Fannie and Freddie -
This morning’s WSJ reports that Treasury is close to amending the terms of its agreement which provides support to Fannie Mae and Freddie Mac. The amendment, according to the WSJ, would strengthen the two GSE’s financially while accelerating their balance sheet shrinkage. Reportedly, the dividend due Treasury would change from the current dividend rate of 10% to a dividend of all of their profits. Separately, the amendment may accelerate the current 10% per year balance sheet shrinkage to 15%, a change which would bring the GSE’s to their ending balance sheet cap of $250 billion in on-balance sheet assets each by 2018.
http://www.treasury.gov/press-center/press-releases/Pages/tg1684.aspx
The Fed -
Comments from Fed Bank Presidents yesterday make clear the divide amongst the FOMC.
Philadelphia Fed President Charles Plosser said,“The evidence is not strong that somehow more (bond purchases) are going to help the unemployment rate move faster to where we’d like it to be.”
Kansas City Bank President Esther George questioned,“Is there anyone not borrowing today or purchasing a house because interest rates aren’t low enough?”
Minneapolis Fed President Narayana Kocherlakota speculated that the “late 2014” was too long, saying that he “would not have chosen to put that date as far out as the Committee did.” However, he also said that the Fed may be willing to let inflation be well-above its target of 2.0% in order to meaningfully bring down the unemployment rate. The Fed may have “to give a little bit on the inflation front to do better on the employment front,” he said.
http://www.reuters.com/article/2012/08/17/us-usa-fed-idUSBRE87G03120120817
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