Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Eiro-group Review –The power of trading education - 4th Dec 20
Early Investors set to win big as FDA fast-tracks this ancient medicine - 3rd Dec 20
New PC System Switch On, Where's Windows 10 Licence Key? Overclockers UK OEM Review (5) - 3rd Dec 20
Poundland Budget Christmas Decorations Shopping 2020 to Beat the Corona Economic Depression - 3rd Dec 20
What is the right type of insurance for you, and how do you find it? - 3rd Dec 20
What Are the 3 Stocks That Will Benefit from Covid-19? - 3rd Dec 20
Gold & the USDX: Correlations - 2nd Dec 20
How An Ancient Medicine Is Taking On The $16 Trillion Pharmaceutical Industry - 2nd Dec 20
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20
MUST WATCH Before You Waste Money on Buying A New PC Computer System - 27th Nov 20
Gold: Insurance for Prudent Investors, Precious Metals Reduce Risk & Preserve Wealth - 27th Nov 20
How To Spot The End Of An Excess Market Trend Phase - 27th Nov 20
Snow Falling Effect Christmas Lights Outdoor Projector Amazon Review - 27th Nov 20
4 Reasons Why You Shouldn't Put off Your Roof Repairs - 27th Nov 20
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Power Shortage at the U.S. Fed?

Politics / Central Banks Jun 29, 2009 - 02:05 PM GMT

By: Money_Morning

Politics

Best Financial Markets Analysis ArticleWilliam Patalon III writes: Documents brought to light by key by congressional investigators hightlight real disagreement between top-level U.S. Federal Reserve officials about how it should address the Bank of America Corp.(NYSE: BAC) acquisition of Merrill Lynch & Co. Inc. are almost certain to fuel the ongoing congressional debate over the central bank’s push to expand its authority over the U.S. financial system.


This growing concern manifested itself Thursday, when Fed Chairman Ben S. Bernanke; was grilled by Capitol Hill lawmakers during a congressional hearing looking into the central bank’s conduct in BofA’s buyout of Merrill Lynch. Bernanke’s failure to resolve some of the most-pointed questions posed by congressional leaders – (especially Republicans) who wanted to discover whether the Fed overstepped its authority and interfered with merger-related decisions – may undermine a proposed financial system overhaul that would imbue the central bank with broad authority over big U.S. financial institutions. One example: In the Bank of America deal for Merrill Lynch, lawmakers felt that Bernanke & Co. should’ve required more concessions in return for the taxpayer-supplied financial aid, Bloomberg News said.

The bottom line: The additional oversight powers that Bernanke is seeking – and that are part and parcel of the proposed Obama administration financial-system overhaul may prove to be one very tough sell.

Both parties are likely to find fault with U.S. President Barack Obama’s plan to put the Fed on the point, positioning it as the single agency responsible for supervising the U.S. economy’s largest and most-interconnected banks and financial institutions, giving the central bank the power to dictate financial standards on capital, management of risk and even liquidity requirements.

“It may be more important for us to find another systemic risk regulator,” U.S. Rep. Paul Kanjorski, D-Pa., who is a member of the House Oversight Committee where Bernanke appeared, told Bloomberg TV. Congress should “hesitate to put any more authority on the back of the Federal Reserve.”
The internal central bank documents – e-mails, written notes and even official memos paint a picture of a government institution that’s “wrestling” with how tough it should be on BofA and other big banks, The Wall Street Journal reported. In December, Bank of America told federal officials it was looking to possibly end the deal, and current and former bank officials contend that the Fed and former Bush administration officials pressured BofA to go through with the deal, which has turned out to be much-less beneficial than hoped for.

On the other hand, these disclosures could bolster the argument by Fed officials that the central bank needs these powers to address future financial crises. The reason: These  disclosures show that it lacked the “tools” (the legislated power and authority) needed to tackle the problems as soon as they surfaced. The inability to do so probably lengthened the crisis and exacerbated both the damages – as well as its ultimate cost.

Market Matters     

In non-financial news, U.S. commercial aircraft giant The Boeing Co. (NYSE: BA) struggled through a miserable week as it postponed testing of the new 787 Dreamliner aircraft and also lost orders from Qantas Airways Ltd., as the entire industry continued to suffer the ill effects of the economic downturn on travel.

Apple Inc. (Nasdaq: AAPL)  reported better-than-expected early sales of its new iPhone 3G and appeared close to welcoming its fearless leader, Chief Executive Officer Steven Jobs, back to work.  Tech giant Oracle Corp. (Nasdaq: ORCL) announced declining profits, but offered favorable forecasts for the current quarter and beyond.  Likewise, retailer Bed Bath and Beyond Inc. (Nasdaq: BBBY) experienced a surprisingly strong quarter, a nice sign that the ailing consumer may be showing renewed life.  State-owned Sinopec Shanghai Petrochemical Group (NYSE ADR: SHI) is attempting to purchase Swiss-based Addax Petroleum Corp. for $7.2 billion in what would be the largest global acquisition by a Chinese company. 

