By Agnes T. Crane The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Though America’s mortgage system subsidizes homebuyers, its dysfunction has cost all taxpayers dearly. Few constituencies with much clout are pushing for change. But the nation’s 39 million rental households – often an afterthought in the housing debate – ought to be up in arms. They might find unlikely allies, too.

Renters may be the only big group in the United States that isn’t invested in the status quo. Homeowners, realtors, homebuilders and banks all benefit from the government’s hand in housing, exercised through Fannie Mae and Freddie Mac, which buy and guarantee mortgages, through other federal vehicles, and through tax rules that subsidize mortgage interest.

This makes home financing cheaper and, usually, more liquid, which in turn makes homes of any given price more affordable and potentially easier to sell on. Banks and investors, meanwhile, are wedded to the security a government guarantee brings to their respective loans and bond investments. And politicians, who have long extolled the virtues of homeownership, are loath to do anything that would make it more difficult for voters to achieve their idea of the American Dream. The trouble is, that’s what would happen if reforms are introduced that reduce or scrap the role of the government’s money and policy objectives in the market.

But rent-payers ought to like that idea. They miss out on the huge tax deductions mortgage interest payers get. And their savings bring in more return when the Federal Reserve hikes interest rates, in contrast to households with equity in homes that in theory go up in value when the Fed pushes lending rates lower and lower. Meanwhile, renters have been hurt by fallout from the housing bust. As taxpayers, they are set to suffer the costs of the government’s attempts to shore up housing – more than $150 billion and counting in losses at Fannie and Freddie alone. And as struggling homeowners hit the rental market, rents are going up too.

At the same time, the ranks of renters are filling up with younger Americans who have witnessed the nightmare of homeownership rather than the dream espoused by older generations. The 44-and-under crowd has been hard hit, with their homeownership rate falling by more than seven percentage points since 2005 to 62.3 percent, according to the U.S. Census Bureau. This matters since they will tell their tales for years to come, potentially undermining the belief that homeownership is part and parcel of American prosperity.

Meanwhile, borrowers who owe more than their home is worth are weakening a key supposed advantage of homeownership: that mortgage deeds bring good deeds to a neighborhood. That probably still applies when someone has a chunky equity stake in their home. But more than a quarter of homeowners now do not. This group is much less likely to fork over, say, $20,000 to fix a leaky roof if it’ll only help the bank’s bottom line rather than their own. Underwater homeowners look a lot like renters with giant mortgage millstones hanging around their necks.

By Agnes Crane and Peter Thal Larsen

The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

The Volcker rule has encountered some surprising new enemies. U.S. banks have long loathed the regulation, which aims to limit proprietary trading. But as policymakers put the finishing touches on it, Canadian and Japanese authorities have joined the chorus of complaints.

The rule, named after former Federal Reserve Chairman Paul Volcker, has the simple aim of barring banks from trading on their own accounts. In practice, however, there’s a fine line between making markets and placing bets. That will make compliance a tricky, and potentially costly, dance with regulators. Banks may decide some markets are no longer worth the effort.

The amount of lost liquidity is anyone’s guess. But it is worrying foreign countries historically dependent in part on U.S. banks making markets in their sovereign debt. Less liquid markets inevitably mean higher interest rates. Moreover, as currency swaps also fall under Volcker’s shadow, the rule could make dollar funding scarcer.

The complaints are genuine. Before the crisis, it was in the interest of banks to ensure markets were deep and liquid because flow visibility enabled them to place more profitable bets with their own capital. And while banks were the main beneficiaries, it also helped governments, companies and consumers to borrow at what otherwise would have been higher rates.

One sovereign that won’t suffer is the United States, because trading in U.S. Treasuries is exempt under Volcker. Mark Carney, governor of the Bank of Canada, says this creates an unlevel playing field and would like to see the carve-out extended to other government bond markets.

By Agnes T. Crane

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Subprime mortgage debt has got its mojo back. A growing number of investors reckon there’s life yet in the mortgage market’s toxic sludge from the crisis – and that now’s the time to buy. But buyers should tread carefully.

