With the victory of Barak Obama in the US presidential race it is now the time when his election manifest will be studied much deeply and carefully so as to understand what his priorities would be during his tenure as the president of the United States of America. Health care seems to be very high in his listed priorities and surely will was a key issue during his campaigns too. so let us analyze as to what his health care policy looks like. On the basis of his campaign it can be deduced that the health plan as proposed by Obama would provide the citizens with the option of both a private insurance plan as well as a public insurance plan. The employees would have the option of either carrying on with the health insurance plan provided to them by their employers or to seek an insurance plan on their own from a private company or also they could avail the facilities of a public insurance plan which offers facilities which are currently being used by government employees. Also in plans in the set up of a national health insurance exchange which could help individuals and small businesses to buy public or government approved private health insurance plans at one place after they have compared all the available health insurance options. The insurance plan also has provisions of bringing about subsidies with the aim of making health insurance plans cheaper and affordable to a larger portion of the population and at the same time seeks expansion of the Medicaid program as well as the State’s children health insurance program. One of the most important changes that the plan aims to bring in the prevalent health insurance program both in the public as well as the private sector is to remove the clause wherein people were either refused a health insurance cover or got it along with exorbitant charges in situations where the applicant suffered from health conditions. This ambitious health insurance plan proposed by Obama is expected to cost about $60 billion per year. Obama plans to fund this plan in part by bringing in a roll back on the tax breaks for American households which had an income of more than $250,000.
Tags: health care reforms
The growing losses from the economic slowdown and financial crisis has made banks and other financial institutions to tighten their lending policies thereby adding fuel to the already prevalent credit crisis sweeping across the United States. This tightening of the lending process has been unanimously attributed to the uncertain economic outlook and the present deteriorating perceived by all banks and financial agencies. Credit cards and other financial loan products have been equally affected by these strict regulations. It has been reported that a whopping 85% of domestic banks have tightened their lending standard’s towards industrial loans and commercial loans which were provided by them to mid sized and large firms. The individuals and businessmen alike have never found it so hard to get access to a loan as they are facing right now. Banks are at regular intervals turning away borrowers which is a very recent development. A majority of banks and other lending institutions in the field of providing credit to large firms and industries have reportedly increased their respective costs on the credit lines while almost all of the banks are in the process of increasing their respective spreads on the borrowing rates over the cost of funds pertaining to the loans being provided to mid sized firms and large firms. Also reported to have been affected are the maximum size and the maximum maturity of loans or credit which was being offered by banks to firms. Tightened standards have also impacted the vertical of prime mortgage loans. the US economy has seen a contraction at an annual pace of 0.3 per cent between the months of July 2008 to September 2008. The unemployment rate too has subsequently increased to reach a figure of 6.1%. Tightened lending standards have also been reported on the credit card front as well as the personal loan front. A slump has been seen in the number of people applying for a loan in these turbulent times. These tough loan standards prompted the Federal Reserve to cut the benchmark interest rate by 1 per cent recently.
Tags: banks tighten credit
The results of a survey conducted by the US mortgage giant Freddie Mac has reported of a drop in the mortgage rates which surely has come as a breath of fresh air for the people desiring to buy a house in the otherwise bleak economic condition. According to this report the 30 year fixed rate mortgages have shown a slump in their rates from the previous 6.46 per cent reported last week to the present rate of 6.2 per cent. It is not this bracket alone which has witnessed this slump. The same downward trend has also been noticed in conjunction with the 15 year loans as well as the 5 year mortgages. In the case of the fixed 15 year mortgage which is a popular segment with the people interested in refinancing the interest rates have slipped down from the value of 6.19 per cent which was reported last week to the present day value of 5.88 per cent. In the case of the flexible rate five year mortgage the rate of interest fell to 6.19 per cent from the rate of 6. 36 per cent which was reported last week. Registering a similar fate was the category of the one year adjustable rate mortgage where the decline was measured to stabilize at 5.25 per cent as against the value of 5.38 per cent which was seen last week.
