2012 - Corporate & Federal Debt Apocalypse?
According to the NYT, in 2010 we will have over $700 billion in notes coming dues from the private and public sectors. We could see a financial version of the hyped 2012 end of the world, by the lack of available credit for businesses as all these debt issues needs to be paid off and or borrowed. It is mind-boggling that our own U.S. government is going to tap the markets for $2 trillion (With a “T”) in treasury auctions.
We need to get this spending under control, we are slowly mortgaging our country and if we keep doing this eventually foreigners will own a good portion of it. If you don’t believe the last statement, Warren Buffet said the same thing on the News Hours when he was asked about the large amount of public debt.
New York Times - When the Mayans envisioned the world coming to an end in 2012 — at least in the Hollywood telling — they didn’t count junk bonds among the perils that would lead to worldwide disaster. Maybe they should have, because 2012 also is the beginning of a three-year period in which more than $700 billion in risky, high-yield corporate debt begins to come due, an extraordinary surge that some analysts fear could overload the debt markets.
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U.S. debt credit rating is danger of losing triple A status
According to Moody’s in their quarterly report cited the rising federal budget as a reason why the United States debt rating has continued to be under review. Going forward we can assume that either a significant increase in taxes is coming, large reduction in spending (not likely in the current climate) or issuance of more debt & currency (very likely). In the latter scenario, the U.S.’s rating would be under review and likely will experience a reduction.
Fortune - The United States isn’t in jeopardy of losing its gold-plated credit rating, though by one measure America is closer to the ratings-downgrade danger zone than Spain.
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New York Fed to expand list of banks for reverse repurchases
This is a good sign to see this liquidity drained from the system but the big question is what will happen to the banks taking back the “toxic assets” that were purchased during the crisis. First off, some real accounting will need to be made on the actual values of those securities.
The real estate market is no where near the peak so most of those will require write-downs to reflect the fair-market value (FMV). We will need to follow this closely to see how this arrangement is handled and see what the banks are putting on their balance-sheets.
Reuters, New York - The U.S. Federal Reserve is taking an additional measure to lay the groundwork to drain excess bank reserves, as it seeks to remove some of the $1 trillion in cash it injected during the global credit crisis.
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Lawmakers herald reformed credit card rules for U.S. card holders
Too bad the card companies had many months to hike rates and implement new fees before this bill went live. Good to see this reform happening, long over due but as the industry said, give us the rules and we will follow them and then innovate based on those rules. This is not the last word on this issue and that is certain.
Reuters - The implementation of rules from the credit card act, signed into law in May, will help cardholders understand how much their credit cards cost to use, U.S. Treasury Secretary Timothy Geithner and President Barack Obama said in statements.
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Federal Reserve Sees No Need to Raise Interest Rates Soon
Until we see the government support of the economy withdrawn and the economy shows it can operate normally without that intervention, we will not see rates raising anytime soon.
The Fed does not see inflation as a threat at this point as well. The stock market is rising rapidly and with the amount of money and credit that has been pumped into the market with low interest rates, it is not surprise we are seeing these increases. The test will be, can these companies make their earnings and conduct their normal financing operations is the normal regulated private market.
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Citigroup sells three credit card portfolios valued at $1.3 billion
Reuters, New York - Citigroup Inc. said on Monday it sold three credit card portfolios representing $1.3 billion in managed assets, as part of a plan to unload weak businesses and troubled assets that caused huge losses.
The third largest U.S. bank by assets, which did not disclosed the terms of the deals, said it will continue to service the portfolios through the first half of 2010.
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U.S. Banks to Cut Credit Limits for 58 Million Americans in 12 Months
This is natural to have when you have a reduction in confidence and credit in the financial system as a whole. If you look where the funding for many of these credit card companies come from, you would know that they issue debt and right not that type of debt is not en-vogue. It is worth noting that President Obama did just sign into legislation the new credit card regulation bill (C.A.R.D. Act). I still most of this decision would logically be in response to a worsening economic environment, not an improving one.
News (New York Times):
Credit card companies slashed limits for an estimated 58 million card holders in the 12 months ended in April, even though a high percentage had good credit scores when their limits were cut.
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