Linking ≠ endorsement. Enjoy and share:
↑ [Highly Recommended] Jesse’s Café Américain: Wm. K. Black: JP Morgan’s Frauds Are Epic, Unprecedented, NSA Scandal a PR Disaster
William K. Black:
“CEO Jamie Dimon has presided over the largest financial crime spree in world history. . . . It depends on how you count it, but it is more than a dozen, and more in the range of 15 major felonies that either the United States investigators have found, state investigators have found or foreign governments have found…JP Morgan’s frauds are epic in scale, unprecedented in world history…
“The system is ungovernable… It has already largely imploded.”
This video will set the stage for many of the links below.
The video starts off discussing the NSA but delves way into the banking-fraud scandals thereafter.
Greg Hunter conducts an in-depth interview with Bill Black:
↑ Taming Bubbles is Hard, But Central Banks Can Try: Dallas Fed Paper – Real Time Economics – WSJ
In their paper, the two economists propose a model by which a bubble can be burst if the public is warned one is forming, eliminating the ability of investors who detect it early to “ride” the bubble for their own benefit.
Bubbles refer to asset prices that exceed an asset’s fundamental value because current owners believe they can resell the asset at an even higher price. There are four main strands of models: (i) all investors have rational expectations and identical information, (ii) investors are asymmetrically informed and bubbles can emerge because their existence need not be commonly known, (iii) rational traders interact with behavioural traders and bubbles persist since limits to arbitrage prevent rational investors from eradicating the price impact of behavioural traders, (iv) investors hold heterogeneous beliefs, potentially due to psychological biases, and agree to disagree about the fundamental value.
Nailing Jello to the wall?
↑ Washington Center for Equitable Growth | “Beer Goggles”, Forward Guidance, Quantitative Easing, and the Risks from Expansionary Monetary Policy
Brad DeLong disagrees with Dallas Federal Reserve Bank President Richard Fisher. Brad DeLong:
So what are the risks of QE?
It really seems to be this:
- Commercial banks traditionally accept deposits, put the deposits in long-term Treasuries, rely on the law of large numbers and on deposit insurance to allow them to always hold their long-term Treasuries to maturity, and so have a riskless and profitable business model.
- When commercial banks cannot do this, they find some way to gamble with government-insured deposits.
But this is not a source of systemic risk: because the deposits they may be gambling with are government insured by the FDIC, no run on the banking system or the shadow banking system occurs when risks come due. It would be embarrassing, yes. And the proper response to thinking that commercial banks are running undue risks with government-insured money is to send in the bank examiners—not to undertake policies that raise unemployment.
↑ macroblog: What Accounts for the Decrease in the Labor Force Participation Rate?
Since the recession began, the labor force participation rate (LFPR) has dropped from 66 percent to 63 percent. Many people have left the labor force because they are discouraged from applying (U.S. Bureau of Labor Statistics data indicate that a little under 1 million people fall into this category). But the primary drivers appear to be an increase in the number of people who are either retired, disabled/ill, or in school.
That’s not very granular (a good start by Ellyn Terry, but …). How many youths say they are not in the labor force because they are in school but say that because there aren’t enough jobs right now regardless? How many people are ill for real (or to collect benefits; hopefully few) because of the lack of jobs? Unemployment increases stress which increases illnesses, etc. Survey methodology is an art.
↑ What Happens When the Poor Receive a Stipend? – NYTimes.com
This is related to affordable housing.
When Professor Costello published her first study, in 2003, the field of mental health remained on the fence over whether poverty caused psychiatric problems, or psychiatric problems led to poverty. So she was surprised by the results. Even she hadn’t expected the cash to make much difference. “The expectation is that social interventions have relatively small effects,” she told me. “This one had quite large effects.”
She and her colleagues kept following the children. Minor crimes committed by Cherokee youth declined. On-time high school graduation rates improved. And by 2006, when the supplements had grown to about $9,000 yearly per member, Professor Costello could make another observation: The earlier the supplements arrived in a child’s life, the better that child’s mental health in early adulthood.
… Randall Akee, an economist at the University of California, Los Angeles, and a collaborator of Professor Costello’s, argues that the supplements actually save money in the long run. He calculates that 5 to 10 years after age 19, the savings incurred by the Cherokee income supplements surpass the initial costs — the payments to parents while the children were minors. That’s a conservative estimate, he says, based on reduced criminality, a reduced need for psychiatric care and savings gained from not repeating grades. (The full analysis is not yet published.)
… Professor Costello’s findings are not necessarily a sweeping endorsement of Native American gaming, and casinos generally. Rather, they suggest that a little extra money may confer long-lasting benefits on poor children.
↑ The Global Crisis and East Asian currency misalignment | vox
A dramatic withdrawal of short-term capital from the East Asian countries by US and European financial institutions and institutional investors accelerated the depreciation of East Asian currencies against the US dollar. At the same time, since the defaults on subprime mortgages had only a limited effect on Japanese financial institutions, the Japanese yen was considered a less risky currency, and consequently was bought in foreign exchange markets across the world. The Japanese yen substantially appreciated against the US dollar and the euro since the summer of 2007. Both the depreciation of emerging-market currencies and the appreciation of the Japanese yen induced exchange-rate misalignments among the East Asian currencies. The asymmetric response of East Asian currencies to the changes in capital flows around the Global Financial Crisis is still an urgent problem to be resolved.
It’s a worthy paper, but where’s the discussion of interest rates?
↑ Why Renters Renovate – NYTimes.com
“We get a break on rent, but put a significant investment in the property,” said Mr. Michon, a financial analyst who works on Wall Street. The deal, he added, “allows us to get a home without the mortgage and without having to search hundreds of apartments for something that suits our taste.”
The landlord also benefits.
… most leases contain a provision that forbids making any changes to an apartment without the landlord’s written consent. That is partly to protect against the possibility of building violations. If tenants want to build a wall to divide a room in two, for instance, they must meet certain requirements if the work is to remain within code. But the provision also helps avoid major customizations that wouldn’t appeal to the general tenant population.
The landlord had to be willing to wait to reap the benefits. The landlord’s cash flow would have to be positive enough to allow for this. You can bet that Mr. Michon penciled out his side of the deal. His break on rent probably paid for most if not all of the changes. The rent would have been $177K/5yrs. Their monthly rent could be $2,200 or even lower. Depending upon the landlord’s mortgage, it may still be in positive territory.
As you can probably detect, we like this development.
