...

Americans borrowed less for a 10th consecutive month in November with total credit and borrowing on credit cards falling by the largest amounts on records going back nearly seven decades.

          The Federal Reserve said yesterday that total borrowing dropped by $17.5 billion in November, a much bigger decline than the $5 billion decrease economists had expected.

          November’s $17.5 billion drop in total credit was the biggest amount in dollars terms since records began in 1943.

          That represents an 8.5 percent fall from the October borrowing level. That was the biggest percentage drop since total credit declined 9 percent in May 1980.

          The borrowing category that includes credit cards fell by $13.7 billion, an all-time record decline in dollar terms. The drop was 18.5 percent from October, the biggest decline in percentage terms since a 29.6 percent plunge in December 1974.

          The Fed’s credit report excludes home loans and home equity mortgages, covering only borrowing that is not secured by real estate.

          The drop in overall credit for 10 straight months continued a record in terms of consecutive declines, surpassing the mark of seven straight declines set in 1943 and in 1991.

          Hank Greenberg, former chief executive officer at American International Group Inc., said Goldman Sachs Group Inc. is responsible for the collapse of the insurer during the economic crisis, the Wall Street Journal reported.

          “It certainly wouldn’t be difficult to come to that conclusion,” Greenberg is quoted as telling the newspaper.

          Greenberg blamed new standards for credit-default swaps - -pushed by Goldman or Deutsche Bank AG, he said -- and subprime, housing-backed derivatives sold and then shorted by Goldman as contributing to AIG’s collapse, the newspaper reported.

          “Mr. Greenberg appears to base his views on news reports rather than facts,” Lucas van Praag, a Goldman spokesman, said in an e-mail to Bloomberg News. “It is interesting that he doesn’t mention the devastating conclusions about AIG reached by the company’s own auditors.”

          The Federal Reserve will ask a U.S. appeals court to block a ruling that for the first time would force the central bank to reveal secret identities of financial firms that might have collapsed without the largest government bailout in U.S. history.

          The U.S. Court of Appeals in Manhattan, after hearing arguments in the case today, will decide whether the Fed must release records of the unprecedented $2 trillion U.S. loan program launched after the 2008 collapse of Lehman Brothers Holdings Inc. In August, a federal judge ordered that the information be released, responding to a request by Bloomberg LP, the parent of Bloomberg News.

          Bloomberg argues that the public has the right to know basic information about the “unprecedented and highly controversial use” of public money. Banks and the Fed warn that bailed-out lenders may be hurt if the documents are made public, causing a run or a sell-off by investors. Disclosure may hamstring the Fed’s ability to deal with another crisis, they also argued. The lower court agreed with Bloomberg.

          “The question is at what point does the government get so involved in the life of the institution that the public has a right to know?” said Charles Davis, executive director of the National Freedom of Information Coalition at the University of Missouri in Columbia. Davis isn’t involved in the lawsuit.

          The ruling by the three-judge appeals panel may not come for months and is unlikely to be the final word. The loser may seek a rehearing or appeal to the full appeals court and eventually petition the U.S. Supreme Court, said Anne Weismann, chief lawyer for Citizens for Responsibility and Ethics, a Washington advocacy group that supports Bloomberg’s lawsuit.

          U.S. investors oppose federal initiatives that would force them to give up control over their 401(k) accounts, the Investment Company Institute said.

          Seven in 10 U.S. households object to the idea of the government requiring retirees to convert part of their savings into annuities guaranteeing a steady payment for life, according to an institute-funded report today.

          “Households’ views on policy changes revealed a preference to preserve retirement account features and flexibility,” the institute, which represents the mutual-fund industry, said in the report.

          The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

          The institute’s member companies manage $11.6 trillion of assets in mutual funds, including employer-sponsored 401(k) accounts. Some lawmakers have questioned the public-policy value of the tax benefits for people investing in retirement accounts, the ICI said in a report today.

