Overall spending on construction declined 0.9% in May from April to a seasonally adjusted annual rate of $965.0 billion. On a year-over-year basis spending is down 11.6%. This means that there has been no real change in the rate of contraction in spending.On a year-to-date basis, spending is down 11.7%. Private construction was once again the culprit as public spending (stimulus?) was up by 0.6%. Private construction spending was down 1.0% for the month and is off 17.4% on a year over year basis.Surprisingly, within public spending, educational construction was up 0.5% and highway spending was down 1.3%. Within private spending, the decline was all due to the residential side, which was down 3.4% for the month and is off 33.9% year over year. Non-residential construction actually inched up 0.5% and is off just 3.3% on a year over year basis. The graph below (from ...

Overall, the country will be in better shape if the regulatory reform proposals put forward by the Obama Administration were enacted than if we were to do nothing.There are many good aspects to it. In particular, the creation of a financial products safety board is long overdue. However, much of it looks like merely shuffling around the organizational chart.Vesting the Fed with overall systemic risk regulation is questionable, but there is a clear need for one agency to do the job, and the Fed is probably best positioned to do it. The questions come from its not very sterling record as a regulator leading up to this crisis (it did a better job of monetary policy in reaction to the crisis, so I'm not just being a Fed-basher here).The only other existing agency that would be a viable candidate for the job would ...

Overall, we continue to maintain a negative outlook on both U.S. and non-U.S. Banks in the near-to-medium term.

The new Financial Stability plan announced by the Treasury Secretary Tim Geithner fell short on the details and we think that the benefits, if any, will take a long time to come by. While the earlier programs launched by the government have helped alleviate the capital and funding concerns to a great extent, the efforts have not succeeded in restoring the lending activity at banks.

It remains to be seen whether these steps and others like them in other countries will be sufficient to restore confidence in the financial system and increase lending.

In the meantime, lower lending activity will continue to hurt the margins though the low interest rate environment should be beneficial to the banks with a liability sensitive balance sheet.

It still remains a bit

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