This is a response questions. I asked when the six months about the direction of the financial system. Although the disclosure of information will come out in a manner that is not clear. Images, they also see you have other tracks that the future of the financial support of the residents of the United States will look like what.

The Ministry of Finance of the United States. We issue proposals and options on financial markets, housing revolution. Which contains the two main reasons.

First, a process that results causes the government to support the financial side. Home to the U.S. for many years at Fannie Mae and Freddie Mac have been damaged greatly during the past 3-4 years, as follows.

First, despite laws that established the two agencies. The purpose is to serve the U.S. people are encouraged to address their own, they live with the shareholder structure of the private sector. Along with overseeing the work the two agencies lax Driving operation is in a maximum profit. Results bear risk than the. And have to destroy people’s tax money eventually.

The two agencies both receive support from the government. The terms of the tax advantage over private sector Share capital of less than And received the protection that never fail in the eyes of U.S. residents. The expansion in the segment with a high risk to the quick. Cause damage. In addition, there is no self-sufficient buffer of capital well.

Finally, the enforcement agency supervising financial institutions, both noted to have poor performance due to the regulatory structure of U.S. financial institutions to include agencies. Directed several sure enough.

Secondly, the main content of the proposal that just came out is to find alternatives for financing for the housing of the United States. The new system. To balance the weight. During the public access to the funds was insufficient. And the use of public tax money to a minimum. To promote the economy, the Ministry of Finance. U.S. has proposed three options include.

First alternative to the private sector acts as a financial services provider in housing loans except those with low to moderate income. The existing agencies continue to provide financial assistance to that side. Live next The advantages of this alternative is that not a distortion of resource allocation between other sectors of the economy, with housing finance sector. And must bear the risk more than necessary as the past, but of course that people with low incomes would be able to access funding more difficult from this alternative because the market such as line of business that the private sector fails to cooperate. much attention. From the profits of this business for quite a few customers.

The second choice. Similar to the first alternative. But the gaps with no help from the government reserve system in times of crisis in the housing market by governments acting together to help the risk of such damage. With help from the government to supplement the process of financial services from the private sector through two types of set fees high enough price. Investment fund units or damage to government protection. As a compensation fund for damage caused when a crisis comes up. Of course, that Affects the interest rates people pay to buy a house in the loan at a higher level.

Option three Similar to the first alternative. But the gaps with no help from the government reserve system in times of crisis in the housing market by setting up a new agency of the U.S. government (unit B as shown) serves to guarantee the securities relating to housing loans. Instruments that are backed by home loans, including certain types of MBS (section C) a Reinsurance or insurance fund to supplement the strength of the private sector (unit A) If the crisis. Or fall of financial institutions in the future. Various investors. Access to MBS investors and trading mechanisms such as the interest rate will help people buy homes, do not borrow to pay much higher because many private investors. Can help cover the cost in time of crisis, the levels decrease. From the price mechanism, which has higher performance. Liquidity and credit shall also be accessible to people with low incomes more evenly.

I have noticed the new guidelines for the three criteria for a U.S. Treasury Department. Would be willing to offer ideas for the housing finance system in the alternative. The third official for the U.S. to be realized. Flow of ambiguity, they doubt the mechanism of a free market economy, while this particular issue of asset pricing through market mechanisms from Securitization CDO instruments during the last crisis. Resulted in the concept. Would be opposition parties. Both political and social currents. U.S. Treasury Department has proposed using the first and second choice, and then rely on more work than the private sector. To make a third choice. Compared to the more casually, and then tilt the receiving assistance from the government plus Or may be called the technique ‘Nudge’ to convey the contents of the public policies they want without being too much to resist.

The second mechanism to guide the market look to it again. Still rely on the structure of private shareholders. The operating style of the highest profit. Results have been at risk over the same. Reverse loss of experience and state financial institutions both Mentioned above.

Finally should be noted that the Ministry of Finance. U.S. will not dare to propose new financial architecture that very clear. Will be seen that the first and second choice. All it was a concept that still lacks guidelines and procedures that clearly the possibility that the U.S. Treasury Department may not want to be named who held. New agency set up in the government of their own. Because Mr. Timothy chicken quot Partners will not likely benefit much anything. If the new division to work as planned, however, if the agencies that cause damage to the U.S. economy in the future up to those who must be someone responsible for most is one who establishes agency said. up sure enough.

