see attached
Wednesday, April 29, 2009
FOMC (FED MINUTES) TEXT
Press Release
Release Date: April 29, 2009
For immediate release
Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is facilitating the extension of credit to households and businesses and supporting the functioning of financial markets through a range of liquidity programs. The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of financial and economic developments.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
Release Date: April 29, 2009
For immediate release
Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.
In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is facilitating the extension of credit to households and businesses and supporting the functioning of financial markets through a range of liquidity programs. The Committee will continue to carefully monitor the size and composition of the Federal Reserve's balance sheet in light of financial and economic developments.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.
Thursday, April 23, 2009
Auditors: Nearly 25% of Companies May Not Be Going Concerns
A research firm predicts 3,589 public companies will report that their auditors doubt they will continue as going concerns.
Sarah Johnson, CFO.com | US
April 22, 2009
The auditors of nearly one-quarter of publicly traded companies feel that the companies may not live out the year.
Auditors have become increasingly doubtful about their clients' ability to continue as going concerns, according to the most recent report on the subject by Audit Analytics, which has tracked the number of such going-concern opinions this decade in a recently released report. With calendar year-end 2008 filings still coming in to the Securities and Exchange Commission, the research firm estimates there will be 3,589 going-concern opinions eventually filed for 2008 annual reports, an increase of 9% compared to last year's total of 3,293 going-concern opinions.
Audit Analytics made this prediction based on a compilation of regulatory filings made as of late March for 2008 10-Ks. Its data suggests auditors' going-concern doubts were more commonplace compared to the previous year. If the firm's estimate is correct, the number of auditors' documented worries about their clients' viability will reach the highest level this decade.
In 2001, 19.2% of companies noted their auditors' going-concern uncertainty. But only 15% had those qualifications in 2003, according to the Audit Analytics report. For 2007 10-Ks, that number rose to 20.9%, reflecting the highest number of going-concern doubts since 2000. Now the total could reach 23.4% percent, the firm's researchers say.
The audit profession has been predicting a surge in the number of going-concern doubts since last fall, when auditors were on the verge of beginning their annual reviews for calendar year-end companies amid the rough economy. Last month, on the heels of General Motors revealing its auditors' going-concern doubts, Grant Thornton CEO Ed Nussbaum told CFO.com there will be "an unprecedented number of going-concern footnote disclosures and clarification from the auditors" forthcoming.
Auditors must consider several factors during their annual client reviews that may signal that a company won't be in existence 12 months from now. Among them: negative recurring operating losses, working capital deficiencies, loan defaults, unlikely prospects for more financing, and work stoppages. Auditors also consider such external issues as legal proceedings and the loss of a key customer or supplier.
Auditors' going-concern evaluations don't stop there. If they have doubts about a company's future, they tend to confer with their client's management and review the company's plans for overcoming the problems noted and decide whether those plans can likely keep the company in business. If they still aren't satisfied, then the auditors will explain why they have "substantial doubt" about the company's ability to stay a going concern in an opinion filed with the company's 10-K.
In late March, when Audit Analytics compiled the data, only 10,895 auditor opinions had been filed for year-end 2008 with the SEC. That means that Audit Analytics' forecast could be off, since the data doesn't account for about 5,000 10-Ks that were still due. Still left to be collected was data from smaller companies, late filers, and foreign filers. But it's likely that companies that have missed the SEC's filing deadlines are dealing with financial issues, possibly involving discussions over a going-concern qualification with their auditors, suggests Don Whalen, research director at Audit Analytics.
To be sure, what the findings mean has yet to be determined . Still unclear is whether audit firms are being more conservative in their forecasts because regulators have indicated they will keep a close watch on going-concern opinions.
Or is it a fact that a higher number of companies have a seriously uncertain financial future? "I'm not really sure what's driving this," Whalen says. "Obviously, there's a lot of economic pressure right now with the credit crunch and the dearth in consumer spending. At the same time, it might be that ... auditors are being a little more cautious in their assumptions."
Accounting firms have been criticized for not reliably raising going-concern red flags for investors before their clients file for bankruptcy protection. Past academic studies have found audit firms have made going-concern qualifications for just over half of the companies that eventually go bankrupt, according to Joseph Carcello, a University of Tennessee professor.
Last fall, in a practice alert, the Public Company Accounting Oversight Board warned auditors that companies' ability to stay viable during the economic downturn would likely slide — effectively putting audit firms on notice that this would be at least one area high on the radar of PCAOB inspectors in the coming year. Further, the board is revising its going-concern rules to align them more with those of the Financial Accounting Standards Board.
Audit Analytics hasn't analyzed whether certain kinds of firms were more likely to issue going-concern opinions than others. Whalen noted, however, that smaller audit firms as well as larger ones have expressed doubts about their clients' viability. "The smaller audit firms are not shying away," he says.