This drop in mortgage rates surely translates into very good news for all the aspiring home buyers who had put up their plans on hold considering the high interest rates. But these house buying plans are still finding it hard to materialize owing to the bad financial credit crunch prevalent in the market wherein the buyers find themselves in a situation where there are not enough banks or any financial institution willing to provide them with the needed finances to take on the mortgages. The previous hike in the mortgages had caused a serious dent in the US housing sector which went ahead to have a direct impact on the US economy and is largely responsible for the condition it is in today. Dipping home values have resulted in a decline in the spending capacity of consumers leading many towards foreclosures which had directly impacted the big financial institutions by making them suffer losses.
Tags: drop in us mortgage rates
The golden words of ‘interest free borrowing’ may very soon be a thing of the past. The present credit crunch has made credit lender cautious and pragmatic in their approach and have made it clear that sooner or later this candy offer of credit being offered to customers at zero interest rate will cease to exist. Also facing the same apathy are companies which were providing zero interest on balance transfers where the customer could transfer his debt from one company to the other without having to pay any fee or charge. The zero interest rate applicable on certain credit cards mean that for a set time duration the amount due on the credit card will not garner any interest on it.
Working on this characteristic the credit card lenders and banks are working towards reducing this interest free time limit from the presently allowed 10.1 month period to 9.5 months. Also coming with these reductions are the implementation of strict lending conditions by lenders and financial institutions. This could effectively mean that it would now become very difficult for a customer to keep shifting his debt from one company to another as the new company may not find you as a good customer befitting their requirements.
Clear indications of banks and lenders moving towards scarring these zero interest deals can be got from the fact that many of such institutions have stopped advertising their balance transfer cards from many comparison websites on the internet clearing indicating their intent to withdraw from this segment. Strict and tight lending conditions have also been implemented with regards to the industrial credit demand. The overdraft limits have witnessed substantial cuts while the interest rates have moved up steadily. This is clearly indicating that borrowing across all verticals has become very difficult now and this situation does not seem to be improving in the near future too.
Tags: zero % credit cards
The home loan industry in the United States has taken a severe beating owing to the current crisis gripping the financial markets. In the wake of this aftermath the US government is said to be mulling over a plan which if implemented is reported to provide relief to millions of home owners by allowing them to avoid foreclosure. The spoken loan modification plan is rumored to include certain modifications in the loans which subsequently would result in lowering the interest rates for a period of five years. According to reports there are well over 4 million mortgage users in the United States who are presently running behind their repayment schedule or are in the process of filing for foreclosure. In such grim times the government had to sooner or later intervene and come out with a rescue act.
This house loan modification plan proposed by the government if implemented would surely be the most aggressive step taken by the US government in an attempt to curtail the damage from the housing recession hitting the US. This loan modification program of the government will be implemented by the Federal Deposit Insurance Corp. the present running loan programs launched by the government in an effort to curtail the losses has been found to be too slow and small to take care of the large amount of foreclosures.
In a previous attempt to curtail the home loan losses due to mortgages the US government had come to the rescue of the mortgage giants Freddie Mac and Fannie Mae where the treasury department had injected funds in the tune of almost $100 billion dollars to each of them in a desperate quest to keep the two afloat and running. Though it is still very hazy and unclear as to what role these two mortgage moguls will play in the house loan modification program being worked out by the government but the approach expected from them would be much more aggressive and relief oriented.
Tags: US government
The Indian government finally succeeded in clearing the much anticipated insurance amendment bill which was aimed towards increasing the foreign direct investment or FDI in the private insurance sector to 49% from the present value of 26%. The bill will now be tabled in the Rajya Sabha of the Parliament during its December session and will be open for discussion then as the present parliament session does not provide the bill enough time to be discussed and understood in depth and in detail.
The bill which is the insurance amendment bill 2008 aimed towards amending the Insurance act 1938, the general insurance business act 1972 and the Insurance regulatory and development act 1999 was approved after taking into consideration the recommendations provided by a Group of Ministers(GoM) who were asked to look into the suggestions laid out by the KP Narashimhan committee and the Law commission. I strongly believe the amendments are clearly aimed towards removing old, not usable redundant provisions from the legislation and subsequently would move towards incorporating flexibility to the IRDA which would allow it to function smoothly and efficiently in sync with the changing times.