          The average 401(k) fund balance dropped 31 percent to $47,500 at the end of March 2009 from $69,200 at the end of 2007, according to a Fidelity Investments review of 11 million accounts it manages. The Standard & Poor’s 500 Index tumbled 46 percent in that period. The average balance of the Fidelity accounts recovered to $60,700 as of last Sept. 30 as the stock market rebounded.

          Senator Herb Kohl, chairman of the Senate Special Committee on Aging, proposed legislation on Dec. 16 to require fund companies to do more to ensure 401(k) options are appropriate for workers. The Wisconsin Democrat cited reports that target- date funds designed for people retiring in 2010 invested in high-yield, high-risk corporate bonds.

          Representative George Miller, a California Democrat, is advocating legislation to require more disclosure about 401(k) fees paid by investors. The Education and Labor Committee, which Miller leads, approved a bill requiring more disclosure about fees in June.

          The ICI survey was based on a telephone survey of 3,000 households from Nov. 20 to Dec. 20 and had a sampling error of plus or minus 1.8 percent.

          Federal Reserve officials squabbled about how to proceed with a program of mortgage-backed-securities purchases at their December meeting, with some saying a weak economy could warrant expansion and at least one arguing for scaling back. The minutes show some officials worried the housing recovery could be cut short next year when the Fed stops buying mortgage debt and when other federal support programs expire. Some participants remained concerned about the economy's ability to generate a self-sustaining recovery without government support,’ the minutes of the Dec. 15-16 meeting said. Some officials argued the Fed might need to expand its mortgage-purchase program and extend it beyond the first quarter to keep the recovery going. It goes without saying, if this recovery fails for whatever reason, yeah, they’ll ramp up asset purchases,’ said Alan Levenson, chief fixed-income economist at T. Rowe Price.

          The Dallas Cowboys’ first postseason game in their new $1.1 billion stadium has no cheap seats for fans or cheap parking for cars.  The Cowboys are charging as much as $500 for seats along the sidelines at Cowboys Stadium in Arlington, Texas, more than twice the regular-season price. Tickets start at $35 for standing-room that doesn’t guarantee a view of the field.  Before they even get into the stadium with a 60-yard-long video screen, $13 Kobe beef burgers and $9 Shiner Bock beers, fans have to fork over as much as $75 to park.

          Personal bankruptcies soared last year in Western states hit hardest by the real-estate bust.  In states such as California, Arizona and Nevada, where housing prices soared and then collapsed during the past decade, consumer bankruptcy filings rose roughly twice as much as the national average increase of 32%. In Arizona and Nevada, where bankruptcies increased most, filings skyrocketed by 79.6% and 59.5%, respectively. Nearly 6.2% of mortgages in Arizona and 9.4% of mortgages in Nevada were in foreclosure by the end of the third quarter. California saw personal bankruptcy filings rise 58.8% last year. At the end of the third quarter, some 5.8% of loans were in foreclosure there.

          Federal Reserve officials discussed whether the economy is strong enough to allow their $1.73 trillion of asset purchases to end in March and differed over the risk of inflation, minutes of their last meeting showed.  A few policy makers said it ‘might become desirable at some point’ to boost or extend securities purchases aimed at lowering mortgage rates.

          Morgan Stanley Asia Ltd. Chairman Stephen Roach said U.S. policy makers should start to exit emergency stimulus measures now if the economic recovery is as strong as they say it is.  There is never an easy time to do it, Roach said. The longer they wait, the greater the chance they sow the seeds for the next bubble. So I’m in favor of an early exit strategy.

          John Taylor, creator of the so-called Taylor rule for guiding monetary policy, disputed Federal Reserve Chairman Ben S. Bernanke’s argument that low interest rates didn’t cause the U.S. housing bubble.  ‘The evidence is overwhelming that those low interest rates were not only unusually low but they logically were a factor in the housing boom and therefore ultimately the bust,’ Taylor, a Stanford University economist, said. Taylor, a former Treasury undersecretary, was responding to a speech by Bernanke two days ago, when he said the Fed’s monetary policy after the 2001 recession ‘appears to have been reasonably appropriate’ and that better regulation would have been more effective than higher rates in curbing the boom.