Investors breathed a collective sign of relief when the final leg of the record $104 billion U.S. Treasury auction came to a close and interest rates had not soared through the roof.  Instead, institutions and sovereign funds seemed to maintain a hearty appetite for U.S. government securities, despite rumors to the contrary.  In recent weeks, naysayers have been predicting that foreign buyers would shun domestic fixed income as the ballooning U.S. deficit spiraled out of control with expensive new programs to cure all that ailed the country.  For the time being, at least, Treasuries remain a safe-haven investment, and the yield of the benchmark 10-year bond even fell to around 3.5%. 

From an equity standpoint, investors remain confused about the future direction of the markets and whether to ride the prior upward trend or take profits from the rally that exceeded 30% in anticipation of a return to the lows set in early-March.  Some believe the indexes will trade sideways for the foreseeable future.  The Dow Jones Industrial Average lost ground (thanks in large part to Boeing), while other major indexes closed relatively flat from the prior week’s levels.  Despite a bit of volatility, oil hovered neared $70 a barrel level and gasoline prices fell slightly for the first time in two months.

While the economic numbers appear to be getting stronger (see below), many investors want to see more than just “less” contradiction or “slower” weakness in the economy and various sectors.  Many believe that the “worst of times” may be over, but the “best of times” may still be far away.  Some even approve of the job Bernanke is doing (despite what their elected reps are saying).

Market/ Index

Year Close (2008)

Qtr Close (03/31/09)

Previous Week
(06/19/09)

Current Week
(06/26/09)

YTD Change

Dow Jones Industrial

8,776.39

7,608.92

8,539.73

8,438.39

-3.85%

NASDAQ

1,577.03

1,528.59

1,827.47

1,838.22

+16.56%

S&P 500

903.25

797.87

921.23

918.90

+1.73%

Russell 2000

499.45

422.75

512.72

513.22

+2.76%

Global Dow

1526.21

1347.38

1,633.70

1,633.36

+7.02%

Fed Funds

0.25%

0.25%

0.25%

0.25%

0 bps

10 yr Treasury (Yield)

2.24%

2.68%

3.79%

3.51%

+127 bps

 

Peter Schiff: Why this Money Should Replace the U.S. Dollar There's a new universal currency, backed by solid gold. You can use it to make online purchases anywhere in the world. Converting some money to the new currency takes just 5 minutes. You can start with as little as $10... or as much as $10 million. According to CNBC star analyst and Euro Pacific Capital President Peter Schiff, this money could double the value of your savings - automatically - in just 6-9 months. For Schiff's full analysis and recommendations, please go here.

Economically Speaking

A Congressional tongue-lashing didn’t keep Bernanke and Fed policymakers from completing their business at hand.  Last week’s policy meeting provided few surprises as the Fed left the benchmark Fed Funds rate unchanged at (virtually) 0% and announced that no rate changes seem likely in the near-term.  The Fed also confirmed its intent to buy $1.45 trillion in mortgage-related securities and $300 billion in Treasuries, though made no commitment to purchase more than that previously announced amount.  The accompanying statement depicted an economy that remained weak, but seemed to be exhibiting some signs of rebounding (ever so slightly).  For the time being, inflation (or even deflation) does not appear to be of major concern.  The policymakers also continued to apprise the public on the success of the various “stimulus” actions and announced the closing of several lending programs that they no longer deem necessary. 

The World Bank said the worldwide slump would be worse than it has previously projected, boosting its forecasted slump to 3% from the previous forecast which called for a slump of 1.75% – and claimed that activity would be the worst on record.  By contrast, the Paris-based Organization for Economic Cooperation and Development reported that the “worst may soon be over” and revised its economic forecast to more favorable terms for the first time in two years.

Among weekly releases, new home sales declined in May and existing home sales rose less than expected as much of the buying centered around distressed sales and foreclosures.  The median price of an existing home purchased in May was more than 16% below last year’s level.

 Higher durable goods orders lent some confidence to manufacturers, as activity rose for the second consecutive month.  Personal income and spending both increased in May and the administration was quick to praise the benefits of the stimulus package.  However, the savings rate also climbed to its highest level in 15 years as consumers remained uncertain about the economy in general and their job situations in particular.  On a bright note, the Reuters/University of Michigan Sentiment index increased to its highest level since February 2008. Gross domestic product (GDP) in the first quarter was revised again – to minus 5.5% (from minus 5.7% reported last month), a positive sign, though impatient economists and investors alike seem ready for even better (positive) data in the quarters to come.

Weekly Economic Calendar


Date

Release

Comments

June 23

Existing Home Sales (05/09)

Slower than expected increase in activity

June 24

Durable Goods Orders (05/09)

2nd consecutive monthly increase

 

New Home Sales (05/09)

Surprising decline in sales

 

Fed Policy Meeting

Recession easing with no real signs of inflation

June 25

Initial Jobless Claims (06/20/09)

Increases in new and total claims

 

GDP (1st qtr revised)

Contraction improved to -5.5% from -5.7%

June 26

Personal Income/Spending (05/09)

Higher income, spending, and savings due to stimulus

The Week Ahead

 

 

June 30

Consumer Confidence (06/09)

 

July 1

Construction Spending (05/09)

 

 

ISM –Manu (06/09)

 

July 2

Initial Jobless Claims (06/27/09)

 

 

Unemployment Rate (06/09)

 

 

Non-farm Payroll (06/09)

 

 

Factory Orders (05/09)

 

July 3

July 4th Holiday Observed

 

 

Money Morning/The Money Map Report

©2009 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules