federal reserve

Bucks Blog: Credit Cards Aimed at College Students

September 29, 2011 by NewsMaker Leave a Comment

The new rules restricting aggressive credit card marketing on campus, included in the CARD Act of 2009, seem to have reduced the practice, says a report from Credit.com.

The report cited a study from the Federal Reserve that showed, for instance, that the total of new credit card accounts opened by students decreased 17 percent from 2009 to 2010.

But while some of the more overt on-campus marketing ploys (like offering free T-shirts and pizza to students who sign up for cards) are no longer allowed, a quick online search shows that card offers aimed at students are still plentiful. The credit card comparison site CardHub.com recently analyzed roughly 1,000 cards to see which ones offered the best deal. Since most students are on a budget, the cards recommended all come without annual fees. Typically, the student cards start out with low credit lines — $300 to $500, if the student does not have a previous credit history — but can increase over time. If students are careful and pay their bills on time, the cards can help build a credit record that will help after graduation, CardHub’s chief executive, Odysseas Papadimitriou, said.

Students who can pay their card balance in full each month, CardHub advised, should hunt for cards that offer at least 1 percent cash back, on average, on all purchases. One to consider is the Citi Dividend Platinum Select Card for college students, offering 5 percent back on supermarket, drugstore, gas station and utility charges for the first six months, and 1 percent after that. The card also gives 2 percent back on rotating categories, and 1 percent on everything else.

The Journey Student Rewards card from Capital One offers 1.25 percent cash back on all purchases when the bill is paid on time, and no foreign transaction fees — a help for those spending a semester studying abroad.

Students who may need extra time to pay for expensive items bought at the start of the year, like textbooks, should consider a zero percent card to avoid costly finance charges. The Discover Student More card currently offers the longest period without a finance charge: nine months.

If you’ve already run up credit card debt, transferring the balance to a student balance-transfer card can lower your cost and make it easier to pay off the debt. The Pentagon Federal Credit Union Platinum Cash Rewards Card for Studentsoffers an interest rate of 4.99 percent for balance transfers for 24 months, (You do have to be a credit union member, and that is possible even if you do not have a military affiliation, for an annual fee, according to PenFed’s Web site). The Elks College Rewards Visa Credit Card offers zero percent interest on both purchases and transfers for six months. Both cards charge a 3 percent transfer fee.

Do you think it makes sense for college students to have credit cards?

Article source: http://feeds.nytimes.com/click.phdo?i=dac59cb05da375c9a362673b17045b93

Filed Under: Your Money Tagged With: citi dividend platinum select card, credit history, federal reserve

Fed Runs Risk of Doing Less Than Expected

September 19, 2011 by NewsMaker Leave a Comment

The central bank is often described as facing the choice of whether to do more to improve the economy. But the anticipatory behavior of investors means the Fed really faces a slightly different choice, one it has confronted often in recent years: whether to risk doing less than expected.

The overriding argument for action is the persistent weakness of the American economy, which has left more than 25 million Americans unable to find full-time work.

The Federal Reserve chairman, Ben S. Bernanke, who has made a series of unusual efforts to revive growth, has not discouraged speculation that he is ready to try again.

“I think the Fed has no choice but to act,” said Krishna Memani, director of fixed income at Oppenheimer Funds. “If the Fed were not to do anything having built market expectations to a pretty decent level, I think the markets would react quite negatively to that.”

But the Fed also faces mounting pressure against additional action, including strident criticism from Republican presidential candidates and divisions in the policy-making committee. Moreover, the options available to the central bank have less power to generate growth, a greater chance of negative consequences, or both, than those it has already tried.

Some close watchers of the central bank say investors’ behavior could let the Fed offer a token gesture now, postponing any larger move at least until its next meeting in November. After all, the Fed is reaping the benefits of action without the costs.

“There is no reason for the Fed to rush,” Lou Crandall, chief economist at Wrightson/ICAP, wrote in a recent note to clients predicting such an outcome. “It is in the Fed’s interest to milk the anticipation effect as long as possible.”

The move markets are anticipating is a new effort to reduce long-term interest rates, which would allow businesses and consumers to borrow more cheaply. Yields on the benchmark 10-year Treasury note fell to a record low of 1.88 percent at the start of last week, reflecting the Fed’s earlier efforts to lower rates and investors’ pessimism about the economy.

