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Industry Risk - US SEC Adopts Temporary Rule Requiring Municipal Advisors to Register with Agency
The Securities and Exchange Commission yesterday announced that it has adopted a temporary rule requiring municipal advisors to register with the SEC by October 1, a deadline established by the newly-enacted Dodd-Frank Wall Street Reform and Consumer Protection Act. Municipal advisors provide advice to state and local governments and other borrowers involved in the issuance of municipal securities. The advice typically relates to municipal derivatives, guaranteed investment contracts, investment strategies or the issuance of municipal securities. Municipal advisors also solicit business from a state or local government for a third party.
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Headline News, Friday, September 3, 2010
September 3: Market Risk - Haldane on Patience and Finance
In a paper to be presented at the Oxford China Business Forum in Beijing on 9th September, Andrew Haldane – Executive Director for Financial Stability – discusses the roles of patience and impatience in financial decision-making, drawing on lessons from economics, history, psychology, neurology and sociology.
September 3: Market Risk - Modest Inflation Expectations Allow US Mortgage Rates to Once Again Set New Record Lows
Freddie Mac (OTC: FMCC) yesterday released the results of its Primary Mortgage Market Survey (PMMS), and for yet another week, fixed-rate mortgages reached record lows, as did the 5-year adjustable rate in this survey. (The 30-year fixed-rate survey began in 1971, the 15-year began in 1991, and the 5-year adjustable in 2005.)
September 3: Market Risk - FHFA Establishes New Housing Goals for Fannie Mae and Freddie Mac
The Federal Housing Finance Agency (FHFA) has sent a final rule to the Federal Register establishing new housing goals for Fannie Mae and Freddie Mac (the Enterprises) for 2010-2011. The Housing and Economic Recovery Act of 2008 (HERA) required FHFA to establish housing goals for the Enterprises for targeted segments of the mortgage market.
September 2: Commentary - I Renounce Monetarism (with Apologies to Mr. Lippman of Pendant Publishing)
Monetarism, the notion that the behavior of some definition of the money supply is a leading indicator of aggregate demand, is akin to malaria. Once it is in your “system,” it is very difficult to totally purge it from your system. Early in my career, I was strongly sympathetic toward monetarism. In the late 1990s, I was introduced to the Austrian school of economics, in particular, the Austrian theory of the business cycle (ATBC). I was immediately sympathetic to the ATBC because bank credit played such an important role in it. I and the Austrians believe bank credit is unique inasmuch as an increase in it unambiguously implies an increase in nominal aggregate demand for goods, services and/or assets.
September 2: Commentary - The New Risk Management, Data Management?
These days, risk management is high on most trading firms' agendas. That is risk management in both the broadest and narrowest sense. Increased oversight, regulation and both the rapid evolution and increasing speed of markets is driving this need. In a climate of price volatility, volumetric uncertainty, innovation in deal structures, changing regulations and globalization, effective risk management and the ability to respond to valuation challenges and portfolio optimization opportunities are pre-requisites to profitability for organizations that deal in commodities.
September 2: Economic Risk - US Manufacturing Sector Growth Unexpectedly Picked Up in August
The ISM manufacturing index indicated that the sector grew for the thirteenth-consecutive month, and the pace of expansion unexpectedly increased as shown by the index rising to 56.3 in August from 55.5 in July (a reading above 50 indicates the sector is generally expanding). Market expectations going into today’s report were for a decline in the index to 52.8. The employment component continued its upward trend, rising to 60.4 from the previous month’s reading of 58.6, its highest level since December 1983.
September 2: Energy Risk - Research in Practice
You can't miss it -- 213 solar panels and a battery the size of a tractor trailer sit alongside one of Duke Energy's electric substations on Charlotte, North Carolina's Highway 51. And that is intentional, said Paige Layne, Duke Energy's corporate communications manager. "We found because the solar panels are out there on one of the busiest highways in Charlotte, people call in and ask us about them."
September 2: Weather Risk - EARL Wanes, Curving to Parallel East Coast
Contrary to rumor, Danielle's & Earl's traverse through West Atlantic actually helping to enhance/bolster East Ridge & Heat Wave. FIONA [60 mph] plateaus, fighting shear & dry air, bending up to Sargasso Sea. Moderately inhospitable environment makes it difficult for Fiona to reach Hurricane status, but stalling near Bermuda possible.
September 2: Industry Risk - Private Equity Emerges from the Economic Crisis
Market conditions are now providing opportunities for private equity managers and their investors in selective areas of the market according to new research produced by global professional services company Towers Watson. The research asserts that portfolio company operating performance is stabilizing, pricing for new deals is becoming more compelling from a buyer’s perspective and financing packages are increasingly available for the right businesses.