Said by : Dr. Boontam Rajitpinyolirsh

The guilty plea was announced by Loretta E. Lynch, United States Attorney for the Eastern District of New York, Janice K. Fedarcyk, Assistant Director-in-Charge of the Federal Bureau of Investigation, New York Field Office, Richard H. Neiman, New York Superintendent of Banks, and Jon T. Rymer, Inspector General, Federal Deposit Insurance Corporation.

The indictment alleges that from 2001 to 2003, Kontogiannis purchased and subdivided Loring Estates, located in East New York, Brooklyn, and Edgewater Development, located in College Point, Queens. After the conspirators obtained permits to construct multi-unit housing, Kontogiannis staged sales of the properties financed by mortgage loans. He then directed others to prepare false loan files to create the appearance that the properties were being purchased by creditworthy homeowners, when, in fact, Kontogiannis sold the properties to family members and employees who acted as straw buyers. The mortgages were supported by fraudulent appraisals depicting finished homes when the buildings had yet to be built or had fictional addresses, and the mortgage files contained fraudulent title abstract reports and other documentation designed to indicate that the seller, a Kontogiannis-controlled entity, had clear title to convey and that the lender’s interest was protected by title insurance. The loans were financed by lenders controlled by Kontogiannis, including Interamerican Mortgage Corp., later known as CIP Mortgage Corp. and Coastal Capital Corp. After the loans were closed, Kontogiannis ensured that the mortgages and deeds were not recorded, thereby permitting him to “sell” the same property repeatedly. Kontogiannis eventually sold the loans to WAMU or DLJ.

In an effort to conceal the multiple sales of the same properties, Kontogiannis changed the addresses of properties located in East New York, Brooklyn, to addresses in neighboring Howard Beach, Queens. In addition, he directed others to make monthly payments on the mortgages, ensuring that none of the mortgages became delinquent. The payments ceased in 2007, with approximately $92 million in principal outstanding on the fraudulent mortgages.

Kontogiannis, along with eight other defendants, were indicted on conspiracy and bank and wire fraud charges in June 2009. Four other defendants have pleaded guilty to date.

“The scope of this fraud is staggering,” stated United States Attorney Lynch. “The defendant controlled every aspect of the mortgage lending process, right up to the sale of fraudulent loans into the secondary market.” Ms. Lynch expressed her grateful appreciation to the New York State Banking Department for its assistance.

FBI Assistant Director-in-Charge Fedarcyk stated, “Kontogiannis has added another conviction to his rap sheet by defrauding banks and others in his $92 million mortgage fraud scheme. He thought he had the system figured out and now faces adding even more time to his sentence. This guilty plea is a step towards cleaning up the housing market, and the FBI will continue to vigorously investigate those that perpetrate this type of crime which affects all Americans.”

New York Superintendent of Banks Neiman stated, “This plea of guilty to one of the largest mortgage frauds directed by a single individual was made possible by seamless coordination between federal agencies and the state banking department. This degree of cooperative federalism, with each agency contributing specialized expertise, will restore confidence in the mortgage sector and the greater financial system.”

FDIC Inspector General Rymer stated, “The Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG) is pleased to join the United States Attorney’s Office for the Eastern District of New York and our law enforcement colleagues in announcing this guilty plea. The American people need to be assured that their government is working to ensure integrity in the financial services and housing industries and that individuals and entities involved in mortgage fraud criminal misconduct will be prosecuted. Bringing these individuals to justice helps maintain the safety and soundness of the nation’s financial institutions.”

Kontogiannis faces up to 30 years imprisonment on the conspiracy count to which he pleaded guilty. Kontogiannis also consented to forfeiture of the proceeds of his fraudulent activity, including a criminal forfeiture money judgment and money traceable to four commercial properties he controlled worth at least $50 million.

The government’s case is being prosecuted by Assistant United States Attorneys Jonathan E. Green and Duncan Levin.

This law enforcement action is part of President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.

Merrill Lynch, including a significant amount of loss in the third quarter, valued at 5,000 million U.S. Dollar They alleged that the debt obligations guaranteed or CDOs, and the collapse of the work Subprime for this loss. Washington is home to a total loss of the other announced earnings decline 75% in the third quarter. Summary of WaMu credit losses estimated at 975 million U.S. Dollar for the third quarter. Incorporating. The three problems are the same Citigroup Inc. reported a decrease of 60% of revenues in the third quarter compared to the amount of income in the same period last year.