Yields are certainly enticing. Last year’s battering lopped up to a third off the value of subprime mortgage bonds, leaving some fetching 10 to 12 percent, according to Barclays estimates. U.S. junk bonds, by contrast, offer less than 8 percent. Moreover, while the U.S. housing market is hardly in a recovery, few think home prices will fall by more than a few percentage points from here.

Investment banks in particular look eager to scoop up the mortgage sludge. Credit Suisse has just bested Goldman Sachs and two other broker-dealers to a $7 billion slice of the subprime holdings the Federal Reserve took from American International Group in 2008 – though the central bank will not disclose the price until April. It’s not the first time this year the Swiss bank has been involved in the market: the bank’s senior managers are getting in on the act, too, voluntarily buying $450 million-worth of securities and putting them into a fund of mostly subprime bonds that the bank set up in 2008 to pay staff bonuses.

Less swift investors may be focusing on the chance of a good deal of supply coming onto the market. All in, some $1.2 trillion is walled up in U.S. banks, insurers, hedge funds and European firms, according to Barclays. Banks, especially, may be big sellers as Basel III capital rules are onerous for securitized debt. Europe’s lenders hold some $70 billion, with up to $20 billion potentially for sale, while U.S. banks are sitting on around $200 billion, according to Barclays’ tally.

But subprime mortgage bonds have long been an illiquid asset. The analysis required to price such complex securities makes trading them incredibly difficult. And any attempt to sell more than a small amount can quickly whack prices. That happened last year when the Fed used public auctions to get rid of some of its AIG waste and ended up offloading less than it hoped.

By Agnes T. Crane

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Wednesday marked a day of mourning for American junk food aficionados – and not for the first time. Hostess Brands, maker of the cream-filled bright yellow Twinkie snack, filed for Chapter 11 bankruptcy just three years after emerging from the court’s protection. That’s not just a kick in the gullet for Ripplewood Holdings, the private equity owner that sank $40 million into the baker last year. The company’s failure leaves a greasy stain on the American bankruptcy process itself.

Filing for Chapter 11 protection is supposed to give debt-laden companies a fresh start. General Motors, Chrysler, major U.S. airlines like United and others have used the courts precisely for this reason. It is easier to renegotiate labor contracts and ax unsustainable debt loads inside the courtroom. Hostess clearly didn’t go far enough in pruning its obligations the first time around. Its largest unsecured creditor isn’t a bondholder or bank; it is a pension fund. The company, in fact, blamed legacy pension and health benefit costs for its current predicament.

To be fair, Hostess isn’t the only repeat filer. Edward Altman, finance professor at New York University, tallies 215 so-called “Chapter 22” filings between 1984 and 2009. The main problem, it seems, is that companies are not emerging from bankruptcy in solid enough shape. One 2006 study found that firms had higher debt ratios compared with the industry standard even after substantially cutting their debt burdens in bankruptcy.

That’s hardly encouraging for firms like General Motors that have returned to the land of the living in recent years. Operating at a disadvantage when times are tough, especially if, like at Hostess, pension costs remain significant, is hardly ideal. Yet if a producer of baked staples like Wonder Bread and Ding Dongs can’t make it, investors should remain skeptical about just how effectively Chapter 11 can scrub away problems.

By Agnes T. Crane The author is a Reuters Breakingviews columnist. The opinions expressed are her own. The sluggish economic recovery hasn’t been kind to the female population in the U.S. workforce. They’ve nabbed only 43,000 of the 1.4 million net new nonfarm jobs created since June 2009. Though painful, this gender rebalancing makes some sense. Men disproportionately suffered the worst of the post-crisis mega-bust – so much so, in fact, that the high incidence of unemployment was given its own awkward moniker: “Mancession.”

Moreover, female-dominated work areas are still in the dumps. Government jobs are a case in point. Tough talk and action to tighten belts at the federal, state and local levels have been hard on women, who accounted for nearly two-thirds of the job cuts, even though they represented only 57 percent of the bureaucratic staffers.

