiscally responsible. Illinois’ budget crisis was thrust into the national spotlight earlier this year when a State Supreme Court struck down a pension reform bid, setting off a series of events which culminated in Moody’s downgrading the city of Chicago to junk. From there, the nation media picked up on the story, leading to all sorts of amusing coverage including several pieces documenting the plight of Illinois lottery “winners” who the state began paying in IOUs thanks to the fact that Springfield couldn’t pass a budget even with the help of $30,000/month “guru” and Laffer disciple Donna Arduin. The fiasco culminated in the October announcement by Comptroller Leslie Geissler Munger that the state would miss a $560 million pension payment in November. As a reminder, here’s a look at Illinois pension problem:
Event-Driven Hedge Funds Are The `Worst Disappointment,' Says K2 - (www.bloomberg.com)
Reactions - Japan back in recession - (www.reuters.com)
Wary of capital outflows, Japan urges China to go slow on yuan reform - (www.reuters.com)
Japan Business Investment in Weakest Patch Since 2011 Earthquake - (www.bloomberg.com)
Emerging Stocks Fall to Six-Week Low on Paris Attacks; Won Drops - (www.bloomberg.com)
OPEC Export Price Falls Below $40 for First Time Since 2009 - (www.bloomberg.com)
Lending by China's Biggest Banks Falls for First Time Since '09 - (www.bloomberg.com)
China Stocks Rise on Suspected State Buying After Margin Curbs - (www.bloomberg.com)