Posts Tagged ‘Treasury Department’
Monday, March 21st, 2011
The year 2010 saw 956 megawatts worth of solar panels installed in the United States, providing a cumulative capacity of 2.6 gigawatts – enough to power 500,000 homes. Even though the Solar Energy Industries Association (SEIA) says solar is a fast-growing business, it still provides less than one percent of the nation’s electrical capacity. In 2010, solar panels were a $6 billion business, a significant increase over the $3.6 billion reported in 2009. Despite the growth in dollar volume, the global share of American photovoltaic installations fell in 2010, to just five percent of the world’s total from 6.5 percent in 2009. Although demand is growing in the United States, other countries are adopting solar to the point where they are leaving the United States in the dust.
Not surprisingly, sunny California leads the nation in solar installations. In second place was Jersey, followed by Florida, Arizona, Nevada, Colorado and Pennsylvania. The six states accounted for 76 percent of solar capacity installed in 2010.
President Barack Obama is an enthusiastic supporter of renewable energy sources, and Congress extended their federal tax credits, originally set to expire at the end of last year, through 2011. “This remarkable growth puts the solar industry’s goal of powering 2 million homes annually by 2015 within reach,” Rhone Resch, SEIA president and CEO, said. According to Resch, “Achieving such amazing growth during the economic downturn shows that smart polices combined with American ingenuity adds up to a great return on investment for the public. The bottom line is that the solar energy industry is creating tens of thousands of new American jobs each year.”
“Another doubling of U.S. installations in 2011 is likely, even in the absence of a substantial mid-year price decline,” said Shayle Kann, GTM Research’s managing director of solar research. A Treasury Department grant program, which repays 30 percent of the cost of installing solar panels, boosted the number of projects. The price of installing photovoltaic systems fell by 10 percent for commercial and eight percent for residential consumers last year. Other countries are cutting their subsidies this year, possibly leading to an Italy, the more suppliers are going to price more competitively in new markets, like the U.S., ultimately growing the market,” Kann said.
In addition to the United States, the leading nations that are adopting solar energy include Germany (9,785 megawatts); Spain (3,386 megawatts); Japan (2,633 megawatts); Italy (1,167 megawatts); the Czech Republic (465 megawatts); Belgium (363 megawatts); China (305 megawatts); France (272 megawatts); and India (120 megawatts).
Tags: Clean energy, congress, Gigawatts, GTM Research, jobs, Megawatts, Photovoltaic installations, President Barack Obama, Rhone Resch, Solar energy, Solar Energy Industries Association, solar panels, Treasury Department
Posted in Development, Green | 2 Comments »
Monday, March 7th, 2011
Republican congressmen searching for sizeable spending cuts are targeting Wall Street’s regulators over a plan to slash millions from the budgets of several vital agencies. They are setting their sights on the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). The workload of both agencies is expected to increase significantly as the Dodd-Frank financial reform law is implemented. House Republicans want to slash the CFTC’s funding by $56.8 million – nearly 33 percent of the agency’s entire budget — over the next seven months. The SEC’s funding would be cut by $25 million over the same time.
CFTC Chairman Gary Gensler said he would have no option but to reduce his staff from 680 to fewer than 440 if the cuts are approved. “We’d have to have significant curtailment of our staff and resources,” Gensler said. “We would not be able to police…or ensure transparent markets in futures or swaps.” Under Dodd-Frank, the CFTC regulates the multi-trillion dollar derivatives market that includes over-the-counter products called credit default swaps. The story is similar at the SEC, which is working to augment its enforcement of Dodd-Frank. “It (budget cuts) will have a very real effect on the SEC’s ability, not just with respect to Dodd-Frank implementation, but also with respect to our core mission,” SEC Chairman Mary Schapiro said in testimony before Congress.
