KeNo's Housing and Economic Portal: Sunday February 14 Housing and Economic stories

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TOP STORIES:

Greek Bonds Show Waning Faith It Can Avoid Bailout - (www.bloomberg.com) Greece is losing the confidence of bondholders that it will reduce the largest budget deficit in the European Union amid increased speculation that the country won’t be able to meet its debt obligations. The nation’s government bonds are the world’s worst performers in January, losing 6 percent in local currency terms and extending their decline over the past three months to more than 11 percent, Bloomberg/EFFAS indexes show. Credit-default swaps tied to Greece trade at about the same levels as Dubai when it got a $10 billion bailout from Abu Dhabi in December. Greek 10-year bonds rebounded today after EU Monetary Affairs Commissioner Joaquin Almunia said the country won’t default.

Commodity trading houses set to slip under Volcker net - (www.ft.com) Commodity trading houses are set to emerge as beneficiaries of US president Barack Obama’s clampdown on Wall Street as they escape proposed rules designed to hit banks. Mr Obama’s plan, known as the Volcker rule, would stop banks from trading on their own accounts if the business is unrelated to customers, potentially hitting their raw materials businesses. While details are fuzzy, executives at banks and the publicity-shy merchants of oil, metals, coal and foodstuffs are bracing for a shake-up of the commodity order. A ban on proprietary bets could present unique wrinkles in commodities, an important source of trading revenue for banks including Goldman Sachs and Morgan Stanley. Beyond trading abstract derivatives such as futures and swaps, several banks also buy and sell actual shipments of oil, gas, industrial metals and other physical assets.

Cloud of uncertainty over securitisation - (www.ft.com) More than two years into an economic crisis that started with hundreds of billions of losses on securities backed by mortgages, a more "normal" securitisation market remains elusive. Indeed, as 4,000 participants in the securitisation industry prepare to gather for a conference, a heavy cloud of uncertainty still hangs over the sector. Many financial markets have recovered from the shocks of 2008, with funding costs in many cases back to pre-crisis levels, but the repackaging of loans into securities is one crucial part of the financial plumbing that remains largely blocked. Indeed, it is still far from clear whether this market will shed its status as a source of toxic assets and revive as a significant source of funding. This, in turn, will affect how much banks can lend. This so-called "originate to distribute" model, where loans such as credit card loans and mortgages are taken off banks' balance sheets and sold to other investors, was a key source of funding for much of the last decade. "Is the 'originate to distribute' model dead? We still don't know, but if it is, the economy is likely to face even greater problems," says Lewis Cohen, partner at Clifford Chance in the US.

Portuguese minister hits at rating agencies - (www.ft.com) Portugal’s finance minister on Thursday condemned international credit rating agencies for damaging his country’s economy by making mistaken risk assessments.The attack came as yields on Portuguese government bonds rose to a six-month high on the back of a lukewarm response by rating agencies to the Lisbon government’s budget proposals to cut a record deficit. “Many of the problems we face are related to errors in risk evaluation that have been made, in part, by the rating agencies,” said Fernando Teixeira dos Santos. The agencies, the minister added, needed “to show moderation”. “We cannot be subject to the commercial strategies [of rating agencies] whose objective may be to increase their market share,” he said. It was “paradoxical”, he stressed, that rating agencies had appealed to governments to support economies at the height of the global crisis, but were now insisting that states rapidly consolidate their deficits.

Paulson Says Russia Urged China to Dump Fannie, Freddie Bonds - (www.businessweek.com) Russia urged China to dump its Fannie Mae and Freddie Mac bonds in 2008 in a bid to force a bailout of the largest U.S. mortgage-finance companies, former Treasury Secretary Henry Paulson said. Paulson learned of the “disruptive scheme” while attending the Beijing Summer Olympics, according to his new memoir, “On The Brink.” The Russians made a “top-level approach” to the Chinese “that together they might sell big chunks of their GSE holdings to force the U.S. to use its emergency authorities to prop up these companies,” Paulson said, referring to the acronym for government sponsored entities. The Chinese declined, he said. Russia’s five-day war with U.S. ally Georgia started on Aug. 8, the same day as the opening ceremonies of the Beijing Games. Prime Minister Vladimir Putin told U.S. President George W. Bush during those ceremonies that “war has started,” according to Dmitry Peskov, Putin’s spokesman. “The report was deeply troubling -- heavy selling could create a sudden loss of confidence in the GSEs and shake the capital markets,” Paulson wrote. “I waited till I was back home and in a secure environment to inform the president.”

