Fitzpatrick proposes SEC control of competitive ratings
June 28, 2005
Legislation to open up the credit rating industry to more competition has been introduced to Congress in a bill by Representative Michael Fitzpatrick.
The legislation would let any rating agency that meets certain standards register with the Securities and Exchange Commission. It would also allow the SEC to inspect rating agencies and regulate how they handle conflict of interest situations and non-public information.
Passage of the bill through Congress would not only open up the industry for competition, but it would also greatly reduce the power of such agencies as S&P and Moody’s.
Those two agencies currently hold 80 percent of the market between them. In introducing the legislation, Mr. Fitzpatrick criticized these two agencies for failing to give adequate warning of the disasters at Enron and WorldCom.
Under the current system, the SEC designates select agencies as “nationally recognized statistical rating organizations,” and only credit ratings generated by those agencies are legally valid in the US.
Housing robust, though manufacturing production slows
June 24, 2005
The housing market in the United States remained robust in May according to new data, but orders for durable goods were lower than expected.
The US housing market remained at just below record levels. New home sales rose by 2.1 percent in May and are expected to remain at present levels for the time being, at least until mortgage rates rise significantly.
Additionally, the strong tempo of home building has begun to slow down the rise in new home prices, and resale prices may begin to slow down soon as well as supply has begun to rise.
Meanwhile, one analyst has said of the durable goods data that the slowdown in new orders indicates that a slowdown in production could be on the way. This could be compensated for, however, if there are orders that have not yet been filled.
Durable goods orders were up 5.5 percent overall in May, but most of that growth was due to a 165 percent increase in civilian aircraft orders. Disregarding that sector, orders were down by 2.3 percent.
The biggest decline in orders came in computers, where orders fell by 7 percent. Machinery orders fell by 1.9 percent, and non-defense capital goods shipments fell 0.7 percent.
Greenspan speaks against sanctions on Chinese imports
June 23, 2005
Federal Reserve Chairman Alan Greenspan said today in testimony before the finance committee of the US Senate that trade sanctions against China would not hold any advantages for the United States.
The hearings grew out of increasing concerns about China on the subjects of that nation’s exports and it’s current high interest in investing in US companies. The hearings are especially relevant in light of China state-controlled National Offshore Oil Corporation’s almost $20 billion bid Wednesday for US oil company Unocal.
Mr. Greenspan addressed a couple of issues, including the imposition of proposed tariffs against China and revaluation of China’s currency. Tariffs would not have any effect in protecting jobs in the US, Mr. Greenspan said, because lower imports from China would only mean that more good would be imported from other low-cost markets in Asia and Latin America.
Instead, the tariffs would threaten growth in living standards worldwide, including in the United States.
Snow criticises China and Europe
June 14, 2005
In Brussels on Tuesday, US Treasury secretary again admonished the Chinese on revaluation of their currency. He also warned European leaders about criticizing capitalism.
John Snow once again told the Chinese that they must act immediately to revalue the renminbi, something he has been saying for some time now.
Mr. Snow also accused European leaders of using “anti-capitalist rhetoric”, warning them that if they continued to do so they risked driving away US investors.
His comments came at a time when German Social Democrats, the ruling party, have been using what has been characterized as anti-business language.
As an example, the leader of the party recently called hedge-fund managers and private equity investors “locusts”. Additionally, France has recently made criticisms of “Anglo-Saxon” capitalism.
Mr. Snow said that such language and the policies it spawns makes US investors feel unwelcome. He pointed out that there are lots of investment opportunities for capital around the world, and that if nations make investors feel unwelcome, they will find places to invest where they feel more comfortable.
Dollar rises against foreign currencies
June 9, 2005
The dollar was up on Thursday in relation to the euro, the yen, sterling, and the Canadian dollar on Thursday.
The dollar was up 0.4 percent against the euro to $1.2177. It was rose by 0.5 percent against the yen to ¥107.76, gained 0.3 percent to $1.8176 against sterling, and advanced by 0.5 percent to C$1.2579 in relation to the Canadian dollar.
Predictions from JP Morgan that interest rates would stand at 4.25 percent by the end of the year and that the dollar would strengthen to $1.18 in relation to the euro and to ¥110 against the yen by March 2006 helped the dollar higher.
So did comments by Federal Reserve chairman Alan Greenspan to a Congressional committee on Thursday. He gave a fairly optimistic assessment of the US economy, including his belief that the US economy is on “a reasonably firm footing” and that inflation is at an acceptable level.
Dollar down on forex markets
June 6, 2005
The US dollar was down in relation to almost all currencies on Monday.
The exception was the Brazilian real, which fell 1.9 percent in relation to the dollar amid sell-offs in reaction to a political corruption scandal in which the Brazilian Workers Party has been accused to paying congressmen to support its programs.
The US dollar was also down 0.4 percent against sterling, to $1.8205. It was also down 1.3 percent to $0.7651 in relation to the Australian dollar and fell 1.4 percent against the New Zealand dollar.
The yen was up in relation to the US dollar, rising 0.8 percent to ¥106.87.