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Allison Testimony before the Oversight and Government Reform Committee
December 17, 2009--Chairman Kucinich, Ranking Member Jordan and members of the Subcommittee, thank you for the opportunity to testify before you today regarding Treasury's efforts under the Emergency Economic Stabilization Act of 2008 (EESA) and the Troubled Asset Relief Program.
As a result of our efforts under EESA, confidence in our financial system has improved, credit is flowing, and the economy is growing. The government is exiting from its emergency financial policies and taxpayers are being repaid. Indeed, the ultimate cost of those policies is likely to be significantly lower than previously expected.
While EESA provided the Secretary of the Treasury with the authority to invest $700 billion, it is clear today that TARP will not cost taxpayers $700 billion. We have funded $370 billion to date and, based on current commitments and plans, we expect total disbursements to be around $550 billion. We expect that the overall cost of the program will be at least $200 billion less than the $341 billion that was projected in the August Mid-Session Review of the President's Budget. The financial statements we just published estimate that the ultimate cost of the disbursements through the end of September will be about $42 billion.
With the recent announcements of repayments by Bank of America, Citigroup, and Wells Fargo, banks will have soon repaid nearly two-thirds of the total amount invested in banks under the program. We also expect a positive return from the government's investments in banks. Investments are generating more income than previously anticipated – more than $15 billion in income so far – and we expect substantial additional income going forward.
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Source: U.S. Department of the Treasury
DB Index Research -- Weekly ETF Reports -- US
Among the Emerging country ETFs, iShares MSCI Brazil ETF turnover was US$1,268m followed by iShares FTSE/Xinhua China ETF with turnover of US$854m. In non-US developed market flows, iShares MSCI Japan had turnover of US$367m. In non-domestic regional flows, emerging market turnover was US$3.6bn and developed markets regional flows EAFE had turnover of US$1.1bn.
Assets under Management (AUM) To request a copy of the report Global X Funds Lists Global X China Energy ETF on NYSE Arca SSGA files with the SEC SIFMA’s Economic Advisory Roundtable Unveils Predictions for Q4 2009, 2010 Interest Rates
Survey participants unanimously believe that the Federal Open Market Committee (FOMC) will not change its current 0.0 to 0.25 percent target Fed funds rate at this week’s meeting.
The Economy
The median forecast calls for gross domestic product (GDP) to fall 2.5 percent in 2009 on a year-over-year basis (0.3 percent on a fourth quarter-to-fourth quarter basis). Full-year nonfarm payroll employment losses in 2009 were estimated to total 4.5 million jobs; while job recovery estimates for 2010 ranged widely, the median expectation was for a return to growth, albeit restrained, of 800,000 jobs. Survey respondents expected the full-year average unemployment rate to be 9.3 percent in 2009 and 10.1 percent in 2010.
Monetary Policy
Respondents were nearly unanimous in their opinion that the Federal Reserve’s expanded balance sheet did not pose a near-term inflationary risk. When asked to rank possible steps the Federal Reserve would take to reverse course, respondents cited reverse repos, with test operations totaling $1 billion as of December 14th, as the most likely first step by 80 percent of respondents. Other possible actions frequently mentioned by respondents were paying interest on reserves, directly selling assets back to the market or using a collateralized vehicle.
Transaction Tax
Respondents were also unanimous in their judgment that a securities transaction tax would have a negative impact on both the U.S. financial markets and economy.
The report also includes forecasts concerning oil prices, fiscal policy, and consumer spending, among other issues. view SIFMA Year-End 2009 Economic Outlook
SEC Approves Stronger Safeguards to Protect Clients’ Assets Controlled by Investment Advisers
“The Madoff Ponzi scheme and other frauds have caused investors to question whether their assets are safe when they entrust them to an investment adviser,” said SEC Chairman Mary L. Schapiro. “These new rules will apply additional safeguards where the safeguards are needed most — that is, where the risk of fraud is heightened by the degree of control the adviser has over the client’s assets.”
The SEC’s custody rule as amended today would promote independent custody and require the use of independent public accountants as third-party monitors. Depending on the investment adviser’s custody arrangement, the rules would require the adviser to be subject to a surprise exam and custody controls review that are generally not required under existing rules.
Surprise Exam — The adviser is now required to engage an independent public accountant to conduct an annual “surprise exam” to verify that client assets exist. Such a surprise examination would provide another set of eyes on the client’s assets, and provide additional protection against theft or misuse. The accountants would have to contact the SEC if they discovered client assets were missing.
Custody Controls Review — When the adviser or an affiliate serves as custodian of client assets, the adviser is now required to obtain a written report — prepared by an accountant that is registered with and subject to regular inspection by the PCAOB — that, among other things, describes the controls in place at the custodian, tests the operating effectiveness of those controls and provides the results of those tests. These reports are commonly known as SAS-70 reports. Requiring that the accountant be registered with and subject to inspection by the PCAOB provides greater confidence regarding the quality of these reports.