Leading the charge in Congress is Representative Randy Neugebauer, chairman of the House Financial Services Subcommittee on Oversight and Investigations. One of Neugebauer’s top priorities is assuring that regulators are not “overreaching” and moving too quickly with their new authorities under Dodd-Frank. Neugebauer expressed concern about whether regulators are adequately performing cost-benefit analyses on every rule in Dodd-Frank, a process required under federal rule-making procedures. He expects to call SEC Chairman Schapiro and CFTC Chairman Gensler back to testify about the issue, especially since he believes that Gensler gave him “vague” responses about cost-benefit analyses on derivatives rules. Neugebauer said another of his major priorities will be to rein in the powers of the Consumer Financial Protection Bureau, an entity created under Dodd-Frank. The Texas congressman wants to move the bureau to the Treasury Department and out of the Federal Reserve’s control.
Another congressional Republican makes this point. “When the House and Senate passed the Dodd-Frank Act, supporters continually purported that small financial institutions, like many I represent, were exempt,” Representative Shelley Moore Capito, (R-WV) said. “As the provisions of Dodd-Frank are going through the rule making process, I am starting to hear concerns from small institutions about the unintended consequences that could adversely affect them.”
One point of contention with the Republicans is the orderly liquidation provision that authorizes regulators to seize large financial institutions that are about to fail and dismantle them in a way that is less disruptive than either taxpayer bailouts or bankruptcy.
“People are saying we won’t have the guts” to invoke orderly liquidation, acknowledged Democratic Representative Barney Frank, (D-MA), who co-sponsored the legislation with now-retired Senator Christopher Dodd (D-CT). “Well, we had the guts with regard to the TARP to get the money back. We got it back,” he said, referencing the $700-billion Troubled Asset Relief Program (TARP) that bailed out Wall Street firms and which has been largely repaid. “I don’t have any question that we’re going to go through with it,” Frank said.
Tags: bankruptcy, Commodities Futures Trading Commission, congress, Consumer Financial Protection Bureau, credit-default swaps, Derivatives markets, Dodd-Frank Wall Street reform law, Federal Reserve, Financial regulators, Gary Gensler, House Financial Services Subcommittee on Oversight and Investigations, Mary Schapiro, Orderly liquidation, Representative Barney Frank, Representative Randy Neugebauer, Representative Shelley Moore Capito, Republicans, Securities and Exchange Commission, Senator Christopher Dodd, TARP, taxpayer bailouts, Treasury Department, Wall Street firms, Wall Street reform, “Too big to fail”
Posted in Economics, Financing, General | No Comments »
Wednesday, February 23rd, 2011
The Obama administration and the Treasury Department have decided that Fannie Mae and Freddie Mac — the public-private housing finance model in place for the past four decades – will come to an end, although they pledged to continue backing the agencies’ existing obligations. “The GSE (government-sponsored enterprise) model is dead,” an Obama administration official said. The Treasury Department is currently working on three broad options for overhauling the mortgage lending system, but will let Congress make the final decision. The government bailouts of Fannie and Freddie have cost taxpayers nearly $150 billion.
Obama administration officials have emphasized areas of agreement with Republicans, stressing that they favor a system that is less dependent on government support. Approximately 90 percent of new mortgages are currently backed by Fannie, Freddie or other federal agencies. The move pleased Republicans, who have long criticized the mortgage companies. “I’m encouraged to see the administration included a number of reform ideas that track closely with my own,” Representative Scott Garrett (R — NJ) said. Garrett heads the House Financial Services subcommittee, which oversees Fannie and Freddie. Representative Randy Neugebauer (R – TX), said he was pleasantly surprised by the focus on restoring the mortgage-backed securities market issued without the government’s guarantee. Debate over the future of the mortgage giants is often contentious on Capitol Hill. Republicans consistently criticized last year’s Dodd-Frank financial-overhaul bill for not addressing the fate of Fannie and Freddie. Treasury Secretary Timothy Geithner said that winding down Fannie and Freddie and creating an alternative won’t happen overnight. “Realistically, this is going to take five to seven years,” he said. “We are going to start the process of reform now, but we are going to do it responsibly and carefully so that we support the recovery and the process of repair of the housing market.”
The Treasury Department report suggests that Fannie and Freddie purchase loans with smaller outstanding balances, reducing their risk. The report also recommends phasing in a requirement that Fannie and Freddie borrowers make larger downpayments — at least 10 percent. Lastly, the government wants Fannie and Freddie to wind down their own mortgage investment portfolios. In their heyday, Fannie and Freddie were public companies that encouraged home ownership thanks to a Congressional mandate. The companies buy home loans from lenders, which use the money to offer new loans to consumers.