All three groups have been affected by the natural and obvious set of activities in this regulation subprime mortgage industry. The first major attack July 19, 2007 is the standard of the United States hit their pickup point. Crisis continues at the same rate until August 22, 2007 when compared to critical decrease of 6.4% volatility index on the CBOE during this time off near the danger of increasing the price of the contract agreement worth 15-23 U.S. Dollar.

Problems in the mortgage subprime is not just a result of a lack of interest in the mortgage loan but as a result of an incorrect structure of loan products by banks to capital Bank investments in this case have failed. to evaluate the risk of subprime loans serve as collateral. Associated with these various factors, such as the strong impact of interest rate home loans. This increase is about 200 basis points in two years. Real estate sector has suffered from falling sales and prices fracture to lower interest rates. The process of economic slowdown also shows the effect of it, and finally the flexibility provided for in the property sub, prime benchmark lending and complete the process of preparing the soil for the upcoming snow storm.

Ground base defined in terms of loans to total loans subprime has been reduced from 14.86% estimated in early 2002 to 10.58% at the end of 2004, but since then increased strength of 13.93%. , estimated in early 2007 during the very short time, demonstrating the availability of credit subprime easy, the preparation of factors chaos subprime now coupled with price increases in loan subprime were used. pay increase in risk of 14% to 32% in early 2006 to mid 2007, however, costs on a percentage of risk is now a disappointment.

Lending the United States is estimated at 10,000 billion U.S. Dollar in this market mortgage subprime share of the market’s 13% of Gross Domestic and U.S. GDP combined with the stock 9% of the market, subprime This amplifies the severity of the disaster. subprime mortgage disaster. It’s not just the mortgage market, banking and lending. But the country’s economy and are affected by this subprime whim. The result is a global problem Mortgage Subprime causes and effects on the mortgage loan market last

Testifying before the Senate Banking Committee, Bernanke acknowledged that European debt problems are slowing U.S. growth, as is the protracted slump in the U.S. housing sector. He said mounting federal budget deficits must be addressed, but added that government spending is warranted given the lack of private-sector demand for goods and services.

Bernanke shot down suggestions that his Fed is out of bullets should the economy slide back toward contraction.

“If the recovery seems to be faltering, then we at least need to review our options. We need to think about possibilities. But, broadly speaking, there are a number of things we could consider” he said.

The Fed’s benchmark interest rates, a main lever of the central bank to spur economic activity, have been near zero for the past two years. That’s led some economists to worry that the Fed is running out of options to spark a slumping economy.

Bernanke countered that there are a number of unconventional steps the Fed still could take to stimulate the economy, ranging from resuming purchases of mortgages to reinvesting in securities to issuing a statement that interest rates will remain at zero for a fixed period to provide certainty to investors.

“We have not come to the point where we can tell you precisely what the leading options are” he said, adding that “policy is already quite stimulative. I think we still do have options, but they are not going to be the conventional options.”

Bernanke was blunt about the challenges, and he acknowledged that some government stimulus that powered the expansion in the first half of 2010 is likely to fade.

“Although fiscal policy and inventory restocking will likely be providing less impetus to the recovery than they have in recent quarters, rising demand from households and businesses should help sustain growth” Bernanke said in opening remarks.

He later discounted, when asked directly, the chances of sliding back into recession.

“Our expectation is still for a moderate recovery which will over time bring down the unemployment rate. That’s still our main scenario, that the economy will continue to grow and that private demand will take over as the driver of growth” he said.

Financial markets slumped shortly after Bernanke’s testimony was made public, in part because of his acknowledgement that “the economic outlook remains unusually uncertain” but the thrust of what he said was positive.

Real consumer spending appears to have expanded at about a 2.5% annual rate in the first half of 2010, Bernanke said, with purchases of durable goods “such as large appliances” increasing especially rapidly.

The economic forecast of the Fed’s Open Market Committee (FOMC), which sets the benchmark lending rate that influences borrowing costs across the economy, remains mostly unchanged, he said. Most FOMC members expect the economy to grow at a rate of 3-3.5% this year and 3.5-4.5% in 2011 and 2012, and they anticipate a jobless rate of 7-7.5% by late 2012.