↑ No Job Openings for More than Three Out of Five Job Seekers | Economic Policy Institute
Why they’ll continue renting if they can afford even that:
The Job Openings and Labor Turnover Survey (JOLTS) data released this morning [Jan. 17, 2014] by the Bureau of Labor Statistics showed that job openings increased by 70,000 in November, bringing the total number of job openings to 4.0 million. However, there were 10.8 million job seekers in November (unemployment data are from the Current Population Survey and can be found here). That means there were 2.7 job seekers for every job opening in November. In a labor market with strong job opportunities, the ratio would be close to 1-to-1. November’s ratio of 2.7-to-1 means that for more than three out of five job seekers, there simply are no jobs.
↑ Low delinquency rates prove mortgage lending’s too tight | Inman News
In normal times 1945-2000, Fannie-style underwriting produced delinquency rates just above 4 percent and foreclosure rates near 0.7 percent. Today the overall U.S. delinquency rate is still 6.25 percent, some 4.5 million loans. However, new loans made since 2010 have had the lowest rates of delinquency ever measured. One of the best metrics is early default: Performance in the first six months of a new loan reveals underwriting “misses” — those who had dreamed of owning a home but were not ready and quickly were late on a payment.
What one needs to keep in mind is that post-crash, people are being extremely careful with their money relative to the trend line. It’s not possible to say what the normal rate of defaults would be at the current underwriting standards. Overextending via a low-standard mortgage is not better than paying rent.
↑ Exclusive: Cybercrime firm says uncovers six active attacks on U.S. merchants | Reuters
Landlords and management have sensitive tenant and other data too, which presents a liability risk calling for risk management and transfer via cyber-insurance coverage.
IntelCrawler’s findings are the latest sign that the cyberattacks disclosed by Target Inc and upscale department store Neiman Marcus are part of a wider assault on U.S. retailer customer data security.
↑ Its 2014: Rents and Acquisitions on the Rise
Interest rates, competition, new construction, …: Steve Cook:
There are now 43 million renter households, or 35 percent of all U.S. households, the highest rate in over a decade for all age groups, according to Harvard’s Joint Center for Housing Studies; 4 million more renters today than there were in 2007. With the bar to homeownership rising in the form of tough lending standards, rising down payments and rising prices, there’s no reason to believe rental demand will subside.
In 2014, completions should total more than 160,000 apartments, roughly one-third more than the long-term historical average, according to Reis. That could cause the national vacancy rate to rise slightly for the first time since 2009. CoStar Group, another real-estate research firm, predicts new-apartment supply will peak this year at 220,000, but an additional 350,000 units will hit the nation’s 54 largest markets in 2015 and 2016 combined.
With home prices reporting double digit gains in 2013 and forecasted to rise another 3% to 4% this year, there’s no relief in sight on acquisition costs, especially for the mid to lower tiered properties that make the best rental units. Over time, these high acquisition costs will raise the bar for entering real estate investing and signal an end to an era.
↑ China’s red-hot housing market shows signs of easing
China’s home prices continued to surge in December, though the pace of gains overall did not exceed the previous month’s and rises eased in some major cities, suggesting that government tightening measures may be starting to bite.
Home prices in many Chinese cities have continued to set records in the past year despite a four-year long government campaign to cool the market, adding to the threat of a price bubble and forcing some local governments into a fresh round of curbs in November.
Average new home prices in 70 major Chinese cities climbed 0.4 percent in December on the month, easing from November’s 0.5 percent and the fourth straight slowdown since August’s 0.8 percent gain, according to Reuters calculations from data released by the National Bureau of Statistics (NBS) on Saturday.
↑ Obamacare tax credit upheld by court. How much can you get? – Don’t Mess With Taxes
Landlords and managers pay income taxes, as do their tenants. Here’s a little extra info about Obamacare and tax credits from Kay Bell.
A group that opposes the Affordable Care Act, or Obamacare as it’s popularly known, filed a lawsuit challenging the availability of the credit for folks who buy their coverage through the federal marketplace instead of state exchanges.
They contended that the Premium Tax Credit was created as an incentive to get states to establish and run marketplaces for Obamacare-mandated insurance coverage. As such, argued the plaintiffs in Halbig v. Sebelius, the credit should not be available to those who buy insurance via the federal marketplace.
The lead plaintiff in the federal suit against Health and Human Services (HHS) Secretary Kathleen Sebelius was Virginia resident Jacqueline Halbig. She was joined in the complaint by individuals and employers from states where insurance marketplaces are operated by the federal government.
But as I noted last week at my other tax blog, D.C. District Court Judge Paul Friedman rejected Halbig et al’s argument. Friedman affirmed in his 39-page ruling that Congress intended to provide the tax credit to insurance buyers at any exchange, state or federal.
The map is interesting too.
↑ New Home Loans Fall Fastest Since 2011: Video – Bloomberg
(Bloomberg) — Paragon Real Estate Group Realtor Associate Brendon Desimone and Sandler O’Neill and Partners Chief Strategist Robert Albertson discuss U.S. housing on Bloomberg television’s “Bloomberg Surveillance.” (Source: Bloomberg)
↑ Apartment Leasing Trend | Top 3 Ways Residents Could Break Their Lease – Apartment Intelligence™
One surefire way of protecting you and your investment is to document everything from the initial walk through and move in to any and all maintenance requests and repairs using video. This way if, or better yet when, a tenant tries to call foul, you and your team will have the ability to produce visual evidence as to what the truth of the situation really is.
We aren’t sure it’s surefire, but we’re sure it’s still a good idea.
↑ Chinese capital flows: Hot and hidden | The Economist
GFI notes that flows of hot money into China surged when the Federal Reserve began trying to suppress rates by buying up government bonds and other securities. Now that the Fed is “tapering” its asset purchases, it is reasonable to ask if the flow of hot money will slow or even reverse.
Chinese regulators have noisily complained about the illicit inflows. In December they promised a crackdown on over-invoicing and other such scams. But the inflows are a problem most developing countries would be happy to endure. Chinese officials are sure to be even less pleased if the hot money rushes out the door.
↑ Job Growth Not Trending Higher | News | News and Events | ECRI
Separately, the household survey, adjusted to the payroll concept, actually shows a decline in employment since the summer.
Bottom line: even ignoring the December jobs data, the trends are worsening, especially for data not subject to major revision.
