Ugly But Honest News 3-20-2017
From Federal Reserve Bank of Minneapolis:
There’s a straightforward way to help prevent the next financial crisis, fix the too-big-to-fail problem, and still relax regulations on community lenders: increase capital requirements for the largest banks. In November, the Federal Reserve Bank of Minneapolis, which I lead, announced a draft proposal to do precisely that. Our plan would increase capital requirements on the biggest banks—those with assets over $250 billion—to at least 23.5%. It would reduce the risk of a taxpayer bailout to less than 10% over the next century.
Alarmingly, there has been recent public discussion of moving in the opposite direction. Several large-bank CEOs have suggested that their capital requirements are already too high and are holding back lending. It is true that some regulations implemented after the 2008 financial crisis are imposing undue burdens, especially on small banks, without actually making the financial system safer. But the assertion that capital requirements are holding back lending is demonstrably false.
While this may sound like a great idea, it will never happen as the political influence of the banks will prevent any changes they do not want.
The Conference Board Leading Economic Index for theU.S. increased 0.6 percent in February to 126.2, following a 0.6 percent increase in January, and a 0.6 percent increase in December.
After six consecutive monthly gains, the U.S. LEI is at its highest level in over a decade. Widespread gains across a majority of the leading indicators points to an improving economic outlook for 2017, although GDP growth is likely to remain moderate. Only housing permits contributed negatively to the LEI in February, reversing gains over the previous two months.
Great news other than the weak housing permits…
From NY Times:
In every multibillion dollar settlement with a big bank that peddled faulty mortgage securities, a major provision has been a requirement that the bank provide “consumer relief.”
In the case of JPMorgan Chase, for instance, the nation’s largest bank satisfied its requirement to provide $4 billion in consumer relief in September by modifying and restructuring mortgages for about 169,000 borrowers — many of them the bank’s own customers.
One criticism of consumer relief settlements – especially those involving Goldman and Deutsche Bank that effectively empower them to buy mortgages or provide loans to other firms – is that they come with a profit incentive.
Well imagine that! Shouldn’t really surprise anyone the banks that created the housing mess will profit from their punishment.
In my opinion, it’s long past time we be brutally honest about the banks. Their influence and reach has metastasized to the point where we now live under a captive system. From our retirement accounts, to our homes, to the laws we live under — the banks control it all. And they run the system for their benefit, not ours.
While the banks spent much of the past century consolidating their power, the repeal of the Glass-Steagall Act in 1999 emboldened them to accelerate their efforts. Since then, the key trends in the financial industry have been to dismantle regulation and defang those responsible for enforcing it, to manipulate market prices (an ambition tremendously helped by the rise of high-frequency trading algorithms), and to push downside risk onto “muppets” and taxpayers.
Oh, and of course, this hasn’t hurt either: having the ability to print up trillions in thin-air money and then get first-at-the-trough access to it. Don’t forget, the Federal Reserve is made up of and run by — drum roll, please — the banks.
A must read without a doubt and today’s Ugly But Honest Truth.
Led by improvements in employment-related indicators, the Chicago Fed National Activity Index (CFNAI) increased to +0.34 in February from –0.02 in January. All four broad categories of indicators that make up the index increased from January, and only one of the four categories made a negative contribution to the index in February.
I’ve discussed the Credit Suisse Global Wealth Reports before, an excellent source of data for both wealth and wealth inequality. The most recent edition, from November 2016, shows the United States getting wealthier, but steadily more unequal in wealth per adult and dropping from 25th to 27th in median wealth per adult since 2014. Moreover, on a global scale, it reports that the top 1% of wealth holders hold 50.8% of the world’s wealth.
One important point to bear in mind is that while the United States remains the fourth-highest country for wealth per adult (after Switzerland, Iceland, and Australia) at $344,692, its median wealth per adult has fallen to 27th in the world, down to $44,977. As I have pointed out before, the reason for this is much higher inequality in the U.S. In fact, the U.S. ratio of mean to median wealth per adult is 7.66:1, the highest of all rich countries by a long shot.
Disturbing stuff without a doubt. What can be done to improve the median wealth of ALL Americans? Not just the rich but everyone?
The Federal Reserve Bank of New York today released results from its February 2017 Survey of Consumer Expectations (SCE) Credit Access Survey, which provides information on consumers’ experiences and expectations regarding credit demand and credit access.
The release shows an increase in unmet credit demand of U.S. consumers compared to the October release. The proportion of “discouraged” consumers rose. Both application rates and rejection rates declined. Involuntary account closures also rose to their highest level since the series’ start.
The expectations component of the survey also painted a subdued picture. The proportion of respondents likely to apply for at least one type of credit over the next 12 months decreased. Consumers were also generally more pessimistic of future approval rates.
No need to be discouraged IMHO. If someone wants to buy a home, and it makes sense and they are financially ready, they should take the first step and talk to a lender.
Highlights from NY Fed report:
Real consumer spending was soft in January, suggesting slower real PCE growth in Q1 than in recent quarters
January data suggested somewhat stronger near-term momentum for business equipment spending in 2017Q1
Surveys suggest sizable improvement in manufacturing conditions, but production data still indicate sluggish growth
Single-family housing starts appear to remain on a gradual uptrend, but new single-family home sales may have peaked in late 2016
Payroll growth was solid again in February and some labor compensation measures are pointing to firmer wage growth
The unemployment rate fell, while the labor force participation rate and employment-population ratio rose in the month
Headline and core price data were strong in January, suggesting inflation is continuing its progress towards the FOMC’s goal
Draw your own conclusions but I do not think it is much to get excited about. Not really bad just not really good…
Both the Shipments and Expenditures Indexes have been positive for two months in a row. Throughout the U.S. economy, there is a growing number of data points suggesting that the economy is getting better.
Some data points are simply less bad, but an increasing number of them are better, and even a few are becoming outright strong. The 1.9% YoY increase in the February Cass Shipments Index is yet another data point which strongly suggests that the first positive indication in October may have indeed been a change in trend.
In fact, it now looks as if the October Cass Shipments Index, which broke a string of 20 months in negative territory, was one of the first indications that a recovery in freight had begun in earnest. Data is suggesting that the consumer is finally starting to spend a little. It also suggests that, with the surge in the price of crude in October of last year, the industrial economy’s rate of deceleration first eased and then began a modest improvement led by the fracking of DUCs (drilled uncompleted wells), especially in the fields with a lower marginal production cost (i.e., Permian and Eagle Ford).
We have been questioning, “How fast will the recovery from here be?” However, the overall freight recession, which began in March 2015, appears to be over and, more importantly, freight seems to be gaining momentum.
Awesome news without a doubt! Let’s just hope the idiots in Washington don’t screw things up!
Forty percent (40%) of Likely U.S. Voters think the country is heading in the right direction, according to a new Rasmussen Reports national telephone and online survey for the week ending March 16.
That’s down two points from the previous week and is the lowest weekly finding since President Trump took office on January 20. This is the eighth week in a row that this finding has been in the 40s after running in the mid- to upper 20s for much of 2016.
While this is a vast improvement, it still means 60% do NOT think we are headed in the right direction. So I am still in the majority…
Not that the majority is always right…
That’s it for today. I plan on posting this week’s Market Reports late tonight or early tomorrow. Check back or subscribe below!