FIG Topics of Interest



The amount on the largest banks' books for construction and development, multifamily and nonresidential loans were all down at the end of January compared to year end, according to weekly Federal Reserve Bank data. This was the first time all three have dropped in the same month since the Federal Reserve started tracking the individual categories in January 2015.
Leading the decline was a $2.7 billion drop in nonfarm, nonresidential loans - an annualized decline of more than 7.5%. This is fifth consecutive month the category has shrunk and the seventh time in the last eight months. It was the largest month-to-month decline. Over the last eight months, the amount of nonresidential commercial loans has dropped by $7.6 billion. 

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The White House will unveil its long-awaited infrastructure plan on Monday, fulfilling a signature campaign promise of President Donald Trump. The proposal includes $200 billion in federal infrastructure spending over a decade, which would be paid for through cuts elsewhere in the budget.
The largest single piece of the White House plan is a proposed $100 billion that would be made available to states and municipalities in the form of matching funds for infrastructure projects, according to White House officials who spoke to the press on background over the weekend. Federal funding, however, would be capped at 20 percent of the overall cost of any given project, leaving cities and states responsible for raising the other 80 percent.

Officials said the plan is designed to stimulate $1.5 trillion in new infrastructure investment, but they did not weigh in on how states and cities would raise the other eighty percent of the funds for new projects.

The proposal also includes $50 billion for rural infrastructure projects, which would be distributed to states in the form of block grants. Twenty billion would also be set aside to finance cutting-edge projects deemed too risky to qualify for traditional funding, but which have the potential to be transformative if they succeed. Another $20 billion would go to expanding current loan programs for public-private partnerships.

According to the White House, one particular financing program, known as TIFIA, leverages each dollar of federal money into an average of $40 from other sources. So by this rationale, an additional $20 billion for TIFIA financing programs would be expected to produce $800 billion in new infrastructure investment.

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The Senate is poised to pass a bipartisan budget deal Thursday that would avert a government shutdown and suspend the federal debt ceiling, but the bill faces less certain prospects in the House, where the chamber’s top Democrat and GOP conservatives are raising objections.
The mood in the House was in stark contrast to the comity in the Senate, where Majority Leader Mitch McConnell and Democratic leader Chuck Schumer delivered laudatory back-to-back speeches on the accord, which would add nearly $300 billion for government programs and suspend the debt ceiling until March 2019.

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The short-term spending bill passed by the House to avoid a government shutdown this Friday may get replaced with a longer-term budget plan that raises spending caps for defense and domestic programs if congressional leaders can wrap up a deal in the next two days.

The House bill, passed 245-182 Tuesday, would keep the government open only until March 23 while funding the Pentagon through September. But Republican and Democratic leaders in both chambers are working on a two-year budget plan that -- if that comes together -- may be combined with other important but stalled measures, including lifting the federal debt ceiling and hurricane disaster aid.
Current government funding runs out at the end of the day Thursday. Senate leaders said they don’t want to bring the government to the brink of a shutdown and see little risk that it would occur. Last month, the government was closed for three days after Democrats demanded action on immigration legislation. The threat of another hang-up dissipated after Senate Majority Leader Mitch McConnell agreed to an open debate on immigration.

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About $157 billion of Apple’s $285 billion in cash, mostly held overseas, is invested in corporate debt, making it a leading lender. The cutback in buying, echoed by other tech firms with sizable overseas holdings, such as Alphabet Inc. and Oracle Corp., could have an impact on corporate borrowing costs.
The tech companies have started sitting out bond deals this year as they look to trim their holdings, said the people, who asked not to be identified because the information isn’t public. U.S. companies with savings held offshore will likely move them home or use them by 2020, Credit Suisse analyst Zoltan Pozsar wrote in a Jan. 29 report.

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High-Powered Advice for the Incoming Fed Chairman...

Alan Blinder - “What I would do if I ran the world would be to make the inflation target a range of 1-1/2 to 2-1/2 percent.”
Martin Feldstein- “(There should be) a shift in focus to include financial stability as a key determinant of what the Fed is trying to do with its monetary policy.”
Kristin Forbes- “I would actually put a priority on thinking more about macro prudential policy and how it can be used to address financial stability concerns.”
Austan Goolsbee- If they’re debating how far should we tighten when everyone else in the world is saying, ‘Let’s not tighten or let’s even loosen,’ the U.S. has got to be at last a little circumspect about whether we are truly out of the woods.
Laurence Meyer- “I would have better communication about the meaning of the symmetric inflation objective.”
Frederic Mishkin- “The Fed and other central banks should commit to an average inflation rate of 2 percent…But they do it over a fixed period of years, say five years.” 
Athanasios Orphanides- “I’m very much in favor of (Stanford University professor) John Taylor’s proposal for the Fed coming up on its own with a simple rule that would make its policy framework even more transparent.”
Charles Plosser- “They need to settle on an operating regime and on what they’re going to do with the balance sheet and they need to communicate that to the public.”
Adam Posen- “There will be pressure on you to hike rates before wage inflation goes up, to tighten financial conditions before the next bubble emerges, to show your hawkish credibility, and, as a new CEO, to establish a new targeting regime. Resist all of these pressures.”
Lawrence Summers- The core strategy of the industrial world in responding to recessions for the last 40 years has been rate cuts by central banks of 500 basis points. There’s going to be nothing like that level of room the next time… How are we going to respond to that needs to be a great concern.

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"I believe low volatility to be the result of years of monumental liquidity injections by major central banks and their reflexive effect on investors' behavior and the buy-the-dip mentality, expecting central banks to hold their back," Francesco Filia, chief executive officer of Fasanara Capital, told CNBC via email.
"Low volatility may eventually prove to be a trap for markets, when the tide turns, suddenly revealing the pressure cooker it led investors into," Filia said.

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“Without real federal funding to address the huge backlog of desperately needed improvements to the nation’s roads, bridges, public transit, airports, water systems, and other critical assets, it’s an empty promise,” Dave Raymond, president and chief executive of the American Council of Engineering Companies, said in a statement.


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Starting at 6 a.m. on Feb. 2 – the moment Trump’s proclamation reducing the size of the Bears Ears and Grand Staircase-Escalante National Monuments takes effect – private citizens and companies will be allowed to stake claims for hard rock mining in a process governed by the General Mining Law of 1872, according to the U.S. Bureau of Land Management.

The process for staking a claim remains much as it did during the Gold Rush: A prospector hammers four poles into the ground corresponding to the four points of a parcel that can be as big as 20 acres, and attaches a written description of the claim onto one of them. A prospector then has 30 days to record the claim at the local BLM office. 
The costs of claiming are low: a $212 filing fee, and an annual maintenance fee of $150. Unlike laws governing petroleum extraction, there are no environmental guidelines specific to hard rock mining, and no requirement to pay a royalty. The claims provide prospectors mineral rights but not ownership of the land.
The law covers mining for uranium, gold, silver, copper and other precious metals, but excludes coal and petroleum.
The Bears Ears area is known to have uranium deposits, but prices are currently in the dumps - at around $25 a pound compared with $130 a decade ago - due to weak domestic demand from nuclear reactors.

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North America is a prime example of workers with jobs that aren’t yet a ticket to sizable pay increases. The rise of involuntary part-time employment in the U.S. and Canada has also been combined with increased temporary contract work that can act as a brake on wage growth, the ILO said. 

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