The new rules also will impose an important new control on advisers to hedge funds and other private funds that comply with the custody rule by obtaining an audit of the fund and delivering the fund's financial statements to fund investors. The rule will require that the auditor of such a private fund be registered with and subject to regular inspection by the PCAOB.
The new rules also require that the adviser reasonably believe that the client’s custodian delivers the account statements directly to the client, to provide greater assurance of the integrity of these account statements. It also will enable clients to compare the account statement they receive from their adviser to determine that the account transactions are proper. SEC Approves Enhanced Disclosure About Risk, Compensation and Corporate Governance
"Good corporate governance is a system in which those who manage a company — that is, officers and directors — are effectively held accountable for their decisions and performance. But accountability is impossible without transparency," said SEC Chairman Mary L. Schapiro. "By adopting these rules, we will improve the disclosure around risk, compensation, and corporate governance, thereby increasing accountability and directly benefiting investors."
In particular, the new rules require disclosures in proxy and information statements about:
The relationship of a company's compensation policies and practices to risk management.
The background and qualifications of directors and nominees.
Legal actions involving a company's executive officers, directors and nominees.
The consideration of diversity in the process by which candidates for director are considered for nomination.
Board leadership structure and the board's role in risk oversight.
Stock and option awards to company executives and directors.
Potential conflicts of interests of compensation consultants.
The new rules, which will be effective Feb. 28, 2010, also require quicker reporting of shareholder voting results.
read more view Final Rule: Proxy Disclosure Enhancements
Treasury Continues Local Outreach on Recovery Act's Build American Bond Program
This week, Treasury hosted two webinars for local officials responsible for public financing plans. Webinar participants included treasurers from 18 states and dozens of municipal and county level officials responsible for program implementation, including members of the National Association of State Treasurers, National Association of State Auditors, and National Association of State Comptrollers. Treasury plans to continue its outreach effort to include mayors, transit authorities, and other groups that could benefit from issuing Build America Bonds.
A new financing tool created by the American Recovery and Reinvestment Act (Recovery Act), Build America Bonds allow state and local government to obtain much needed funding at lower borrowing costs. Under the Build America Bonds program, the Treasury Department makes a direct payment to the state or local governmental issuer in an amount equal to 35 percent of the interest payment on the Build America Bonds. Since the program was launched on April 3, 2009:
There have been $55 billion in Build America Bond issuances;
Build America Bonds now constitute about 21.3 percent of the municipal bonds market; and
There have been a total of 650 separate issues of Build American Bonds by local or state governments in 43 states.
A complete list of issuances organized by state is available here. Additional updated data is available here. First Ever China Energy ETF (CHIE) starts trading on the NYSE Arca China is expected to become the world’s biggest energy consumer by 2010, according to the International Energy Agency (IEA), with energy use expected to more than double from 2005 to 2030. The agency notes that “as China becomes richer, its citizens are using more energy to run their offices and factories, and buying more electrical appliances and cars.” China is also the leading producer of energy from renewable sources, according to the Climate Group, and “is on the way to overtaking developed countries in creating clean technologies.”
“With the rapid expansion of China’s middle class, its energy consumption will necessarily mount. The China Energy ETF affords investors efficient access to this growth while tapping into China’s increasing leadership in alternative energy,” said Bruno del Ama, CEO of Global X Management.
The fund is the latest launch in the family of China sector ETFs offered by Global X Funds, joining the China Consumer ETF (ticker: CHIQ), China Financials ETF (ticker: CHIX), China Industrials ETF (ticker: CHII), and China Technology ETF (ticker: CHIB), all trading on the NYSE Arca; the upcoming China Materials ETF (ticker: CHIM) is not yet available for purchase. All funds have a 0.65% expense ratio. Hearing on Covered Bond Legislation The legislation would adopt a statutory structure for covered bonds issued by U.S. financial institutions.
December 16, 2009--ETF Liquidity Trends
US ETF turnover declined by 4.2% to US$57.7bn in the previous week. Turnover in the S&P 500 SPDR ("Spider") was US$18.0bn. The iShares Russell 2000 had turnover of US$3.7bn same as that of PowerShares QQQ Nasdaq 100 with turnover of US$3.7bn.
There were eleven new ETFs launched in the last week. FaithShares Advisors launched three new Equity ETFs. Charles Schwab and Global X launched two new Equity ETFs each. Blackrock Fund Advisors (formerly BGI) launched two Bond ETFs. Additionally, Old Mutual Global Shares Trust and Claymore also listed one new Equity ETF each. All the listings were on NYSE Arca.