The bad news is that mortgage costs could increase a bit once Fannie and Freddie are phased out. “Over the long run, the cost of a mortgage will rise modestly for the average American homeowner,” Geithner said. “We think it’s very important for the government to continue to play a role, a targeted role” to make certain that “Americans who need help to find a home, to rent a home, or own a home get that help.”
Nor will the process of replacing Fannie and Freddie be easy. Writing in the Wall Street Journal, David Reilly points out that “A return of private capital requires the revival of securitization markets for mortgages not backed by the government since bank balance sheets aren’t big enough to fill the gap”. But 30-year loans in their current form aren’t attractive to investors without a government guarantee. The Treasury implicitly acknowledges the conflict, noting that the less government backing there is for housing finance, the less feasible the 30-year mortgage becomes. It also admits the reward for losing that benefit, and largely removing government from mortgage markets, would be a reduced incentive to invest in housing so that ‘more capital will flow into other areas of the economy, potentially leading to more long-run economic growth and reducing the inflationary pressure on housing assets.’ That should be the clear goal of any housing-finance revamp.”
Tags: bailouts, congress, Dodd-Frank financial overhaul bill, Fannie Mae, Freddie Mac, GSE model, House Financial Services subcommittee, mortgage-backed securities, mortgages, Obama administration, President Barack Obama, Public-private housing finance model, Representative Randy Neugebauer, Representative Scott Garrett, Republicans, Timothy Geithner, Treasury Department
Posted in Economics, Financing, General, Residential | No Comments »
Monday, February 21st, 2011
Federal Reserve Chairman Ben Bernanke is knocking heads with Representative Paul Ryan (R-WI), the new chairman of the House Budget Committee, about how to best control inflation while buying billions of dollars worth of Treasury bonds to build up the economy in a process called quantitative easing 2 (QE2). As the nation’s debt climbs to an unprecedented high level, President Obama is in the difficult position of having to forge an agreement with Congress on how high the legal cap on how much money the government can borrow will be. The Republicans who now control Congress say they will consent to an increase in the cap only if President Obama agrees to make significant budget cuts. Ryan has been an outspoken opponent of the Fed’s stimulus policy, which is pumping $600 billion into the economy through purchases of long-term Treasuries. He is concerned that the policy will accelerate inflation, create asset bubbles and reduce the dollar’s value. “My concern is that the cost of the Fed’s current monetary policy…will come to outweigh the perceived benefits,” Ryan said. “We are already witnessing a sharp rise in a variety of key global commodities and basic material prices.”
Bernanke disagreed, saying “The inflation is taking place in emerging markets because that’s where the growth is.” In the United States, he said, “overall inflation is still quite low and longer-term inflation expectations have remained stable.” Bernanke pointed to growth in economies like China, India and Brazil as the real cause of rising prices.
Speaking in a different venue, Treasury Secretary Timothy Geithner expressed confidence that Congress ultimately will raise the debt limit. “I can say this with complete confidence – that the U.S. will meet its obligations, that Congress will act as it always has to make sure we meet those obligations,” Geithner said. “There’s always a little political theater around this.”
Democrats and Republicans remain sharply divided on the issue. “It would be reckless from an economic and financial perspective…to essentially default on our debts and question the creditworthiness and full faith and credit of the United States, correct?” asked Representative Chris Van Hollen (D-MD) “Wouldn’t significant reductions or addressing the short-term spending aspect be good for the market and economy?” asked Representative Scott Garrett (R-NJ).
Representative Ron Paul (R-TX) and a Libertarian characterized Bernanke’s testimony as “cocky”. Paul, a 2008 presidential candidate who is a long-term critic of the Federal Reserve, now has a platform to air his views, thanks to the Republicans winning control of the House. As chairman of the House Domestic Monetary Policy and Technology Subcommittee, Paul called the hearing to examine the impact of the Fed’s policies on job creation and the unemployment rate. Paul has advocated for measures that would review the Federal Reserve or even eliminate it. Additionally, Paul slammed the Fed’s latest $600 billion bond-buying program, saying it and near-zero interest rates haven’t led to job creation in the United States.
