Fed Members Release Financial Reports

By Jeffrey Sparshott and Andrew Ackerman

Federal Reserve Vice Chairman Janet Yellen stands as potentially the wealthiest member of the central bank’s board of governors since joining in October.

Yellen reported assets valued between $5.1 million and $14.4 million, according to financial disclosure forms released Friday.

The disclosure forms, used by officials across the government, report asset valuations and income only in broad dollar ranges and include spouses.

Yellen was previously president of the Federal Reserve Bank of San Francisco, where she earned more than $400,000 annually. She is married to Nobel laureate George Akerlof, whose substantial income from writing and speaking engagements was included in the disclosure forms.

She far outpaced Fed Chairman Ben Bernanke, who reported assets valued between $1.1 million and $2.3 million — figures barely changed from a year earlier.

Upon leaving the San Francisco Fed, Yellen also reported that she received as departure gifts both an Apple iPad, from the bank’s board of directors, and $400 toward the purchase of an Apple iPhone, from the bank’s top officers. The gifts were valued at $400 each.

Bernanke also earned between $150,000 and $2 million in textbook royalties. His 2010 salary was $196,700. Other governors earned an annual salary of $179,700 from the Fed.

By Al Yoon

Merrill Lynch and Citigroup Inc. dominated bidding on the risky residential mortgage-backed securities sold so far from the Federal Reserve Bank of New York‘s Maiden Lane II portfolio, the New York Fed reported on its website Friday.

Merrill Lynch, Pierce Fenner & Smith paid $1.144 billion out of the total $4.684 billion in market value sold from the portfolio, which was formed to take toxic securities from insurer American International Group Inc. in the depths of the financial crisis. In March, AIG offered to buy the portfolio, but the New York Fed said a competitive auction process would better serve taxpayers that paid for the bailout.

Merrill Lynch, Pierce Fenner & Smith is a broker-dealer arm of Bank of America Corp., which bought parent firm Merrill Lynch & Co. during the financial crisis in 2008.

Consumer Sentiment Tumbles

Consumer attitudes hit a wall in the middle of July, falling to the lowest level since March 2009.

The preliminary Reuters/University of Michigan index of consumer sentiment moved to 63.8, from 71.5 the month before. It had been expected to hit 71.0, and it will be revised at the end of the month.

The report’s preliminary current conditions index was 76.3 from 82.0, while the expectations index was 55.8 in July, from 64.8 last month.

The view on inflation softened, with the one-year forecast standing at 3.4%, from 3.8%, while the five year forecast was 2.8%, from 3.0%.

Manufacturing conditions in the district overseen by the Federal Reserve Bank of New York weakened again in July, amid moderating inflation pressures.

The bank reported Friday in its monthly Empire State Manufacturing survey that its general business conditions index moved to -3.76, from -7.79 in June. Negative numbers indicate contractionary activity and as such, the July reading describes a slower pace of retreat for the current month. The index went negative in June for the first time since November of last year.

Secondary Sources: Basic Needs, China Bubble, Home Prices and Foreclosures

A roundup of economic news from around the Web.

–Basic Needs: Dan Witters looks at Gallup polling data that track Americans’ access to basic necessities, ranging from food and shelter to clean water and healthcare and finds the level remains below prerecession readings. “The continued lack of recovery in the Basic Access Index metrics overall in 2011 shows that Americans are still lagging behind prior years in terms of their access to the basic necessities that foster a healthy, productive life. While Gallup has documented the decline in access to health insurance in recent years, important elements of healthcare including Americans’ ability to maintain a personal doctor and visit the dentist have also been casualties of the economic recession. This means millions fewer American adults have those basic needs met now than did before the financial crisis, despite modest improvements found in some areas. These results lend further evidence to the sluggishness of the current economic recovery, and underscore in real terms the health impact of the recession on the lives of American adults.”

–China Housing Bubble: Christian Dreger and Yanqun Zhang find evidence of a China housing bubble. “For a while now, analysts have been arguing there is a bubble in China’s property market. Using records from 35 major cities this column finds evidence of a housing bubble. It compares house prices to cointegrated fundamentals and finds that property in China is in general overvalued by around 20% – and even more so in the boom towns. “

–Home Prices and Foreclosures: David Blitzer looks at the connection between foreclosures and falling housing prices. “Digging into the details and ranking the cities by foreclosure rates and how far prices fell reveals some differences across cities. Among the cities with the largest price drops we also find the highest foreclosures. But past the top four, the pattern, as shown in the chart, is more varied. San Diego prices fell a bit less than either Los Angeles or San Francisco but experienced more foreclosures. Minneapolis, ranked 9th by price declines was ranked 15th on foreclosures. Dallas was the reverse — smallest price drop but 14th of 20 in foreclosures. Some of the differences relate to state laws. In New York and Massachusetts (Boston), foreclosures go through the courts and the backlogs are large; in Nevada most cases are settled outside the courts with a trustee. So, falling prices are associated with rising foreclosures but, as with most things in real estate, where the house is can make a big difference.”

