BEIJING, Sept 25 (Reuters) – Chinese regulators have told domestic banks to stop interbank lending to U.S. financial institutions to prevent possible losses during the financial crisis, the South China Morning Post reported on Thursday.
What Chinese domestic banks have lent to American banks is nothing compare to what China’s central bank is lending to the US everyday. Besides, it is a little late to stop lending to US Banks.
With refineries unable to fill pipelines that move product into the Midwest and East Coast, inventories have been dropping, and spot shortages, mainly of gasoline, are occurring, even with increasing imports arriving to help fill the gap. While the restoration of electrical power to refineries has progressed rapidly, it still takes time to bring refineries back online (assuming no mechanical problems occur) and even longer before they reach normal production levels.
Given these circumstances, gasoline inventories have declined to record low levels. At 179 million barrels, total motor gasoline inventories stand at the lowest level since 1967, based on monthly EIA data. Continuing reports of spot shortages of gasoline at some retail outlets where supplies have been most disrupted can be expected over the next several weeks. Distillate inventories and supplies are in better shape, but tight nonetheless. They remain within the lower part of the EIA-defined “normal” range for this time of year.
Robert Rapier explains how politicians have made this worse….
But prices aren’t going up nearly as much as you would expect during these sorts of severe shortages. Why? I think it’s a fear that dealers have of being prosecuted for gouging. So, they keep prices where they are, and they simply run out of fuel when the deliveries don’t arrive on time. If they were allowed to raise prices sharply, people would cut back on their driving and supplies would be stretched further.
So desperate was the bank owner of 8111 Traverse Street to unload the property that it agreed to pay $2,500 in sales commission and another $1,000 bonus for closing the $1 sale; the bank also will pay $500 of the buyer’s closing costs. Throw in back taxes and a water bill, and unloading the house will cost the bank about $10,000.
Japan, China and other holders of U.S. government debt must quickly reach an agreement to prevent panic sales leading to a global financial collapse, said Yu Yongding, a former adviser to the Chinese central bank.
“We are in the same boat, we must cooperate,” Yu said in an interview in Beijing on Sept. 23. “If there’s no selling in a panicked way, then China willingly can continue to provide our financial support by continuing to hold U.S. assets.”
An agreement is needed so that no nation rushes to sell, “causing a collapse,” Yu said. Japan is the biggest owner of U.S. Treasury bills, holding $593 billion, and China is second with $519 billion. Asian countries together hold half of the $2.67 trillion total held by foreign nations.
How could such an agreement be enforced?
From US News and World Report….
With Congress preoccupied with the massive, $700 billion bailout plan for the financial industry, General Motors, Ford, and Chrysler have finally secured Part One of their own federal rescue plan. A bill set to be passed by Congress and signed by President Bush as early as this weekend—separate from the controversial Wall Street bailout plan—includes $25 billion in loans for the beleaguered Detroit automakers and several of their suppliers. “It seemed like a lot when we first started pushing this,” says Democratic Sen. Debbie Stabenow of Michigan, one of the bill’s sponsors. “Suddenly, it seems so small.”
There is a new issue corporate bond today from Caterpillar (CAT) and the pricing of that issue is troublesome – quite troublesome, and reflective of the dire straits of the credit market and the dysfunction which has engulfed the corporate market.
Caterpillar announced a 5 year and a 10 year this morning. The size has yet to be determined, but it is likely to be around $500 million for each tranche
In early August Caterpillar brought a 5 year bond to market, the 4.90 of August 2013. That bond priced 175 basis points cheap to the benchmark 5 year Treasury note. With the turmoil in the credit markets the last several weeks, the issue has widened on spread and this morning it was quoted 225/ 210.
The talk on the new issue is T + 325 basis points. That is fully 100 basis points cheap to the outstanding issue and 150 basis points above where the same maturity was priced six weeks ago
This comment explains the lingo.
Also from Megan McArdle….
American Honda (the finance arm of the car company) just issued 5 and 10 year bonds similar to Catapiller. They are rated AA, and the offering went off at 400 over.
These are top notch industrial companies. I wonder what the less then top notch are being forced to pay right now?
From the Des Moines Register….
Assuming the government’s latest crop forecast is right and this fall’s corn and soybean harvests are sufficient to meet demand, stocks of corn and soybeans are still expected to fall to historically low levels. That’s even as biofuel production and global grain consumption are likely to keep growing.
Corn supplies are projected to fall by one-third to just more that 1 billion bushels, or about one month’s consumption, when harvest starts next fall. Supplies could be even tighter; many analysts think the latest production forecast is overly optimistic.
The scary thing is the first comment on the story. I hope there are not to many farmers who think like him.
To many people are worried about the health of the financial sector and not enough people are worried about the economic health of the nation of a whole.
Look at this chart. It is a graph of debt as a percentage of GDP. Now tell me; how is a 700 billion dollar bail out going to help America’s fundamental problem?
US regulators have underestimated potential bank losses on preferred stock issued by Fannie Mae and Freddie Mac, the American Bankers Association said on Monday.
Nearly a third of US banks hold preferred stock issued by the two mortgage financiers that were taken into conservatorship this month, according to an industry survey conducted by the ABA. The average bank exposure to such securities relative to core equity capital was 11 per cent.
“The negative impact on banks – particularly Main Street community banks – is far greater than regulators first thought,” wrote Edward Yingling, chief executive of the ABA in a letter to the Treasury, the Federal Reserve and other banking regulators.
The government takeover of Fannie and Freddie all but wiped out the value of $36bn of their preferred shares. This would force exposed banks to take writedowns at the end of the third quarter that could impede future lending, the ABA warned.
“When the actions were contemplated to reduce dividends on Fannie Mae and Freddie Mac preferred stock, the bank regulators estimated that only a dozen banks would be affected by it,” Mr Yingling said.
It is the first time social scientists have produced evidence that large numbers of men might be victims of gender-related income disparities. The study raises the provocative possibility that a substantial part of the widely discussed gap in income between men and women who do the same work is really a gap between men with a traditional outlook and everyone else.
The differences found in the study were substantial. Men with traditional attitudes about gender roles earned $11,930 more a year than men with egalitarian views and $14,404 more than women with traditional attitudes. The comparisons were based on men and women working in the same kinds of jobs with the same levels of education and putting in the same number of hours per week.
My first thought when I saw the headline was that they did not account for age. But they did. In fact they followed the same group of people from the time when they where children.
All the guys I know who have traditional ideas of gender roles are more ethical (taken as group there are exceptions) then the men who do not have traditional ideas of gender roles (again, granting there are exceptions). But working in a union environment where everyone with the same job is paid the same amount, it never occurred to me that this could lead to higher pay.
That may be wrong explanation based on my limited circle of acquaintances. It may also be possible that men with traditional attitudes towards gender roles may have higher testosterone levels on average. Testosterone generally helps/drives you to become top dog in any situation.
And last but not least, family background does not seem to have been taken into account. It is likely that the people who had more traditional attitudes towards gender came from more stable families then people who did not have have traditional attitudes towards family. Coming from a more stable back ground may have enabled them to be more successful even when they had the same job as other people.
I am not sure which if any of my explanations are correct. But they are both better then the explanations that the authors of the study came up with. They seemed designed to maintain a PC orthodoxy in the face of inconvenient facts.
Also, it seems that the authors of this study consider people with in similar jobs, working similar hours, and with similar education as being equal. I suspect that the did not account for how long people spent in the same job as opposed to moving around.
If this is true it would explain why traditionally minded woman make so much less the other categories even when doing the same work. On paper they might have the same qualifications, but I doubt they stay in the same field for as long.