© CFO Publishing Corporation 2008. All rights reserved.
http://www.cfo.com/printable/article.cfm/13525910
Sarah Johnson, CFO.com | US
April 22, 2009
The auditors of nearly one-quarter of publicly traded companies feel that the companies may not live out the year.
Auditors have become increasingly doubtful about their clients' ability to continue as going concerns, according to the most recent report on the subject by Audit Analytics, which has tracked the number of such going-concern opinions this decade in a recently released report. With calendar year-end 2008 filings still coming in to the Securities and Exchange Commission, the research firm estimates there will be 3,589 going-concern opinions eventually filed for 2008 annual reports, an increase of 9% compared to last year's total of 3,293 going-concern opinions.
Audit Analytics made this prediction based on a compilation of regulatory filings made as of late March for 2008 10-Ks. Its data suggests auditors' going-concern doubts were more commonplace compared to the previous year. If the firm's estimate is correct, the number of auditors' documented worries about their clients' viability will reach the highest level this decade.
In 2001, 19.2% of companies noted their auditors' going-concern uncertainty. But only 15% had those qualifications in 2003, according to the Audit Analytics report. For 2007 10-Ks, that number rose to 20.9%, reflecting the highest number of going-concern doubts since 2000. Now the total could reach 23.4% percent, the firm's researchers say.
The audit profession has been predicting a surge in the number of going-concern doubts since last fall, when auditors were on the verge of beginning their annual reviews for calendar year-end companies amid the rough economy. Last month, on the heels of General Motors revealing its auditors' going-concern doubts, Grant Thornton CEO Ed Nussbaum told CFO.com there will be "an unprecedented number of going-concern footnote disclosures and clarification from the auditors" forthcoming.
Auditors must consider several factors during their annual client reviews that may signal that a company won't be in existence 12 months from now. Among them: negative recurring operating losses, working capital deficiencies, loan defaults, unlikely prospects for more financing, and work stoppages. Auditors also consider such external issues as legal proceedings and the loss of a key customer or supplier.
Auditors' going-concern evaluations don't stop there. If they have doubts about a company's future, they tend to confer with their client's management and review the company's plans for overcoming the problems noted and decide whether those plans can likely keep the company in business. If they still aren't satisfied, then the auditors will explain why they have "substantial doubt" about the company's ability to stay a going concern in an opinion filed with the company's 10-K.
In late March, when Audit Analytics compiled the data, only 10,895 auditor opinions had been filed for year-end 2008 with the SEC. That means that Audit Analytics' forecast could be off, since the data doesn't account for about 5,000 10-Ks that were still due. Still left to be collected was data from smaller companies, late filers, and foreign filers. But it's likely that companies that have missed the SEC's filing deadlines are dealing with financial issues, possibly involving discussions over a going-concern qualification with their auditors, suggests Don Whalen, research director at Audit Analytics.
To be sure, what the findings mean has yet to be determined . Still unclear is whether audit firms are being more conservative in their forecasts because regulators have indicated they will keep a close watch on going-concern opinions.
Or is it a fact that a higher number of companies have a seriously uncertain financial future? "I'm not really sure what's driving this," Whalen says. "Obviously, there's a lot of economic pressure right now with the credit crunch and the dearth in consumer spending. At the same time, it might be that ... auditors are being a little more cautious in their assumptions."
Accounting firms have been criticized for not reliably raising going-concern red flags for investors before their clients file for bankruptcy protection. Past academic studies have found audit firms have made going-concern qualifications for just over half of the companies that eventually go bankrupt, according to Joseph Carcello, a University of Tennessee professor.
Last fall, in a practice alert, the Public Company Accounting Oversight Board warned auditors that companies' ability to stay viable during the economic downturn would likely slide — effectively putting audit firms on notice that this would be at least one area high on the radar of PCAOB inspectors in the coming year. Further, the board is revising its going-concern rules to align them more with those of the Financial Accounting Standards Board.
Audit Analytics hasn't analyzed whether certain kinds of firms were more likely to issue going-concern opinions than others. Whalen noted, however, that smaller audit firms as well as larger ones have expressed doubts about their clients' viability. "The smaller audit firms are not shying away," he says.
© CFO Publishing Corporation 2008. All rights reserved.
http://www.cfo.com/printable/article.cfm/13525910
What have we learned in the last two millenia??
"The budget should be balanced, the treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance."
– Cicero , 55 BC
Evidently, not a damn thing…
– Cicero , 55 BC
Evidently, not a damn thing…
Wednesday, April 22, 2009
A Visual Guide to Where Your Taxes Go
I know you were expecting a toilet!
http://www.wallstats.com/blog/wp-content/uploads/WallStatsDATlarge.jpg
http://www.wallstats.com/blog/wp-content/uploads/WallStatsDATlarge.jpg
The Entire World is Feeling this Downturn, Even the Nomads
By GORDON FAIRCLOUGH
TSOGT, Mongolia -- Waves from the global economic downturn hit Sodnomdarjaa Khaltarkhuu when bank officials showed up at his tent on the edge of the Gobi desert and threatened to foreclose on his goats, sheep and camels.
