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| Ludwig Von Mises Institute |
| The Ludwig von Mises Institute is the research and educational center of classical liberalism, libertarian political theory, and the Austrian School of economics. Working in the intellectual tradition of Ludwig von Mises (1881-1973) and Murray N. Rothbard (1926-1995), with a vast array of publications, programs, and fellowships, the Mises Institute, with offices in Auburn, Alabama, seeks a radical shift in the intellectual climate as the foundation for a renewal of the free and prosperous commonwealth.
It is the mission of the Mises Institute to restore a high place for theory in economics and the social sciences, encourage a revival of critical historical research, and draw attention to neglected traditions in Western philosophy. In this cause, the Mises Institute works to advance the Austrian School of economics and the Misesian tradition, and, in application, defends the market economy, private property, sound money, and peaceful international relations, while opposing government intervention as economically and socially destructive.
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| U.S. Department of Labor: Bureau of Labor Statistics |
| About BLS
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MISSION
The Bureau of Labor Statistics is the principal fact-finding agency for the Federal Government in the broad field of labor economics and statistics. [More about the BLS Mission]
VISION
With the strongest commitment to integrity and objectivity, the BLS will be premier among statistical agencies, producing impartial, timely, and accurate data relevant to the needs of our users and to the social and economic conditions of our Nation, its workers, and their families.
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| CONGRESIONAL BUDGET OFFICE |
| The Congressional Budget Office is a small, nonpartisan agency that produces policy analyses, cost estimates of legislation, and budget and economic projections that serve as a basis for the Congress's decisions about spending and taxes. Every piece of legislation affecting the use of the nation's resources undergoes CBO's scrutiny. The agency is a public-sector "think tank" that employs an elite, multidisciplinary staff of professional analysts--public-policy and budget experts, economists, and other critical thinkers who enjoy challenges--at levels ranging from undergraduate and graduate interns to researchers with doctorates and substantial experience.
Each year, in the bustle of the budget process, CBO serves as a source of objective information. At stake is a federal budget of more than $2 trillion that affects the lives of everyone in the United States and many people around the world. The Congress depends on CBO to help it sort through the maze of programs competing for funds and to serve as a much-needed "reality check" for partisan advocacy.
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| Bloomberg Financial News |
| Bloomberg is the leading global provider of data, news and analytics. The BLOOMBERG TERMINAL and Bloomberg's media services provide real-time and archived financial and market data, pricing, trading, news and communications tools in a single, integrated package to corporations, news organizations, financial and legal professionals and individuals around the world.
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| Board of Governors of the Federal Reserve System |
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Advisory Councils
The Federal Reserve System uses advisory and working committees in carrying out its varied responsibilities. Three of these committees advise the Federal Reserve Board directly: the Consumer Advisory Council, the Federal Advisory Council, and the Thrift Institutions Advisory Council. The first two were established by law, and the third was created by the Federal Reserve Board.
Consumer Advisory Council
Federal Advisory Council
Thrift Institutions Advisory Council
Each Federal Reserve Bank also uses advisory committees. These committees advise the Bank on matters of importance in the Bank's District, such as agriculture and small business.
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| Federal Reserve Bank of New York |
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What We Do
In order to foster the safety, soundness and vitality of our economic and financial systems, the Federal Reserve Bank of New York works within the Federal Reserve System and with other public and private sector institutions.
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| A Dangerous Game |
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OutFront
A Dangerous Game
Daniel Fisher 10.16.06
Hedge funds have gotten rich from credit derivatives. Will they blow up?
The downfall of Amaranth Advisors, the hedge fund that lost $6 billion in a single week by betting on natural gas, was a special case. There was no domino effect taking down energy traders generally, no meltdown of an industry. But if you want to fret over the next financial catastrophes, turn your gaze away from energy futures and focus on something far more obscure: credit default swaps. Hedge funds are neck-deep in these derivatives, and if something goes wrong, the pain will be widespread.