Tags: Ben Bernanke, Capitol Hill, congress, Corporate tax rates, economic recovery, Federal Reserve, House Budget Committee, House Domestic Monetary Policy and Technology Subcommittee, inflation, Libertarian, Long-term Treasuries, monetary policy, President Barack Obama, Quantitative easing, Representative Chris Van Hollen, Representative Chris Van Hollen (D-MD), Representative Paul Ryan, Representative Ron Paul, Representative Scott Garrett, Republican-led House, Timothy Geithner, Treasury Department, unemployment rate
Posted in Economics, Financing, General, Green, Office, Residential | No Comments »
Monday, December 20th, 2010
The Obama administration is leaning on mortgage giants Fannie Mae and Freddie Mac to write down underwater loans and make life easier for homeowners who are at risk of default and may see their personal finances deteriorate. The Federal Housing Finance Agency (FHFA) wants Fannie and Freddie to join a Federal Housing Authority (FHA) program that allows banks and other creditors, which agree to write down mortgages, to transfer the reduced loans to the FHA.
According to government estimates, between 500,000 and 1.5 million homeowners have the potential to benefit from the program. This is a fraction of the 11 million homeowners who were underwater as of June 30, according to CoreLogic, Inc. To put that number into perspective, approximately 23 percent of all American households with a mortgage are underwater. According to the mortgage industry, the FHA program will be of minor benefit to the housing market unless Fannie and Freddie participate. In its first three months, the program accepted 61 applications and modified three loans.
David Stevens, the FHA’s commissioner, said resistance by lenders has been frustrating. Obama administration officials have given lenders “a responsible way to address borrowers with negative equity and if institutions are blatantly refusing” to participate, then that is “short-sighted.” “Letting the status quo continue is going to be much more expensive than people think,” said Kenneth Rosen, a professor of economics and real estate at the University of California at Berkeley. “We’ve got a downward spiral in housing here, and they’d better break the back of this with some shock and awe.”
Fannie and Freddie have been reluctant to reduce mortgage principal, primarily for the reason that it limits their opportunity to recover losses. According to the Office of the Comptroller of the Currency, Fannie and Freddie have reduced only 10 of the 120,000 loans modified during the 2nd quarter of 2010. “We have historically counted on the fact that the vast majority of borrowers – even borrowers who are underwater – continue making their payments,” said Don Bisenius, a Freddie Mac executive vice president.
Tags: CoreLogic Inc., Fannie Mae, Federal Housing Administration, Federal Housing Finance Administration, foreclosures, Freddie Mac, mortgage modifications, Obama administration, Office of the Comptroller of the Currency, Treasury Department, U.S. housing market, Underwater loans, University of California at Berkeley
Posted in General | No Comments »
Thursday, December 16th, 2010
The estimated cost of the Troubled Asset Relief Program (TARP) keeps falling, according to the nonpartisan Congressional Budget Office (CBO). The latest estimate is that TARP will cost the taxpayers just $25 billion – significantly less than the $700 billion allocated for the financial bailout in the fall of 2008. The CBO’s last estimate – made in August – was that TARP would add up to a $66 billion loss, so the newest numbers represent a significant improvement.
This optimistic prediction is thanks to funds returned to the Treasury Department as banks repaid their loans and bought back stock warrants. Another factor in the revised numbers is that less money than anticipated went to bailing out AIG and General Motors, the latter of which recently had an extremely successful initial public offering. “Clearly, it was not apparent when the TARP was created two years ago that the cost would turn out to be this low,” according to the CBO. “At the time, the U.S. financial system was in a precarious position, and the transactions envisioned and ultimately undertaken through the TARP engendered substantial financial risk for the federal government.”