Falling demand for cashmere among recession-hit shoppers in the West is cutting into earnings among nomadic herders in Mongolia, whose goats produce the soft fiber used in high-end sweaters, scarves and coats. The result: herder loan defaults.
Mongolian animal herders are being squeezed in this country's version of a subprime lending crisis.
Mongolia Falls Deeper Into Poverty
Mongolians are calling the current situation a financial zud, invoking a local term for unusually harsh winters that devastate herds. After Mr. Sodnomdarjaa couldn't pay back a $2,700 loan, he says bank officials pressed him to sell his livestock -- which he used as collateral. The bank says he misrepresented the number of animals he owned, which he denies. Now a judge has ordered the seizure of Mr. Sodnomdarjaa's family home -- a tent -- if he doesn't come up with the rest of the money soon.
"We don't have any animals," says Mr. Sodnomdarjaa, sitting in his tent, heated by camel dung burned in a cast-iron stove. "How can we pay?"
Mongolian nomads' troubles show that the ravages of the economic crisis have spread to even the most remote parts of the world. More than a quarter of the households in Mongolia -- which has a population of about 2.6 million -- earn a living raising animals.
The credit crisis on the steppe has root causes similar to those of the subprime mess in the U.S. Some herders, betting on continued strong cashmere prices, borrowed more than they should have, and spent the money on the Mongolian equivalent of conspicuous consumption: motorbikes and solar panels to provide electricity for their tents. Banks, looking to cash in on rural prosperity in the good years, didn't pay enough attention to risk management and lent too freely, some bankers say.
Bankers say pressuring herders to sell animals and moving to foreclose on other collateral are last resorts. "We try our best to have flexible policies," says Daimaa Batsaikhan, deputy chief executive of Khan Bank. He said the bank's own forecasts for cashmere prices last year were "inaccurate" and that the bank has changed its risk-management practices.
He says his bank and other lenders have been working with herders. Khan Bank says it has restructured 7,000, or nearly 11%, of its outstanding herder loans, essentially extending the time borrowers have to repay. Ultimately, though, the money lent to herders is "money deposited by other Mongolians," the banker says, and it is the bank's responsibility to protect their interests.
Many banks have cut back on new lending. And a flood of forced sales has helped drive down prices for animals, skins and meat.
Munkhbat Tsedendorj, a 30-year-old animal dealer, based in Altai, the capital of the province where Mr. Sodnomdarjaa lives, says animals for sale in the city's central market have been fetching about half of what they were before the downturn. "I've been in this business 10 years, and I've never seen anything like it," he says, standing before a blue truck piled with skinned and frozen carcasses of sheep and goats. "They are bankrupting the herders."
Debt is a main topic of conversation here in Tsogt, a settlement of tents, government buildings and a few shops. Sheriffs from the provincial capital delivered a new round of court orders in January, barring defaulters from disposing of their possessions until courts can rule on foreclosure proceedings.
Naranchimeg Sonom, 45, says she had to sell her herd of more than 300 animals to pay off her defaulted loan. Otherwise, she says, the bank would have foreclosed on her tent, known here as a ger, and on the decorative mirror that graces its back wall. She says bank collection officers said: "You are all beggars. Why did you take a loan if you can't pay it back?"
In recent years, commercial banks started competing to extend credit to herders, who typically earn significant cash just twice a year -- in the spring through cashmere and wool sales, and in the autumn through sales of animal skins and meat. The money helped families get through the times in between, usually at a cost of between 2% and 3% in interest per month.
Troubles began when demand for cashmere started falling after the U.S. slipped into recession in late 2007. By last June, the price for cashmere in Mongolia had fallen by more than 33% from a year earlier, hitting about 28,000 togrog, or $19, a kilogram. Prices have dropped further. "Everyone says now that we are just taking care of banks' animals," says Janchiv Nyambuv, a 65-year-old herder who borrowed 500,000 togrogs, or $350, that he must repay in May.
Herders who have sold their herds to repay loans have struggled to find other sources of income. Purevdelger Budkhuu, a 38-year-old widow, says she was forced to sell her family's 128 goats and sheep after she couldn't pay back a six-month loan of $1,270. Now, she and her two children live in a tent near Altai's grimy central market. She says she has looked for work, to no avail, at shops, restaurants and hotels. "I don't know what to do. I can't go back to the countryside because I have no animals," she says. "And I can't stay here because I can't find a job."
Mr. Sodnomdarjaa says he went to a Khan Bank branch at the beginning of 2008 to get a loan to help repay those who had given him animals to start his herd and buy food and clothes for his wife and four children.
Mr. Sodnomdarjaa and his wife, Altantsetseg Tseyentsend, 38, say they intended to repay the loan by selling cashmere and other products from the 90 or so goats and sheep they owned, as well as from another more than 170 animals they were looking after for others. "We'd never taken a loan before" but, Mr. Sodnomdarjaa says, the bank officer he talked to seemed eager to give him money.
