Thursday, May 20, 2010

Initial Jobless Claims Survey: 440 Actual 471 Prior 444 Revised 446

The WSJ says a rift among Democrats prevented a vote on the financial reform bill yesterday, even after
Maine’s two Republican Senators crossed the aisle to vote with the Democrats in favor of the bill. Russ
Feingold wanted to restore the Glass-Steagall prohibitions against commercial bank/investment bank
affiliations and Maria Cantwell wanted to impose stricter regulations on bank trading in derivatives,
which someone told her contributed to the financial crisis. Feingold also wants specific size limits on
banks. – FTN

Why did cloture vote fail on Wed? Republican Sen Brown apparently promised Reid a “Yes” vote but
winded up voting “nay”; Brown wants issues concerning “Volcker Rules” resolved before voting in favor
to end debate. Politico

The €750bn ESM could become a good holding operation for the Euro Area while it sorts out its fiscal
unsustainability problems. Unfortunately, there is only €60bn on the table as yet - mere lunch money
compared with the scale of the problem and the resources needed to discourage self-fulfilling speculative
attacks on EA sovereign debt. So the ECB had to come in with outright purchases of sovereign debt. With
the fiscal unsustainability problems unresolved and the ECB's credibility weakened, the Euro Area is at a
crossroads. Either a permanent, large-scale mutual fiscal insurance mechanism with rigorously enforced
conditionality is established soon…or the Euro Area could break up, dragging the European Union in its
wake. – Citi

Credit cards achieve victory – the Whitehouse amendment was voted on Wed night - the Whitehouse
amendment attracted only 35 votes, well short of the 60 votes needed for passage. This is a mild pos. for
the credit-sensitive card companies (COF, AXP, etc) and not such a big deal for the network operators (V,
etc). The Whitehouse amendment would have allowed individual states to cap interest rates vs. the
current practice of a card company’s home state setting such maximums

An average of 23% of Americans have been satisfied with the way things are going in the United States
this year, including 24% in the most recent update. That is well below the 40% historical average and is
the lowest Gallup has measured in any midterm election year.

Spain and French debt auctions both saw decent demand this morning – one little bit of sunshine

Hedge funds – some prominent HF managers tell CNBC they are de-risking given the current
environment (CNBC)

There is a huge interest in the German vote in both houses of Parliament tomorrow regarding Germany's
contribution to the European Stabilisation Mechanism

Auto debt – sellers of ABS backed by auto loans finding warm reception in the market (WSJ)