Not everyone agrees with the Fed’s assessment

“This forecast looks a bit optimistic. Our own outlook calls for growth of 2.4% in 2010 and 2.5% growth next year” Mark Vitner, senior economist with Wells Fargo Securities in Charlotte, N.C., wrote in a research note to investors after Bernanke’s testimony.

What Bernanke didn’t say was also noteworthy. There was no mention of the threat of deflation, a fall in prices across the economy.

Deflation leads businesses and consumers to hoard cash on the assumption that prices will be lower soon, and growth skids. The word deflation doesn’t appear anywhere in Bernanke’s 56-page Monetary Policy Report to Congress, either.

Yet some prominent economists fear that the United States is nearing a deflationary cycle like the one now in Japan. They point to core inflation, which strips out volatile food and energy prices. Through June, it was running at a year-over-year rate of 0.9%, the lowest increase since 1966. That’s below the Fed’s target rate of 1-2%.

“Bernanke has thought long and hard about how to avoid a Japanese-style economic trap, and the Fed’s researchers have been obsessed for years with the same question. But here we are, visibly sliding toward deflation and the “Fed is standing pat” columnist Paul Krugman, a Nobel Prize-winning liberal economist, wrote recently.

Krugman’s concerns are shared by John Makin, a highly-regarded analyst at the conservative American Enterprise Institute, a research center. Makin fears that consumers and businesses may begin sitting on cash because it gains purchasing power as prices fall.

“The desire to hold cash is a dangerous part of the deflation psychology” he warned, noting that deflation often accompanies a financial crisis.

Near the end of his lengthy testimony, Bernanke was asked directly about deflation and he discounted the threat.

“Forecasts are very uncertain, but I don’t view deflation as a near-term risk for the United States” he said, noting that the Fed would be “assiduous” should deflation emerge. As the economy picks up steam, inflation will start ticking back toward the 2% range, Bernanke said.

The credit crisis proved to be a major shock for the financial markets, sending institutional investors into a strong risk-aversion mode. This was reflected directly in the Treasury market, where investors bought the safety of the debt market, while shorting risky assets such equities and commodities.

With investors rallying into the Treasury market, the yield on the government debt fell to record low levels during the credit crisis, mainly during the last quarter of 2008.

Since then, the market has gradually returned to risk-tolerance, which means that investors are looking for higher yielding assets instead of the safety assets. These days, the VIX index is returning to the pre-credit crisis levels, while equity and commodity markets are surging towards yearly highs, suggesting investors confidence is high.

It seems that risk-tolerance does not mean anything at all for the Treasury market, since the debt market has continued to trade within the same tight range over the last half of year. This was best seen in the short maturity bill market, where the market is trading close to the 0.0% benchmark level.

Right now, the U.S. government pays a 0.1% yield for a 3-month loan, while for a 12-month loan pays 0.30%.

In other words, the Government pays $5000 for every $1 million that it borrows with a 3-month maturity, which is probably one of the best deals of the last few centuries. Making the matter even more ironic is that during the prior week the yield on the 3-month bill fell into negative territory in intra-day trading, meaning that the market was willing to pay an interest rate charge to lend money to the U.S. Government.

The last time that short-term yields fell into negative territory was after Lehman’s bankruptcy, in December 2008. All this points to something being wrong at one of the two ends of the interest rate equation. Either, the Treasury market is following the wrong event – most market participants say that the Fed’s pledge to maintain low interest rates low for a long period influenced the debt market or that the equity and commodity markets are deeply overvalued.

Either way the story goes, two points are clear: the economy is recovering, thus pointing to higher yields, while the FOMC rates cannot go any lower from where they are currently standing; yet again pointing to higher yields.

Maybe the dollar will find buyers after all, as the market starts to price in global interest rate increases from most central banks, only to realize that the U.S. yields are already up there with the top end of the market, in real terms.

Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, launched the two key reports which demonstrate the strength and resilience of Australia’s financial markets and how well they have fared in contrast to other major financial centres following the Global Financial Crisis (GFC).