          As the US Federal Reserve pulls back from the mortgage market, will the government and its proxies, Fannie Mae and Freddie Mac, pick up the baton?  Many investors are looking to Fannie and Freddie to play an expanded role in the market for mortgage-backed securities (MBS) – helping to keep the market liquid and mortgage rates low – as the Fed completes its $1,250bn purchase programme.  This is mitigating concerns, expressed by some Fed officials that the scheduled winding down of Fed purchases of MBS by March 31 could ‘undercut’ a fragile housing recovery.

          U.S. apartment vacancies rose to a record 8% in the fourth quarter and rents fell the most in three decades according to Reis Inc.  Asking rents dropped 2.3% from a year earlier to an average of $1,026, the biggest decline since Reis began records in 1980. Never before have we observed rental properties in so much distress, Victor Canalog, Reis’s research director, said.

          Office vacancies in the U.S. surged to a 15-year high in the fourth quarter and rents fell the most on record according to Reis Inc.  The vacancy rate climbed to 17% from 14.5% a year earlier.

          Vacancies at the largest U.S. shopping centers reached a record 8.8% in the fourth quarter. Reis Inc. said.  Vacancies at smaller neighborhood and community centers increased to 10.6%, the highest level since 1991, from 8.9% a year earlier.

          U.S. state tax collections fell the most in 46 years in the first three quarters of 2009 as the recession shrank revenue from sources including personal income, the Nelson A. Rockefeller Institute of Government said.  Revenue dropped 13.3%, or $80 billion, compared with the same nine months of 2008, to $523 billion, the institute said. Collections in the third quarter alone sank 10.9% to about $162 billion. The first three quarters of 2009 were the worst on record for states in terms of the decline in overall state tax collections, as well as the change in personal income and sales tax collections, Rockefeller analysts Lucy Dadayan and Donald J. Boyd wrote. Budget gaps have opened in 31 states since fiscal year 2010 began, Dadayan and Boyd wrote 2010 is going to be very difficult for the states and the next year is likely to be significantly worse, Rockefeller Deputy Director Robert Ward said.

...

THE INTERNATIONAL FORECASTER

WEDNESDAY, JANUARY 13, 2010

011310(4)_IF

P. O. Box 510518, Punta Gorda, FL 33951-0518

An international financial, economic, political and social commentary.

Published and Edited by: Bob Chapman

NOTE: NEW E-MAIL ADDRESSES

For correspondence to Bob: bob@intforecaster.com

For subscription and renewal: info@intforecaster.com

CHECK OUT OUR WEBSITE

www.theinternationalforecaster.com

1-YEAR $159.95 U.S. Funds

US AND CANADIAN SUBSCRIBERS: Make check payable to Robert Chapman (NOT International Forecaster), and mail to P.O. Box 510518, Punta Gorda, FL 33951-0518. Please include name, address, telephone number and e-mail address.

Or:

We accept Visa and MasterCard charges.  Provide us with your card number and expiration date.  We will charge your card US$159.95 for a one-year subscription.

You can email us in two separate emails (1- the Credit Card Number with full name, address and your telephone number and (2- the Expiration date on the card.

NON US OR CANADIANS SUBSCRIBERS:

Due to the time that it takes for your mail to arrive to us from a foreign country, we would like for you to email us as above the CC information in two separate emails.

Note:  We publish twice a month by surface mail or twice a week by E-mail. bob@intforecaster.com

 or info@intforecaster.com

RADIO APPEARANCES:

To check out all of our radio appearances click on this link below:

http://www.theinternationalforecaster.com/radio

-- Posted Wednesday, 13 January 2010 | Digg This Article