The hope is that an additional reduction in rates will provide a little more encouragement for companies to build factories and hire workers and for consumers to buy cars and dishwashers.

The Fed has held short-term rates near zero since December 2008, by increasing the supply of money.

To further reduce long-term rates, the Fed bought more than $2 trillion in government debt and mortgage-backed securities, reducing the supply available to investors and thereby forcing them to pay higher prices — that is, to accept lower interest rates.

The Fed could seek to amplify that effect by adjusting the composition of its portfolio, selling short-term securities and using the proceeds to buy long-term securities, which it predicts would further reduce rates.

An analysis by the forecasting firm Macroeconomic Advisers estimated that such an effort by the Fed could raise gross domestic product by 0.4 of a percentage point over the next two years, and create about 350,000 jobs. That is comparable to estimates of the impact of the central bank’s most recent aid campaign, the QE2, or quantitative easing, purchases of $600 billion in Treasury securities, which concluded in June.

Mr. Bernanke announced in August that the Federal Open Market Committee, the policy-making board, would meet for two days, extending its scheduled one-day meeting this week, to consider that and other options.

The Fed could take smaller steps, like promising to maintain current efforts longer. It may also consider options that could deliver a more powerful jolt to the economy, like increasing the size of its investment portfolio again. But more aggressive measures have little internal support.

The Fed, Mr. Bernanke said, is “prepared to employ these tools as appropriate to promote a stronger economic recovery in a context of price stability.”

He still commands a solid majority of his 10-member board despite the emergence of the largest bloc of internal dissent in two decades. Three members voted against the decision last month to declare an intention to hold short-term interest rates near zero for at least two more years, replacing a stated intention to maintain the policy for an “extended period.”

Jackie Calmes contributed reporting from Washington, and Eric Dash from New York.

Article source: http://feeds.nytimes.com/click.phdo?i=349bd1e505ec64b039b387b5e69e7cc7

Filed Under: Business News Tagged With: bernanke, federal reserve, fixed income

Survey Says Consumers Remain Uneasy About the Future

September 17, 2011 by NewsMaker Leave a Comment

Consumer sentiment in the United States rose in early September, but Americans remained gloomy about the future with their expectations for the economy falling to the lowest level since 1980.

The Thomson Reuters/University of Michigan’s survey showed consumer sentiment edged up to 57.8 from 55.7 in August, topping economists’ forecasts after reaching the lowest level in nearly three years last month.

Even so, the expectations gauge in the preliminary survey inched lower, and three out of four consumers expected bad times for the economy in the year ahead.

“The consumer is still very frustrated with virtually everything — 9 percent unemployment, still very tepid jobs creation and heightened job destruction,” Lindsey M. Piegza, economist at FTN Financial in New York, said.

The survey’s index of consumer expectations dipped to 47.0 from 47.4, hitting the lowest level since May 1980. The economic outlook for the next 12 months fell to 38 from 40, the lowest since February 2009 when the world economy was gripped by the credit crisis.

Only 17 percent of those surveyed expected their finances to improve, the lowest rate ever recorded.

“Consumers are going to be very hesitant to spend with such negative views of their personal finances,” the survey director, Richard Curtin, said.

Still, the survey’s barometer of current economic conditions rose to 74.5 from 68.7, better than a forecast of 68.0.

“It was certainly nice to see the current conditions index rise again, but all we did was retake some ground to where we were in July,” said Tom Porcelli, senior United States economist at RBC Capital Markets in New York.

Investors are now turning their attention to next week’s Federal Reserve meeting. The central bank is expected to introduce new measures to bolster growth, though analysts expect the Fed will be able to take only modest steps.

The survey’s one-year inflation expectation rose to 3.7 percent from 3.5 percent, while the survey’s five- to 10-year inflation outlook rose to 3 percent from 2.9 percent.

Article source: http://feeds.nytimes.com/click.phdo?i=9c0f477b12c810d64d739eac9d8c1672

Filed Under: Economy News Tagged With: consumer sentiment, federal reserve, survey director

Prices for Imports to U.S. Fall Again

September 14, 2011 by NewsMaker Leave a Comment

Prices of goods imported into the United States fell in August for the second time in three months as the cost of oil and food dropped, while autos stabilized, the Labor Department said Tuesday.

