KeNo's Housing and Economic Portal: Thursday April 9 Housing and Economic stories

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ECB Nerves Fray on Greece as Supervisors Rile Central Bankers - (www.bloomberg.com) Inside the five-month-old union between monetary policy and financial oversight at the European Central Bank, nerves are beginning to fray. As officials under ECB President Mario Draghi seek to replace deposits fleeing Greek banks without blatantly financing the state, the efforts of the institution’s new Single Supervisory Mechanism to do its part are riling the old guard. Central bankers say they are concerned that overly-strict orders to lenders could worsen the Greek turmoil. After building an institutional pillar that has supervised the euro area’s largest banks since November, the ECB is now facing one of the worst flare-ups in six years of sovereign-debt crisis. Officials must work out how to align their two policy arms in a way that can find a path through the Greek turmoil and set a template for handling banking turbulence to come.

Iceland Stuns Banks: Plans To Take Back The Power To Create Money - (www.zerohedge.com) Who knew that the revolution would start with those radical Icelanders? It does, though. One Frosti Sigurjonsson, a lawmaker from the ruling Progress Party, issued a report today thatsuggests taking the power to create money away from commercial banks, and hand it to the central bank and, ultimately, Parliament. Can’t see commercial banks in the western world be too happy with this. They must be contemplating wiping the island nation off the map. If accepted in the Iceland parliament , the plan would change the game in a very radical way. It would be successful too, because there is no bigger scourge on our economies than commercial banks creating money and then securitizing and selling off the loans they just created the money (credit) with. Everyone, with the possible exception of Paul Krugman, understands why this is a very sound idea. Agence France Presse reports: Iceland Looks At Ending Boom And Bust With Radical Money Plan: Iceland’s government is considering a revolutionary monetary proposal – removing the power of commercial banks to create money and handing it to the central bank. The proposal, which would be a turnaround in the history of modern finance, was part of a report written by a lawmaker from the ruling centrist Progress Party, Frosti Sigurjonsson, entitled “A better monetary system for Iceland”.

Reckoning Arrives for Cash-Strapped Oil Firms Amid Bank Squeeze - (www.bloomberg.com) Lenders are preparing to cut the credit lines to a group of junk-rated shale oil companies by as much as 30 percent in the coming days, dealing another blow as they struggle with a slump in crude prices, according to people familiar with the matter. Sabine Oil & Gas Corp. became one of the first companies to warn investors that it faces a cash shortage from a reduced credit line, saying Tuesday that it raises “substantial doubt” about the company’s ability to continue as a going concern. About 10 firms are having trouble finding backup financing, said the people familiar with the matter, who asked not to be named because the information hasn’t been announced. April is a crucial month for the industry because it’s when lenders are due to recalculate the value of properties that energy companies staked as loan collateral. With those assets in decline along with oil prices, banks are preparing to cut the amount they’re willing to lend. And that will only squeeze companies’ ability to produce more oil.

Cheap oil prices chop jobs by thousands - (www.usatoday.com) Planned oil industry layoffs in the U.S. are approaching 100,000 in the past four months with more likely to come. Oil-producing states such as North Dakota, Texas, Oklahoma and Louisiana are catching the brunt of the cutbacks just as consumers are enjoying cheaper gasoline prices brought on by the 55% drop in crude oil prices since last June. "The entire Midwest from Texas to North Dakota is really feeling the effects," saysMoody's Analytics economist Aaron Smith. About 91,000 energy-related job cuts have been made public since early December, says Continental Resources, the Oklahoma City-based oil producer, which has been tracking companies' layoff announcements by the week. They came from oil exploration and production companies, oilfield services companies and manufacturers, such as U.S. Steel, that supply them. Some cuts have occurred, and most are expected this year.

Cost of Borrowing Cash Overnight in Exchange for U.S. Treasurys Spikes - (online.wsj.com) The cost of borrowing cash overnight in exchange for U.S. Treasurys spiked on Tuesday to the highest level since the financial crisis, the latest sign that securities dealers are being squeezed by changes in short-term debt markets. The cash-for-Treasurys trades, known as repurchase agreements, or repos, are short-term loans in which government bonds or other high-quality securities are used as collateral. Dealers, including banks and independent firms, use the cash they get in repos to finance their day-to-day operations. They also stand as middlemen on the trades, matching lenders such as money-market funds with borrowers who need financing, such as hedge funds. The repo market has been subject to increased regulatory scrutiny since the demise in 2008 of Bear Stearns Cos. and Lehman Brothers Holdings Inc., which were presaged by difficulties in the short-term financing markets.

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