↑ Will China’s Shadow Banking Craze Slow Down? – Bloomberg
Matthew C. Klein:
It’s unclear what is supposed to happen if the borrowers financed by WMPs can’t repay the original investors. Many people who buy these instruments are under the impression that the government stands behind them. Past defaults on WMPs have led to protests by angry savers. They eventually got all their money back after the government stepped in, which is good if you want to keep your citizens happy but isn’t exactly a great way to convince people that these products are distinctly riskier than bank deposits.
The government seems to be taking a tougher line now. Interest rates on new WMPs have been increasing since the summer, which has presumably discouraged borrowers from taking on more debt. Bloomberg News reports that the China Securities Regulatory Commission is increasing the “disclosure requirements for trusts and wealth management products.” ICBC executives probably wouldn’t be telling newspapers they’re unwilling to bail out investors unless they had the backing of senior government officials, considering the megabank is a state-owned enterprise.
↑ When It Comes To Real Estate Bubbles, China’s Got Nothing On Brazil – Forbes
World investors may be worried about China’s real estate bubble. But only one country surpasses that market’s housing boom, and that’s Brazil.
Whether it’s because of the new mortgage market and low interest loans available to Brazilians earning more money, or just a plain old over-stretched housing bubble, the roof has blown off Brazil’s housing market. Anyone who has bought a home in Brazil is smiling wide with its increased valuation. Anyone trying to buy a home has surely been priced out of a market or two over the last five years.
↑ Seattle listed as 2nd hottest housing market for 2014 – Rain City Guide
The new Zillow predictions for the 2014 housing market show Seattle as the second hottest market in 2014.
They also predict only 3% increase in prices overall, so “hottest” could be kind of cool.
↑ Construction up, but are we building too many houses?
Multifamily apartment construction is surging much more than single family. At just under 292,000 units started, construction volume is now nearly three times what it was in 2009 and right around the 10 year, prerecession average. What has changed, however, is the purpose of these apartments. During the housing boom, less than 60 percent of these structures were built as rentals. More than 40 percent were sold as condominiums. Today, 92 percent of multifamily starts are intended for rental, the highest since the Census began tracking this data set in 1974.
We’ve read that the plan for many of these is to start out as rentals and convert to condos when the time is right.
↑ Is there a Canadian real estate bubble
7.5% of the Canadian workforce is in the construction industry, while 7% of the Canadian economy is based on residential construction — both record highs;
The latest Canadian jobs report was dismal, as its economy shed 45,000 jobs in December, and the unemployment rate rose from 6.9% to 7.2% ….
↑ Fed taper could hit housing market | UTSanDiego.com
… many experts see little risk that interest rates will skyrocket as they did in the early 1980s, when the Fed cranked up rates to tame high inflation. Indeed, Bernanke has warned that inflation is too low.
“I would tell people not to panic on interest rates; they aren’t going to be going up very much,” said Christopher Thornberg, founding partner of Beacon Economics in Los Angeles. “We have a world that is awash with capital, and not much demand for it for a variety of reasons.”
↑ Real Estate Housing Trend | Aging America’s Impact on Multifamily Real Estate – Apartment Intelligence™
If the decision-makers decide to simply adopt amenities that cater to the aging demographic, like specifically engineered floor plans, while also advertising affordable rents to this segment, they should have no problem attracting new lessees.
With more than 60 million Americans over the age of 55 and a projected 107.6 million by 2030, we’re not getting any younger. In the coming decades, we can expect to see the aging American population continue to make a huge impact on multifamily real estate markets as their demand for housing continues to expand.
↑ Real Estate Trend | How Demand is Putting Landlords in a Great Position – Apartment Intelligence™
While landlords and property owners across the country have seen an increase in new tenants in the last few years, two major segments of the population are responsible, above all others, for the spike in occupancy: the young millennials and the pre-retirement empty-nesters.
In a multifamily apartment community, these segments are looking for upgraded amenities accompanied by decent rental rates. Unfortunately, due to the sheer number of would-be renters in the market, this demand has watered down the tenant’s position.
With this influx of new renters both entering the market for the first time and transitioning into the market from traditional housing, this growing demand has put the lion’s share of the power into the hands of the landlords and property owners.
↑ Banks embracing a housing-bubble favorite: interest-only loans – latimes.com
Customers for such loans are often self-employed and capable of making big down payments and maintaining fat bank accounts. Banks believe such borrowers could afford traditional loans but want to maximize the cash available for other investments or ventures. Some borrowers just want the tax deduction available on the first $1 million a year in mortgage interest payments.
“These are very low-risk loans to very high-net-worth borrowers who are prospective clients for other bank services,” said Rick Sharga, executive vice president at online real estate firm Auction.com.
Wells Fargo, the largest mortgage lender, says less than 10% of the jumbo mortgages it writes are interest-only. It requires borrowers with interest-only jumbos to make down payments of at least 25%, or have that much equity if they are refinancing, compared with 15% for those with amortizing jumbo loans.
The San Francisco bank sometimes makes interest-only loans to borrowers with debt-to-income ratios higher than 43%, which is the consumer bureau’s standard for a qualified mortgage.
“But only for borrowers with very strong income and significant assets,” said Brad Blackwell, executive vice president of Wells Fargo Home Mortgage. “We won’t do a 45% or 48% debt ratio for a borrower who has no money in the bank — someone who hasn’t shown an ability to save or manage their finances effectively.”
↑ New federal rule gives home buyers better access to appraisals – latimes.com
Say your appraiser works for a management firm that uses low-cost, inexperienced appraisers. By chance it turns out that your appraiser lives 80 miles away and is not familiar with local real estate trends. Then the valuation comes in low because the appraiser used inappropriate “comparable” properties, including a house that sold at a depressed price because the owners were in financial distress.
Under the new rule, your lender will have to send you a copy of the full appraisal report soon after receiving and reviewing it, including exhibits and attachments. Alerted early on, you, your realty agent and other advisors should have time to spot errors and then challenge the validity of the appraisal and demand corrections.
“I am thrilled,” says Pat Turner, a senior residential appraiser in the Richmond, Va., area. “Let everyone see the clear distinction of time, effort, expertise and accuracy of a truly professional appraisal.”
It’s a good development.
↑ Guess who’s coming to America? – Jan. 19, 2014
The number one place new residents are coming from: the United Kingdom. Up next: Germany, China, Australia and France.