The department said the import-price index fell 0.4 percent. The decline followed a 0.3 percent increase in July. Economists projected a 0.8 percent decrease, according to the median of 52 estimates in a Bloomberg News survey. Prices excluding fuel rose 0.2 percent.

Slower growth in Europe and emerging economies like China, together with less demand in the United States, may restrain the cost of goods from abroad. Ben S. Bernanke, the Federal Reserve chairman, said last week that “transitory” influences that had pushed up some prices would wane, and that the central bank had tools to spur growth if necessary.

Compared with a year earlier, import prices rose 13 percent, the report showed, down from a revised 13.8 percent increase in the 12 months ended in July.

The cost of imported petroleum fell 2.1 percent from the prior month and was up 44 percent from a year earlier.

Import prices excluding all fuels increased 5.3 percent from August 2010, after rising 5.4 percent in the year that ended in July.

Imported food was 0.8 percent less expensive last month. The cost of imported automobiles was little changed, which may reflect the easing of supply constraints after the disaster in Japan.

Consumer goods excluding vehicles showed a 0.3 percent gain and were up 2 percent over the last 12 months, the biggest year-over-year increase since November 2008. Costs for clothing made overseas climbed 1.2 percent last month.

United States export prices increased 0.5 percent after declining 0.4 percent the previous month, the report showed. Prices of farm exports increased 2.2 percent, while those of nonfarm goods climbed 0.3 percent.

The price of consumer goods shipped overseas excluding autos climbed 5.9 percent over the last 12 months, the biggest gain since the records began in 1983.

Article source: http://feeds.nytimes.com/click.phdo?i=c3daba733daf208c2e830d11e5056e9c

Filed Under: Business News Tagged With: federal reserve, import price index, labor department

Strategies: Federal Reserve Considers a Revival of ‘Operation Twist’

September 10, 2011 by NewsMaker Leave a Comment

Ben S. Bernanke, the Federal Reserve chairman, hasn’t actually put it that way. But in his search for ways to improve the lamentable state of the economy, he seems to be contemplating the revival of an old dance that was once all the rage at the Federal Reserve and the Treasury.

What’s the Fed considering, exactly? It might embark on some arcane financial engineering, shifting the bonds within its own portfolio to bring down longer-term interest rates even further than they have already dropped. That’s been tried before, notably in 1961, in a once-obscure episode of Fed history known as “Operation Twist.” Some of the techniques used then may be coming back into vogue because the economy needs help and it’s not clear where it will come from.

Europe is awash in financial and fiscal problems of its own, Japan is struggling, and China’s economy is slowing, noted Robbert Van Batenburg, head of research at Louis Capital Markets. And while President Obama on Thursday proposed a $447 billion program to spur growth and job creation, the Republican leadership in Congress was initially unenthusiastic about much if not all of it.

“The surprise here was that the president’s program was about $100 billion more than the markets had anticipated,” he said. “That’s good. But problem No. 1 is, it isn’t clear how much, if any of it, Congress is likely to pass.”

The Fed, meanwhile, has already used some of its most powerful weapons — like holding short-term interest rates near zero at least through mid-2013, and buying more than $1.8 trillion of fixed-income securities as part of a bid to bring down longer-term rates.

So in a series of speeches, including one on Thursday in Minneapolis, Mr. Bernanke has been saying that the Fed is reconsidering the entire “range of tools” at its disposal to stimulate the economy. It may be time to try something a little different.

How about the Twist?

Cue the summer of 1960. Chubby Checker’s version of “The Twist” soared to the top of the charts. America was swiveling its hips. Fast-forward to Feb. 2, 1961. The glamorous new president, John F. Kennedy, elected on a pledge to “get the country moving again,” made his first major official speech on the economy, which was then formally in recession. He announced his own program to stimulate the economy and to fight unemployment, then an unpalatable 6.8 percent. (Today it’s much worse, at 9.1 percent.)

Embedded in that speech was an unorthodox monetary policy that the Fed and Treasury were to conduct jointly. It was known within the Fed as “Operation Nudge,” because it involved nudging interest rates by altering the composition of the Fed’s portfolio. That name, though, didn’t catch on. (As far as we know, nobody was dancing the Nudge.)