In the previous week, average daily turnover in the Large Cap, US Sector, Leveraged and Global Regional products was US$23.3bn (-3.7%), US$9.2bn (-2.1%), US$7.6bn (-9.6%) and US$4.9bn (-3.0%) respectively.
Total assets under management for equity based ETFs remained at about the same level in the previous week, AUM were US$590.1bn/
Source: Aram Flores and Shan Lan -DB Index Research
December 16, 2009--NYSE Euronext (NYX) announced that its wholly-owned subsidiary, NYSE Arca, today began trading the Global X China Energy ETF (Ticker: CHIE). The ETF is sponsored by Global X Funds.
The fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the S-BOX China Energy Index. The Index is a free float adjusted, liquidity tested and market capitalization-weighted index that is designed to measure performance of the investable universe of companies in the Energy sector of the Chinese economy, as defined by the index provider Structured Solutions AG, which generally includes companies whose businesses involve: oil, gas, consumable fuels, alternative energy and electricity production and distribution; and energy equipment and services.
Source: NYSE Euronext
December 16, 2009--SPDR Series Trust has filed a prospectus with the SEC for
SPDR Barclays Capital Short Term Corporate Bond ETF -Ticker:SCPB
view filing
Source: SEC.gov
December 16, 2009--The Securities Industry and Financial Markets Association’s (SIFMA) Economic Advisory Roundtable today unveiled its outlook for Q4 2009 and 2010, forecasting the Federal Open Market Committee will not change its current 0.0 to 0.25 percent target federal funds rate at its December 15-16 meeting.
“While cautiously optimistic about the generally positive trend of most economic indicators, the economists were restrained in their forecasts and demurred from predicting the level of rebound one might normally expect after a severe recession.,” said Kyle Brandon, managing director of research for SIFMA. “The outlook warned of potential future challenges, particularly missteps in fiscal and monetary policies.”
Source: SIFMA
December 16, 2009--The Securities and Exchange Commission today adopted rules designed to substantially increase the protections for investors who turn their money and securities over to an investment adviser registered with the SEC. The new rules provide safeguards where there is a heightened potential for fraud or theft of client assets.
Most investment advisers do not maintain physical custody of their clients’ assets. Instead, those assets are held by a qualified third-party custodian, such as a regulated bank or a broker-dealer. However, over the past year, the SEC has brought a series of enforcement cases against advisers who had access to their clients’ assets and misused them. These advisers often covered up the misuse by distributing false account statements to their clients reflecting assets that didn’t really exist. The SEC’s new rules are intended to help prevent that from happening.
Source: SEC.gov
December 16, 2009--The Securities and Exchange Commission today approved rules to enhance the information provided to shareholders so they are better able to evaluate the leadership of public companies.
Beginning in the upcoming annual reporting and proxy season, the new rules will improve corporate disclosure regarding risk, compensation and corporate governance matters when voting decisions are made.
Source: SEC.gov
Build America Bonds Provide $55 Billion Nationally
U.S. Treasurer Hosts Webinars with State Treasurers, Local Officials
December 16, 2009----As part of the Obama Administration's effort to accelerate the implementation of American Recovery and Reinvestment Act (Recovery Act) programs, U.S. Treasurer Rosie Rios this week began a series of webinars to help raise awareness, discuss benefits, and solicit feedback on maximizing the effectiveness of the Recovery Act's bond programs. New data also released by Treasury this week show the Build America Bonds program already providing $55 billion in low-cost borrowing nationwide.
"During a time when state and local budgets have been drastically scaled back, the Recovery Act's bond programs provide much needed access to financing and low-cost borrowing," said Rios. "Build America Bonds are a little known, but successful tool that have already helped hundreds of communities fund the development of schools, hospitals, and other public projects. Through continued outreach efforts, Treasury aims to provide an accessible forum for officials to learn how these bonds can help revitalize their communities as well."
Source: U.S. Department of the Treasury.
December 16, 2009-New York-based asset manager Global X Management Company today launched the Global X China Energy ETF (NYSE Arca: CHIE), the first ETF offering targeted access to the China Energy sector. CHIE is the latest addition to the comprehensive family of China sector ETFs offered by Global X Funds.
The Global X China Energy ETF seeks to replicate the S-BOX China Energy Index, which is designed to reflect the performance of the energy sector in China. As of November 30, 2009, the Oil and Gas sector represents 42% of the index, Alternative Energy 23%, Coal 15%, Electric 14% and Energy Equipment & Services 5%. The largest index components were PetroChina, CNOOC, China Shenhua Energy and China Petroleum & Chemical.
Source: Global X
December 15, 2009--The Financial Services Committee of the U.S. House of Representatives held a hearing on covered bonds on December 15, 2009. The Committee heard testimony on proposed legislation introduced by Representative Scott Garrett (R-NJ).
view the legislation
Source: Online News