The U.S. economy has rebounded faster than most of the Eurozone, spurring an inflow of workers from that region, explained Michael Stoll, economist and chair of the Department of Public Policy at UCLA. In addition, more U.S. companies are looking farther afield for highly skilled workers, he said.
Those who move here are willing to work for less. This puts a strain on US jobs and unemployment. There are many highly skilled workers who aren’t being given the work here that’s going to immigrants.
We aren’t taking an anti-immigration stance here, just fleshing out the details a bit. We’d like to see everyone doing well everywhere.
We are not in favor of the race to the bottom before all ships rise with the tide. We’d like to see standards raised in other countries rather than shipping US jobs overseas or bringing in cheap labor here without raising the standards where those immigrants come from. Your view?
↑ Times Square Real Estate | Times Square Condos
Loathed by many New Yorkers first as [a] seedy hotbed of crime and then as an over-the-top tourist attraction, newly built luxury condominiums have convinced some New Yorkers to give Times Square a chance.
“When I first moved in, you wouldn’t really [want to] be on Eighth Avenue alone after the theaters closed,” Tim Lorah, who lives in a brownstone on West 46th Street and is a board member of the alliance, told the Wall Street Journal. “It’s really settled into being a more gentrified neighborhood.”
It’s pricing people out.
How may we “gentrify” (lower crime and clean up an area) without pricing out the lower economic class?
↑ Did Facebook and Twitter nix your loan? – CBS News
Social networks like Facebook (FB), Twitter (TWTR), Instagram and Snapchat may be fun for many, but can have their downsides. People have lost their jobs because of images or messages they posted, while employers and colleges scrutinize people’s online profiles for hints about their personality.
Add loan companies to the list of businesses interested in mining the Web for details about consumers’ online lives, according to The Wall Street Journal. And while the practice of picking through potential borrowers’ social media information is mostly limited to startup lenders, there’s a good chance that your online persona will increasingly get connected to your credit profile.
There are liability risks in using such info against applicants.
Applications usually require the applicant to attest to the accuracy of the info to the best of the applicant’s ability to be accurate. Those application forms don’t require that the applicant also be as accurate on all social media.
If an applicant is rejected and sues to discover the reason and finds that social media was the cause, the applicant might be able to raise the issue of a harmless mistake (not attested to) or that the application-rejecting entity failed to take the information in full context, etc.
Applicant reviewers might (probably) view information about an applicant that cannot be legally used in making a determination and should not be asked during the application process. An applicant could then raise the possibility that the rejection was based upon more than what the rejecting entity claimed against the applicant.
↑ UPDATE 1-Co-op Group scraps general insurance sale plan | Reuters
In the UK, capitalization requirements are higher for insurance companies than for banks, or was this insurance division just easier to let go of than to recapitalize?
Britain’s Co-operative Group has scrapped the sale of its general insurance business following a restructuring deal which means it does not have to contribute as much capital to its struggling bank as initially envisaged.
↑ Saul Eslake slams Australian housing policy | | MacroBusiness
Leith van Onselen
The AFR is today reporting that Saul Eslake, who has held multiple chief economist roles at various banks, as well as acted on the National Housing Supply Council, has provided a personal submission to a Senate Inquiry into Affordable Housing. The submission, entitled ’50 years of failure’, provides a damning assessment of Australian housing policy, claiming that government self interest has led to the worst affordability problem since the end of World War II:
“Politics — more than any other single factor — means that Australians are likely to have to live with a dysfunctional housing system for a long time yet to come,” Mr Eslake said.
Government policies including cash assistance to first-time home buyers and negative gearing had only served to inflate the demand for housing whilst doing next to nothing to increase the supply and therefore made affordability worse, he said…
While political parties and governments professed to care about first home buyers, the reality was that they preferred to garner the votes of the 5.8 million households who sought policies that would increase house values.
↑ RP Data, APM warn on Sydney house prices | | MacroBusiness
With Sydney house prices reaching for the stars:
Driven by an epic boom in investor demand:
Data providers — Australian Property Monitors (APM) and RP Data — have both issued warnings that Sydney housing values have overshot fundamentals and risk a slowdown:
“All the pointers are there showing that the Sydney investor market has overshot its fundamentals,” said the senior economist at Australian Property Monitors, Andrew Wilson…
↑ UK house prices set to rise 8% in 2014, says RICS – Business News – Business – The Independent
The Royal Institutions of Chartered Surveyors (RICS) estimates that all parts of the UK “should see” home prices rise, with London set for another 11 per cent jump.
The surveyor warns the “acute” demand and supply imbalance remains the biggest challenge facing the residential market.
The estimated jump in construction starts to 155,000 in 2014 from 125,000 this year could be insufficient given the rapid growth in population, it added.
↑ Money laundering cases surge after crackdown – Business News – Business – The Independent
The value of money laundering cases surged last year, according to a study by the auditor BDO. Reported money laundering in the UK rose to £288m in 2013, more than four times the £70m recorded in 2012.
It’s not much to go on in terms of what money laundering they’re looking for. Are they looking for all money laundering, or are they allowing politics to guide their search?
↑ HMRC issues letters to Cayman Islands evaders – 20 Jan 2014 – Accountancy Age
Crowe Clark Whitehill tax investigations partner Sean Wakeman said: “This New Year resolution by HMRC shows it is extending its reach beyond the low hanging fruit of Liechtenstein and Switzerland, and going global. This could be the start of a modern day crusade, attacking the missing billions from the chancellor’s coffers.
There’s no indication that they’ll play favorites, but we’ll have to wait to see just how transparent they end up having to be. Will they be able to hide the criminality of favored politicians and their cronies?
↑ US tech companies move against tax avoidance reforms – 20 Jan 2014 – Accountancy Age
LOBBYISTS representing Silicon Valley have urged the OECD to halt curbs against tax avoidance.
Companies including Google, Amazon and Starbucks have been in the firing line for their use of offshore jurisdictions to drive down their UK tax liabilities.
↑ Canada’s Household Debt-To-Income Ratio, Price-to-Rent Ratio and Real House Prices Are Flashing Warning Signs
Housing market corrections in Canada and Australia will probably lead to recessions. I bet they will be fueled by Fed tapering/tightening and China’s deleveraging.
In our estimate, it will be more a matter of China popping than of the US tapering.
↑ Royal Bank quietly cuts some mortgage rates – The Globe and Mail
Royal Bank of Canada, the country’s largest mortgage lender, has quietly cut some of its mortgage rates this weekend. The move appears to be part of a broader dip in rates, although economists generally still expect an increase in 2014.
