Last month, we reported the positive developments that were happening with the major players--GM, Citigroup, and AIG--still left in the Troubled Asset Relief Program (TARP). In November, Citigroup had fully repaid all the assistance it had received in various TARP programs, GM had significantly reduced Treasury's ownership stake in itself, and AIG was in the process of an exit plan.
Over the past week, interest rates on the benchmark 10 year Treasury bond rose. Key drivers were: less safe haven demand for US government instruments (a “flight to quality” typically pushes down interest rates) and increased demand for US government instruments with higher yields, based on signs that the US economy is continuing to recover.
Can Dreams of Cooperation be Fulfilled? – Yesterday the nation celebrated the legacy of Dr. Martin Luther King, Jr. His vision of unity and reconciliation will be needed as a divided Washington takes on many contentious issues, such as health care repeal and several budget-related issues.
Nearing the end of the week, markets are still wrestling with the same cross-currents they faced last week, but with a new wrinkle - Spain.
The growth play: With most forecasters sticking to their stronger near-term growth forecasts since the tax cut deal was announced, traders have continued to rebalance portfolios away from bonds and into stocks. Still, growth is not expected to be strong and data has continued to be mixed.
With the Senate getting past a procedural vote in approving the tax deal, it appears more and more likely that this deal will soon become law.
Markets this week have been dominated by the White House announcement of a fiscal package deal with Republican Congressional leaders that would add over $800 billion in new measures over the next two years – mainly on the tax side – to support the economy.
Last week, we reported the good news from the Congressional Budget Office that the Troubled Asset Relief Program (TARP) would cost $25 billion, significantly less than any previous estimates. Now, the Treasury has announced the sale of its remaining Citigroup stock for $10.5 billion, another bit of good news for taxpayers.
Financial markets have reacted to the new tax cut deal between the White House and Congressional leaders which would add some $800-900 billion to our national debt.
In the past two trading days since the deal was announced, we have seen the largest bond sell-off this year and so interest rates have gone up fairly dramatically. So far, yields on the benchmark 10 year Treasury bond have jumped by over 35 basis points (considered a sizeable rise), to the highest point since June. Money has shifted to the stock market, and the dollar is higher.
Today, the Center for American Progress released a plan to get specific on our growing deficits and debt. Or, rather, they've released five illustrative plans, specifically endorsing one--the 50/50 plan--as a balanced compromise.