Lunchtime Links 3-22

March 22, 2010

Interest-rate deals sting cities, states (Lucchetti, WSJ) Most of these municipal swaps were structured so that municipalities could lock in low rates. They were borrowing at a floating rate and that meant they carried significant interest-rate risk if rates went up. To lock in their rates, the municipalities “swapped” their floating rate for a fixed one, agreeing to pay a dealer a fixed rate and receive a payment based on a floating rate in return. It was a hedge to avoid higher interest costs if rates went up. But they went down. So now the payment they receive, based on the floating rate, is ultra low, while the fixed rate they locked in is relatively higher.

Obama pays more than Buffett as U.S. risks AAA-rating (Kruger/Keough, Bloomberg) If the U.S. ever did default, Berkshire debt wouldn’t be a safer place to hide…

(Schizophrenic) IMF gives debt warning to the wealthiest nations (Bradsher/Chan, NYT) At the same time, they’ve been telling wealthy nations that fiscal stimulus must be continued in order to prop up aggregate demand. Can’t have it both ways guys…

Option ARMs pose threat to housing market (Reckard, LA Times) Nothing new here, but a well-written piece that explains the option ARM problem, and why California is ground zero. It ends with a typical extend/pretend anecdote…a homedebtor had his mortgage payments frozen for 2 years, then 5, then 10. He’ll make a dent in his principal over time, but house prices won’t rise enough over that time to give him equity. So when 10 years is up, the loan is still likely to go bad. Meanwhile, the bank (in this case FDIC, which took over the assets in receivership) is stuck holding a modified loan that will lose mucho value if rates ever go back up…

WSJ aims to win over NYT’s local audience (Perez-Pena, NYT) The paper’s A section has become largely useless. The partisan editorials/op-eds were always easy to ignore, but at least the rest of the section was thick with great business journalism. Now it’s all general interest stuff one can find elsewhere. No, Rupert can’t do that better than the Sulzbergers, which is why I’ll be trading my WSJ subscription for the NYT (or FT)…

Good news alert: Bank levies gain traction in the UK and Germany (Reuters) Too-big-to-fail banks must be penalized in a way that increases their funding costs. Their TBTF status gives them access to cheaper funds in the market, which helps them grow even larger. Bank levies can be an important countermeasure.

House approves sweeping healthcare overhaul (Whitesides/Smith, Reuters) Be careful what you wish for…

Solution to online credit card fraud (imgur)

India-Pakistan border closing ceremony (YouTube) Wacky…

Swingless golf clubs…

Comments

The swingless golf club is an indication of what is so wrong and right with America. It is so wrong in the sense that now obese Americans don’t even need to swing to play the sport. And it is so right in that ingenuity and drive create something that fills a need or desire.

Goatmug

Posted by Goatmug | Report as abusive
 

Rolfe, as a student, I was wondering if you could do a piece on the new health-care legislation. I want to hear your opinion on it from a fiscal perspective, as well as what differentiates it from what we have now. Thanks.

Posted by grmanny | Report as abusive
 

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