Wednesday, June 30, 2010

News from Washington; Financial regulatory reform. US economy and the double-dip risk


· Financial regulatory reform – the House/Senate reconciliation committee met late on Tues and removed from the reform bill the ~$19B of taxes inserted at the last minute; instead, the committee Tues night agreed to wind down the TARP early (this will free up ~$11B) and will also raise the FDIC assessments charged on large depository institutions (this will make up the balance).  The taxes had threatened Senate support by driving away the few Republicans who appeared ready to vote in favor of the measure.  The House could vote on the bill as soon as Wed (passage is expected) although the Senate vote looks like it will be pushed into the week of Jul 12.  Its not clear whether the 4 “yes” Republicans from back in May would support this new measure (it looks like Maine senators Snowe and Collins will support the measure).  Despite the uncertainty and delayed action in the Senate, passage is still widely expected.  WSJ 

· “Volcker Rules” – former Fed chief and current White House advisor Paul Volcker is said to be disappointed w/the final text of the “Volcker Rules” – he is said to be disappointed that the rules were diluted as much as they were – Bloomberg 

· Housing – late in trading on Tues, the House voted to approve a measure that would give homebuilders three more months to close on a home purchase and still qualify for the homebuyers tax credit (keep in mind that this move was expected and won’t drive any incremental housing demand; instead, for those who have entered into a housing contract by the Apr 30 tax credit deadline, they will now have until the end of Sept to close on the purchase vs. the current law which requires closure by June 30).  The Senate was trying to attach this extension to a bill that would have extended unemployment benefits, among other items, although the broader measure failed 3x to pass.  Majority Leader Reid said he would push to pass this closure extension although its not clear if it will happen prior to the Jul 4 recess. 

· New derivatives laws could wind up costing companies ~$1T – the ISDA has warned that U.S. companies could face as much as $1 trillion in additional costs as a result of new laws designed to reduce risks in the $450 trillion, privately traded derivatives market – Reuters

· Hedge Fund managers targeted by NY State – state thinks hedge fund managers from Connecticut and New Jersey should pay the state of New York millions more in taxes.  lawmakers over the weekend embraced a proposal by Mr. Paterson to begin taxing nonresident fund managers’ carried interest.  NYT

· Unemployment assistance – the House plans to try again today to approve legislation extending unemployment benefits after a measure to do so was blocked yesterday because of its cost.  Bloomberg 

· Climate Change – following a meeting on Tues between Obama and Congressional leaders, it appears like an economy-wide cap-and-trade program will be shelved for a less ambitious proposal; it now looks like there will be an effort to cap emissions from utilities only.  WSJ  

· “Warning signals of a double-dip recession flash brightly across the world” – the London Telegraph warns that global bond markets are flashing warning signals of a sharp slowdown in growth across the world and a possible slide towards a double-dip recess and outright deflation – London Telegraph.

· US economy and the double-dip risk - the FT warns against jumping on the "double dip" bandwagon just yet   says the ECRI may be getting too much attention   the ECRI itself is cautioning against reading too much into the recent move (FT)

· Immigration – Obama will make a major address on Thurs during which he will call for comprehensive immigration reform (NBC) 

· Hunger = more risk taking - people who are hungry are more risk-seeking, and people who are sated are more risk-averse.  NYT

· GLD - State Street says its GLD ETF now has $50B+ in assets.  Assets up 32% YTD.

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