That’s certainly pro-cyclical: egging on bursting the bubble.
↑ Is China’s Historic Credit Bubble About to Pop? – Matthew O’Brien – The Atlantic
Good post by Matthew O’Brien:
Local governments and developers have gone on a borrowing binge the past five years to build new infrastructure and new cities, including ghost ones. In other words, China is getting rich now by building the things it needs to be rich, and putting it all on the credit card. The result, as the ratings agency Fitch points out, has been a bigger credit increase relative to GDP than just about anywhere else in history. As you can see in the chart below from Credit Suisse, total credit shot up from around 120 percent of GDP in 2008 to 190 percent today—most of it from so-called “shadow banks” that aren’t regulated.
↑ Crunch Escalates as Money Funds Rival Shadow Banks: China Credit – Bloomberg
A doubling in China’s money-market funds in the past six months is draining bank deposits and raising the risk of financial failures during cash crunches, according to Fitch Ratings.
The assets under management of such plans surged to a record 737 billion yuan ($122 billion) on Dec. 31 from 304 billion yuan on June 30, said Roger Schneider, senior director at Fitch’s Fund and Asset Manager Rating Group. Yu’E Bao, managed by Tianhong Asset Management Co. and sold online by Alibaba Group Holding Ltd., offers an annualized return of 6.7 percent, compared with the 3 percent official one-year savings rate. Some funds are offering higher rates, with news portal Eastmoney.com marketing a product that targets 10 percent.
“Clearly, yields of 8-10 percent are not sustainable,” Schneider said in a Jan. 10 interview from Frankfurt. “They will definitely come with the risk, and the premium includes both credit risk and liquidity risk in what they buy. There are strong refinancing needs among corporate issuers this year and the credit profile is to some extent deteriorating.”
When, not if?
↑ [Recommended] The Professor Michael Pettis China forecast: 3-4% real growth on average for the next decade. And that would be a good result. | Bond Vigilantes
Excellent post by Jim Leaviss:
… the China slowdown view is nearer to the consensus — although you’d still find it difficult to find an official sub-5% China GDP forecast over any timeframe. Pettis maintains that 3-4% average growth is China’s likely future; the IMF’s World Economic Outlook has revised down its estimate of Chinese potential growth, but only from 8.9% to 8.0%. This morning the 2013 Chinese GDP number was released, at 7.7%, the 4th year in a row now of lower annual growth rates (and even then sceptics suggest that electricity consumption data and freight analysis show that the GDP numbers are overstated in the official statistics).
We think 4% growth in China will look good.
↑ Chinese data hints at more slowing | | MacroBusiness
This is the lowest annual pace of growth since 1999. Quarterly growth was at 1.8% versus 2% expected.
This will start to be felt around the world.
If hyper-greed rather than prudence continues driving their economy, they’ll crash sooner than later too. They know it, but do they have the intestinal fortitude to turn in time? That’s the question.
↑ China’s Economy Slows on Investment Spending – China Real Time Report – WSJ
Shuang Ding, an economist at Citibank in Hong Kong, says higher interest rates will continue to push down growth in 2014. “We expect tighter credit conditions in the context of containing local government debt and regulating shadow banking to continue weighing on investment and growth this year,” he said.
… Chinese authorities aren’t likely interested in a “drastic tightening” of monetary policy, fearing that could upend its growth forecasts, RBS says. But the bank acknowledges a slowdown in investment toward the end of 2013 is worrisome.
Others are less sanguine. HSBC expects growth to slow a little this year, which would mark the country’s slowest pace of expansion since 1990. The increasing cost of capital is a major concern. The fourth-quarter number “masks the growing challenges for the Chinese economy,” Mr. Neumann [Frederic Neumann, economist at HSBC] said.
Citibank forecasts 2014 growth at 7.3%, while ANZ forecasts it at 7.2%, which is below consensus. The bank says the Communist Party’s efforts to overhaul the economy, allowing the working of market forces in more sectors, will lead to lower growth.
At this time, the Chinese sound like they will underreact.
↑ BBC News – China economic growth rate stabilises at 7.7%
Euan Stirling, investment director of UK equities at Standard Life Investments, told the BBC: “There’s a broad belief that the growth rate is below that of the 7.7% published this morning – it’s probably nearer 4% or 5%.”
That’s how we see it.
↑ BBC News – The good and bad of China’s growth
… in 2007 most economists were even then arguing that China was too dependent on investment, with expenditure on plant, equipment, buildings and infrastructure already 40% of national income, or GDP.
But rather than there being a “rebalancing” away from investment, it actually shot up, to 50% of GDP. There was a splurge on remaking the urban and industrial landscape, more or less unprecedented in history.
Chu [“Charlene Chu, late of ratings agency Fitch”] does not think an economy can be weaned off that degree of addiction to debt-fuelled growth without – ahem – there being some kind of shock to the economy.
… the longer that China has the wrong kind of rapid growth, the greater the risk that an eventual crash will muller China and bring contagion to connected financial institutions and economies.
… China remains hooked on debt-fuelled investment. There is no healthy rebalancing.
↑ BBC News – China’s no-win situation
China’s working-age population fell by 2.44 million last year, which is the second straight year of decline. It is reminiscent of the problems of ageing faced by rather more developed countries like Japan.
A shrinking workforce usually means less investment and productivity; China’s problem is self-inflicted through its one-child policy.
The government has decided to relax the policy and allow parents who are single children themselves to have more than one child. It will take a generation before the change bears fruit, however.
Robotics will impact upon how long it will take depending upon how much robotics development is shared around the world and how much the benefits are generally shared across whole populations rather than working to increase the unsustainable income/wealth divide.
↑ Every Job In America, In 1 Graph : Planet Money : NPR
There are roughly 137 million jobs in this country. About two-thirds of those jobs are in private-sector services; the remaining third are split between goods-producing jobs (mainly manufacturing and construction) and government work (mostly at the state and local level).
Click through to see the rather easy-to-read graphic.
↑ IMF warns on threat of income inequality – FT.com
“Business and political leaders at the World Economic Forum should remember that in far too many countries the benefits of growth are being enjoyed by far too few people. This is not a recipe for stability and sustainability,” she [Christine Lagarde, Managing Director, IMF] told the Financial Times.
The World Economic Forum has identified the gap between the rich and poor as an important theme for this year’s gathering.
