Securities and Exchange Commission Chairman Elisse Walter said Friday at the
annual “SEC Speaks” conference, according to data compiled by the agency’s
division of risk, strategy and financial innovation, the amount of money raised
in public debt and equity offerings rose 22% in 2012. In 2012 there was $2.4
trillion in debt and equity offerings, up from $2 trillion in debt and equity
offerings in 2011. Chairman Walter said, “Obviously if more capital raising is
going on that is a sign of increasing investor confidence. It is a good trend
line in terms of what investors are feeling.” In April 2012 President Barack
Obama signed into law, the Jumpstart Our Business Startups or JOBS Act.
Following the financial crisis in 2008, Congress approved the law in response to
a major cut in initial public offerings. Chairman Walter said, “It’s important
that we embrace a regulatory agenda that is consistent with continued growth in
public offerings.” Chairman Walter also said it was too early to determine
whether the JOBS Act had an impact on the recent hike in capital formation. “If
you want to try to determine the effect of the JOBS act you are going to have to
wait a while longer,” Chairman Walter said. Assistant director for corporate
finance in the risk and financial innovation unit Scott Bauguess told reporters
that equity is a much smaller part of public issuances and that debt offerings
are typically about 75% of private offerings and issuances. Bauguess added that
initial public offerings typically represent only 5% to 6% of total public
capital raised in any particular year, with secondary offerings representing a
much larger chunk of public offerings.
President Barack Obama calling Republican leaders on Thursday about replacing
the sequester. For the remainder of fiscal 2013, cuts totaling $85 billion will
begin to kick in on March 1. The atmosphere in Washington has not reached crisis
level yet possibly because the cuts would gradually take effect. Sequester cuts
of nearly $1.2 trillion will be spread out from fiscal year 2013 to fiscal year
2021. Even though the sequester will be in slow motion, there remains risk for
both sides of the aisle when furloughs begin and the economy begins to feel the
Transportation Secretary Ray LaHood said Friday, if automatic budget cuts from
the sequester are allowed to take effect, travelers should expect flight delays
of up to 90 minutes at U.S. airports. In April, the government would begin to
furlough Federal Aviation Administration workers, one or two days a week as long
as the sequester lasts. LaHood told reporters at the White House, "It's not
possible to continue the same schedules with less people."
The Federal Reserve has paid the U.S. Treasury Department nearly $300 billion
dollars over the past four years. During 2012, profits from increasing its
balance sheet allowed the Fed to distribute a record $88.9 billion to the U.S.
Treasury. In recent weeks, the Fed’s balance sheet has reached $3 trillion. The
Fed may suffer losses when interest rates rise which means, it will not pay any
income to the government. Federal Reserve Chairman Ben Bernanke downplayed
concerns that ultra-loose policy was spawning asset bubbles. If Congress is
feeling budget pressure, they are likely to be unhappy with no income from the
Fed which could lead the Fed to delay balance sheet normalization and fail to
exit its easy policy as needed, to keep inflation in check. Federal Reserve
Board Governor Jerome Powell and Boston Federal Reserve President Eric Rosengren
tried to relieve the lack of progress on fiscal policy, that would force the
central bank into actions they might not otherwise take. “I find myself in
disagreement” with the argument “that the current fiscal policy challenges might
interfere in the near-term with the conduct of monetary policy in the United
States,” said Fed Governor Powell. Rosengren said the Fed’s latest round of
quantitative easing is benefitting federal finances and should not be judged
solely because it may add risks to the deficit in later years.
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