KeNo's Housing and Economic Portal: Friday June 21 Housing and Economic stories

TOP STORIES:

Analysis: Abe courts new risk with plan to shake up public pensions - (www.reuters.com) He could announce the move as soon as Wednesday as part of a package of measures designed to kick economic growth into a higher gear. The prime minister has already pushed through $100 billion in government spending and shaken up monetary policy by prodding the Bank of Japan into a $1.4 trillion stimulus effort. Having long prescribed "bold" economic measures to turn around 15 years of grinding deflation and sluggish economic growth, he now wants the nation's public pensions to take more risk with their $2 trillion pool of funds. It is a policy that directly affects tens of millions of Japanese workers and pensioners in a country that is very conscious of how rapidly it is ageing. A government survey last year estimated those aged 65 or over would double by 2060. "The government is trying to do this with pension money," said Nobusuke Tamaki, a professor at Otsuma Women's University and a former director general of the country's biggest public pensions fund, the Government Pension Investment Fund (GPIF). "But how would the public at large feel if their pensions suffer huge losses? Politicians need to talk to the public about this and debate the issue in an intensive way." Shifting hundreds of billions of dollars from bonds into riskier assets, such as equities or infrastructure financing, also risks disrupting markets, already jittery following two weeks of volatility and some analysts questioned if the public funds had the expertise to manage greater investment risk.

Illinois Bond Grade Cut as Lawmakers Can’t Fix Pensions - (www.bloomberg.com) Illinois had its credit rating cut one level after lawmakers failed to restructure state pensions saddled with almost $100 billion in unfunded liabilities. Fitch Ratings cut the state’s $27.5 billion in general-obligation bonds to A- from A today, citing the inaction in the legislative session that ended May 31. Lawmakers adjourned without taking final votes on proposals to reduce an unfunded pension liability that grows by $17 million a day. As they left the capitol in Springfield, with plans to return in late October, members of both parties acknowledged a credit cut was almost unavoidable. Governor Pat Quinn, a Democrat, called the leaders of the state House of Representatives and the Senate to a meeting tomorrow. “If I could issue an executive order to resolve the pension crisis, I would have done it a long time ago,” Quinn, 64, said in a statement from his office in Chicago. He called the credit cut “no surprise.”

Turkish unions join fierce protests in which two have died - (www.reuters.com) Turkey's deputy prime minister apologized on Tuesday for "excessive violence" by police in an effort to defuse days of unrest, comments which contrasted sharply with Prime Minister Tayyip Erdogan's defiant dismissal of the protesters. With Erdogan abroad and strikes and demonstrations still rumbling on after five days, Deputy Prime Minister Bulent Arinc sought to assuage some of the anger at the government's initial hardline response to what began as a sit-in against plans to build on an Istanbul park. "The excessive violence that was used in the first instance against those who were behaving with respect for the environment is wrong and unfair," Arinc told a news conference in the capital Ankara. "I apologize to those citizens."

EU Seeks Role in Bank Shutdowns That Goes Against German Plan - (www.bloomberg.com) The European Commission is seeking to give itself the power to shut down failing euro-area banks as part of a draft crisis blueprint that defies German calls for a more decentralized approach. The Brussels-based authority is set to propose that decisions to force losses on crisis-hit lenders’ creditors, as well as other steps to prevent a disorderly collapse, should be taken largely out of national hands, according to a document obtained by Bloomberg News. While the system would include a “newly-created central resolution body,” final decisions would be taken by the commission itself. “Among EU institutions, the commission is best placed to play this role, bolstered by its experience of bank restructuring during the crisis under state-aid control, and given the need to ensure expeditious and effective decision-making,” according to the document.

Senators Near Plan to Abolish Fannie Mae, Shrink U.S. Backstop - (www.bloomberg.com) A bipartisan group of U.S. senators is putting the final touches on a bill that would liquidate Fannie Mae and Freddie Mac (FMCC) and replace them with a government reinsurer of mortgage securities behind private capital. The legislation, written by Tennessee Republican Bob Corker and Virginia Democrat Mark Warner with input from other senators, is likely to be the first detailed blueprint reflecting a growing consensus in Washington that the U.S. role in mortgage finance should be limited to assuming risk only in catastrophic circumstances. It also reflects the prevailing view among lawmakers that the two government-sponsored enterprises should cease to exist, according to a discussion draft obtained by Bloomberg News.

OTHER STORIES:

‘Temporary’ farm subsidy program may finally meet the reaper - (www.washingtonpost.com)

Strong pickup truck sales boosted U.S. autos in May - (www.reuters.com)