The message is hitting home. Shinzo Abe, Japan’s prime minister, is coming to Switzerland with the message that Japanese companies must raise wages, while the government of David Cameron, his UK counterpart who is also attending the forum, called for a large inflation-busting rise in the British minimum wage last week.
Christine Lagarde is absolutely correct that it is not sustainable. It’s refreshing that Davos is actually focusing on the issue.
↑ Trickle-down economics is the greatest broken promise of our lifetime | Alex Andreou | Comment is free | theguardian.com
… the realisation must dawn soon — one hopes — that this model is unsustainable because its effects are uncontrollable. The more unequal we become as a society, the faster the top’s earnings diverge from the bottom’s. “When so much of the purchasing power, so much of the economic gain, goes to the very top,” Bill Clinton’s former labour secretary Robert Reich explains in the film Inequality For All. “There’s simply not enough purchasing power in the rest of the economy.” At the same time, there is far too much loose cash sloshing around at the top, leading to unwise risks and toxic investments. Wealth inequality in the US was at its highest levels, historically, in 1928 and 2007, one year before its two biggest financial crises, notes Reich. The base of the pyramid atrophies and begins to crumble.
Then why are most governments continuing to fiddle with supply-side levers in order to revive the economy, when it is abundantly clear it does not work? The simple answer is in two parts. First part: habit. The second was perfectly expressed by the creator of The Wire, David Simon: “That may be the ultimate tragedy of capitalism in our time, that it has achieved its dominance without regard to a social compact, without being connected to any other metric for human progress.”
We have come to measure, to an increasing extent, individuals’ success by their wealth, spending power and other assorted trappings. We do the same with the economic success of governments; measure it by an aggregated data set that fails to take into account wealth distribution, educational achievement, innovation, or even the welfare and health of the population they claim to represent. We must shift this perspective. It will be the hardest, simplest thing we have ever had to do as a species.
We agree but will qualify by saying that the problem isn’t as much the mixed economy as it is laissez-faire thinking.
Milton Friedman would have had you believe that rational self-interest would finally readjust the markets to take care of the imbalance, but that just hasn’t been happening.
The only things that has ever worked are a change of heart and the actions of government (such as the New Deal that, despite the protestations of the Libertarians, did end the Great Depression).
The problem with waiting for changes of heart is that people are suffering now and we live in a democratic republic where people should be able to vote themselves a fair share, which most now do not have due to the deregulation mania (laissez-faire push/movement) that began under Ronald Reagan and continued through both Democratic and Republican administrations ever since with the exception of minor corrections that have been forced upon the super-rich because of the Great Recession.
A purely capitalistic economy does not work because not everyone can, or should have to, compete as a capitalist (one with the money to own the means) or as an employee of that one with the money.
We must take care of those who are less able or who do not have the self-centeredness to strive over the tops of others. We must do that or lose what humanity we have. Ought we to leave it solely to the generosity of the ultra-wealthy to donate to charity? How many people would needlessly starve to death while the world would be waiting? What good is any reasonable level of democracy in that case?
What are your thoughts on it? All thoughtful replies (Libertarian and otherwise) are welcome.
↑ H. Publius: Here is why both Fama and Shiller are correct!
A good analysis:
Eugene Fama believes in rational economic participants and efficient markets. Accordingly, individual investors can neither outperform the market nor predict asset bubbles. Robert Shiller, who has also done extensive work on asset prices most notably the construction of the Case-Shiller home price index, believes in economic participants who sometimes act irrationally driven by group-think and emotions such as fear or exuberance. Accordingly, markets can be inefficient which explains asset booms and busts. I believe that these seemingly irreconcilable positions can be explained by two economic forces. First, rational individuals will not necessarily produce rational outcomes when acting as a group and second, since money is denominated in itself, changes in money demand affect the prices of other assets.
↑ This Is Brad DeLong’s Grasping Reality…: We Have Government Purchase and Residential Investment Problems: Double Graph of the Week (Week of January 17, 2014)
Relative to the last business-cycle peak, exports are 1.2% points higher as a share of potential GDP, business equipment investment is 0.3% points lower as a share of potential GDP, residential investment is 1.5% points lower as a share of potential GDP–and 3.5% points lower than at its housing-bubble peak–and government purchases is 2.3% points lower.
↑ Deflation ‘ogre’ probably won’t come to life | Reuters
“It looks as though low inflation is a reflection of the waning powers of central banks as they have resorted to unconventional monetary stimulus measures,” wrote Stephen King, group chief economist at HSBC, in an outlook for the world economy.
“It is already abundantly obvious that unconventional policies have had a bigger impact on financial asset values than on the real economy.”
True. It’s why we need a better fiscal policy that targets greater governmental-spending at putting people back to work in high-skills jobs. We need to train them to do it and employ them publicly if necessary until the private sector can employ them at better results.
↑ France’s Hollande is completely out of touch with modern economics | Dean Baker | Comment is free | theguardian.com
Dean Baker on the French economy and Francois Hollande:
…The problem is that we do not know how to boost private sector demand. The basic Keynesian story of spending money sounds simple, but it also happens to be right. In an economy that is constrained by inadequate demand, the need is for more spending. That may not typically be the case — the economy may typically be supply constrained — but it is demand constrained right now. This means that if the government spends more money on education, healthcare, research or infrastructure, it will boost the economy and put people to work.
If there was any doubt on this point, there is much new research to back it up.
… Hollande will get most of his proposed cuts put into law. These cuts will directly hurt people, slow growth and cost jobs.
Remarkably, the cuts will likely be viewed as a success by the business press and much of the public. The reason is simple: France is likely to show decent growth in 2014, in spite of the cuts.
Economies do not shrink forever. After years of cutting back, governments across Europe are relaxing austerity, at least modestly. The same is true in the United States. This will be a net positive for growth everywhere, including France.
↑ The real scandal is France’s stagnant economic thinking – FT.com
Wow, a scathing rebuke of France’s current government by Wolfgang Münchau:
The European Commission, in particular, is so engulfed in supply-side group think that it did not see the crisis coming, let alone provide intellectual leadership in the subsequent debate. …
Until he was elected president in 2012, Mr Hollande seemed to offer a refreshingly alternative view. He favoured debt mutualisation and other solutions despised by Berlin and Brussels. He also criticised austerity. Nothing came of it because he lost focus once in power. In particular, he failed — or possibly never intended — to build a coalition against Angela Merkel, the German chancellor …. Since then, Berlin has prevailed in every single point in the crisis, including and especially most recently in the agreement to water down banking union to quasi-insignificance.
