Obama's Oil Czar...the 17th. FNMA 4.0% bond is DOWN 19 bps.

Remember the FNMA 4.0% bond?  We had been watching the FNMA 4.5% bond to see where rates were going and now we are watching this one.  The coupon is another Mortgage Backed Security offered by FNMA and because rates are so low it more closely relates to the loans being securitized today.  The FNMA 4.0 Bond is Currently down 19 bps.  When the pricing goes DOWN on these: rates come UP.  

30 year fixed rates have come up some but the average is still at 4.75%-ish out there.  

Oil Companies are on Capitol Hill in front of the House Energy and Commerce Committee today discussing offshore drilling.  The story I read suggested that the "other guys" are throwing "BP" under the bus and looking to convince the Energy and Commerce Committee that offshore drilling needs to get going again.  Really, with the millions of gallons of oil pumped each day at thousands of rigs: a disaster like this one has got to be an anomaly.

Obama will be addressing the nation tonight at 6pm Mountain time so watch for that.

Fed Members are divided.  Janet Yellen the San Francisco Fed President was quoted this morning for her opinion that the Fed Funds Rate should stay the same until 2012.  There are other members that side with her.  Even though they are all looking at the same data: they are starting to disagree here.  Other members are seeing signs of recovery and would like to start raising that rate again very soon.  Remember that when the Fed Funds Rate is higher: money is more expensive and therefore it tends to slow inflation, decrease retail spending and have other affects on the economy.  It is like a little button that they can push but do not see the effects for several months.

Below is an article I wrote this morning about Obama's Oil Czar that may be interesting.

Cheers!

Chad

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watch?v=XLiqvZOP8TY

Obama is naming an oil recovery czar according to news released this morning. This comes after criticism by "experts" who don't feel like the head of the coast guard Thad Allen is capable of such a huge undertaking as the clean-up efforts.  (This guy has been doing this for decades and it is the responsibility of his position to do so.)

In defense of the critics: we have NEVER seen anything of this magnitude that will require this much clean up.  "Experts" are estimating this to be a 25 million gallon mess by the time they get a handle on it.  (By the end of the month 90% of the remaining leaking oil will be able to be recovered and the leak will be much less daily volume with relief efforts.) Valdez was a 10 million gallon spill.  There was a 173-million-gallon spill in 1979 in Mexico, but that oil mostly washed up on the sandy beaches instead of the wetlands that are being affected by this spill.

Why a czar? This White House has almost found a "magic loophole" with the Czar concept, they have appointed SIXTEEN of them.  Czars are EASY.  They report directly to the president.  Their salary is what he says it is.  They don't answer to congress.  They are not elected.  They are not "vetted". (Vetting is the process whereby any "skeletons in the closet" are brought out into the open for consideration by committee)  Here is a great article for more info.

An "Oil Recovery Czar" would be someone solely responsible to oversee the clean-up effort over the next several years which will be a huge job.

To better answer "Why a czar?"

1. It is QUICK and 2. requires less oversight or rule by committee.  It is like the difference between picking up some "handy" men and women from Home Depot to build a home yourself vs. and wading through the bids process with licensed and bonded contractors and getting plans/specs/bids approved by a committee.

What about BP?

Unfortunately, BP's cap on liability is at $75 million for a disaster such as this one  unless there is negligence that can be proven.  BP stock has lost something like 40 billion worth of value through this though and they have shown that they want to do the right thing and be involved with efforts to get through this.  (They have been spending 6 million dollars a day to try and keep the spill contained.)

What do you think?

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Chad Schauers
Montana Mortgage Lender, Bozeman, Montana
Personal Cell: 406 799 8613
Personal Email: metchad@gmail.com