The bank says it checked government records of herders' animals, which said Mr. Sodnomdarjaa owned 267 animals and had no reason to doubt their accuracy. The bank said that after Mr. Sodnomdarjaa defaulted, it discovered just 90 of the animals belonged to him. Bank officials said that if they had known that, he wouldn't have qualified for such a large loan. Mr. Sodnomdarjaa denies any wrongdoing and says bank officials in Tsogt never asked him about the makeup of his herd.
When the loan was due, Mr. Sodnomdarjaa says he was unable to pay. He says the bank eventually pushed him to sell his animals. The bank says Mr. Sodnomdarjaa still owes more than 2.7 million togrogs, or about $1,900.
Mr. Sodnomdarjaa says he and his wife are determined to repay the loan and plan to look for construction or mining work. These days, the couple cares for other families' camels. Their only regular compensation is the right to milk the herd. About half the milk, they drink. The other half they sell. Two months' earnings are about enough to buy a sack of flour.
"The kids want to eat meat, but we have nothing to give them," says Mr. Sodnomdarjaa.
Write to Gordon Fairclough at gordon.fairclough@wsj.com
http://online.wsj.com/article/SB124017991210632815.html
TSOGT, Mongolia -- Waves from the global economic downturn hit Sodnomdarjaa Khaltarkhuu when bank officials showed up at his tent on the edge of the Gobi desert and threatened to foreclose on his goats, sheep and camels.
Falling demand for cashmere among recession-hit shoppers in the West is cutting into earnings among nomadic herders in Mongolia, whose goats produce the soft fiber used in high-end sweaters, scarves and coats. The result: herder loan defaults.
Mongolian animal herders are being squeezed in this country's version of a subprime lending crisis.
Mongolia Falls Deeper Into Poverty
Mongolians are calling the current situation a financial zud, invoking a local term for unusually harsh winters that devastate herds. After Mr. Sodnomdarjaa couldn't pay back a $2,700 loan, he says bank officials pressed him to sell his livestock -- which he used as collateral. The bank says he misrepresented the number of animals he owned, which he denies. Now a judge has ordered the seizure of Mr. Sodnomdarjaa's family home -- a tent -- if he doesn't come up with the rest of the money soon.
"We don't have any animals," says Mr. Sodnomdarjaa, sitting in his tent, heated by camel dung burned in a cast-iron stove. "How can we pay?"
Mongolian nomads' troubles show that the ravages of the economic crisis have spread to even the most remote parts of the world. More than a quarter of the households in Mongolia -- which has a population of about 2.6 million -- earn a living raising animals.
The credit crisis on the steppe has root causes similar to those of the subprime mess in the U.S. Some herders, betting on continued strong cashmere prices, borrowed more than they should have, and spent the money on the Mongolian equivalent of conspicuous consumption: motorbikes and solar panels to provide electricity for their tents. Banks, looking to cash in on rural prosperity in the good years, didn't pay enough attention to risk management and lent too freely, some bankers say.
Bankers say pressuring herders to sell animals and moving to foreclose on other collateral are last resorts. "We try our best to have flexible policies," says Daimaa Batsaikhan, deputy chief executive of Khan Bank. He said the bank's own forecasts for cashmere prices last year were "inaccurate" and that the bank has changed its risk-management practices.
He says his bank and other lenders have been working with herders. Khan Bank says it has restructured 7,000, or nearly 11%, of its outstanding herder loans, essentially extending the time borrowers have to repay. Ultimately, though, the money lent to herders is "money deposited by other Mongolians," the banker says, and it is the bank's responsibility to protect their interests.
Many banks have cut back on new lending. And a flood of forced sales has helped drive down prices for animals, skins and meat.
Munkhbat Tsedendorj, a 30-year-old animal dealer, based in Altai, the capital of the province where Mr. Sodnomdarjaa lives, says animals for sale in the city's central market have been fetching about half of what they were before the downturn. "I've been in this business 10 years, and I've never seen anything like it," he says, standing before a blue truck piled with skinned and frozen carcasses of sheep and goats. "They are bankrupting the herders."
Debt is a main topic of conversation here in Tsogt, a settlement of tents, government buildings and a few shops. Sheriffs from the provincial capital delivered a new round of court orders in January, barring defaulters from disposing of their possessions until courts can rule on foreclosure proceedings.
Naranchimeg Sonom, 45, says she had to sell her herd of more than 300 animals to pay off her defaulted loan. Otherwise, she says, the bank would have foreclosed on her tent, known here as a ger, and on the decorative mirror that graces its back wall. She says bank collection officers said: "You are all beggars. Why did you take a loan if you can't pay it back?"
In recent years, commercial banks started competing to extend credit to herders, who typically earn significant cash just twice a year -- in the spring through cashmere and wool sales, and in the autumn through sales of animal skins and meat. The money helped families get through the times in between, usually at a cost of between 2% and 3% in interest per month.