…the new consensus spans the entire mainstream political spectrum. If you live on the European continent and if you have a problem with Say’s Law, the only political parties that cater to you are the extreme left or the extreme right.
As for Say’s Law, it certainly applies to itself. It is an economic theory that created its own demand from defunct politicians. What it also tells us is that the policy debate within the eurozone is largely concluded. Those who favoured a new governance framework, which once included the French, have lost.
↑ How The ECB Could Be Radical By Being Old Fashioned
Oxford Professor of Economics Simon Wren-Lewis:
… forward commitment policy is radically different. It promises to allow both inflation and the output gap to be above target in the future, so as to increase demand today. How does this work? Perhaps the easiest way to think about this is by considering long term interest rates. Long term (say 5 year) interest rates are mainly a combination of expected short rates from now until 5 years ahead. If you promise to have above target inflation tomorrow, the central bank must allow future short term interest rates to be lower tomorrow, which reduces long term rates today. Lower long term interest rates encourage additional consumption and investment today.
Correct us if we’re wrong, but we believe that’s New Keynesianism.
↑ Kenya’s Banking Revolution Lights a Fire – NYTimes.com
A pragmatist: Murithi Mutiga:
The Kenyan mobile giant Safaricom was spun off this sprawling morass of inefficiency. Because it was largely given the room to operate using rational management practices, it grew to become the biggest company in East Africa by revenue and Kenya’s largest taxpayer. In partnership with Vodafone, it went on to form M-Pesa (Pesa is a Swahili word for money), which allows subscribers to use a pin-secured virtual bank account on their mobile phones. Each account can hold a maximum of just over $1,000 at any time. This transforms the phone into a mobile wallet. Using a text message, one can send money to a friend, buy goods in a supermarket, settle utility bills or pay for a cab without using cash.
Launched in 2007, there are now 18 million active subscribers to the service. In 2012 M-Pesa processed transactions amounting to 31 percent of the country’s G.D.P. of about $37 billion.
It would be superficial to argue that the mobile phone industry’s success in sub-Saharan Africa proves the merits of privatization in every instance. There also have been failures, including a botched privatization of railroad services in East Africa. The question of less-versus-more government involvement leads to a cul-de-sac of ideological debate. The past 50 years have shown that both approaches can work.
That will certainly have lifted real-estate values there.
What happened was that it bypassed corruption. Not all governmental enterprises are similarly corrupt. In fact, some are less corrupt than their private-sector counterparts. It simply depends on where and when one is doing the comparisons.
We definitely believe that the GSE’s Fannie and Freddie were much less corrupt at their cores than were the Wall Street investment and commercial banks leading up to the Great Recession.
Do you agree? If not, why not?
↑ ObservingGreece: The Banking Crisis Is Moving North!
Greece, Cyprus and Spain have been at the forefront so far as regards crises of their banking sectors. However, what we have seen there may appear as a tempest in a teapot once the ECB stress tests of 124 European banks are completed in the second half of this year.
Greece, Cyprus and Spain again? Forget it! It may well be Germany, France and Italy. Those countries are much larger than Greece, Cyprus or Spain. Their banking sectors are, too. And so are their problems.
↑ Congress Releases FY 2014 HUD Appropriations Bill | Ballard Spahr LLP – JDSupra
Many investors acquire Section 8 properties. This will be of particular interest to them.
Congress passed the fiscal year 2014 appropriations bill for the U.S. Department of Housing and Urban Development (HUD) this week. The bill increases funding for many programs compared to funding levels in fiscal year 2013.
The appropriations bill provides funding increases for many programs: …
The budget includes a number of changes to the public housing program. The changes include: …
… the omnibus bill changes the definition of “extremely low-income” to be the higher of 30 percent of area median income or the poverty guidelines. The appropriations bill changes the income-targeting requirement for public housing and housing choice vouchers by using this new definition. Under the new law, 40 percent of new public housing households and 75 percent of new voucher recipients must be “extremely low-income,” rather than households at or below 30 percent of area median income. This change in definition will affect only areas with lower median incomes.
↑ Confounded Interest | Death Valley Days: Mortgage Lending In A Decelerating Economy (Declining Income And Credit Growth)
Why are mortgage purchase applications stalled? Real median household income has been falling since 1999. Real disposable personal income YoY is at 00.1% and falling. Bank credit growth YoY is at 1.1% … and falling.
↑ New Index Reveals Market at Risk
The Mortgage Risk Index was devised by Edward Pinto, who was with Fannie Mae up until the late 1980s and who is now a resident fellow at AEI, and Stephen Oliner, a resident scholar at AEI, an organization he joined after spending more than a quarter-century analyzing the U.S. economy and financial markets for the Fed.
… why measure mortgage safety under economically stressful conditions? Pinto and Oliner point to the fact that cars are safety-rated for crashworthiness at 35 mph, not 5 mph, and homes in the paths of hurricanes are rated for safety based on 125 mph winds, not 30 mph. Similarly, they say, mortgage loans should be risk-rated under the stress of a substantial drop in home prices-not flat or rising prices.
We certainly agree with that but hasten to add that the 125-mile-an-hour winds in this case represent lending standards as lax as those in the lead up to the Great Recession. If we don’t go there, we won’t have high winds.
We don’t need to beat up on the GSE’s. We don’t need to encourage privatization when the GSE’s are working now and working well, which they are.
Privatization will only lead to higher mortgage rates, too high in our view, and will not generally aid the taxpayers the way the GSE’s are doing now (despite FHA having had to pick up the slack caused by massive deregulation).
↑ In U.S., efforts to fight offshore secrecy hit snags | International Consortium of Investigative Journalists
The United States, as the world’s largest economy and home of leading secrecy jurisdictions such as Delaware and Nevada, is a central battleground in the struggle over ownership transparency.
Even if the rule is enacted, its impact on financial secrecy will be limited. The requirement would not affect state-level requirements for incorporation, and an individual wishing to form a shell company in Delaware or Nevada would not have to disclose any more information than under current rules.
