Apr 3, 2012 21:10 UTC

Europe unrecognizable from U.S. Republican rhetoric


By Martin Hutchinson

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

Europe is mostly unrecognizable from the U.S. Republican rhetoric. Presidential hopefuls Mitt Romney, Rick Santorum and Newt Gingrich, who face off again in Tuesday’s trio of primaries, often accuse Barack Obama of leading America to “European-style socialism.” The monolithic pejorative works to a point but conveniently overlooks the many economic achievements throughout the continent. On this matter, voters shouldn’t take the candidates seriously, and the candidates might do well to consider Europe more so.


Wasn’t recovery under Reagan, from Carter, over 7%, so why would we be joyous with even 4.3% growth? Our best days are not behind us, but our current leadership seems to think so.

Posted by CArepublican | Report as abusive
Mar 27, 2012 21:01 UTC

Ally’s mortgage misery needs a clean ending


By Agnes T. Crane and Antony Currie
The authors are Reuters Breakingviews columnists. The opinions epxressed are their own.

Ally Financial finally seems to have woken up to the need to get rid of ResCap, its ailing mortgage unit. Once the jewel in the former GM finance unit’s crown, the home lending and servicing operation has been a prime candidate for the bankruptcy court for years. ResCap has been on U.S. taxpayer-funded life support since 2008 – sucking up most of the $17.2 billion in aid the U.S. Treasury funneled to Ally. Now a Chapter 11 restructuring may finally be on the cards. But Ally needs to ensure its mortgage misery comes to a clean ending.

Mar 21, 2012 20:36 UTC

Student debt may land double whammy on US growth


By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Student loans could be the next asset class to school the United States about poor debt management. Graduates are now forking over more of their disposable income in repayments than 10 years ago, defaults are rising and with Uncle Sam now directly holding $450 billion of student debt, taxpayers are on the hook again. That could put U.S. higher education in the embarrassing position of hindering, rather than helping to fuel, economic growth.

Here’s how: first, the size of the student loan market has mushroomed. Bachelor-degree debt at graduation has grown 250 percent over the past decade, according to finaid.org. At $867 billion, it exceeds both credit-card and auto debt in the United States, according to a study by the New York Federal Reserve. If this trend continues, by 2021 it’ll be equivalent to 1.3 percent of GDP, triple its current level, assuming GDP cleaves to its 4.5 percent 15-year average nominal growth.


You have to have a job to pay off debt!!!STOP supporting red china!!!Made in America is the only answer!!Be American and Buy American goods!!!

Posted by kentonwoods | Report as abusive
Mar 16, 2012 17:35 UTC

Dollars everywhere – so where’s the inflation?


By Martin Hutchinson and Christopher Swann
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

Money supply is rising fast, so where is the inflation? U.S. consumer prices rose 0.4 percent in February, but that was mostly gasoline. Year-on-year, inflation is above the Fed’s 2 percent target but not by much. Yet money supply is going through the roof. Either inflation is on the way, or Milton Friedman should lose his Nobel prize.

Friedman argued that “inflation is always and everywhere a monetary phenomenon.” He proposed that central banks should increase money supply at a constant annual rate, ignoring economic cycles, so as to minimize self-reinforcing bouts of inflation and deflation.


Confusious say, “He who flirts with inflation will soon end up marrying her”. It’s on the way folks. Like a tsunami, first the water draws back revealing the sand sea bed, then the 50 foot high wave rushes in at the speed of a train. And then the wreckage. Fasten your seat belts.

Posted by Eric93 | Report as abusive
Mar 15, 2012 21:04 UTC

U.S. market rumblings point to revved up growth


By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.Rising oil prices and interest rates are election-year bait for U.S. politicians. But in reality – along with higher stock markets – they suggest a long-awaited strengthening of the economy. But sticker-shock at the pump and more expensive debt could yet knock confidence.

This week, even bearish bond traders seem to have conceded that growth prospects look brighter. U.S Treasury yields, which had been stuck in a narrow, low range since October, rose substantially, with the 10-year yield adding more than 0.3 percentage points to 2.35 percent before settling back a bit on Thursday. Stocks have been on a tear for more than five months, with the S&P 500 Index breaching 1,400 this week for the first time since 2008.

Mar 12, 2012 21:26 UTC

Facebook’s underwriter friends are cheap insurance


By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Facebook has friended a raft of new underwriters for its forthcoming initial public offering. According to the company’s latest filing, there are now 31 of them, up from an initial six. That may be overkill, but the social network’s clout means it can line up the extra resources and reputational buffing at little, if any, cost.

Mar 8, 2012 17:29 UTC

Just let housing regulator DeMarco do his job


By Agnes T. Crane and Daniel Indiviglio
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.

The knives are coming out for Edward DeMarco. The acting director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, has been coming under increasing attack recently from Democratic lawmakers as well as housing lobby groups. His crime: he won’t cut principal on underwater home loans backed by Fannie and Freddie. But his critics should cut him some slack.

Principal reduction can have a role to play in helping out underwater homeowners. There is, after all, some $700 billion of negative equity in U.S. housing, according to CoreLogic. Providing some relief on the amount a borrower owes could make the difference between keeping up payments and lurching into default. DeMarco’s critics argue that such a strategy should be a no-brainer for such loans held by Fannie and Freddie. They argue that since taxpayers are already on the hook for mortgages guaranteed by the government, it’s better to take a modest hit to prevent a much bigger loss should a mortgage default.