The matter has generated some undue handwringing after the National Women’s Law Center gave Friday’s latest data dump from the Labor Department some attention. The kerfuffle over the lack of recent new jobs for women in America masks the gains they have chalked up over the last decade. In the last decade, the female ranks of the U.S. labor force increased by 2.8 percent while the number of men shrank by about 1 percent.

The shift isn’t surprising given the XX stamp on higher education. According to the U.S. Census Bureau’s 2010 tally of the working population, slightly more working women held a bachelor’s degree – or more – compared with men. More telling for the future, however, is for those aged 25-29. More than a third of women in that bracket completed four years or more at a university or college compared with only a little more than a quarter of their young male counterparts.

If these trends persist, men won’t sustain their current edge finding jobs. The Mancession left women temporarily with the majority of U.S. jobs in early 2010. It should only be a matter of time before they reclaim the mantle – and widen the gap.

By Agnes Crane and Neil Unmack The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Finance directors may start giving finance ministers a run for their money. The woeful state of national balance sheets will push risk-averse investors into highly rated companies like Microsoft and other cash-rich issuers best positioned to withstand uncertain times. Corporate bonds could prove more attractive than even top quality sovereigns.

Sovereign debt from developed world nations used to be considered one of the surest bets for safety-conscious investors. States’ powers of taxation, and the printing presses in countries that controlled their own currencies, made default almost inconceivable. That’s clearly no longer the case. The euro crisis that began with Greece has cast doubt on the region’s bigger economies, such as Italy, Spain and even France. Even the United States’ full faith and credit is no longer stain-free after 2011’s congressional mud-slinging over long term deficits.

In fact, investors are already much more comfortable with corporate credit. An index created by Markit which measures how expensive it is to insure a basket of investment-grade corporate bonds – excluding financial companies – showed it cost twice as much to protect against defaults of European sovereign bonds in early December. In Europe, companies including Enel, Electricite de France, Siemens and Vinci all have had lower credit spreads than their respective sovereigns. Meanwhile, U.S. companies with top ratings like Microsoft have seen credit spreads on their bonds actually drop since the beginning of the year.

There’s some logic for putting companies on still higher ground. France, one of Europe’s stronger sovereigns, had debt equivalent to 166 percent of revenue (mostly tax revenue) compared to the average of just 48 percent for highly-rated companies, according to JPMorgan. The 12-month trailing default rate for U.S. companies considered investment grade is just 0.6 percent, according to Standard & Poor’s.

Corporates can’t hope to replace official fiscal authorities in terms of providing the market with the same amount of easy-to-trade debt. Companies also aren’t immune to the sovereign crisis: troubled governments may try to raise revenues by increasing taxes, or curry favour with voters by toughening up regulations. Yet corporate debt can act as antidote to the violent ups and downs hitting sovereign debt and their proxies, financial institutions and broad stock indexes. At the very least, such bonds introduce a valuable element of diversification.

Predictions: Breakingviews is publishing a series of articles over the holiday that look ahead to 2012. The pieces will be collected together in the annual ’Predictions Book,’ produced in print and electronic form early in the New Year.

By Agnes Crane The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The New York Times Co has regrouped since flirting with oblivion three years ago. The company looks ready for a deeper digital dive. But before it can take that plunge, the firm may need to pay its dues to its controlling family.   The Ochs-Sulzberger clan has stood by the Gray Lady in her time of need. But it has been nearly three years since the company paid a dividend – a flow that in 2007 poured nearly $25 million into the various family members’ coffers. The Times’ fortunes, though still challenging, have taken a turn for the better. It paid off an onerous $250 million loan ahead of schedule, shed assets like a stake in the Boston Red Sox, and plans to unload 16 regional newspapers.

Free cash flow has also seen a turnaround from the red ink that bedeviled the newspaper group between 2006 and 2008, according to Moody’s Investors Service. This year it is on track to turn out $200 million. The sale of the regional papers could reduce that, but the Times will still be throwing off a fair bit of cash.

Meanwhile, the abrupt departure last week of Janet Robinson, the company’s chief executive for seven years, has tongues wagging that something big – perhaps an acquisition – could be in the works, potentially making the flagship New York Times title much stronger for the digital age.