↑ Zhang Jun argues that the dichotomy of extensive and intensive growth is a red herring when it comes to China and other Asian economies. – Project Syndicate
Zhang Jun, Professor of Economics and Director of the China Center for Economic Studies, Fudan University, Shanghai:
The fact that some of Asia’s most dynamic economies — including China, Japan, and the four tigers (Hong Kong, Singapore, South Korea, and Taiwan) — have experienced investment-propelled growth and improvements in TFP simultaneously can be explained by the fact that TFP gains increase investment returns, accelerating capital expansion further. Though further analysis is needed to elucidate the long-term relationship between capital expansion and TFP, it is clear that the long-accepted theory that they cannot co-exist is seriously flawed.
↑ Mortgage Rates Preview : HARP 3.0 Could Release This Week
Mortgage-rate expert Dan Green:
Mortgage markets improved for the second straight week last week, defying analysts who believed that a QE3 taper would lead mortgage rates up.
30-year fixed rates are down about one-eighth percentage point since the Fed announced that its mortgage rate-suppressing program would shrink by $10 billion monthly.
This week, meanwhile, rates may continue to fall. With little economic data due for release, momentum may play in favor of low rates. Furthermore, new Federal Housing Finance Agency (FHFA) Director Mel Watt begins his third week in office. Watt as FHFA Director makes the passage of HARP 3 much more likely.
Wall Street believed that a reduction in QE3 would lead mortgage rates higher. So far, however, that has not happened. Mortgage rates are improved since January 1, and may continue to drop through this holiday-shortened trading week with very little on the calendar.
The taper slowed the economy. The unemployment news was terrible. The dollar fluctuated but was up last we saw. Bonds had to do better (lower prices; higher yeilds), which improved mortgage rates, naturally. Correct?
↑ Student Loans, the Next Big Threat to the U.S. Economy? – Businessweek
New York Fed President William Dudley told reporters in November. “People can have trouble with the student loan debt burden—unable to buy cars, unable to buy homes—and so it can really delay the cycle.”
In our view, not publicly funding college educations for our youths is very short sighted.
↑ Spain’s Worst Year for Work Leaves Rajoy Counting Cost – Bloomberg
Spanish Prime Minister Mariano Rajoy can count the social cost of the economy’s slump when data this week show how 2013 was probably the worst year for work in its democratic history.
Austerity was not, and is not, the solution to this. The opposite is.
↑ Andrés Velasco warns that Latin America could be facing a long-term economic slowdown. – Project Syndicate
Andres Velasco, Professor, Professional Practice in International Development, Columbia University’s School of International and Public Affairs:
… high consumer debt, slowing population growth, and rising income inequality have weakened consumer demand and stimulated savings, while slowing growth in productivity and output itself has discouraged investment. So the “natural” rate of interest — the rate at which the demand for investment equals the supply of savings — has fallen, and arguably has become negative. But, because real interest rates cannot be strongly negative unless inflation is high (which it is not), there is a savings glut. With consumption and investment lagging, the US economy is bound to stagnate.
But how could such a situation apply to Latin America, where GDP growth is faster, interest rates are higher, and domestic demand is stronger than in the US?
… Latin American countries save 18% of GDP, on average, compared to 30% in fast-growing East Asia.
As a result, every time investment picks up in Latin America, it has to be financed with loans from abroad.
He made the complicated fairly simple.
↑ It’s a landlord’s world now | 2014-01-20 | HousingWire
Another report — this time the Securitization Weekly Overview from Bank of America-Merrill Lynch (BAC) — is forecasting a shift away from single-family home purchases to a rental market.
Granted, this is not the first time a report predicting multifamily growth has hit in the past few months, but it does reiterate a common theme — investors are betting on multifamily more often.
↑ Global Unemployment Rise Despite Mild Economic Recovery: UN | Economy Watch
“If current trends continue, global unemployment is set to worsen further,” the report said, estimating that global unemployment will climb to more than 215 million job seekers by 2018.
Ryder [ILO’s Director General Guy Ryder] warned that more people were joining the ranks of the unemployed because companies were using the better economic times to increase payouts to shareholders rather than invest in new workers.
“Corporate profits are up and global equity markets are looking forward to another year of plenty, while at the same time unemployment and household incomes stand still,” he said.
“The modest economic recovery has not translated into an improvement in the labour market in most countries. Businesses have been sitting on cash or buying back their own stocks, rather than investing in productive capacity and job creation.”
↑ Real Estate Investment a Major Factor in City Success According to Research by Jones Lang LaSalle – Multifamily News Headlines — Breaking News, Stories, Top Headlines :: MultifamilyBiz.com
… with 50 percent of the US$4.6 trillion in direct commercial real estate investments over the past decade having been concentrated in 30 cities worldwide, there are signs of change. Investment patterns are shifting partly due to the shortage of available product in the super and primary cities and partly to the dynamism in second-tier cities.
Mid-size cities with innovative urban strategies, good governance and sound education bases are gaining momentum by using well designed, accessible, flexible real estate to attract and retain growth sectors such as tech, healthcare and bio that will underpin future economic success.
Super cities are the largest, most internationally connected cities with very deep corporate bases and high levels of real estate liquidity. The four super cities (London, Paris, New York and Tokyo) account for nearly one-fifth of global direct commercial real estate investment activity.
Primary cities have high levels of international connectivity and significant concentrations of global business services.
Second-tier cities are mature cities with lower levels of international business activity than the other categories.
↑ Home-equity loans are back, pitfalls included – Amy Hoak’s Home Economics – MarketWatch
The statistics: New home-equity loan activity (including both one-time loans and lines of credit) rose 30.8% during the first nine months of 2013, compared with the same period a year earlier, according to data collected by Inside Mortgage Finance, a mortgage industry publication. Activity is still far below levels seen between 2001 and 2007, added Guy Cecala, chief executive and publisher of IMF.
↑ Ultra rich increase holdings in property – Estate Agent Today
Around 3 per cent, or US$5.3 trillion, of the world’s total real estate value is owned by UHNWIs. This wealthiest 0.003 per cent of the world’s population has real estate holdings which are worth an average of US$26.5 million each.
↑ You Might Not Know Your City Is Going Broke – Bloomberg
In what kind of financial shape are the cities and towns where you invest? What kind of account basis do they use? Do they smooth out pension obligations and other long-term obligations rather than marking their investments to market?
… the Government Accountability Office in July 2012 listed a variety of possible reforms, including standardizing the accounting methods that states and cities use in financial reports, requiring more timely reporting of financials and giving the SEC the power to enforce deadlines. More recently, a draft of a white paper by the National Federation of Municipal Analysts also recommended changes, including plain language summaries of the offerings in financial documents and clearer discussion of the source of funds that would be used to repay a debt.