September 1: Operational Risk - US SEC Issues Report Cautioning Credit Rating Agencies
The Securities and Exchange Commission yesterday issued a report cautioning credit rating agencies about deceptive ratings conduct and the importance of sufficient internal controls over the policies, procedures, and methodologies the firms use to determine credit ratings. The Report says that because of uncertainty regarding a jurisdictional nexus between the United States and the relevant ratings conduct, the Commission declined to pursue a fraud enforcement action in this matter. The Report notes that the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act provided expressly that federal district courts have jurisdiction over SEC enforcement actions alleging violations of the antifraud provisions of the securities laws when conduct includes significant steps, or a foreseeable substantial effect, within the United States.
September 1: Industry Risk - Regulatory Demands and Ambiguity Are Greatest AML Challenges
Results found that 87% of compliance professionals agree that either increased regulatory demands or the rise of organised financial crime are the biggest challenges for banks in these regions. In North and South America, more than half of respondents found increased regulatory demands a significant challenge. In Europe however, the most commonly cited challenge was the ambiguity of sanctions regulations, which 73% agreed or strongly agreed should be more straightforward.
September 1: Economic Risk - Business Optimism Index Drops 10 Points
Grant Thornton LLP’s Business Optimism Index, based on a quarterly survey of U.S. business leaders, decreased significantly to 58.4 in August from a recent high of 67.6 in May. Business leaders are again becoming pessimistic, with only one-third (34%) expecting the U.S. economy to improve in the next six months, down significantly from 63% in May. The hiring outlook has also dimmed; only 38% of business leaders report that their companies will ramp up hiring in the next six months.
September 1: Commentary - No-regrets Innovator
It was early May, under stormy skies, when Jim Rogers gave the opening keynote, "Smart Grid: The Catalyst to Transform the Energy Sector," at the Smart Grid Roadshow in Cincinnati. Later that morning, he followed up about his vision for the utility industry. One of his key messages: Keep educating the customer, and pay attention to the customer's wants and needs.
September 1: Market Risk - End of Month Stock Factoid
DJIA down 451.22 points for the month of August.
August 31: Commentary - Double Dip Economy, Does Quantitative Easing Really Matter?
It is unclear why proponents of quantitative easing or "QE" inside the Federal Open Market Committee (FOMC) are confident that it will be the answer to our current economic woes. Many of the arguments and models linking QE to improved performance of the real economy are unsatisfactory. The terms of these models are poorly defined and the conclusions drawn from them are at variance with accepted understanding of the function of prices in markets. Prices we should recall act as the signaling and incentive carrying element of market behavior. More importantly, the only available empirical analyses available suggest that QE, when employed in Japan, had little if any effect at all on GDP, inflationary expectations, or measured inflation. Given the definitional problem, the Fed's reliance on QE (targeted expansion of the Fed balance sheet via the purchases of Treasuries) seems questionable. As discussed below, it is far from certain that QE will prove to be an effective policy tool to fight unemployment or real estate price deflation.
August 31: Basel – Committee Issues Paper, Microfinance Activities and the Core Principles
The Basel Committee on Banking Supervision today issued the final version of its paper entitled Microfinance activities and the Core Principles for Effective Banking Supervision. The Basel Core Principles for Effective Banking Supervision (the Core Principles) are the global de facto standard for sound prudential regulation and supervision of banks.
August 31: Regulatory Risk - Fitch Comments on Recent Basel Regulatory Capital Proposals
Fitch Ratings is supportive of the Basel Committee's Aug 19 proposal to require regulatory capital instruments to be loss-absorbing ahead of state support for banks. Fitch is not taking any rating actions as a direct result of the proposals. "The Basel Committee is putting forward a contract law proposal to solve problems that arose in the contractual terms of regulatory capital instruments," says Gerry Rawcliffe, Managing Director in Fitch Ratings Financial Institutions team in London. The proposal addresses difficulties with making regulatory capital instruments absorb losses when states support banks and the distinction becomes blurred between going concern and gone concern (when a company is legally insolvent).
August 31: Commentary - A Rational Look at the Plans for Moving Forward in the Gulf
Though non-binding, a report released late last week by the Bipartisan Policy Center should provide momentum toward the lifting the deepwater drilling moratorium currently in place in the wake the of the Deepwater Horizon disaster. The BPC was asked by the federal government's National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling to review the effect of the moratorium and the response by both industry and the government.
August 31: Market Risk – US Home Values Rise in Second Quarter
The Conventional Mortgage Home Price Index (CMHPI) Purchase-Only Series for the United States registered a 3.1 percent (13.2 percent annualized) increase in the second quarter relative to the first quarter on a not-seasonally-adjusted basis. U.S. home values fell 0.2 percent relative to the second quarter a year ago.
August 30: Operational Risk - CEBS Publishes Its Revised Guidelines on Stress Testing
The Committee of European Banking Supervisors (CEBS) last week published the final text of its revised Guidelines on stress testing which takes into the account the results of the earlier public consultation which run from December 2009 to March 2010. The revised guidelines draw on the experience that supervisors have obtained by reviewing institutions’ stress tests in recent years, and take account of the revised principles for sound stress testing practices and supervision published by the Basel Committee of Banking Supervision (BCBS).