Troubles began when demand for cashmere started falling after the U.S. slipped into recession in late 2007. By last June, the price for cashmere in Mongolia had fallen by more than 33% from a year earlier, hitting about 28,000 togrog, or $19, a kilogram. Prices have dropped further. "Everyone says now that we are just taking care of banks' animals," says Janchiv Nyambuv, a 65-year-old herder who borrowed 500,000 togrogs, or $350, that he must repay in May.
Herders who have sold their herds to repay loans have struggled to find other sources of income. Purevdelger Budkhuu, a 38-year-old widow, says she was forced to sell her family's 128 goats and sheep after she couldn't pay back a six-month loan of $1,270. Now, she and her two children live in a tent near Altai's grimy central market. She says she has looked for work, to no avail, at shops, restaurants and hotels. "I don't know what to do. I can't go back to the countryside because I have no animals," she says. "And I can't stay here because I can't find a job."
Mr. Sodnomdarjaa says he went to a Khan Bank branch at the beginning of 2008 to get a loan to help repay those who had given him animals to start his herd and buy food and clothes for his wife and four children.
Mr. Sodnomdarjaa and his wife, Altantsetseg Tseyentsend, 38, say they intended to repay the loan by selling cashmere and other products from the 90 or so goats and sheep they owned, as well as from another more than 170 animals they were looking after for others. "We'd never taken a loan before" but, Mr. Sodnomdarjaa says, the bank officer he talked to seemed eager to give him money.
The bank says it checked government records of herders' animals, which said Mr. Sodnomdarjaa owned 267 animals and had no reason to doubt their accuracy. The bank said that after Mr. Sodnomdarjaa defaulted, it discovered just 90 of the animals belonged to him. Bank officials said that if they had known that, he wouldn't have qualified for such a large loan. Mr. Sodnomdarjaa denies any wrongdoing and says bank officials in Tsogt never asked him about the makeup of his herd.
When the loan was due, Mr. Sodnomdarjaa says he was unable to pay. He says the bank eventually pushed him to sell his animals. The bank says Mr. Sodnomdarjaa still owes more than 2.7 million togrogs, or about $1,900.
Mr. Sodnomdarjaa says he and his wife are determined to repay the loan and plan to look for construction or mining work. These days, the couple cares for other families' camels. Their only regular compensation is the right to milk the herd. About half the milk, they drink. The other half they sell. Two months' earnings are about enough to buy a sack of flour.
"The kids want to eat meat, but we have nothing to give them," says Mr. Sodnomdarjaa.
Write to Gordon Fairclough at gordon.fairclough@wsj.com
http://online.wsj.com/article/SB124017991210632815.html
Wednesday, March 25, 2009
Interesting Chart RE: Japan's Quantitative Easing
Which is what we in the US are doing now via Bernanke's Fed purchasing of US treasuries.
Tuesday, March 24, 2009
The big news items
Off the wires.. no link
(US) REPORTEDLY, SEC IS WORKING ON UPDATED VERSION OF UPTICK RULE FOR APR 8TH MEETING
- Could include price test which would only allow investors to short stock if Bid price is rising
- Also considering circuit breakers for individual stocks to stop aggressive short selling.
March 23 (Bloomberg) -- U.S. stocks rallied, capping the market’s steepest two-week gain since 1938, as investors speculated the Obama administration’s plan to rid banks of toxic assets will spur growth and investor Mark Mobius said a new bull market has begun. Treasuries and the dollar fell.
http://www.bloomberg.com/apps/news?pid=20601087&sid=atgwohr1NWTs&refer=home
Treasury Department Releases Details on Public Private Partnership
http://treasury.gov/press/releases/tg65.htm
(US) REPORTEDLY, SEC IS WORKING ON UPDATED VERSION OF UPTICK RULE FOR APR 8TH MEETING
- Could include price test which would only allow investors to short stock if Bid price is rising
- Also considering circuit breakers for individual stocks to stop aggressive short selling.
March 23 (Bloomberg) -- U.S. stocks rallied, capping the market’s steepest two-week gain since 1938, as investors speculated the Obama administration’s plan to rid banks of toxic assets will spur growth and investor Mark Mobius said a new bull market has begun. Treasuries and the dollar fell.
http://www.bloomberg.com/apps/news?pid=20601087&sid=atgwohr1NWTs&refer=home
Treasury Department Releases Details on Public Private Partnership
http://treasury.gov/press/releases/tg65.htm
Tuesday, March 17, 2009
Fed may still buy Treasurys, just not now
NEW YORK (MarketWatch) -- The Federal Reserve is likely to hold off on using one of its last weapons to get credit flowing -- buying back Treasury securities from the open market -- because it has already made progress driving interest rates down in markets that would benefit from such a step, investors and strategists say.
When the Federal Open Market Committee releases ita statement on interest-rate policy Wednesday afternoon, culiminating a two-day meeting, members may hew closely to January's statement -- saying, namely, that the Fed retains the option of purchasing Treasurys if conditions warrant.
