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STORIES:
Fed’s $4 Trillion Rescue Helps Hedge Fund as Savers Hurt -
(www.bloomberg.com) Deepak Narula’s mortgage-bond fund is up 39 percent this year. George
Sanchez’s monthly annuity payout is down 41 percent. The near-zero interest rate the Federal Reserve charges
financial firms, as well as securities purchases that will balloon the central
bank’s balance sheet to
almost $4 trillion next year, have made it easier for Narula’s $1.6 billion
fund to thrive and more difficult for Sanchez, a former college library
director, to enjoy retirement. Chairman Ben S. Bernanke’s efforts to energize the U.S. economy since 2008 have been
credited with rousing the housing market from a six-year funk, lowering the
jobless rate and putting more money in the pockets of both mortgage lenders and
borrowers. At the same time, Fed policy has been blamed for starving
money-savers of income and boosting certain asset prices, widening the gap
between the rich and the rest of the country, said Joseph E. Stiglitz, the Nobel Prize-winning
Columbia University economist. “Monetary policy has been indirectly,
surreptitiously helping the top and hurting the bottom,” Stiglitz said.
Municipalities Fight a Proposal to Tax Muni Bond Interest -
(www.nytimes.com) France's parliament has passed a contentious budget for next year that
includes a raft of new taxes aimed slashing the country's deficit and putting
it on the path to economic recovery. Socialist President Francois Hollande's budget
aims to cut €30 billion ($40 billion), with two-thirds of that coming in tax
hikes, including a 75 percent levy on incomes earned over €1 million. But it
was the increase in taxes on profits from investments that raised the most
hackles in France, touching off a Twitter revolution of entrepreneurs who
accused the government of punishing those who take risks. The bill, which the
conservative opposition complained doesn't make enough spending cuts, has
struggled to get through parliament. The lower house eventually passed it
Thursday in a show of hands vote.
Cash-for-Gold Loans Hide Shadow-Banking Risks in India - (www.bloomberg.com) When Rashmi Deshmukh needed money for her hand-knit clothing business in
Mumbai, she couldn’t wait for bank approval. Instead, she put up her wedding
jewelry as collateral at a loan-for-gold company to get cash on the spot. Muthoot Fincorp Ltd., which advertises three-minute gold loansand
has 3,125 branches across India, charged 24 percent
annual interest. While a bank gets half that rate, it would have loaned her
less and required paperwork, she said. “It’s faster, it’s easier, it isn’t
cheaper, but I get more for my gold from Muthoot than the bank,” said Deshmukh,
37, who borrowed 250,000 rupees ($4,576) in October because she had more orders
than yarn ahead of this year’s holiday season. Assets at non-bank lenders such
as Muthoot have increased 20 percent annually for the past five years to $670
billion, according to a November report by the
Financial Stability Board. That makes India the world’s second-fastest-growing
market, after Indonesia, for lending outside the banking system, or shadow
banking.
Weve
Nationalized the House Mortgage Market. Now What? - (www.propublica.org) At the height of the 2008 financial crisis, the country heatedly debated
whether to nationalize the failing banking system. Both the George W. Bush and
Barack Obama administrations rejected that path as excessive government
intrusion into the marketplace. Yet since then, with little planning and paltry
public discussion, the government has almost completely taken over the American
home mortgage market. Banks and other for-profit financial services companies
lend money to homeowners, but without the guarantees and other support the
government provides, the housing market would barely be functioning now. Fannie
Mae and Freddie Mac, the taxpayer-controlled housing giants, guaranteed 69
percent of new mortgages in the first nine months of the year, up from about 27
percent share in 2006, according to Inside Mortgage Finance. Meanwhile, the
Federal Housing Authority and the Department of Veteran's Affairs currently
back another 21 percent of mortgages, up from just 2.8 percent in 2006.
Altogether, 9 of every 10 new mortgages are backed by the U.S. taxpayer, up
from three in 10 in 2006, when the government share hit a decade-low, according
to the publication.
House
mortgage subsidy may be abolished - (www.sfgate.com)
Shirley Ann Stern is
such a big Giants fan that she's buying a new one-bedroom condo near AT&T
Park in Mission Bay. At $819,000, the one-bedroom would be considered top of
the line almost anywhere in the country but here, where it's just a notch above
San Francisco's median home price. Being able to deduct all her mortgage
interest from her taxable income makes the payments much more manageable, said
Stern, who works as a software security program manager. The deduction lops
several thousand dollars a year off her tax bill. "I'm a single woman
well into middle age," she said. "I have no other tax deductions
because I don't have children. I make a fairly decent salary, but frankly in
this area it would be hard to afford a nice place to live without a mortgage
deduction. It really helps."
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