Bernanke To Congress Don’t Play Politics
Federal Reserve Chairman Ben Bernanke said in remarks to the New York Economic Club on
Tuesday that members of Congress should not kick the can down the road and said
they need to cut a deal to avoid the fiscal cliff and don’t play politics with
the federal debt limit again. His additional message aimed for Washington,
confusion over the course of U.S. tax and spending policy is weighing on the
spending decisions of households and businesses, as well as on financial
markets. “Uncertainty about how the fiscal cliff, the raising of the debt limit
and the longer-term budget situation will be addressed appears already to be
affecting private spending and investment decisions, and may be contributing to
an increased sense of caution in financial markets. Such uncertainties
will only be increased by discord and delay,” according to Bernanke.
Putting off policy choices would only “prolong and intensify these
uncertainties,” he said. “In contrast, cooperation and creativity to deliver
fiscal clarity, in particular a plan for resolving the nation’s longer-term
budgetary issues without harming the recovery could make the new year a very
good one for the American economy.” “A failure to reach a timely agreement this
time around could impose even heavier economic and financial costs,” he
commented. “Coming together to find fiscal solutions will not be easy, but the
stakes are high.” Bernanke said Fed monetary policy has helped diminish
headwinds holding back the recovery. He added that it is too early to assess
the full effects of the central bank’s third round of bond buying, known as
QE3. Under QE3, the Fed is buying $40 billion of mortgage-backed securities per
month with no end date, saying only that the purchases would continue until
there was substantial improvement in the labor market. Bernanke noted that,
since the Fed announced QE3 in September, yields on corporate bonds and agency
mortgage-backed securities have fallen significantly on balance. Even when the
recovery strengthens, the central bank said it expects to hold rates near zero
until mid-2015. “We hope that such assurances will reduce uncertainly and
increase confidence among households and businesses, thereby providing
additional support for economic growth and job creation,” Bernanke added.
Best Buy Co., Inc. (BBY: NYSE) shares ended the session on Tuesday, down over 13%
after reporting a fiscal Q3 loss of $10 million or 3 cents a share, compared
with a profit of $156 million or 43 cents per share, in 2011. Excluding
restructuring charges, Best Buy said it earned 3 cents a share. In the quarter
ended November 3, revenue fell to $10.75 billion from $11.1 billion and
comparable store sales fell 4.3%.
The U.S. Department of Commerce reported Tuesday that construction on new U.S.
homes rose 3.6% during October to a seasonally adjusted annual rate of 894,000
striking the highest rate seen since July 2008. Government analysts said
Hurricane Sandy had minimal effect because it hit only a small part of the
country at the end of the month. By region, housing starts fell 6.5% during
October in the Northeast and fell 2.5% in the South. Housing starts rose 8.9%
in the Midwest and in the West rose 17.2%. Building permits, which provides a
sign of future demand, declined 2.7% to a rate of 866,000. Permits for single-family
homes rose 2.2% to an annual rate of 562,000 in October, while permits for
structures with at least two units fell 10.6%. New home starts are up 42% from
2011, though the rate remains well below the peak in 2006 of almost 2.3
In a lawsuit filed with the U.S. District Court for the Southern District of New
York, the Securities and Exchange Commission alleges that a professor of
neurology at the University of Michigan Medical School tipped off a hedge fund
run by CR Intrinsic to liquidate $700 million worth of positions in Elan (ELN:
NYSE) and Wyeth which is now a unit of Pfizer (PFE: NYSE) as well as establish
$960 million worth of shorts against the firms. The SEC has alleged that $276
million in illegal profits or avoided losses were made by investment advisers
and their hedge funds by trading ahead of negative news on a clinical trial of
an Alzheimer's drug developed by Elan and Wyeth. The SEC is also suing Mathew
Martoma, who worked at CR Intrinsic as well as Dr. Sideny Gilman, the professor
who was the chairman of the safety-monitoring committee overseeing the clinical
trial and allegedly a paid consultant with an expert networking firm. The U.S.
Attorney’s office said the professor who was not specifically named, entered
into a non-prosecution agreement to provide information. Paid consultants for
hedge funds have been the focus of previous insider-trading cases brought by
the government. The SEC alleges Martoma received a $9.3 million bonus at the
end of 2008, which was a significant portion of the drug trial trades. Per the
SEC, Gilman received over $100,000 from the expert network firm. “Mathew
Martoma was an exceptional portfolio manager who succeeded through hard work
and the dogged pursuit of information in the public domain. What happened today
is only the beginning of a process that we are confident will lead to Mr. Martoma’s full exoneration,” said Charles Stillman of
Stillman & Friedman in New York, in a statement.|
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Nov 20, 2012