It wouldn’t be surprising if some of the family members, who collectively control the company through special rights attached to their roughly 18 percent economic interest, were feeling the need for a bit of income. A regular dividend could help ensure the family’s support and avoid the kind of fracturing that led the Bancroft clan to sell Dow Jones, owner of the Wall Street Journal, to Rupert Murdoch’s News Corp four years ago.

The Times’ credit rating would probably suffer if it tried to return anywhere near the 23 cents a share quarterly payout that once kept the Ochs-Sulzbergers flush. But a modest 3 cent quarterly dividend might be a start. That would cost the company $18 million a year and net over $3 million annually for the family – hardly a king’s ransom, but better than nothing. For the next CEO, something like that could be the price of approval for corporate ambitions.

By Agnes T. Crane The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Morgan Stanley chief James Gorman’s settlement with bond insurer MBIA puts a big chunk of the financial crisis legacy behind the firm. At $1.8 billion, it doesn’t come cheap. But it puts the investment bank on the right track by boosting regulatory capital and tidying up a very messy second year for Gorman.

The bank’s spat with MBIA was, like much of the litigation stemming from the crisis, about who would ultimately bear the cost of wagers gone disastrously wrong. MBIA made a name for itself in the staid municipal bond market by insuring more esoteric instruments, including bonds backed by commercial real estate debt held by Morgan Stanley. The bank recently valued MBIA’s insurance contracts at some $4.9 billion.

By settling the dispute, Morgan Stanley is tacking a $1.8 billion loss to an already-crummy year, all the better to kick off 2012 on a more solid footing. First, the deal frees up capital, getting the firm closer to meeting stiffer requirements coming down the pike under the Bank for International Settlements’ Basel III accord.

The New York bank estimates that closing its MBIA-related positions, even after taking the loss, should unlock $5 billion of capital. That should punch up its ratio of so-called Tier One common equity to risk weighted assets, estimated at over 7 percent at the end of September, by another 75 basis points. That nudges the bank closer to the 8.5 percent to 9 percent cushion it could eventually need.

The loss notwithstanding, investors applauded the move. That alone could encourage the remaining five banks – including Bank of America – still engaged in a legal battle with MBIA to consider similar deals. True, modest applause at year-end hardly makes up for the near 40 percent decline in Morgan Stanley’s stock so far this year. Gorman needs to do more than clean up old messes next year to keep shareholders on his side.

By Agnes T. Crane The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The U.S. Federal Reserve is working to improve its monetary policy communications. But its key role as a crisis lender is also now in the spotlight. Ben Bernanke’s Fed would get less flak if it managed this message better as well.

On monetary policy, the U.S. central bank has pledged to keep interest rates near zero for at least two years and is taking big policy steps aimed at getting the economy off the floor. The Fed’s public relations strategy has developed accordingly, with Bernanke now hosting press conferences after some interest rate decisions. Next year, the central bank is expected to reveal more about how it approaches its double-headed mandate to keep both inflation and unemployment down.

But the Fed also serves as the lender of last resort for the U.S. banking system – and, most recently, as the wingman for the European Central Bank and other monetary authorities when the dollar is in short supply in their jurisdictions. It’s a crucial role that keeps money flowing when the system would otherwise seize up.

Yet it took a court order in support of an effort pioneered by Bloomberg to get the Fed to divulge details of the emergency lending it conducted during the 2008 crisis. Even then, Bernanke left it up to the press and the public to interpret the data it eventually dumped.

A figure of $1.5 trillion actually measures the peak of Fed lending in December 2008. That’s hardly small change, but Bloomberg calculated a much higher total – $7.77 trillion – based on the aggregate of all the lending limits and guarantees the Fed provided during the financial crisis, many of which were only partly used. Other news outlets ran with the larger number, sometimes misrepresenting it as the cash actually lent out by the Fed. That would be a full order of magnitude more than the controversial $700 billion Troubled Asset Relief Program, which had required congressional approval.

The misunderstanding and the subsequent back-and-forth have left Bernanke on the defensive. Yet an independent central bank that can act as a lender of last resort when liquidity dries up is a vital safety net. The Fed needn’t be shy about making that case.