Fed"s Plosser pushes back on "no sale" assets policy

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Philadelphia Federal Reserve President Charles Plosser speaks at an Economics21 event in New York, March 25, 2011.


Credit: Reuters/Brendan McDermid








Tue Apr 16, 2013 6:17am EDT





(Reuters) – The head of the Philadelphia Federal Reserve said on Tuesday at this point he would not want to say that the central bank would not sell assets in the years ahead.




Charles Plosser, a hawkish Fed policymaker, gave a speech in Beijing that was very similar to one given in Hong Kong last week in which he pitched a plan for returning the central bank’s balance sheet to a more normal size around $ 1 trillion, from $ 3.2 trillion now.




But he took a step further on Tuesday in arguing against the possibility that the Fed could simply allow its massive stable of assets to mature, instead of selling them later this decade.




“We have little theory or evidence to guide us in establishing a priori the most desirable path of sales. As a result, I am uncomfortable declaring at this point that we would not engage in sales,” Plosser, who does not vote on policy this year, said in prepared remarks at Tsinghua University.




The Fed “will need to fully consider the implications of maintaining a large balance sheet as it navigates its exit from the extraordinary monetary policy accommodation it has applied over the past five years,” he said.




As it stands, the Fed is buying $ 85 billion in bonds per month to help along the U.S. economic recovery. Fed policymakers are discussing adjusting an existing plan for reducing the balance sheet, though no decisions have been made.




(Reporting by Jonathan Spicer; Editing by Diane Craft)





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Reuters: Economic News

Fed"s Plosser pushes back on "no sale" assets policy

Tesla CEO pushes Texas to allow direct-to-consumer car sales

Elon Musk, the chief executive of Tesla Motor, speaks at the South by Southwest Interactive festival in Austin, Texas, March 9, 2013.

Credit: Reuters/Gerry Shih

By Corrie MacLaggan

AUSTIN, Texas | Wed Apr 10, 2013 2:50pm EDT

AUSTIN, Texas (Reuters) – Tesla Motors Inc (TSLA.O) Chief Executive Elon Musk is pushing to change Texas law to allow his electric car company to sell directly to consumers, and he took his fight to the state Capitol on Wednesday.

Texas law prevents Tesla from selling its cars directly to the public – as it does in other states – because it does not have a relationship with a franchised dealer. In Texas, new vehicles are generally required to be sold through dealers.

“Nothing could be further from what Texas is all about,” Musk told reporters at a Capitol press conference on Wednesday, citing examples of Texans such as Michael Dell who have succeeded in direct-to-consumer sales.

A proposal in the Texas legislature would allow U.S.-based manufacturers of electric or battery-powered vehicles to sell directly to consumers in the state.

The Texas Automobile Dealers Association opposes the legislation, which is pending before committees in the House and Senate.

“We don’t see any business reason or law reason that this product should receive a special exception from the law that applies to everyone else,” said Rob Braziel, CEO of legislative affairs of the Texas Automobile Dealers Association.

Braziel said the association is worried that any manufacturer of electric vehicles could use the new law to compete directly with their own dealers.

Musk said he’s been warned that the legislation is unlikely to succeed but that he wants to give the effort his best shot.

He said he discussed the proposal about a month ago with Texas Governor Rick Perry and that the governor agreed to support the measure if it lands on his desk. However, the governor’s office did not confirm that.

“Unfortunately, I’m not privy to the personal conversations the governor has, so I can’t confirm that for you,” Perry spokesman Josh Havens said in an email. “The legislature will debate a number of bills this session and the governor will thoroughly review any that make it through the process and arrive on his desk.”

Meanwhile, Tesla is allowed to show cars at educational galleries in Texas, but staffers there are not allowed to discuss prices or offer test drives, Musk said.

“Is Texas a free enterprise state or not?” Musk asked. “In this particular area, it is the worst in the country.”

Musk reiterated on Wednesday that Tesla will report its first quarterly profit when it announces first-quarter results and that the company had exceeded it sales target for that period.

The automaker went public in 2010 and has narrowed its losses as production of the Model S sedan ramped up late last year. Earlier this month, Tesla said it was partnering with Wells Fargo & Co (WFC.N) and U.S. Bank (USB.N) on a financing product that it says will make its electric cars accessible to more people.

(Editing by Bernard Orr)

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Reuters: Business News

Tesla CEO pushes Texas to allow direct-to-consumer car sales

EU Pushes Bail-In Regulations on All Deposits Above €100,000; Run on Banks Coming Up?

Cyprus was such a “success”, EU to push for losses on big savers at failed banks.

The European Parliament will demand that big savers take losses if their banks run into trouble, a senior lawmaker told Reuters, adding momentum to a policy unveiled as part of a Cypriot bailout.

Jeroen Dijsselbloem, head of the Eurogroup of euro zone finance ministers, said on Monday that in future, the currency bloc should first ask banks to recapitalize themselves, then look to shareholders and bondholders and then “if necessary” to uninsured deposit holders.

Now the likelihood is rising that tough treatment of big depositors will be written into a new EU law, making losses for large savers a permanent feature of future banking crises.

“You need to be able to do the bail-in as well with deposits,” said Gunnar Hokmark, an influential member of the European Parliament, who is leading negotiations with EU countries to finalize a law for winding up problem banks.

“Deposits below 100,000 euros are protected … deposits above 100,000 euros are not protected and shall be treated as part of the capital that can be bailed in,” Hokmark told Reuters, adding that he was confident a majority of his peers in the parliament backed this line.

The law, which will also introduce means to impose losses on bondholders, is due to take effect at the start of 2015. Germany wants provisions for bailing in bondholders and others in the same year, though that may be delayed.

Hokmark urged savers to check their banks’ health before taking the risk of depositing money.

“If you put your money in Royal Bank of Scotland … or Deutsche Bank, depending on how that bank is working you are taking a risk,” he said. “You need to be aware that you are taking a risk.

Step in Right Direction

Such regulation is a step in the right direction actually. There should be no deposit guarantees at all, no bondholder guarantees, and people should have to pay attention to where they put their money.

For a detailed explanation, please see Fraudulent Guarantees; Fictional Reserve Lending; Comparison of US to Cyprus; What About New Zealand?

Here are the key ideas from the article

Five Key Points

1. In a Fractional Reserve Lending scheme, the notion there are meaningful reserves is ridiculous


2. Far more money has been lent out than really exists (the rest is a fictional accounting entry)


3. Fractional reserve lending constitutes fraud (just as lending something you do not own is fraud)


4. There is no way for all this money to be paid back (so it won’t be)


5. Of all the central banks, the Reserve Bank of New Zealand has the most sensible policy for the most sensible reasons of all the central banks.

That said, note how bondholders and the ECB have been protected so far.

Bondholders did not suffer losses on Irish bonds, and the ECB did not even take a hit on its Greek bonds. Cyprus bondholders were not protected, primarily because the big European banks were not involved so they had nothing to lose.

Run on Banks Coming Up?

Looking ahead, the implication is that no one should place more than €100,000 in any bank. So no one will, especially in questionable Southern European banks. Instead, expect capital flight to presumed “too big to fail” Northern European banks, and also expect people to park more money directly at the ECB, where it will be safe.

Might such legislation then, spur a run on banks? Seems that way to me. My advice for European depositors is simple “Please don’t wait until 2015 to find out.”

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Mish’s Global Economic Trend Analysis

EU Pushes Bail-In Regulations on All Deposits Above €100,000; Run on Banks Coming Up?