A credit swap is an insurance policy on a bond, often a junk bond. The fellow selling the swap--writing the policy, that is--collects a premium. If nothing goes wrong, he pockets the premium and looks like a financial genius. But if the bond defaults, the swap seller has to make good. The notional amount--the aggregate of bonds, loans and other debt covered by credit default swaps--is now $26 trillion. This is a staggering sum, twice the annual economic output of the U.S.
Hedge funds account for 58% of the trading in these derivatives, says Greenwich Associates, a financial research firm. Selling protection has been a big moneymaker for funds like $23 billion (assets) D.E. Shaw and $12 billion Citadel, say market participants, and for specialized outfits like Primus Guaranty in Bermuda, which took in $57 million in the first half of 2006 selling protection on $1.6 billion in debt.
With corporate debt defaults low these days, the temptation is high to write insurance policies on bonds. A hedge fund can make $60,000 to $1 million a year selling protection on $10 million in bonds. It's like finding money in the street. Unless, of course, the economy suddenly enters a recession. If that happens, hedge funds addicted to the credit market will be in deep trouble. "A lot of [hedge funds] have sold insurance, are sitting on the premiums--and are bare-ass," says Charles Gradante, cofounder of Hennessee Group, which tracks hedge fund performance. "If there is a Long Term Capital-type systemic risk potential out there, it's in the [credit swap] market."
There must be a lot of investors--or credit speculators--who are cavalier about corporate defaults because junk bonds are trading at yields only modestly higher than the yields on safe U.S. Treasury bonds. The chart displays the yield spread, as calculated by Moody's Investors Service, between junk bonds rated speculative and seven-year Treasurys. Saks bonds with a 97TK8 coupon due October 2011, for example, are now yielding 7.6%, or 287 basis points (2.9 percentage points) over seven-year Treasurys, compared with a 700-basis-point spread to Treasurys four years ago. Today's tight spreads don't leave much of a cushion to cover defaults.
There is a close correlation between yield spreads and credit default swap prices. That's because selling a credit swap is equivalent to buying the corporate bond on margin. If you buy a junk bond with borrowed funds, you collect the high coupon on the bond while paying out a lower amount, presumably not too much more than what the U.S. government pays to borrow money. Either way--with a swap or a margined bond trade--you pocket the spread, unless and until the corporate bond gets into trouble, at which point you're sitting on a painful capital loss.
The credit-derivatives business is dominated by 14 dealers. Among them: jpmorgan Chase, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley. All have staggering amounts of derivatives on their books: JPMorgan's notional exposure was $3.6 trillion as of June 30, according to the Federal Deposit Insurance Corp., which is almost three times assets and 30 times capital. Credit derivatives at Wachovia Corp. have jumped sevenfold since 2003 to $170 billion, more than three times capital. Banks love derivatives because they provide multiple ways to make money. read more... |
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| U.S. Securities and Exchange Commission |
| The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.
As more and more first-time investors turn to the markets to help secure their futures, pay for homes, and send children to college, our investor protection mission is more compelling than ever.
As our nation's securities exchanges mature into global for-profit competitors, there is even greater need for sound market regulation.
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| U.S. Department of The Treasury |
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Mission
The mission of the Department of the Treasury is to promote the conditions for prosperity and stability in the United States and encourage prosperity and stability in the rest of the world.
This mission statement highlights Treasury’s role as the steward of U.S. economic and financial systems, and as an influential participant in the international economy. Treasury’s commitment to our citizens is to create economic and employment opportunities for all by raising the rate of sustainable growth. To the extent this objective is linked to world economy, Treasury will seek to influence global financial and economic issues whenever possible to promote global economic growth and stability.
The Department of the Treasury is the primary federal agency responsible for the economic and financial prosperity and security of the United States, and as such is responsible for a wide range of activities including advising the President on economic and financial issues, promoting the President’s growth agenda, and enhancing corporate governance in financial institutions.
In the international arena, the Department of the Treasury works with other federal agencies, the governments of other nations, and the International Financial Institutions (IFIs) to encourage economic growth, raise standards of living, and predict and prevent, to the extent possible, economic and financial crises.
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