Dodd-Frank-Created Stats Office Comes Under Fire

For the most part, Treasury’s new Office of Financial Research has gone unnoticed as Washington and Wall Street agonize over other aspects of last year’s Dodd-Frank financial-overhaul law.

Indeed, the office’s mandate to description as a provider of data and economic analysis to federal regulators hardly sounds like ingredients of controversy. But the new office and the man in charge of setting it up – former chief U.S. economist for Morgan Stanley, Richard Berner – felt some heat this afternoon.

The subject of an oversight hearing Thursday, the investigating subcommittee’s chairman, Rep. Randy Neugebauer (R., Tex.) criticized the office’s data-collecting mission as “Orwellian” in his prepared remarks, and painted an image of powerful bureaucracy with no limits on how much it can spend or what information it can demand from the industry, a characterization echoed by many of his Republican colleagues.

Author and investor Nassim Taleb, one of the witnesses at the hearing, described the office in his prepared testimony as an attempt to create “an omniscient Soviet-style central risk manager.”

Dodd-Frank created the new semi-autonomous office to support a new council of regulators – the Financial Stability Oversight Council, or FSOC – that is charged with spotting and tamping down emerging risks to financial stability. The OFR has two key components – a data-collection arm that has broad power to request any kind of information from financial firms it deems necessary, and a research and analysis arm that to be focused on monitoring the financial system for risk and producing research to improve regulation.

“As we learned during the financial crisis, many firms did not understand what they had on their own balances sheets, let alone how their balance sheets interacted with their counterparties. The goal of OFR is to standardize and coordinate data with the aim of reducing firms operating costs while protecting taxpayers from another forced Wall Street bailout,” said Sen. Jack Reed (D., R.I.), who helped write the provision creating the OFR.

Vital Signs: Unemployment Claims Decline

The number of people filing for unemployment declined to the lowest level since April. Initial jobless claims fell 22,000 to 405,000 for the week ended July 9 from the previous week. The drop came despite about 11,500 new unemployment claims related to Minnesota’s government shutdown. As a rule of thumb, claims need to be below 400,000 for the unemployment rate to fall.

Benefits Take Hit Amid Weak Job Market

Originally posted on the Juggle:

The anemic job market doesn’t just mean it’s tough for many people to find a job. It also means that those who have jobs may also be getting fewer benefits.

A few family-related benefits have taken a hit since the recession, and haven’t recovered, according to the Society for Human Resource Management’s (SHRM) latest annual survey of 600 employers’ benefits’ offerings.

Only 25% of employers offer paid family leave, about unchanged from 2010 and down from 33% in 2007, says the survey, released late last month. Other casualties include assistance with adoption expenses, which tumbled to 8% from 20% in 2007; elder-care referral services, down to 9% from 22% in 2007; and mentoring programs, which fell to 17% from 26% in 2007.

Another important family benefit is holding its own: Paid leave specifically allocated for new parents has been more stable, with 16% offering paid time off for new mothers and new fathers, down just a fraction from 2007, the survey shows. Leave for new parents is easier for employers to administer than family leave, which covers a wider range of needs. Also, it is popular among employees in their child-bearing years, who are often regarded as desirable recruits.

Still, the survey shows that other benefits have gotten the axe and cost-cutting is the main reason, says Mark Schmit, director of research for SHRM. Most employers aim to spend about 35% to 40% of payroll on employee benefits, he says. And as the cost of health care and other benefits continues to rise, many employers are cutting what they regard as discretionary perks, “to balance things,” Schmit says. Read the full post on the Juggle.

Bernanke Warns Default Would Be ‘Self-Inflicted Wound’

By Jeffrey Sparshott and Michael R. Crittenden

The U.S. government would face significantly higher interest rates if credit ratings agencies downgrade its debt, adding to an already high deficit, Federal Reserve Chairman Ben Bernanke said.

“It would be a self-inflicted wound I would say,” Bernanke said at a Senate Banking Committee hearing. He added that the U.S.’s immediate debt problem is a political, not economic issue.

Federal Reserve Chairman Ben Bernanke, appearing in the Senate Thursday for the second day of his semiannual testimony, faced a simple question from Republican Sen. Richard Shelby of Alabama: Can the European Monetary Union stay together?

The Fed chief didn’t answer that question directly. But he said Europe’s troubles “are at least as much political” as economic. “The European leadership places a great value on maintaining the euro area” and the political ties, Bernanke said.