TARP was originally created so the government could buy toxic mortgage-backed securities from big banks. Former Treasury Secretary Henry M. Paulson ultimately altered the program to infuse cash into banks and other companies that were likely to fail. The majority of banks have repaid their loans; in fact, the federal government has made approximately $12 billion from those transactions. Because the financial system was stabilized more quickly than originally anticipated, only $433 billion of the TARP fund was spent, which reduced the potential for losses, according to the CBO. President Barack Obama and Treasury Secretary Timothy Geithner have hailed the revised projection as a sign that the extremely unpopular program was effective and not the corporate giveaway as some opponents have accused.
Tags: AIG, Congressional Budget Office, financial meltdown, Financial risk, General Motors, Henry M. Paulson, Initial public offering, Nonpartisan, President Barack Obama, Stock warrants, Taxpayers, Timothy Geithner, Toxic mortgage-backed securities, Treasury Department, Troubled Asset Relief Program
Posted in Economics, Financing, General | No Comments »
Wednesday, December 8th, 2010
Sloppy foreclosure paperwork could upset the nation’s housing market and destabilize the economy in general, according to a report released by the Congressional Oversight Panel. This group oversees the government bailout and its statement marks the first time a federal watchdog has issued an opinion on the foreclosure issue. Consumer advocates and financial analysts had previously raised the issue, noting that although the consequences of the foreclosure mess are unclear. The situation has the potential to impact mortgages that are not in trouble but were securitized and sold to investors.
“Everyone’s very nervous about what’s going to happen,” said an anonymous industry source. “We have all hands on deck.” Some lawmakers want to revisit legislation that would allow bankruptcy judges to order lenders to reduce the principal the homeowner owes. Others favor allowing big banks to spin off their mortgage-servicing operations to avoid conflicts of interest. “The risk is small that a bill gets through, but we are taking it very seriously,” said another unidentified financial lobbyist. The dilemma became apparent in recent months as Ally Financial, Bank of America and JPMorgan Chase halted foreclosures as it became clear that many were based on flawed documentation.
The oversight panel also voiced concerns that investors who bought the securitized mortgages could file lawsuits that ultimately might cost banks billions of dollars. At the same time, the panel said the Treasury Department’s claims that the mortgage situation poses slight systemic risk to the financial system are premature. “Clear and uncontested property rights are the foundation of the housing market. If those rights fall into question, that foundation could collapse,” according to the report, which also recommended that the Treasury and Federal Reserve conduct new stress tests on Wall Street banks to gauge their ability to cope with any new upheavals.
Tags: Ally Financial, Bank of America, Congressional Oversight Panel, Consumer advocates, Federal Reserve, Financial analysts, Financial Fraud Task Force, foreclosures, Fraudulent foreclosure paperwork, JPMorgan Chase, lobbyists, Senate Banking Committee, stress tests, Treasury Department, Wall Street banks
Posted in Economics, Financing, Residential | No Comments »
Monday, November 8th, 2010
The ultimate cost of bailing out Fannie Mae and Freddie Mac could cost as much as $154 billion unless the economy improves, according to a government report. The mortgage giants rescue – which has kept the housing market on life supports – already has cost $135 billion to cover losses on home loans in default. The Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac, says the most likely scenario is that house prices will have to fall slightly during a slow economic recovery, then rise a bit. If that occurs, the Fannie and Freddie bailout will cost taxpayers an additional $19 billion. A more upbeat prediction sees the housing market recovering sooner, which would require just $6 billion more for a total bill of $141 billion.
Washington, D.C., research firm Federal Financial Analytics believes the FHFA projection provides a sound indication of what the bailout will cost, but “nowhere near a definitive picture of it.” Fannie and Freddie issued a joint statement that said “It’s simply impossible to forecast reliably now how much foreclosuregate will cost.” Fannie and Freddie’s plight stands in sharp contrast to the success of the Trouble Asset Relief Program (TARP), which is now expected to cost just 10 percent of the $700 billion originally forecast.
Federal regulators seized Fannie and Freddie in September of 2008 in the wake of the financial crisis. Since then, the government has kept the agencies solvent, with President Obama pledging unlimited support. “From the beginning, the Obama administration has made it clear that the current structure of the government’s role in housing finance, while necessary in the short-term to provide critical support to a still-fragile housing market, is simply not acceptable for the long term,” said Jeffrey Goldstein, Treasury Department undersecretary for domestic finance.