For the last four months, the Fed has discussed buying Treasurys to exert pressure designed to lower rates on the many corporate, mortgage and consumer loans linked to benchmark government debt. But at the same time, mortgage rates have fallen by a half percentage point, probably thanks to the Fed's purchases of mortgage-related assets.
That drop, according to observers, has had the effect of reducing any sense of urgency about proceeding with Treasury purchases.
"I don't think they will buy Treasurys," said Andrew Harding, chief investment officer in fixed income at Allegiant Asset Management.
"I think they're doing pretty darn well buying mortgages directly," he said.
Keeping their Treasury plans vague would also give Fed officials time to see if similar plans announced last week by the Bank of England and the Swiss National Bank bear fruit, and how markets respond to earlier programs and the swelling issuance of government debt. It has good reason to tread carefully: Buying Treasurys on the open market could lead to higher inflation -- the enemy of Fed and bondholders alike.
For now, the Fed may not feel pressure to tamper with Treasurys because yields are still historically low.
Yields on 10-year notes, widely considered one of the maturities the Fed may buy, have risen only moderately, to 2.97%. This compares to a 2.72% yield in early December, when Fed chief Ben Bernanke first brought up the possibility of Treasury purchases.
But the FOMC may again bring up purchases as a possibility, as the central bank has in recent statements.
"The Fed doesn't want to rule anything out, and they want to keep their options open," said Michael Pond, Treasury strategist at Barclays Capital.
A sharp rise in yields coinciding with a plunge in Treasury prices, perhaps sparked by the Fed's massive debt issuance this year, could be the tipping point for the Fed to buy government debt.
"They would probably consider it if 10-year yields went up considerably," Pond said, adding that it's uncertain if that level would be 3.50% or 4%. "But it's certainly not 3%," he said.
Lots of talk
At its last policy meeting on Jan. 28, the FOMC said it stood "prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets."
Ten-year yields ended that day at 2.66%, having rebounded somewhat from much lower levels at the end of 2008, when Treasurys benefited from a massive flight to safety amid a darkening economic outlook and a spreading contagion in financial markets.
Treasury yields have continued to rise as the government is almost constantly auctioning more debt to finance all its recovery efforts, making investors demand higher rates to hold the debt.
Still, Bernanke seemed to back off the inclination to buy Treasurys in testimony during congressional hearings earlier this month. He didn't even mention it in his prepared remarks on March 3.
Asked why he didn't want to start buying Treasurys after the previous FOMC meeting, Bernanke responded: "You have to solve the problem you've got" -- a reference to the mortgage securitization market.
Mortgage rates fall
Indeed, the New York Fed jumped into that market and started buying debt sold by the big mortgage finance agencies, including Fannie Mae and Freddie Mac, in January. It also started buying the mortgage-backed securities bundled by the agencies.
So far, the Fed has bought a total of $217 billion in mortgage-backed securities, according to market researcher Wrightson ICAP. That's not quite half the amount it originally said it would spend in that market.
Both steps positioned the Fed as buyer in secondary mortgage markets that had seized up but are vital to enabling lenders to make new mortgages. Lenders sell many of their loans to institutional investors, and higher rates charged by these investors to hold pooled mortgage loans make it harder for originators to offer lower rates on new mortgages.
In a sign that the purchases are driving down rates and encouraging private investors to also step in, the gap's dropped in just a few months between Treasurys and the rates that the agencies and mortgage-backed securities have to carry to make them attractive.
Yields on mortgage-backed debt dropped to 0.87 of a percentage point more than Treasurys, down from 1.90 points in December, and are near the lowest seen since late in 2007, according to a Merrill Lynch index.
Agency debt spreads, meanwhile, have fallen to 0.76 of a point from 1.05 points in mid-December, according to Merrill. That makes it that much cheaper for the housing entities to fund their purchases of individual mortgages and securitize them into bundles more desirable to many more investors.
"It's given a great deal of stability to mortgage markets, and a lot of confidence is building in that asset class," Harding of Allegiant said.
Lower capital-markets costs for mortgage originators and the mortgage agencies have helped drive down interest rates charged on home loans.
Thirty-year rates fell to 5.03% in the most recent week from 5.53% in early December, according to averages compiled by Freddie Mac. And the rates on 15-year mortgages -- popular for refinancing homes, something else the Fed wants to encourage -- also have dropped dramatically, to 4.64% from 5.33%, in the same time.
If yields rise...
Still, some say the Fed should still consider buying Treasurys directly from the market -- not just at the government's auctions, as it does now to manage its accounts.
Such an action would help lower mortgage rates further, by bringing down the yield those spreads are based on, as well as help the myriad of other securities and markets that are priced off Treasurys, including corporate bonds.
"It can help cap yields because all risk spreads go off Treasurys, so it would serve as an anchor pulling everything down," said Max Bublitz, chief strategist at SCM Advisors.