Wall Street gave the new program another name. “In a kind of homage to the dance craze, traders started calling it, ‘Operation Twist,’ ” says Eric Swanson, an economist at the Federal Reserve Bank of San Francisco who has done extensive research on the operation’s effects. “Somewhere along the way, that name stuck,” he says.

Twist is a more apt description of what the Fed was actually doing — swinging longer-term rates in one direction (down), while moving short-term rates the other way. Raising short-term rates made sense at the time because the world was still on a gold standard, and President Kennedy wanted to stimulate the economy without exacerbating a balance-of-payments deficit that was draining American gold supplies. He wanted to bolster the dollar — by raising short-term rates — while giving the economy a lift by bringing down longer-term rates.

Here the steps in the monetary dance get a bit technical. They include selling some of the Fed’s short-term securities and buying longer-term ones, effectively extending the average duration of the Fed’s own portfolio. Because bond prices and yields move in opposite directions, increased purchases of longer-term securities could be expected to drive up prices and drive down interest rates, and vice versa. Today, presumably, the Fed would manipulate its portfolio to lower longer-term rates, but in contrast to 1961, it would hold short-term rates near zero.

A number of scholars — including Mr. Bernanke, when he was a professor at Princeton and a member of the Fed’s board of governors — have concluded that the first Operation Twist was only modestly successful. But Mr. Swanson’s recent research, using contemporary high-frequency techniques to measure the bond market’s short-term response to Fed and Treasury operations, suggests that it actually had a significant effect on long-term Treasury yields.

The yields fell by an average of 0.14 percent (14 basis points), Mr. Swanson says, a shift roughly equivalent to the effect of cutting short-term rates — which can’t be cut now because they’re near zero — by a full percentage point.

“In normal times,” he said, “a drop like that might boost output by a percentage point over the next couple of quarters.”

WHATEVER else they may be, however, these are not normal times. It’s not clear how much effect a shift in the Fed’s portfolio might have right now, he said, but “it might help and it might be worth trying.”

With financial markets weighed down by myriad problems across the globe, Fed policy makers can be counted on to be inventive, said Kathy Jones, fixed-income strategist at Charles Schwab. Long-term bond yields have already started to drop as the markets anticipate some new variation on Operation Twist, she said.

At the Fed, Ms. Jones said, “they are making it clear that they will do whatever they need to do, or whatever they can dream up, to help the economy.”

Article source: http://feeds.nytimes.com/click.phdo?i=01ef64447a7446fed2fbdc1a56bb5fd0

Filed Under: Economy News Tagged With: federal reserve, financial engineering, income securities

Economix Blog: Weekend Business Podcast: Job Creation, Cantor Fitzgerald and Keynes

September 3, 2011 by NewsMaker Leave a Comment

The government’s report on hiring, which showed no gain in jobs in August, provided fresh evidence that the recovery has fizzled without ever gaining momentum.

The report increases the pressure on President Obama as he prepares to deliver an address next week about job creation, on Republicans who have a starkly different approach to economic revival, and on the Federal Reserve, whose policy makers have been divided over what to do next, Shaila Dewan says in a conversation in the new Weekend Business podcast.

While the new data was worse than expected, several economists said the problem is not that companies have been laying off their employees, though there was an uptick in announced layoffs, but that they have delayed investing in new workers.

The 10-year anniversary of the Sept. 11 attacks on New York and Washington is approaching, and perhaps more than any other company, the brokerage firm Cantor Fitzgerald came to symbolize the horrors of that tragedy. Almost one-fourth of the people killed in New York City that morning worked for the firm. In a podcast conversation, Susanne Craig talks about the strategy of Howard W. Lutnick, who ran Cantor then and still does today. Mr. Lutnick has defied those who said that he and Cantor were finished, and he has rebuilt his firm.

In another podcast conversation and in the Economic View column in Sunday Business, Robert J. Shiller contends that the surge of stock market volatility over the last month cannot be explained by conventional means. He turns to the work of John Maynard Keynes, who once compared the stock market to a beauty contest. Keynes described a newspaper contest in which 100 photographs of faces were displayed, and readers were asked to choose the six prettiest. The winner would be the reader whose list of six came closest to the most popular of the combined lists of all readers. The best strategy, Keynes said, is to select those faces that you think others will think prettiest. Better yet, he said, move to the “third degree” — by picking the faces you think that others think that still others think are prettiest. Translated into the current market, investors appear to be trying to outguess one another.

