Warning Signal on U.K. Debt? – Investors bought a net $443 million of credit-default swaps to insure against a U.K. default last week, according to data compiled by the Depository Trust and Clearing Corp., taking the total outstanding to $8.2 billion. That was easily the biggest gain among sovereign borrowers. The size of protection on the U.K. has roughly doubled since the year began, a move that far outpaces the run-up in Greek CDS last fall. That was easily the biggest gain among sovereign borrowers. The size of protection on the U.K. has roughly doubled since the year began, a move that far outpaces the run-up in Greek CDS last fall.
Greece: Moody’s holds off on rating revision – Ratings agency Moody’s says it will wait to see details of an EU-IMF rescue package before a possible revision of Greece’s credit rating, but warns a "multi-notch downgrade" remains likely. Moody’s said Thursday it will maintain its A3 sovereign bond rating for Greece — well within investment grade — until it considers details of the package currently being negotiated in Athens. Greek officials say the talks are likely to be concluded by the end of the week. On Tuesday, ratings agency Standard & Poor’s downgraded Greek bonds to junk status, jolting world markets on renewed fears of a Greek default
Fed Authorizes Tool to Drain Liquidity – The Federal Reserve authorized a tool that could be used to drain some of the liquidity it injected into the economy to fight the financial crisis.The Fed on Friday said it approved the offering of term deposits for lenders who are eligible to collect earnings on their balances at the Fed’s Reserve Banks. The tool could be used by the Fed if needed to sop up money built up in the banking system before the money excites inflation. The Fed’s total portfolio of loans and securities expanded after the financial crisis struck. The central bank proposed the term deposits in December and asked for public comment. Term deposits have specified maturity dates and are held by eligible institutions at Reserve Banks. The deposits will be offered through a term deposit facility.
Income Tax Must Be Raised By 6p To Return Britain’s Economy To Health, NIESR Warns – In a bombshell report with less than a week to go until the general election, the National Institute for Economic and Social Research (NIESR) warned that all three political parties were not ambitious enough with their plans to slash the deficit. It advised that, on top of their radical plans to slash spending and reduce the shortfall in the government accounts, the election winner should "gradually raise income tax by 6p in the pound." The advice is unlikely to be welcomed by the parties, which have already committed to spending cuts which are as deep as any since the 1970s and, in the Tories’ case, since the 1920s. However, Ray Barrell, director of macroeconomic research at NIESR, said that if they intended to bring the deficit down to levels which would leave the country equipped to deal with a "future crisis or war", much more ambitious plans would be necessary.
The Fed’s Hollowing Out Of U.S. Banks -Have the Federal Reserve’s unprecedented market and banking interventions fundamentally weakened America’s banks? In this article, we will illustrate how the Federal Reserve has been hollowing out the US banking system. We will show how the Fed has been creating a banking industry shell that looks strong on the surface, but is increasingly empty beneath that facade, with less and less economic strength, and an ever greater reliance on the Federal Reserve’s monetary creation ability. Using a single loan as an example, we will explore in step by step detail how almost 10 percent of US bank assets have been hollowed out, with former investments in the economy being replaced by excess reserve balances at the Federal Reserve. On paper, these balances are the highest quality assets which a bank can own, yet in economic reality, they represent an investment in nothing at all.
