All posts by Alison Meadows

About Alison Meadows

Alison Meadows has a PHD in Economic Trends in Modern Times and is a known writer who focuses on hedge fund investments. Meadows, her husband, and three kids live in Boston, where she grew up and attended college. Contact Alison at alison[at]businessdistrict.com

Feds Want to See More Fannie Mae and Freddie Mac Help in US Housing Market

Economy, , , , , ,
Fannie Mae

The Federal Reserve Board told Congress this week that Fannie Mae and Freddie Mac, both government-run mortgage finance companies, could be instrumental in helping to get the wallowing US housing market back on track.

Not All Agree

The proposal to use the government mortgage companies to improve the housing situation  threatens to run into hurdles from politicians opposed to the idea.

The Federal Reserve sent a paper to the legislators on Wednesday describing concrete steps which the government can take to help jump-start the lackadaisical housing market, including letting Fannie and Freddie provide affordable mortgages to a larger number of potential homeowners.

Freddie and Fannie Problematic

It is not so simple, however. The two mortgage companies were seized by the government over three years ago as they were about to fall apart despite the fact that they are the biggest sources of US mortgage funding. Since then they have been held together with $169 billion in taxpayer money, making them an easy target of lawmakers on the Hill.

Obama Not So Sure

Even the Obama administration has expressed a desire to reduce the role the government plays in housing finance. Such a reduction was part of a three-pronged program to reform the US finance system that Obama’s administration laid out last year.

“It comes at a time that Congress has become quite skeptical of Fannie and Freddie and their role, and seems to be looking for ways to diminish their long-run role in housing finance, not increase it,” said David Resler, chief economic adviser at Nomura Securities International.

Some Backtracking After Week of Strong Growth in Markets

Economy

There was a small reverse on Wednesday in what was seen as a healthy rise in the international stock markets at the beginning of the New Year. The upward movement was spawned by several pieces of good US economic news.

Jobs Report on Horizon

The US economy is the world’s largest, and its movement is likely to be the fulcrum this entire week, leading up to the crucial jobs report for the month of December, set to be released on Friday. Darkening a bit the overall optimistic feelings, however, is the dismal outlook for Europe and its ongoing debt crisis.Investors have focused their attention on the future of the US economy during the first week of the year, which helped stocks show reasonable gains. The DAX of Germany rose about 5% so far. The Dow Jones index reached its highest place in five months by Tuesday’s closing bell.

Wednesday showed some backward motion from the previous gains, which was not entirely surprising.

Strong Manufacturing Sector

A manufacturing survey showed strong positive results, pointing to a sector which has grown at its fastest rate in six months. This data helps to fuel hopes that will set the tone of the market for the next few weeks to come.

Job Growth Expected

Analysts are expecting that the job report will show that the US economy has created an additional 150,000 jobs during the past month; a strong, although not spectacular, figure.

“Markets have put to one side concerns about Europe so far this week,” said Michael Hewson, markets analyst at CMC Markets.

US and European Economies Diverging as US Market Gains Momentum

Economy, , , , ,
US Economy Going Up

Analysts are predicting that 2012 should be a better year for the US in terms of the economy, even as Europe continues its economic shrinkage along with a great deal of the world.

Positive Feelings

The US has in recent days experienced a surge in confidence, less lay-offs, and improved holiday purchasing, leading economists to have an optimistic view towards the coming year. Maury Harris of UBS Securities and Dean Maki of Barclays Capital both see a growing divergence between the US and European markets, observing that the world’s largest economy is accelerating while the 17-member European market is heading into recession, while growth in emerging markets is slowing.

“There is a sense of decoupling,” said Harris, chief economist at UBS Securities in New York, whose team was the most accurate in forecasting the U.S. economy in the two years through September. “We can still have a decent year here in the U.S. even with the rest of the world slowing down.”

Improved Spending

Fueling the improvement in the US economy is an improved job market and more easily accessed credit and confidence. These forces should help promote more spending among US households, while the debt crisis in Europe forces more “belt-tightening” there. The housing market is also stabilizing, adding strength to the overall economy, while people begin to consider new car purchases now that the economy is on the upswing, helping companies likes General Motors.

Online Gambling Gets Boost from Obama

Economy, , , ,

A new opinion dated from September but only revealed to the public last Friday

State Lotterys Can Now Sell On-Line

reinterprets an old law which could clear the way for many on-line gambling sites to prosper, bringing to the government much needed tax revenues.

Wire Act Forbids Online Gambling

Under what is called the “Wire Act” of 1961 all forms of internet gambling was deemed illegal and could land the operators of such websites with fines and/or jail time facing civil and/or criminal charges. The act forbids wagers made through telecommunication which cross state lines or extend over international borders.

Only for Sporting Events

This Friday it was announced that the Justice Department’s Office of Legal Counsel under the Obama administration has a new interpretation of the Wire Act, stating that the law only applies to bets made on a “sporting event or a contest,” and does not apply to the state’s use of the internet to sell state lottery tickets to adults within its own borders or abroad.

“The United States Department of Justice has given the online gaming community a big, big present,” said I. Nelson Rose, a gaming law expert at Whittier Law School who consults for governments and the industry.

The question arose when the states of Illinois and New York wanted to know if the sale of their own state’s lottery tickets violated the provisions of the Wire Act.

Now Its Legal?

But the conclusion written by Assistant Attorney General Virginia Seitz would nevertheless eliminate “almost every federal anti-gambling law that could apply to gaming that is legal under state laws,” Rose wrote on his blog at www.gamblingandthelaw.com.

“The ordinary meaning of the phrase ‘sporting event or contest’ does not encompass lotteries,” Seitz wrote. “Accordingly, we conclude that the proposed lotteries are not within the prohibitions of the Wire Act.”

Fourth Quarter Looking Good for Economy

Economy, , , ,

Analysts are expecting close to a 3.5% growth during the 4th quarter of 2011. After a lackluster 3rd quarter, this news is giving a happy feel to the holiday season.

Feds Will Ignore for Now

It is expected also that due to the good 4th quarter showing the Federal Reserve Bank will not be easing their monetary policy, at least in the immediate future.

There are still fears that not all will be well, especially considering the difficult situation in Europe which will hinder US economic growth and the fiscal burden here at home, it might not be feasible for the economic improvement to be able to sustain itself.

Home Sales Up

Adding to the optimism is the data about home sales for last month, which showed a rise of 4 percent, to a seasonally adjusted annual rate of 4.42 million sales. The number is lower than the 6 million sales economists believe is a number more consistent with a healthy housing market, but it is still an improvement. It is considerably ahead of the data from 2008, now recognized as the worst year for housing in 13 years.

The data is collected and analyzed by the National Association of Realtors, which has had to revise many of its numbers due to several factors, including “changes in the way the Census Bureau collects data, population shifts and some sales being counted twice.”

Major Data Revisions Needed

The NAR is a private trade group which helps economists take the pulse of the US housing market. They say that they had to revise down its sales from 2007 until this October by about 14%, from 24.8 million down to about 21.3 million.

John Ryding is an economist at RDQ Economics. He labeled the data revisions as “massive” and said that this is a perfect example of how economic data can often be unreliable.