August 30: Country Risk – UK, Monetary Policy After the Fall
In a paper presented at the Jackson Hole Economic Policy Symposium, Charles Bean – Deputy Governor of the Bank of England and member of the Monetary Policy Committee (MPC) – discusses the lessons learned from the financial crisis for the future conduct of monetary policy. He begins by describing the pre-crisis consensus over the appropriate macroeconomic policy framework. Following the crisis, it is natural to ask what the events of the past three years tell us about the suitability of that policy framework. Charles Bean states: “Monetary policy makers would ... be remiss if they did not re-examine their own decisions in the lead-up to the crisis and strive to learn the lessons for the future conduct of policy.”
August 30: DvD Forecast: - 10 Year Forecast of US Treasury Yields and US Dollar Interest Rate Swap Spreads
This week’s projections for the 1 month Treasury bill rate (investment basis) show still another large drop of more than 23 basis points in the 1 month bill rate forecasted for July 2020 compared to last week. The implied forecast this week shows a steady rise in the 1 month bill rate to 3.898% in July 2020. The 10 year U.S. Treasury yield is projected to rise steadily to reach 4.338% on July 31, 2020, down 20 basis points from last week.
August 30: Energy Risk - Making Waves with Tidal Energy
The first-ever federal license to proceed with a utility-scale tidal energy project in this country has been issued in Oregon. After an extensive permitting process, the Federal Energy Regulatory Commission has given the thumbs up to Ocean Power Technologies. Smaller such facilities are now underway. But the commercial-scale one that is to be built in Reedsport, Ore. covers a wide array of issues such as the preservation of aquatic resources, water quality and the maintenance of marine life.
August 27: Industry Risk - IAIS Identifies Need to Further Develop Insurance Specific Macroprudential Surveillance
The International Association of Insurance Supervisors (IAIS) yesterday released the mid-year edition of the Global Reinsurance Market Report, entitled “Macroprudential Surveillance and (Re)Insurance”. The report discusses macroprudential surveillance in insurance and reinsurance, looking at current issues and debates on the meaning, scope and value of macroprudential surveillance. The report also discusses current macroprudential surveillance practices among insurance supervisors as well as recent work at a global level.
August 27: Economic Risk - US Initial Jobless Claims Fall More than Expected in Latest Week
Initial unemployment insurance claims dropped an encouraging -31,000 to 473,000 for the week ending August 21, 2010, more than reversing the previous week’s 16,000 rise to a 504,000 level (initially reported as 500,000). Expectations for today’s report were for the level of claims to dip to 490,000.
August 27: Regulatory Risk - AIMA to Engage with US Authorities on Dodd-Frank Act Implementation
AIMA has set out several key areas of focus ahead of September meetings with U.S. policymakers and supervisors regarding the Dodd-Frank Act. These include the registration of hedge fund managers and the reporting of systemically relevant data in the interests of a broader financial stability assessment; how smaller managers may be impacted by the legislation; OTC derivatives; the revised ‘Volcker Rule’; potential tax issues; and the goal of global regulatory consistency.
August 27: Industry Risk - Americans Want to Give Electric Vehicles a Test Drive
Forty percent of consumers report they are likely to test drive an electric vehicle, according to a new study of online American adults from the Consumer Electronics Association (CEA). The study, Electric Vehicles: The Future of Driving, suggests electric vehicles entice consumers with improved environmental quality and potential cost savings, but leave them with questions about battery life and convenience of battery charging.
August 27: Market Risk - US Long-Term Mortgage Rates Fall for the Ninth Week Out of Ten
Freddie Mac yesterday released the results of its Primary Mortgage Market Survey (PMMS), and for yet another week, fixed-rate mortgages reached record lows, while the 5-year adjustable rate remained tied at its low for this survey. (The 30-year fixed-rate survey began in 1971, the 15-year began in 1991, and the 5-year adjustable in 2005.)
August 26: Operational Risk - SEC Adopts New Measures to Facilitate Director Nominations by Shareholders
The Securities and Exchange Commission yesterday adopted changes to the federal proxy and other rules to facilitate the rights of shareholders to nominate directors to a company’s board. The new rules require companies to include the nominees of significant, long-term shareholders in their proxy materials, alongside the nominees of management. This “proxy access” is designed to facilitate the ability of shareholders to exercise their traditional rights under state law to nominate and elect members to company boards of directors.
August 26: Operational Risk - ISDA Streamlines Credit Derivative Novation Process
ISDA announced that it will further streamline the process of novating or assigning credit derivative trades by way of its 'Credit Consent Equals Confirmation' project. As a key measure in this initiative, ISDA yesterday published Additional Provisions for Consent to, and Confirmation of, Transfer by Novation of OTC Derivative Transactions. The overall objective of the project is to rationalize the current two-step practice of consent followed by confirmation, with an automated, single-step process for parties to provide their consent and their legal confirmation to a novation simultaneously.
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