Austrade’s Chief Executive Officer, Peter O’Byrne, said during the last twelve months Austrade has increased its focus on financial services and has a team which extends throughout Austrade’s global network. This dedicated specialist team works to promote exports from Australia’s financial sector as well as attracting potential international investors.

“Working with the industry, the team supports missions and activities to highlight Australian capabilities to offshore markets extending from North America and Europe and into the Asia Pacific region, reflecting our strengths in funds management, investment banking and growing areas, such as Islamic finance,” Mr O’Byrne said.

“Significant steps toward establishing a strong mutual recognition framework between financial regulatory authorities in Australia and overseas markets have been taken, leading to stronger relationships with markets in the US and China.

“The Australian Financial Centre Forum, set up to help position Australia as a financial services centre in the region, will report on further ways to improve the competitiveness of our financial system, address tax and regulatory barriers and improve market access offshore later this year” Mr O’Byrne said.

Austrade’s National Manager Financial Services, Gary Johnston, said the joint launch of the two publications highlights the strong working relationship developed with AFMA.

Mr Johnston said, Austrade’s 2009 Financial Services Benchmark Report highlights the liquidity and sophistication of Australia’s financial markets and also points to the strength of regulatory and governance frameworks and their transparency which has benefited Australia during the GFC.

This year’s Benchmark Report shows Australia’s financial sector fared better than most other major financial centres. The sector remains strong, continuing to develop as a regional and global centre with Australian based institutions seeking global mandates and viewing Australia as a base for their products,” Mr Johnston said.

“Finance and Insurance remains a significant sector of the Australian economy, and contributed 8.1 per cent to Real Gross Value Added during 2008-09. The sector remains well capitalised, with total assets for Australia’s financial institutions exceeding A$4.4 trillion – equivalent to four times GDP.

“Investment funds – which include life offices, superannuation and other managed funds – account for 26.4 per cent of total financial sector assets at March 2009, totalling A$1.2 trillion – up more than fourfold since 1994.”

“Our banking and insurance sectors are actively looking for opportunities, particularly in emerging markets, while the funds management sector is looking to position Australia as a “product manufacturing” hub for the region.”

Mr Johnston said Australia’s leading financial institutions are also increasingly looking to extend their regional and global reach. Australia is also seen as an important market within the region with growing interest from Chinese and Indian financial institutions.

This points to both challenges and opportunities but offers encouragement for the future and supports the Government’s long term commitment to make Australia a global financial services centre in the Asia-Pacific region.

This elevates the influence of this currency amongst its peers and makes the RBNZ policy decision a meaningful event for the broader FX market.

The RBNZ Holds
It should come as no surprise to fundamental traders that the policy authority decided to keep the Official Cash Rate unchanged at for the third consecutive meeting at 2.50 percent. The economy is still struggling to pull itself out of recession yet inflation is still close to close to the central bank’s target level. More importantly, Governor Alan Bollard has issued commentary over the past months that have been relatively transparent with his intentions. Nonetheless, heading into the event, overnight index swaps were pricing in a 10 percent probability that the rate would be cut by 25 bps.

Putting the Decision into Context
When the decision to maintain the benchmark rate was announced, the market had to make the fine adjustment for the modest premium afforded to the possibility of a cut. More important, was the accompanied the decision. In regards to growth the first stepping stone to a turn in interest policy and therefore the kiwi dollar the prognosis was slightly more optimistic but certainly cautious. Bollard noted evidence that the recession was easing; but that the subsequent recovery was going to be slow and choppy. Looking into specific sectors, he said retail spending and residential housing had stabilized; but there was limited scope for a recovery in employment and investment. With an outlook for medium term inflation to remain within a reasonable range, there was little need to act on rates.

There were a few particular comments that struck a cord with traders though. The Governor said that he would be disappointed with further appreciation in the currency. This isn’t new as he has tried to jawbone and intervene for months and done so unsuccessfully for some time. More interesting was the suggestion that he doesn’t think further rate cuts would have much impact on the kiwi dollar a suggestion that he wouldn’t use policy to influence exchange rates. To offset this bullish notion, he went on to say that he expects to keep the benchmark lending rate unchanged until late into 2010. This seems to put a cap on the yield opportunities; but we have seen in the past that RBNZ is quick to change its stance and act on rates. Clearly, the market thinks his outlook somewhat unrealistic as Credit Suisse overnight index swaps are still pricing in nearly 100 basis points worth of hikes over the coming 12 months. Considering their habit for successful and large rate changes, this is still somewhat reserved and suggests they will not start until early or mid 2010.

