KeNo's Housing and Economic Portal: Wednesday April 12 2017 Housing and Economic stories

Tuesday, April 11, 2017

Wednesday April 12 2017 Housing and Economic stories

TOP STORIES:

Student-Debt Overhang Is Pushing Down U.S. Rates, Dudley Says - (www.bloomberg.com) The rising burden of student debt is weighing on interest rates in the U.S., and it would be a “reasonable conversation” for policy makers to explore making college tuition free, Federal Reserve Bank of New York President William Dudley said. The growing pile of student debt is “obviously one headwind to economic activity” that “probably pushes in that direction of lower equilibrium real rates” because it limits households’ spending power, Dudley said Monday during a press briefing in New York. Fed officials have been trying to estimate the so-called equilibrium level of interest rates that keeps economic growth on a steady and sustainable pace. The concept has increasingly dominated the debate about where to set the U.S. central bank’s benchmark rate and how quickly to move after policy makers in December 2015 embarked on their first tightening cycle in nearly a decade.

'Innovative financing' sours dairy giant in China's rural northeast - (www.reuters.com) The crisis at Huishan Dairy, one of China's biggest dairy companies, is a stark reminder of what can lurk in the dark corners of corporate China, where rapid growth can go hand in hand with tangled finances and heavy debt. China Huishan Dairy Holdings Co Ltd embraced what its executives called "innovative financing", from the sale and leaseback of its cows, to selling wealth management products for rich investors - financial antics that seem incongruous with the dusty fields, tin-roofed sheds and plastic greenhouses of Zhangwu county in northeast China. Now it is battling swollen liabilities, a short-term debt squeeze and considerable unwanted attention. After a late 2016 short-selling attack, it saw an 85 percent drop in its shares in a single day last month, wiping $4 billion off its value and triggering a stock suspension.

Student Debt Giant Navient to Borrowers: You’re on Your Own - (www.bloomberg.com) Over the past several years, Jack Remondi, chief executive of student loan giant Navient Corp., has gone out of his way to tout the company’s devotion to helping Americans cope with student debt. He’s mentioned it in meetings with investors, on calls with Wall Street analysts, in testimony before Congress, and even on his Medium blog. “At Navient, our priority is to help each of our 12 million customers successfully manage their loans in a way that works for their individual circumstances,” he said March 20. But faced with a potential multi-billion dollar lawsuit by the federal government for not living up to that mantra, Remondi’s company, formerly an arm of student lender Sallie Mae, sang a different tune in court filings. Borrowers can’t reasonably rely on America’s largest student loan servicer to counsel them about their many options, Navient said on March 24 in a motion to dismiss the case, because its primary role is, after all, to collect their payments.

#Carmaggedon Not Yet, But Another Wheel Came Off - (www.wolfstreet.com) What I’ve been fretting about – declining auto sales despite the biggest incentives ever to overleveraged car buyers as the bottom is falling out of subprime auto loans and used car values – is now a reality. Total new vehicle sales in March fell 1.6% year-over-year to 1.556 million cars and light trucks, according to Autodata, and are now down 1.5% year-to-date, with truck sales rising 5.2% and car sales plunging 10.6%. This wouldn’t be so bad – just an “unexpected” sales decline – if automakers had not shelled out $3,768 in incentives per new vehicle sold, the highest ever for any March, according to J.D. Power. This would be about 10.4% of suggested retail price. The prior record for March occurred in 2009 as the industry was collapsing.

Global debt hits $215 trillion in 2016, led by emerging markets: IIF - (www.reuters.com) Global debt rose to 325 percent of the world's gross domestic product in 2016, totalling $215 trillion, an Institute for International Finance report released on Monday showed, boosted by the rapid growth of issuance in emerging markets. Global debt grew by $7.6 trillion in 2016 compared with the prior year. Issuance rose from 320 percent of GDP in 2015. Emerging market debt saw a "spectacular rise" to $55 trillion outstanding in 2016, equal to 215 percent of their GDP. This was driven mostly by non-financial corporate debt, the report said. Emerging markets have raised nearly $40 trillion of new debt between 2006 and 2016, a significant acceleration from the roughly $9 trillion added between 1996 and 2006, according to the report.

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