Cardea Partners Derivative and Capital Markets Advisory

The Urban Land Institute’s (ULI) Fall Conference and Expo held October 11-15 in Washington D.C. was an excellent opportunity for our firm to spread the word about our services and meet industry partners and future clients.  ULI is a diverse and active organization that provides excellent networking and educational opportunities for practitioners in all phases of development.  The conference featured the outstandingly frank and sharp FDIC Chair Sheila Bair as keynote speaker.  The potential for rising rates keeps her up at night, so take heed.  We look forward to visiting with our colleagues and new friends at the Spring 2011 conference in Phoenix!

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This is a great summary of the Financial Reform Bill implementation, but not a quick skimmer.  Many of the provisions have extended timelines and are dependent upon future decisions by a number of regulators, but this is the most comprehensive synopsis of FinReg we have seen from Davis Polk & Wardwell LLP.

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The Chairman of the Federal Reserve provides some reassurances to the markets in his statement to both houses of Congress this week.  Points of note: Fed expects 3.5-4.5% GDP growth in 2011 and 2012, 7-7.5% unemployment by the end of 2012, and an initial rebalancing of the Fed’s Treasury and Agency portfolio by reinvesting proceeds from principal paydowns in mortgages into Treasuries to reduce the current 2:1 MBS-Treasury ratio.  He also leaves the door open to further Fed assistance if European markets worsen.

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The Bank for International Settlements (BIS) annual report includes highly topical economic analysis, including Section III, which discusses the potential ramifications of extended periods of low interest rate policies.  In particular, the report notes that the resulting ’search for yield’ can result in distorted financial innovation, lack of real investment, and an unwarranted increase in asset prices/decline in risk premia.  (BIS)

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The House and Senate Banking Committee wrangling wrapped up early this morning after a 20-hour session, with full Congressional approval likely in the next week or two.  Commercial end users of interest rate and foreign exchange derivatives look to be largely unaffected by the bill, although some desks may be spun off from large banks and more clearing will take place between broker-dealers.   Bigger infrastructure for unwinding failing banks and insurers, requiring skin in the game for debt originators, and consumer protections from bank fees are also included. (Bloomberg)

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