　You can find specific segments of the podcast at these junctures: Shaila Dewan on the jobs report (23:36); news summary (19:23); Susanne Craig on Cantor Fitzgerald (17:23); Robert Shiller (8:05); the week ahead (1:05).

As articles discussed in the podcast are published during the weekend, links will be added to this post.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Article source: http://feeds.nytimes.com/click.phdo?i=177af7cf7296a024ceaf2c86179c04ed

Filed Under: Economy News Tagged With: federal reserve, robert j shiller, uptick

Stocks & Bonds: Shares Close Ahead Slightly After Mixed Data

August 31, 2011 by NewsMaker Leave a Comment

The gains lifted the Dow Jones industrial average briefly into positive territory for the year, but it slipped near the end of trading.

The Dow rose 20.70 points, or 0.18 percent, to 11,559.95, just shy of the 11,577.51 at the beginning of 2011. The Standard Poor’s 500-stock index rose 2.84 points, or 0.23 percent, to 1,212.92, and the Nasdaq composite index gained 14 points, or 0.55 percent, to 2,576.11; both are still more than 2 percent below their levels at the year’s start.

The Treasury’s benchmark 10-year note rose 25/32, to 99 18/32, and the yield fell to 2.18 percent from 2.26 percent late Monday.

The United States markets digested a full agenda of economic data, as well as the release of Federal Reserve minutes from a meeting of the bank’s policy makers this month.

The report said Fed policy makers at the Aug. 9 meeting considered changing the size or composition of the Fed’s balance sheet and reducing the interest rate paid on banks’ excess reserve balances. Three members dissented on a vote that promised two more years of low rates, and they agreed to consider other options at their meeting in September, which was extended.

The minutes hardly made waves, with a slight rise in stocks after the report and a brief rally in bonds.

“I think it was in line with expectations, insofar as we have known that they have been getting more into debate and disagreements with one another over what might be prudent,” said Linda A. Duessel, equity market strategist at Federated Investors.

She said it reaffirmed a message that investors had heard from the Fed chairman, Ben S. Bernanke, in a speech last week that there is not much more the Fed can do.

Ms. Duessel and other analysts noted that the report on consumer confidence on Tuesday was one of the worst in recent years. The Conference Board consumer confidence index fell to 44.5 in August, from a reading of 59.2 in July. Stocks dipped in early trading but recovered.

Joshua Shapiro, chief United States economist at MFR Inc., said the index was at its lowest level in more than two years, since a level of 40.8 in April 2009.

In a separate report, residential real estate prices in the United States showed a 3.6 percent increase in the second quarter, according to the Standard Poor’s/Case-Shiller national home price index. But they also had an annual decline of 5.9 percent when compared with the second quarter of 2010. Home price levels for June 2011 were below those of June last year.

Brian M. Youngberg, an energy analyst for Edward Jones, said the markets weathered the consumer confidence numbers.

“It’s a mixed bag, but given everything, the market is holding up relatively well,” Mr. Youngberg said.

Oil prices were up 2 percent, for example, which is a sign of expectations for economic growth, he said. Crude futures for October traded in New York were up slightly at $88.90 a barrel. Gold on the Comex was up more than 2 percent at $1,838.10 an ounce.

Shares in Exxon Mobil, which signed an agreement on Tuesday with Russia’s top crude oil producer, Rosneft, declined 0.3 percent, to $73.91, and was the most widely traded stock on the energy index. Other top energy-related stocks rose slightly.

Philip J. Orlando, chief equity market strategist at Federated Investors, said that with a consumer report that was a “disaster” and the Fed minutes as expected, the attention was turning to the jobs report on Friday.

“The focus is going to be on the data,” he added.

New nonfarm payroll jobs are forecast to be 75,000 for August, compared with 117,000 the previous month, while the unemployment rate of 9.1 percent was not expected to change.

Catherine Rampell contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=a2c32a0953c0d5b0e5473bb3fdcc3511

Filed Under: Economy News Tagged With: bonds, composition, federal reserve

Shares Close Ahead Slightly After Mixed Data