This discussed provision would however not be applicable to the public sector insurance companies and would apply to private sector insurance companies where on agreement with their private partners the insurance companies can now be allowed to increase their stake in FDI from the present value of 26% to reach a much higher value of 49%. The union cabinet in the same meeting also approved the bill meant to increase the share capital of Life Insurance Company or LIC from its present value of 5 crores to 100 crores. This life insurance amendment bill 2008 will be introduced in the Lok Sabha while the other previously mentioned bills will find their way to the Rajya Sabha for discussion in December.
Tags: indian government insurance bill
With the aim of preventing homeowners to move towards foreclosures JP Morgan tightened its mortgage modification efforts and has added itself to the list of banks to work out a plan with the above mentioned aim. This program by JP Morgan aims to help innumerable customers by avoiding foreclosure on about $ 70 billion in loans.
This $70 billion estimate is projected to be spread over a period of two years. This mention plan is expected to bring out changes which will lay emphasis on a particular type of loan which would be so structured that the borrower’s outstanding balance would sometimes grow over month on month. JP Morgan inherited $54 billion of such loans after it took over Washington Mutual in the month of September. Rising home foreclosures and the expected role of banks in this process has provided the major impetus in the formulation of this plan by JP Morgan. The banking community as it is is under immense political pressure to suitably address the problem of fore closures. Apart from JP Morgan, Bank of America and the Federal Deposit Insurance Corp too have similar loan plans in their offering with the aim to somehow curtail the menace of increasing fore closures.
It was this mortgage crunch which made the financial crunch presently sweeping across the United States reach this level. Big financial investors had invested huge money on the securities which were backed by risky mortgages which soon became difficult to value. As a result of it banks suffered huge losses and started lending thereby aggravating the already existing credit crunch. The US government has so far been able to tackle the grievances affecting the banking and the credit sector while the issue of ailing house owners is still to be tackled by the government. It is a widely believed view which I too abdicate that the financial markets and the economy in the US cannot be revived completely till the decline in housing prices is being arrested at a point. Fore closures is surely worsening this malady of declining house prices.
Tags: jp morgan
Over the last several years India has seen a slow but markedly steady change in its liberalization policies targeted towards the inbound investments especially the FDI or the Foreign Direct Investment making its way towards the country. With the entire world being gripped in the clutches of a huge financial debacle India too has wisely decided to approach it with caution and uttermost preparedness. There is nothing strange or unexpected if the Indian government presently finds itself in a state where it is under immense pressure to introduce means and measures to attract foreign inflow and therefore has gone ahead and made certain important announcements towards achieving the same. External commercial borrowings (ECB) and foreign currency exchangeable bonds (FCEB) are some of the topics being covered in these announcements.
In accordance to the prevalent traditional FII regime all foreign institutional investors or FII’s after abiding to certain fixed parameters could invest in Indian shares and certain permitted securities which were being actively traded on the Indian stock exchanges. The FII needed to be registered with SEBI and carry out these investment related trade through means of a registered stock broker. Bringing change to this law there have been recent reports that soon even foreign companies albeit the FII’s too might be permitted to carry out investment in India by buying shares on the stock exchanges. Clearly these investments will not be of strategic importance but surely will provide the company to pick up a stake in any listed Indian company. These changes are aimed towards portfolio investments initially and does not involve strategic investments
Carrying out a clear distinction between a portfolio investment and a strategic investment will surely be a big hurdle to start with. Also it has been speculated that if this rule does in fact come into force then it might enable the foreign company wanting to invest in India to simply increase its stake in a joint venture deal by buying the shares of that particular company straight from the stock market. There are further indications that the Indian government might move a step further and bring into place the framework of a Qualified Foreign Investor in place of an FII which might just allow an individual foreign investor to carry out investment in the Indian stock market.
Tags: indian fii