"It's inevitable that it's going to come," he said.
If that's so, the only question is at what yield would the Fed to deem it necessary to intervene or what other conditions would need to be in force. Conviction about the inevitability of intervention may alone be serving as a cap on bond yields.
"Why tip your hand when you don't need to?" Bublitz asked.
One of the factors that may push yields up to that point could be the Treasury Department's continued need to issue debt: Analysts expect more than $2 trillion in U.S. debt could be sold in fiscal 2010, the fiscal year that started last October.
That could shoot even higher if Congress approves further stimulus funding of some kind, said David Glocke, head of Vanguard's Treasury and taxable money-market group.
"If it looks like Congress will pass another stimulus package, the additional supply in the pipeline will force interest rates higher and increase the risk that the Fed steps in to set a ceiling," he said.
For their part, congressional leaders have given mixed signals as to how seriously they might embrace further stimulus following the recent enactment of a $787 billion package.
Testing the waters
The Fed also has the luxury of watching how its overseas counterparts fare in their effort to bring rates lower by buying debt from the secondary market.
Britain's central bank began buying U.K. debt last week, buying 2 billion pounds worth. The debt, known as gilts, rallied following the announcement, pushing 10-year gilt yields down to 2.97% from 3.64% before the announcement. See previous story on U.K. purchases.
Those kinds of improvements "will encourage the Fed to keep this potent option on the table," said Tony Crescenzi, chief bond-market strategist for Miller Tabak & Co.
The Swiss National Bank also said last week it would begin buying franc-denominated corporate bonds. See previous story on Swiss central bank plans.
The act of a central bank buying its own government's bonds is usually taken on as a way of further lowering borrowing costs once the central bank has already lowered its benchmark rate virtually as much as possible.
The concern is that the practice could ultimately lead to higher inflation, which makes it harder for businesses to grow and erodes the value of bonds' fixed returns. The Fed has to weigh that risk with its desire to help the U.S. economy out of a possibly severe recession.
For Bernanke and the FOMC, the most immediate risk now lie in managing expectations. Ahead of the last meeting, the bond market expected the Fed to take steps toward buying Treasurys.
It was disappointed when the Fed simply talked about it.
"What doesn't work is just saying that details will follow," Harding said.
By Deborah Levine, MarketWatch
http://www.cbonds.info/all/eng/news/index.phtml/params/id/426882
When the Federal Open Market Committee releases ita statement on interest-rate policy Wednesday afternoon, culiminating a two-day meeting, members may hew closely to January's statement -- saying, namely, that the Fed retains the option of purchasing Treasurys if conditions warrant.
For the last four months, the Fed has discussed buying Treasurys to exert pressure designed to lower rates on the many corporate, mortgage and consumer loans linked to benchmark government debt. But at the same time, mortgage rates have fallen by a half percentage point, probably thanks to the Fed's purchases of mortgage-related assets.
That drop, according to observers, has had the effect of reducing any sense of urgency about proceeding with Treasury purchases.
"I don't think they will buy Treasurys," said Andrew Harding, chief investment officer in fixed income at Allegiant Asset Management.
"I think they're doing pretty darn well buying mortgages directly," he said.
Keeping their Treasury plans vague would also give Fed officials time to see if similar plans announced last week by the Bank of England and the Swiss National Bank bear fruit, and how markets respond to earlier programs and the swelling issuance of government debt. It has good reason to tread carefully: Buying Treasurys on the open market could lead to higher inflation -- the enemy of Fed and bondholders alike.
For now, the Fed may not feel pressure to tamper with Treasurys because yields are still historically low.
Yields on 10-year notes, widely considered one of the maturities the Fed may buy, have risen only moderately, to 2.97%. This compares to a 2.72% yield in early December, when Fed chief Ben Bernanke first brought up the possibility of Treasury purchases.
But the FOMC may again bring up purchases as a possibility, as the central bank has in recent statements.
"The Fed doesn't want to rule anything out, and they want to keep their options open," said Michael Pond, Treasury strategist at Barclays Capital.
A sharp rise in yields coinciding with a plunge in Treasury prices, perhaps sparked by the Fed's massive debt issuance this year, could be the tipping point for the Fed to buy government debt.
"They would probably consider it if 10-year yields went up considerably," Pond said, adding that it's uncertain if that level would be 3.50% or 4%. "But it's certainly not 3%," he said.
Lots of talk
At its last policy meeting on Jan. 28, the FOMC said it stood "prepared to purchase longer-term Treasury securities if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets."
Ten-year yields ended that day at 2.66%, having rebounded somewhat from much lower levels at the end of 2008, when Treasurys benefited from a massive flight to safety amid a darkening economic outlook and a spreading contagion in financial markets.
Treasury yields have continued to rise as the government is almost constantly auctioning more debt to finance all its recovery efforts, making investors demand higher rates to hold the debt.
