U.S. Economy Archives - Page 75 of 107 - Money Morning - Only the News You Can Profit From
Senate's Plan for Financial Reform Promises Nothing But Political Gridlock
U.S. senators Christopher Dodd, D-CT, and Bob Corker, R-TN, have fashioned a compromise on stalled banking regulation that straddles divisions over establishing a financial consumer protection agency and addresses unwinding too-big-to-fail firms.
The deal deftly divides lawmakers on both sides of the aisle in the Senate, as well as in the House of Representatives, which passed its plan for financial reform in December.
By engineering gridlock in the nation's capitol, lawmakers seem determined to stall any meaningful overhaul of financial-markets regulation. But rather than counting on backsliding into the status quo to grease the wheels of economic recovery, the overhang of unresolved and ineffectual legislation threatens long-term investor confidence and desperately needed public protections.
Hot Stocks: GM's Robert Lutz to Retire
General Motors Co.'s "Maximum Bob" has apparently reached his vanishing point.
General Motors Vice Chairman Robert A. "Bob" Lutz will retire from the embattled carmaker effective May 1, the executive confirmed yesterday (Wednesday). Lutz had been serving as a senior adviser to Edward E. "Ed" Whitacre Jr., GM's chairman and chief executive officer.
The move comes just one day after GM announced another shake-up in the North American unit that's supposed to be heading the company's overhaul.
Senate's Proposal Calls for Fed to Increase Its Role in Consumer Protection
The Senate's journey to agreement on a financial reform bill could lead to consumer protection responsibilities remaining in the hands of the Federal Reserve.
After much back-and-forth among senators, Senate Banking Committee Chairman Christopher Dodd (D-CT) is proposing a consumer protection unit that will be housed in the Fed. Sen. Bob Corker, R-TN, offered the idea as an alternative to Dodd's earlier proposal of creating a consumer protection division in the Treasury Department.
Dodd's revision aims to appeal more to Republicans than earlier proposals, in hopes the Senate can move forward with U.S. financial regulation overhaul. The proposal is expected to scale back the measures approved by the House of Representatives in December 2009.
AIG Could Seek Another Bailout as it Struggles to Return to Profitability
American International Group Inc. (NYSE: AIG), the insurance giant that received billions in federal bailout money, on Friday reported an $8.9 billion fourth-quarter loss. AIG dismissed the loss as part of its rebuilding process, but it also acknowledged that it may require even more government financing.
The loss is not nearly as bad as the previous year's $61.7 billion fourth-quarter stumble – the biggest quarterly loss in corporate history – but at $65.51 a share, it's still much higher than analysts predicted.
Amid scrutiny, AIG in September 2008 received a $182.3 billion bailout, which gave the government an 80% stake in its business. Since then, AIG's debt pay-off funds have generally come from the sale of its non-core assets. AIG recognizes these "fire-sales" as the best way to pay back its debts while also streamlining its business.
Weak Job Market and Low Inflation Stall Fed's "Exit Strategy"
Any speculation that U.S. Federal Reserve Chairman Ben Bernanke had his finger on the "exit strategy" trigger has been silenced.
Bernanke yesterday (Wednesday) faced the House Financial Services Committee to instill public confidence in the Fed's ability to exercise a smooth exit strategy and quell continued fears of a tightening monetary policy.
The Federal Open Market Committee (FOMC) "continues to anticipate that economic conditions — including low rates of resource utilization, subdued inflation trends, and stable inflation expectations — are likely to warrant exceptionally low levels of the Federal Funds rate for an extended period," he said.
It's Time to Tackle Government Pay
It's fairly well known that the U.S. public sector is paid more than the private sector. What's less well known is that the gap between federal-employee pay and benefits and private-sector pay and benefits is increasing – by about 18% over the last decade.
Given the current level of U.S. unemployment and the size of the budget deficit, it would appear that some economies could be made. In short, it's time to tackle government pay.
After all, if Greece can economize, so can the United States…
Is it Time For Investors to Beware of the Bear?
With U.S. stocks down about 5% from their 2009-2010 rally peak, investors basically want to know one thing: Is this just a correction, or are they looking at a potentially long bear market?
That's no small question. U.S. stocks could be experiencing one of three scenarios at present. They could be:
- Undergoing a short-term "correction" of its 2009 gains.
- Beginning a multi-month "pause."
- Or starting a new bear-market cycle.
These aren't just arbitrary labels. For instance, a typical "correction" lasts but a month or two, with average declines of 8.5% to 10% on the Standard & Poor's 500 Index. A multi-month pause, by contrast, could last eight to 15 months, and involve an S&P 500 decline of 10% to 18%.
But a new bear market is an entirely different animal. A bear-market cycle could last as long as two years and could be marked by a decline of 20% or more.
Plans to Hide Commercial Real Estate Losses Won't Avert a Double-Dip Downturn
Sooner or later, mounting losses on commercial real estate could crash through the market's 2009 optimism and send the economy and stocks into a double-dip downturn.
The major problem is that lawmakers and regulators are setting up investors into believing that commercial real estate (CRE) losses are being effectively addressed. The truth is that escalating losses are being hidden as part of a campaign of optimism in a desperate gamble that a robustly reviving economy will save the day.
To protect yourself from another investment beating, here's what you need to know.
Fed's Discount-Rate Increase Illustrates Exit-Strategy Challenges That Await the U.S. Central Bank
Is the U.S. Federal Reserve finally launching its "exit strategy?"
When the nation's central bank boosted the discount rate last week, it assured investors that this wasn't a monetary tightening. The assurance didn't seem to matter. The move late Thursday touched off a furious global-market reaction and U.S. dollar increase on Friday. This demonstrates the challenge the central bank will face as it crawls toward an ultimate increase in interest rates.
In a move that surprised the markets, the Fed announced Thursday that it was increasing the rate it charges banks for emergency loans to 0.75% from 0.50%. The also reduced the central bank also slashed the maximum-loan-maturity length from 28 days (it was once as high as 90 days) to overnight.
Latest Report Shows the Jobless Recovery Still Endures
Stocks have staged surprise rebounds after seemingly poor payroll reports half a dozen times in the past year. But the one time that there was better-than-expected job news, on Dec. 5, the market tanked. Go figure – it's a great example of how upside down the logic is on Wall Street.
To help us interpret the jobs report of last week, I turned to my favorite independent labor analysts, Philippa Dunne and Doug Henwood. Here's their view of the latest numbers, which they considered the most positive in months – despite the many problems highlighted by the latest jobs report.