For the past year, the Fed has been buying mortgage-backed securities in an effort to keep mortgage rates low and provide some support to the housing market. On March 31, the Fed says, it will stop buying mortgage-backed securities.
So what will happen to mortgage rates and house prices?
No one knows, says Dick Bove, the wise and fearless analyst at Rochdale Securities. (more)
Michigan has an unemployment rate of 14% and has been particularly hard hit by the nation’s economic downturn. Virg Bernero, mayor of the state’s capitol and a leading Democratic candidate for governor, proposes that the state relieve its economic ills by opening a state-owned bank. He says the bank could protect consumers by making low-interest loans to those most in need, including students and small businesses; and could help community banks by buying mortgages off their books and working with them to fund development projects.
Bernero joins a growing list of candidates proposing this sensible solution to their states’ fiscal ills. Local economies have collapsed because of the Wall Street credit freeze. To reinvigorate local business, Main Street needs a heavy infusion of credit; and publicly-owned banks could fill that need. (more)
The People's Party, the largest group in a five-party coalition, walked out amid disputes over how to cope with the country's severe problems.Unemployment has now hit 20 per cent and the economy contracted by 18 per cent last year.
The People's Party quit after its action plan failed to get the backing of Valdis Dombrovskis, the Latvian prime minister, who labelled it "populist".Mr Dombrovskis warned the People's Party's departure could cause yet further economic instability. (more)
The inability of the eurozone to put together a viable package after a month of talks has dismayed markets, which thought the terms of a deal had already been agreed. Yields on 10-year Greek bonds spiked 17 basis points yesterday to 6.26pc. The euro fell two cents against the dollar to below $1.36. "The facade of unity among eurozone members hardly held for more than a day," said Beat Siegenthaler from UBS.
Greek Premier George Papandreou told the European Parliament that his country was running out of patience. It is in effect already subject to the full rigours of an IMF-style austerity plan but without enjoying any of the benefits. He said the savings from cost-cutting measures were vanishing into the pockets of bond-holders through higher interest rates. (more)
There are clear indications that the global economy is in recovery. However, it is also clear that the improvement is an uneven one from a geographical point of view. For example, the recovery in China's economy actually appears to be moving to beyond just recovery. In fact, there is talk that China's economy is approaching the bubble stage. China's Customs Bureau reported that exports increased 45.7% in February from the year ago period, when the median guess called for a 38.3% advance. China reported that their inflation level hit a 16 month high and new loans were more than anticipated. This prompted fears that China could withdraw some of their economic stimulus. In addition, there is a growing belief that China's central bank will increase reserve ratios or interest rates in the near future.
