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BOJ to pump $1.4 trillion into economy in unprecedented
stimulus - (www.reuters.com) The Bank of Japan unleashed
the world's most intense burst of monetary stimulus on Thursday, promising to
inject about $1.4 trillion into the economy in less than two years, a radical
gamble that sent the yen reeling and bond yields to record lows. New Governor
Haruhiko Kuroda committed the BOJ to open-ended asset buying and said the
monetary base would nearly double to 270 trillion yen ($2.9 trillion) by the
end of 2014, a dose of shock therapy officials hope will end two decades of
stagnation. The policy was viewed as a radical gamble to boost growth and lift
inflation expectations and is unmatched in scope even by the U.S. Federal
Reserve's own quantitative easing program.
The Big Risk of Fannie & Freddie's Big Profit - (www.bloomberg.com) Fannie Mae and Freddie Mac, the U.S. government-owned mortgage-finance
giants, are finally back in the black. The two
companies earned a combined net income of $28.2 billion in 2012 -- their most
profitable year ever. Fannie and Freddie will probably enjoy several more
banner years now that they seem to have finished working through their
portfolios of toxic subprime securities. Almost all of those profits will go to
the U.S. Treasury, which would allow lawmakers to claim credit for reducing the
budget deficit without having to raise taxes or cut spending. Despite the
recent good news, abandoning reforms of the companies would be a mistake.
Today's big profits may not persist once interest rates start to rise.
Policymakers should focus on fixing the mortgage giants so that taxpayers won't
ever be on the hook for their losses again.
Regulators closer to supervising nonbank financial companies
- (www.washingtonpost.com) The Federal Reserve approved a final rule Wednesday that brings the
government closer to placing large nonbank companies that were at the heart of
the financial crisis under stricter supervision. The rule leaves a strikingly
wide swath of companies on the table as potentially falling under tougher
oversight, including private-equity firms and hedge funds. Yet industry
officials and others following the process say it’s unlikely that officials
will ultimately single out more than a handful of firms. Jaret Seiberg, a
managing director at Guggenheim Securities, said in a report Wednesday that the
most likely firms to be designated are GE Capital, American International Group,
Prudential and MetLife.
No
cash? No worries. Home lenders ease up rules - (homes.yahoo.com) As housing
heads into the critical spring market, credit is finally beginning to thaw.
Lenders are increasingly approving low-down-payment loans, and
government-sponsored mortgage giant Fannie Mae is buying more of them. It is a
noticeable shift from the last four years, when 20 percent down on a home
purchase loan was the only game in the neighborhood. "In general lenders
have been willing to do more than they may have been willing to do in the
past," said John Forlines, chief credit officer for Fannie Mae's single
family business. "Our requirements have not changed significantly, but other
parties taking risk, the lenders and mortgage insurance companies in
particular, have been more flexible than they may have been in the past." Fannie
Mae will buy loans with as little as 3 percent down payment, but these loans
require private mortgage insurance. During the worst of the housing crash, when
the private insurers were sinking under billions of dollars in claims on
defaulted loans, that insurance was tough to get. The only low down payment
loan left was through the Federal Housing Administration (FHA)—the government's
loan insurer. The FHA took on a huge share of the market, far more than it was
ever meant to, and while that helped prop up the mortgage market in the short
term, it was not sustainable, and the FHA took on huge losses.
Time
bomb to the next crash is ticking as debt sales surge - (www.telegraph.co.uk) When dotcoms crashed, sub-prime imploded and banks collapsed it was not
hard to find the markets’ Cassandras who had spotted the problem and either
made millions betting against the bubble or written a book explaining how it
was all going to go wrong. Today, another bubble is ballooning but unlike those
that have gone before it most investors, policymakers and analysts are well
aware of its existence and the problems it could create. Sales of high-yield
debt – or, as they were once known, junk bonds – have exploded this year. In
January alone, non-investment grade Asian companies, those whose debt is ranked
by credit rating agencies as riskiest, sold just over $9bn (£6bn) of high-yield
bonds, a year-on-year increase of more 6,000pc, according to figures from data
provider Dealogic. In Europe, sales of high-yield debt is also running at
record levels and nearly $30bn of bonds have been sold so far this year. The
massive increase so soon after a financial crisis that was caused in part by
the credit meltdown has raised fears that less than five years on from the
bankruptcy of Lehman Brothers and the near failure of Royal Bank of Scotland
and HBOS, the world is setting itself up for another crash.
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