Morning Report: Larry Summers warns on further rate hikes 1/13/16

Markets are higher this morning as oil rebounds a little. Bonds and MBS are up.

Mortgage Applications rose 21% last week as purchases rose 18% and refis rose 24%.

New regulations may require banks to raise up to $550 billion in the bond market by 2019. The bonds will be part of a package that are designed to prevent another 2008 from happening. They will be senior unsecured debt that converts to equity when a bank becomes insolvent. The new regs are open for comment and the ABA is working hard to lower the amount. I have trouble imagining the type of investor that would buy half a trillion of this stuff.

China’s troubles are further evidence that whenever a country appears to have “cracked the code” for seemingly perpetual growth, a real estate bubble is usually the culprit. And it always ends badly.

Larry Summers is warning the Fed that the global economy cannot withstand 4 rate hikes this year. The bond market rally is saying the same thing. Since the Fed hiked rates on Dec 16, the 10 year bond yield has fallen 20 basis points.

Boston Fed Chairman Rosengren is also warning about further growth and the effect that overseas weakness will have on the US economy.

The US is starting to require title companies to identify the people who pay cash for properties in NYC and Miami.

9 Responses

  1. Interesting note from New York:

    Low income housing advocates vs construction unions on the expiration of 421-a.


    • Former Obama adviser and key architect of/shill for Obamacare, Ezekiel Emanuel becomes a partner in a venture capital firm investing in…wait for it…health care information services.

      “Zeke’s passion for transitioning the healthcare system to be more crony capitalist-friendly higher quality and lower costs is completely aligned with our firm’s mission and purpose,” said Annie Lamont, managing partner at Oak HC/FT, in a statement.


      • This is truly rich, from oral arguments in Friedrichs v. California Teachers Association, the public union dues case:

        Carvin replied that the 1977 decision was wrong, out of step with other First Amendment cases, and thus should be reversed.

        An incredulous Justice Breyer asked whether Carvin thought all of the court’s decisions were correct.

        “Maybe Marbury v. Madison was wrong,” Breyer said, referring to one of the most important landmarks of American law. There are people who think it was, he added. As for the 1977 labor law decision, he observed that it was a “compromise” — but stressed that that “was 40 years ago.” If the 1977 decision were overturned, Breyer said, there were at least three other decisions that sprang from it that would have to be overruled as well.

        Some things are basic enough that they warrant overruling, Breyer noted — like the 1896 decision upholding racial segregation — but most are not.

        If you start overruling things, Breyer continued, “what happens to the country thinking of us as a kind of stability in a world that is tough, because it changes a lot?”

        This is the same Justice Breyer, of course, who was so concerned about stability and previous SCOTUS rulings that he joined the majority in Obergefell, overturning centuries of tradition, both legal and cultural.


      • The decision in Obergfell continued a long and storied tradition of the SCOTUS legislating from the bench, and the finding of previous undiscovered rights and even laws in the emanations and penumbras of the constitution. Thus, it was entirely within the grand traditions of the court.

        Of course, so would reversing a 1977 decision, but given that’s not what Breyer wants to do, it upholds the sanctified tradition of SCOTUS jurists only reversing or amending decisions when it is consistent with their personal ideology. No one is concerned with “stability” when they truly believe the decision was wrong. 😉


  2. My already relatively low opinion of David Brooks just sunk further. No wonder he was able to get a job at the NYT.


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