Market Reaction
Volatility immediately picked up after the release; and the initial move was for a drop in the New Zealand dollar. Concerns over the appreciation of the nation’s currency and warnings that the benchmark rate can be held at its current level for another year or more is certainly bearish. However, comparing the sentiment following this event to previous rate decisions and Bollard commentary, this was relatively reserved if not a modest shift to the center. With signs that individual sectors of the economy are showing improvement, we are laying the ground work for a global recovery. Armed with the knowledge that the RBNZ can on a dime when it comes to interest rates, the kiwi would slowly appreciate after the event.

This week there is another round of notable event risk across the global market place; but it certainly does not carry the same bravado as the data fundamental traders are working with last week. Nonetheless, the most notable events include the US-China talks in Washington; the US consumer Confidence report; the RBNZ rate decision; straggling earnings reports; and, of course, the advanced reading of second quarter US GDP. The pinnacle of market moving influence comes with the growth report (the US stands in as a proxy for global activity when it comes to growth); but this is a long time for a market to consolidate on the edge of such a tense stall in sentiment. It would not be a surprise to risk appetite overwhelm fundamental considerations this week and take charge on producing either a breakout or reversal.

US-China Meeting in Washington
Though it is unlikely to come to much in the way of market moving price action, Chinese officials are meeting with US Treasury Secretary Timothy Geithner and other policy makers in Washington to discuss among other things the health of the US economy and its assets. The US dollar could be an interesting topic as China has swayed back and forth on its official position through supporting the currency (as the yuan is loosely pegged to the greenback and China holds the largest reserves of Treasuries in the world) and calling for its replacement as the world???s reserve with a basket in its stead. Geithner and company will no doubt right any proposals of diversification off; but they will certainly take concerns over the United States??? health and deficits seriously ??? they are the country???s largest investor. Politics aside, look for assurances against protectionist policy and the Chinese ???unwavering??? support of the United States??? assets and its investment interest.

US Consumer Confidence
The US was arguably the source of the global economic and financial collapse back in the summer of 2007. Therefore, it follows that the same economy will be expected to lead the world out of its recent gloom. There has been a very consistent turn in expectations surrounding growth and investment activity; but speculation requires a benchmark in the form of cold-hard data. Among the most timely of indicators happens to be the various sentiment surveys offered for the many economies and sectors. The Conference Board???s consumer optimism report lags its University of Michigan counterpart; but debates over accuracy often times provide the former with a market moving impact even though it comes across the wires second. Compare the changes in present conditions and expectations figures. Employment, income and spending components further make this indicator more valuable than its early-release cousin.

RBNZ Rate Decision
While a change in the benchmark lending rate or the growth forecasts for New Zealand is markedly less impressive than the same from the Federal Reserve or Bank of England; such an alteration could have a significant impact on risk appetite for the broader market. The New Zealand dollar is touted as one of the FX market???s most actively traded currencies; but its relatively small economy certainly doesn???t support such interest. Instead interest for the ???kiwi??? comes through investment flows. Historically, this island nation is known for its relatively high benchmark lending rate. With its overnight rate at 2.50% (below that of its Australian counterpart), a cut or proposal of further reductions could imbalance capital flows and dampen expectations for returns from the global community.

Earnings
The US second quarter earnings season has clearly tapered off with the close of last week. Most of the Dow components, blue chips and ???Stress Test??? banks have already released their respective accounting figures; and the consensus has ultimately taken on a bullish bias. However, the rally that was triggered with a record profit for Goldman Sachs clearly stalled with disappointing figures from stalwarts like Morgan Stanley, Bank of New York, Pfizer, American Express, Capital One and Microsoft. It was these stabilizers that likely stalled the Dow just as it was forging new highs for the year and held the safe-haven dollar from pushing to new lows. So, while the coming week???s reporting companies are not vital firms; their general contribution to earnings sentiment will contribute to the larger whole in judging whether the corporate sector is in facto strong enough to support the levels of speculation that we have seen build up recently.

