Its a quiet week for economic releases. Yesterday's report of a -13% drop in April housing starts to a new record low also carried some encouraging news as single family starts showed a third month of gain as multis/condos provided the direction.
Underlying the continued downtrend in new home supply is the lack of demand seen in new home sales and the nearly 11 month inventory supply which needs to be worked down before the anxious builders ramp up activity. Single family starts are stabilizing but an upturn is still a ways off.
The news of banks requesting to return the funds provided through TARP (i.e. Troubled Asset Relief Program) shows how quickly the tide has changed (and how desperately they want independence on year end bonuses). Just two weeks after the bank stress tests a number of banks are lining up to return their portion of the $700 bln the Fed used to loosen up the frozen mortgage securities market.
The moveon TARP repayment comes just after a Sunday NYT piece written by former Fed vice-chairman Alan Blinder urging the Fed and Administration not to begin the exit strategy until the economy is back on solid ground. "To avoid a replay of the policy disasters of 1936-37, both the Fed and our elected officials must stay the course" Blinder warned.
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