JANUARY 2008 1/31/08 Brazil Adds Compulsory Deposit Rule for Some Accounts, Bloomberg. Brazil's central bank raised deposit reserve requirements to tighten credit, removing about $23 billion from credit markets. Inflation is near the central bank's 4.5 percent target. The requirement goes after the fastest-growing lending sectors. Banks that receive cash deposits from lease underwriters will have to use a portion of the funds to buy government bonds. Those deposits were previously exempt from compulsory deposit rules. The requirement will begin at 5 percent of deposits in May and climb to 25 percent by January 2009. The outlook for inflation in Latin America's biggest economy has worsened recently. The bank targets an annual inflation rate of 4.5 percent, plus or minus 2 percentage points to accommodate price shocks. Consumer prices (the IPCA-15 index) rose 4.55 percent in the 12 months through mid-January. The central bank said the increase in reserve requirements gives equal treatment for leasing companies' interbank deposits and term deposits, which have a 23 percent reserve requirement. Comment: The Central Bank of Brazil is using a tool – varying reserve requirements - that has been in disuse in the United States. This tool may provide an avenue for something not discussed much yet – how do Senators Clinton and Obama propose to reform the regulation of the financial sector to prevent a recurrence of the subprime meltdown in some new sector (say, commercial real estate or alternative energy)? 1/31/08Employment Cost Inflation 3.3 Percent, BLS. Employment costs rose 3.3 percent in December year-over-year for the second year in a row. Comment: For an employer, this is a major component of costs. Another sign that it will be hard to keep consumer price inflation below 3 percent.
1/30/08 Fed Cuts Rate by Half-Point, NY Times Online, 4:15 pm. Fed statement: “Financial markets remain under considerable stress, and credit has tightened further for some businesses and households." The statement referred to data showing the housing market continuing to worsen and the job market “softening.” Comment: At the end of the day, all three major stock market indicators were down - i.e., the FOMC's reduction in the target fed funds rate was fully anticipated. The dollar weakened because lower interest rates in the United States make investments here marginally less attractive than investments in other countries that are paying a higher interest rate
11/19/08: I was privileged to attend a breakfast meeting this morning sponsored by the Drum Major Institute. Boston Mayor Thomas Menino was the featured speaker. He spoke about how he surveyed his city for abandoned buildings and through a variety of creative initiatives, not without opposition, reduced the number of abandoned units by 77 percent. Scott Stringer, Manhattan Borough President, said: "We tax buildings -- imagine if we created a system of incremental land value taxation." Unimproved land is taxed at a much lower rate than improved land. Some cities have attempted to solve this problem by taxing vacant land at a multiple of the rate for improved land. Others have taxed improvements at a fraction (e.g., half) the rate of taxes on land value. The ultimate fix is to tax just the underlying land (hence "land value taxation" or LVT) and not the improvements, so that property-owners pay the same tax regardless of whether or not they build anything on the land. The problem with tax abatements and PILOTs is that they undermine the City's ability to pay for the service needs created by the development. These service needs include education, sanitation, police, and the annual debt service for the bond issues to pay for local infrastructure improvements. 11/19/07 Comment by John Tepper Marlin, Blogspot, Manhattan Borough President Stringer on LVT on liveblog by Corinne Ramey.
11/15: Real estate brokers are happy about continuing European interest in NYC real estate. Comment: Europeans have every reason to be interested in Manhattan real estate because the euro, which was worth as little as 84 cents in mid-2001, is now (November 18) worth $1.47. So a condo priced at $1 million then that has gone up to $1.47 million today would be discounted to $840,000 to aFrenchman who had shopped for it in 2001 and is looking at it again. This is good news not only for the European, but also for anyone in Manhattan (where the typical European buyer would be looking) seeking to sell their apartment, because it means there are some new buyers showing up. But it is bad news for a young person who is waiting for prices to come down, because it means there is competition for the space. It also means that parents of young people are still in demand by sophisticated young Manhattanites. 11/15/07 Comment by John Tepper Marlin on NYC’s Real Estate Brokers Link with European Buyers, NY Sun.
Federal Government Projects
National Commission on Productivity and Quality of Work Life: New York State Survey Commissioned the Council on Municipal Performance (John Tepper Marlin, President) to prepare a study of performance indicators for a sample of local governments throughout New York State. Developed a questionnaire for use by counties throughout the state. Documented the uneven state of performance measures, while providing some comparisons among communities that did develop indicators. Conducted four workshops throughout the state to review the measures. Professor Lewis Friedman worked on this project..
Department of Housing and Urban Development 1. Via a competitive process, commissioned the Council on Municipal Performance to prepare a guide for localities on contracting municipal services, edited by John Tepper Marlin and published by Wiley. This book was used as the basis for a series of seminars on public-private comparisons in different parts of the United States. 2. Through a competitive process, commissioned a guide for local governments on auditing, which was prepared by Peter F. Rousmaniere. The first edition sold out and a second edition was printed.
United States Information Agency Commissioned John Tepper Marlin to give several talks and work with local business and government leaders in Kharkov, Ukraine, to consider projects to convert military facilities to civilian use. Recommended using tank factories to build freight trucks and military airfields to create a distribution center like that of Federal Express in Memphis that might attract high-value manufacturers and consolidators. Bertelsmann has created just such a distribution center in Kharkiv for its books in the region.
Federal Deposit Insurance Corporation - Study of deposit insurance in different parts of the world, published in The Banker's Magazine. - Study of the quality of bank credit in different states, published in The Journal of Money, Credit and Banking