US GDP (2Q A)
The world’s largest economy is scheduled to release its first measurements for second quarter growth on Friday. These numbers lack proper measurements on vital components (hence the sometime-significant changes in subsequent revisions); yet the advanced figures give an important guidance for benchmarking expectations for economic activity. Forecasts for global economic activity have improved over the past three to six months and the time frame for a turn to positive growth has been moved up; but it will be the US that confirms or rejects this speculation. The American economy is the largest consumer and one of the largest producers with an undeniable role as a primary trade partner and financial center. If there is as marked a moderation in the economies recession as economists suspect, the outlook for the global economy and investment will see a market improvement. If traders and other participants have not facilitated their own decision on market trends before this data crosses the wires, this release could single handedly determine trend direction and intensity for all capital markets and financial markets.

Bond traders quickly bought up bargain priced Mortgage Backed Securities pushing mortgage rates down by 1/8th – 1/4%. Bond traders and pundits have commented recently that they would like to hear clear direction from the Fed concerning their policy on inflation concerns. Bernanke gave them some of what they wanted saying “it is important to assure the public and the markets that the extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed, thereby avoiding the risk that policy stimulus could lead to a future rise in inflation”.

The Federal Reserve has committed billions of dollars to the purchase of mortgage backed securities in hopes of keeping long term interest rates low. Bernanke pointed at recent improvements in the credit market saying “Our purchases of agency mortgage-backed securities and other longer-term assets have helped lower conforming fixed mortgage rates. And better conditions in financial markets have been accompanied by some improvement in economic prospects. Consumer spending has been relatively stable so far this year, and the decline in housing activity appears to have moderated”.

Hard hit areas by the real estate bubble like Florida and California are reporting they may have seen the bottom. Although their recovery will be long and drawn out, the bottom may be at hand. Lower mortgage rates will be important to the recovery of the housing market, but along with that employment and the credit markets must improve. Without jobs or the ability to obtain credit low mortgage rates will not have the impact they had in past recessions. Unemployment is known as a lagging indicator but we are in uncharted territory, do not expect this recovery to look like those of the past.

The next few days will be important for mortgage rates, if bond traders keep their appetite for mortgage backed securities mortgage rates will continue to improve. This will be good for both home buyers and home owners as they take advantage of the lower rates with refinances.

Special Term Repo Facility: Extension
The Reserve Bank introduced a special 14-day term repo facility for banks in September 2008 through relaxation in the maintenance of SLR up to 1.5 per cent of their NDTL, to enable them to meet the liquidity requirements of mutual funds (MFs), non-banking financial companies (NBFCs) and housing finance companies (HFCs). The auctions for the special 14-day term repo are conducted on a daily basis. On a review, it is proposed:
- to extend the time for availability of this special term repo facility to banks up to March 31, 2010;
- to conduct these 14-day term repo auctions on a weekly basis.

Export Credit Refinance: Review
With a view to providing flexibility in the liquidity management of banks, the limit of the standing liquidity facility to banks in terms of export credit refinance (ECR) under Section 17(3A) of the RBI Act was raised from 15.0 per cent of the eligible outstanding rupee export credit as on the preceding fortnight to 50.0 per cent in November 2008. It is proposed:
- to review the ECR limit in March 2010.

Money Market Mutual Funds
The liquidity stress recently faced by mutual funds, particularly the money market mutual funds (MMMFs), was caused primarily on account of mobilisation of significant resources from large corporates and banks with redemption facilities on par with current accounts of banks. In this regard, the Securities and Exchange Board of India (SEBI) has taken several measures to mitigate the liquidity risks. In view of the systemic implications of the activities of such funds, it is proposed:
- to identify and address the macro-prudential concerns arising from the current framework in consultation with SEBI.

Interest Rate Futures
The Technical Advisory Committee (TAC) for Money, Foreign Exchange and Government Securities Markets had released the report of the Working Group on Interest Rate Futures (Chairman: Shri V. K. Sharma) in August 2008. The Working Group had recommended, inter alia, the introduction of a physically settled contract based on a 10-year notional coupon bearing government bond. The Reserve Bank has already permitted banks to take trading positions in interest rate futures (IRFs). The RBI-SEBI Standing Technical Committee has completed the preparatory work and an exchange traded IRFs contract on the 10-year notional coupon bearing government bond is expected to be launched shortly.