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US stock market daily report (February 22, 2013, Friday)
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 wrath.
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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