Obama Hypocrisy Watch: Obama Rips Lobbyists, Then Gives Them Private Briefings – (www.nakedcapitalism.com) This is what Obama said in the State of the Union address: We face a deficit of trust – deep and corrosive doubts about how Washington works that have been growing for years. To close that credibility gap we must take action on both ends of Pennsylvania Avenue to end the outsized influence of lobbyists; to do our work openly; and to give our people the government they deserve. Yves here. The funny bit is Obama’s use of the phrase “credibility gap”. That was coined by the media to describe the whoopers that Lyndon Baines Johnson told with abandon while President. Does Obama recognize that he is channeling another legislator turned Chief Executive? He is certainly exhibiting the same sort of behavior. After criticizing lobbyists in his State of the Union address, what does Team Obama (in this case, the Treasury Department) do but invite lobbyists in for a private chat…about the State of the Union address? And no doubt to tell them the tough talk on banks meant less than it appeared to. The really appalling part is the lobbyists are so deeply embedded in the the operations of government, that the get upset when they are called bad names. Not only are they predictably blind to how corrupting their influence is, but they think their role is legimate, and have lost sight of the fact that the legislators and Executive Branch members that they influence need to have plausible deniabilty, hence need to issue the occasional stern statement about how awful lobbyists are before going back to business as usual. The fact that lobbyists are chafing at this necessary ritual says how disproportionate their role has become.

From The Hill: A day after bashing lobbyists, President Barack Obama’s administration has invited K Street insiders to join private briefings on a range of topics addressed in Wednesday’s State of the Union. The Treasury Department on Thursday morning invited selected individuals to “a series of conference calls with senior Obama administration officials to discuss key aspects of the State of the Union address.”… The invitation stated, “The White House is encouraging you to participate in these calls and will have a question and answer session at the end of each call. As a reminder, these calls are not intended for press purposes.”… A handful of lobbyists told The Hill on Thursday morning that they received the invitations and were planning to call in. Some lobbyists say they are extremely frustrated with the White House for criticizing them and then seeking their feedback. Others note that Democrats on Capitol Hill constantly urge them to make political donations. One lobbyist said, “Bash lobbyists, then reach out to us. Bash lobbyists [while] I have received four Democratic invitations for fundraisers.”… Lobbyists say the Obama White House has held many off-the-record teleconferences over the past year…Another lobbyist said these types of teleconferences occur “all the time.”

OTHER STORIES:

Corporate Bonds Beat Stock Returns by Most Since February: Credit Markets - (www.bloomberg.com)

Copper falls below $7,000 in rattled trade - (www.ft.com)

EU Has No Greek ‘Plan B’ as Finance Chief Pledges More Cuts - (www.bloomberg.com)

China’s Stock Index Falls in Biggest Weekly Loss in Two Months - (www.bloomberg.com)

Europe Weighs Possibility of Debt Default in Greece - (www.nytimes.com)

India Raises Reserve Requirement More Than Forecast - (www.bloomberg.com)

Japan Production Rises, Unemployment Falls as BOJ Highlights Yen Concern - (www.bloomberg.com)

Japan’s Housing Starts Slump to Lowest Since 1964 Olympics - (www.bloomberg.com)

European January Inflation Accelerates to Fastest in 11 Months - (www.bloomberg.com)

Senate, Weakly, Backs New Term for Bernanke - (www.nytimes.com)

Balancing stimulus and deficit reduction - (www.ft.com)