Tags: AIG, bailouts, default, Fannie Mae, Federal Financial Analytics, Federal Housing Finance Agency, foreclosures, Freddie Mac, home foreclosures, mortgage, securities, TARP, Treasury Department
Posted in Economics, Financing, Residential | No Comments »
Thursday, August 19th, 2010
A leading candidate to head the new Bureau of Consumer Financial Protection is Elizabeth Warren, although her potential nomination is not without controversy. Writing on CNN Money.com, Katie Benner says “Detractors say that Warren lacks experience, that she’s not impartial, and that she could make it so expensive to extend credit that only the richest Americans and biggest businesses could get a mortgage, a credit card or a loan. But these knocks against Warren obscure the likely impact that she would have on the bureau. And mostly, they are straw men.”
Warren is a Beltway outsider and a Harvard law professor. She did take leave in 2008 to head the Congressional Oversight Panel (COP), which evaluates TARP and oversees the Treasury Department. Since its inception, the COP has published 22 detailed reports with little dissent, despite multiple differences of opinion regarding economics and politics among the staff members. Ken Trotske, an economist who serves on the panel, describes Warren as a consensus builder. “I’m in awe of the work they turn in to meet that schedule, because it’s a demanding schedule.”
In its two years of existence, COP has become an intellectual hub in Washington, D.C.’s efforts to understand the relationship between the federal government and Wall Street. According to Benner, “The outcry over Warren’s impartiality is a through-the-looking-glass twist on the current state of our regulatory affairs. It bears repeating that it’s a good thing for the head of an agency designed to protect consumers to actually put the interests of consumers first. For the last few years, as was made imminently clear by the implosion of 2008, Wall Street regulators were doing anything but regulating.”
In Benner’s words, “Someone like Warren is a shock to that system. She unabashedly sides with consumers. She hates fine print and contracts with ‘gotcha’ clauses. She wants to eliminate predatory loans. And she thinks that it’s okay for bank profits to be crimped in service of a level playing field between borrowers and their lenders.
Tags: Brooksley Born, Bureau of Consumer Financial Protection, Elizabeth Warren, Harvard, Katie Benner, TARP, Treasury Department, Wall Street
Posted in Economics, General | No Comments »
Thursday, August 5th, 2010
The next item on President Barack Obama’s ambitious agenda is likely to be overhauling Fannie Mae and Freddie Mac, the government-backed mortgage firms that so far have cost American taxpayers $145 billion to keep afloat. The two firms, which own more than half of the nation’s $11 trillion in home mortgages, collapsed along with the housing market and were taken over by the federal government in September of 2008.
Many Congressional Republicans believe that scrapping Fannie and Freddie is mandatory; Democrats disagree and President Obama is expected to support reforms backed by consumer, real estate and banking groups. The core of the emerging consensus is to preserve the 30-year, fixed-rate mortgage. Susan Woodward, former chief economist at the Department of Housing and Urban Development (HUD) and a founder of Sand Hill Econometrics, said “People regard it as a right as Americans to get a 30-year, fixed-rate loan.”
Banks and builders agree with consumer advocates representing homebuyers that it’s good for the government to promote residential lending by supporting what Fannie and Freddie have done for years – purchasing mortgages and bundle them into securities that they sell to investors. When the system works as intended, the MBS market creates additional money that is funneled back into the market to make new affordable loans. The task is to determine how to accomplish this without the lax practices that the taxpayers had to pay for when catastrophic losses occurred in 2008.
The Obama Administration and leading Democrats strongly believe that the federal government should have a role in promoting homeownership. Shaun Donovan, HUD Secretary, said “We should not compromise any of our core policy goals in the decisions we make in structuring our house financing system.”
Tags: Barack Obama, Barney Frank, CMBS, congress, Consumer Federation of America, Department of Housing and Urband Development, Fannie Mae, Federal Deposit Inusrance Corporation, Federal Housing Finance Agency, Freddie Mac, George W. Bush, lobbyists, Mortgage Bankers Association, Sand Hill Econometrics, Shaun Donovan, taxpayer money, Treasury Department, Wall Street
Posted in Economics, Financing, Residential | No Comments »