Still, Bernanke seemed to back off the inclination to buy Treasurys in testimony during congressional hearings earlier this month. He didn't even mention it in his prepared remarks on March 3.
Asked why he didn't want to start buying Treasurys after the previous FOMC meeting, Bernanke responded: "You have to solve the problem you've got" -- a reference to the mortgage securitization market.
Mortgage rates fall
Indeed, the New York Fed jumped into that market and started buying debt sold by the big mortgage finance agencies, including Fannie Mae and Freddie Mac, in January. It also started buying the mortgage-backed securities bundled by the agencies.
So far, the Fed has bought a total of $217 billion in mortgage-backed securities, according to market researcher Wrightson ICAP. That's not quite half the amount it originally said it would spend in that market.
Both steps positioned the Fed as buyer in secondary mortgage markets that had seized up but are vital to enabling lenders to make new mortgages. Lenders sell many of their loans to institutional investors, and higher rates charged by these investors to hold pooled mortgage loans make it harder for originators to offer lower rates on new mortgages.
In a sign that the purchases are driving down rates and encouraging private investors to also step in, the gap's dropped in just a few months between Treasurys and the rates that the agencies and mortgage-backed securities have to carry to make them attractive.
Yields on mortgage-backed debt dropped to 0.87 of a percentage point more than Treasurys, down from 1.90 points in December, and are near the lowest seen since late in 2007, according to a Merrill Lynch index.
Agency debt spreads, meanwhile, have fallen to 0.76 of a point from 1.05 points in mid-December, according to Merrill. That makes it that much cheaper for the housing entities to fund their purchases of individual mortgages and securitize them into bundles more desirable to many more investors.
"It's given a great deal of stability to mortgage markets, and a lot of confidence is building in that asset class," Harding of Allegiant said.
Lower capital-markets costs for mortgage originators and the mortgage agencies have helped drive down interest rates charged on home loans.
Thirty-year rates fell to 5.03% in the most recent week from 5.53% in early December, according to averages compiled by Freddie Mac. And the rates on 15-year mortgages -- popular for refinancing homes, something else the Fed wants to encourage -- also have dropped dramatically, to 4.64% from 5.33%, in the same time.
If yields rise...
Still, some say the Fed should still consider buying Treasurys directly from the market -- not just at the government's auctions, as it does now to manage its accounts.
Such an action would help lower mortgage rates further, by bringing down the yield those spreads are based on, as well as help the myriad of other securities and markets that are priced off Treasurys, including corporate bonds.
"It can help cap yields because all risk spreads go off Treasurys, so it would serve as an anchor pulling everything down," said Max Bublitz, chief strategist at SCM Advisors.
"It's inevitable that it's going to come," he said.
If that's so, the only question is at what yield would the Fed to deem it necessary to intervene or what other conditions would need to be in force. Conviction about the inevitability of intervention may alone be serving as a cap on bond yields.
"Why tip your hand when you don't need to?" Bublitz asked.
One of the factors that may push yields up to that point could be the Treasury Department's continued need to issue debt: Analysts expect more than $2 trillion in U.S. debt could be sold in fiscal 2010, the fiscal year that started last October.
That could shoot even higher if Congress approves further stimulus funding of some kind, said David Glocke, head of Vanguard's Treasury and taxable money-market group.
"If it looks like Congress will pass another stimulus package, the additional supply in the pipeline will force interest rates higher and increase the risk that the Fed steps in to set a ceiling," he said.
For their part, congressional leaders have given mixed signals as to how seriously they might embrace further stimulus following the recent enactment of a $787 billion package.
Testing the waters
The Fed also has the luxury of watching how its overseas counterparts fare in their effort to bring rates lower by buying debt from the secondary market.
Britain's central bank began buying U.K. debt last week, buying 2 billion pounds worth. The debt, known as gilts, rallied following the announcement, pushing 10-year gilt yields down to 2.97% from 3.64% before the announcement. See previous story on U.K. purchases.
Those kinds of improvements "will encourage the Fed to keep this potent option on the table," said Tony Crescenzi, chief bond-market strategist for Miller Tabak & Co.
The Swiss National Bank also said last week it would begin buying franc-denominated corporate bonds. See previous story on Swiss central bank plans.
The act of a central bank buying its own government's bonds is usually taken on as a way of further lowering borrowing costs once the central bank has already lowered its benchmark rate virtually as much as possible.
The concern is that the practice could ultimately lead to higher inflation, which makes it harder for businesses to grow and erodes the value of bonds' fixed returns. The Fed has to weigh that risk with its desire to help the U.S. economy out of a possibly severe recession.
For Bernanke and the FOMC, the most immediate risk now lie in managing expectations. Ahead of the last meeting, the bond market expected the Fed to take steps toward buying Treasurys.
It was disappointed when the Fed simply talked about it.
"What doesn't work is just saying that details will follow," Harding said.
By Deborah Levine, MarketWatch
http://www.cbonds.info/all/eng/news/index.phtml/params/id/426882
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