2012 June FIRE (Finance, Insurance, and Real Estate) Policy News

The June issue of FIRE Policy News reports on the Federal Reserve’s apparent commitment to more years of historically low interest rates, despite indications of an improving economy and rising price inflation.

Also in this issue:

• Small businesses may have an easier time raising money and going public, say supporters of the JOBS Act recently signed into law by President Barack Obama.

• Fannie Mae plans to sell nearly 2,500 foreclosed real estate properties to institutional investors who promise to rent them out for several years rather than resell them. The goal is rapid reduction of the backlog of houses for sale without crashing real estate prices. Some analysts have their doubts.

• This election cycle, some U.S. politicians have insisted that in order to solve the government debt problem, millionaires and billionaires must pay their “fair share” and bankers and financiers must be “held accountable.” Their European counterparts are far ahead of them in this regard, with lessons applicable here.

• The Federal Reserve has announced it believes 15 of the 19 biggest banks in the nation would be safe in the face of a major economic downturn, but do the “stress test” results mean much? “The most important piece in the news is that these [capital] levels are still below Lehman Brothers’ when it failed with a Tier 1 capital level of 11 percent. Clearly the capital levels are not that critical one way or the other for long-term safety.”

• Michigan’s state-chartered nonprofit reinsurer for personal injury protection coverage will raise its assessments by 21 percent this year, in part to cover an estimated $2 billion deficit. The increase comes despite legislative efforts to begin addressing the rampant fraud in the system.

• Stockton, California has been listed as the city with the second-highest home-foreclosure rate of a major U.S. metropolis, the second-highest violent crime rate in California, and two times the frontrunner of Forbes magazine’s “America’s Most Miserable Cities.” Now Stockton is hoping to avoid its next bleak title, that of biggest municipality in U.S. history to enter bankruptcy.