Obama’s Big Economy Speech and Other Top Stories on The Street This Week

by Kyle Colona on June 15, 2012

Obama’s Big Economy Speech

President Obama made a play to “reframe” his reelection campaign yesterday by delivering what the Administration called a “major economic speech.” The president declared that the 2012 election is a choice between two “fundamentally different visions” for the American economy.

While the speech did not include anything new in the Obama tool box, he did set the stage for his reelection plea. BusinessInsider noted that the speech had a few main points: the Republican “obsession” on tax cuts for the wealthy ruined the economy, and not Obama. Team Romney wants to end the role of the federal government. And Obama is the “the only one with a plan to get us out of this mess.”

“I believe we need a plan for better education and training and for energy independence, and for new research and innovation; for rebuilding our infrastructure; for a tax code that creates jobs in America and pays down our debt in a way that’s balanced. I have that plan,” said the President.

Uncertainty Still Threatens Economic Recovery

According to Market Watch, businesses are uncertain whether the financial crisis in Europe will blow back into U.S. and if a “divided” Congress can stop big tax increases and sharp spending cuts slated for 2013, “the so-called fiscal cliff.”

In sum this combo could weaken demand in the fragile economy and that means businesses will hold off on adding jobs. Ultimately, that means slower U.S. economic growth, which has been anemic for eons.

While fears of uncertainty are par for the course, these complaints “have been especially intense during the Obama administration,” says Market Watch. That uncertainty stems in part from a myriad of new rules in energy, finance and health care. But the effect of such uncertainty on the economy is hard to quantify according to some economists.

“It has an effect, but it’s hard to measure,” said Scott Anderson, senior economist at Wells Fargo.

The Fed’s “Maiden Lane Loans” Repaid

The New York Fed said that it had been repaid for loans used to back bailouts of Bear Stearns and AIG. However, “vestiges of the sweeping taxpayer bailouts of 2008 remain,” according to the New York Times Dealbook.

In sum, “Maiden Lane” and “Maiden Lane III,” the two vehicles where securities once owned by Bear Stearns and AIG were parked still held assets that needed to be sold. These troubled assets included cmos that were once part of the firm’s portfolios. The Fed said it had been repaid $53.12 billion for the loans plus interest.

Somehow, the Maiden Lane assets have been in hot demand.  Several companies are looking to buy the distressed debt, to syndicate it and recoup losses that were initially incurred as the subprime contagion infiltrated the economic system.

In other words, the same players who bought and sold this stuff back in the day are looking to profit off of tax payer losses.

Central banks coordinate plans ahead of Greek vote

Central banks across the global village are preparing for liquidity injections as Greek voters head to the polls this weekend.

The Greek people will be deciding whether to continue adhering to the austerity measures already in play or vote a more socialist parliament into power that backs more bailouts to kick start economic growth.

The overarching concern is that a pro-austerity vote could trigger a run on the banks in Greece and that this contagion could spill over into the EU banking system.

“This risk has to do mostly with the heightened uncertainty,” said Mario Draghi, president of the ECB. The US Fed has also said it stands ready to inject capital into the EU financial system.

Officials from the G20 nations are all aligned and have indicated that “numerous central banks are preparing to take steps to stabilize financial markets – if needed,” says Reuters.

Hong Kong Exchanges Scoops up LME

Hong Kong Exchanges & Clearing Ltd. agreed to pay 1.39 billion pounds ($2.15 billion) for the London Metal Exchange, which handles more than 80 percent of global trade in industrial-metal.

Bloomberg News notes that Hong Kong “is the only place in China where investors can freely buy and sell shares in Industrial & Commercial Bank of China the biggest lender by value, and PetroChina Co., Asia’s largest company.”

The deal marks HKEx’s first overseas acquisition.  The 135-year-old LME sets global benchmark prices for an array of metals including copper, aluminum and nickel. It is no coincidence that China consumes more precious metals than any other nation but its “network of warehouses doesn’t currently extend into the country.”

“Hong Kong Exchanges can be positive for LME if it can enhance its China exposure,” said Jonas Kan, the head of Hong Kong research at Daiwa Capital Markets.

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Kyle Colona is a New York-based freelance writer and a Feature Writer for CompliancEX> and the Wall Street Job Report. He has an extensive background in legal and regulatory affairs in the financial services sector and his work has appeared in a variety of print and on-line publications. You can find him on linkedin.

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