DeMarco is wrong to assume that most underwater loans will not end up in default, just because they haven’t yet. My loan is guaranteed by Freddie Mac, I have two empty homes next door, I have never made a late payment… but eventually I MUST stop paying.

My wife and I sold our modern, multi-level home six years ago when our youngest moved away to college and we bought a small 1960′s rambler for 210K. We put 50K down. We intended to live in the rambler for about 10 years. Our two dogs would die of old age right around the time we were ready to retire and right around the time we would no longer be able to take care of our 1 acre property. We would sell then to recover our 50K, collect any profit that we earned after making 10 years of payments and improvements and move to a condo with underground parking.

One of the ramblers next door started out on the market at 79K and just got marked down to 58K. I still think I could sell my place for 80K, but I could be wrong about that.

At some point soon, I will be forced to walk away because selling my home won’t generate 160K to pay off the mortgage… and I’m getting old. I cut up three large tree stumps yesterday and I can really feel it today.

Minnesota is a non-recourse state so when I finally stop making payments, the lender cannot pursue me for the difference between what I still owe on my mortgage and the paltry amount they will get when the re-sell my house.

However, non-recourse laws only apply to mortgages that were taken out on the original date of purchase, not to refinanced mortgages. If I would have accepted Freddie Mac’s offer coordinated through CitiMortgage to reduce my interest rate by 2%, my non-recourse status would have changed and CitiMortgage could have come after me for the 80K difference between what they would get when they sell my house and what I still owe on the mortgage. I will NEVER refinance without a principal reduction.

I’m mad as hell about what has happened to my property value. As a taxpayer, I helped bail out all the corporations that caused this problem. I have incurred large personal financial losses caused in large part by CitiMortgage and Freddie Mac’s participation in the vast real estate/mortgage fraud. CitiMortgage didn’t even have the courtesy to inform me that I would lose my non-recourse status if I accepted their “generous” offer.

In fact, the ONLY thing that DeMarco can do to prevent my eventual default is to give me principal reduction to my home’s current fair market value.

Even with a principal reduction, I will never get my 50K back when I finally sell my house. I would only break even on the new mortgage balance. If I am allowed to break even, I could keep my credit intact, perhaps purchase a small condo rather than rent one.

I might be a fool for continuing to make such large payments on a property worth less than half of what it was once worth, but I’m not going to reward Freddie Mac and CitiMortgage for the harm they have done to my property value and my retirement plans by paying off my original mortgage balance with a check for 160K when I sell my house for 80K.

DeMarco is dead wrong about that. The property value is gone. There are losses to be taken.

I will be taking more than 50K in losses, whether DeMarco gives me a principal reduction… or not. Freddie Mac will also take 80K in losses whether DeMarco gives me a principal reduction… or not.

With a principal reduction, the property won’t sit empty, I will continue to take excellent care of the property until I sell and I will still have a good credit rating so I can participate more fully in our nation’s economic regrowth.

Posted by breezinthru | Report as abusive
Mar 5, 2012 22:32 UTC

U.S. stock bubble is in profit, not value metrics


By Martin Hutchinson
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

There’s a bubble in U.S. stocks – but it’s in profitability, not valuation metrics. The S&P 500 Index trades at 14 times historical earnings, so the valuation multiple isn’t excessive. But a measure of domestic U.S. profit margins stands 50 percent above its long-term average. Global profitability has soared even higher. This is unlikely to last long.

Feb 23, 2012 16:03 UTC

New US finance sheriff carves out shadowy domain


By Rob Cox and Daniel Indiviglio
The authors are Reuters Breakingviews columnists. The opinions expressed are their own.The American banking industry has had a rough few years. The subprime meltdown, financial crisis and economic hardship have slammed stocks, slashed bonuses and crunched jobs. But life has been pretty sweet for a motley crew of companies – from cash checkers and credit bureaus to money wirers and debt collectors – operating on the edges of the regulated financial services industry. That may be about to change.

The recent recess appointment by President Barack Obama of Richard Cordray to lead the newly formed Consumer Financial Protection Bureau will, for the first time ever, throw a federal regulatory lasso around the biggest players in the shadows of finance. In the same way that enhanced regulation has curbed many of the excesses on Wall Street, so, too, may the increased scrutiny of this netherworld of the money industry.


Talk about being out of touch! Consumers are not endangered by payday loans. Nobody is forcing us to use them, and it’s unclear how many actually do use them… Yet far too many of us took out risky mortgages to buy over-valued homes in our communities. Interest rates are at an all time low, yet many of us can not refinance, or even find our mortgages as they have changed so many hands in the derivatives market. What’s being done about that?

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Feb 21, 2012 22:12 UTC

Happy stock highs belie bonds teetering on edge


By Robert Cole
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Some nice round numbers have equity investors smiling. The Dow Jones industrial average crossed the 13,000 level for the first time since before the crisis and Britain’s FTSE 100 index is headed towards 6,000. Many in the market may be wondering if the run can be sustained. But the real danger may be lurking for bondholders.