The Obama health care legislation now faces its sternest test as Republicans clearly intend to hold their ground. The minority party contends health care reform is necessary but that an entirely new plan is necessary.

The President concluded the meeting with a request that Republicans work with Democrats to structure a reform bill within the next six weeks. Republicans balked at the proposal saying more time was necessary.

Health care is a huge budget item, consuming 16% of the federal budget yet leaving 48 million Americas uninsured. The meeting was great theater but served only to highlight the party’s agreement to disagree about the current legislation and any future legislation.

Members of both parties were vocal and insistent on their views. The Senate’s number two Republican, Jon Kyl said the parties, “do not agree about the fundamental question of who should be in charge of health care.” Kyl asserts Republicans want doctors to control health care, not Washington. Democrats assert the system is broken, wasteful and in need of a dramatic overhaul.

Democrats are now forced to make a difficult decision. By enacting a seldom-used legislative protocol, the Democrats currently have the votes to push the bill through the House and Senate. Obama and Senate majority leader Reid agree that the bill will not receive one Republican vote in support. By enacting the legislative anomaly, termed reconciliation, Democrats can pass the bill with a simple majority.

Basically, by not working to amend the current bill, the Republicans stand to lose the ability to have any input in the legislation. The bill on the table would cut costs, regulate insurers and expand coverage to millions of uninsured Americans.

How has the NFAs role in foreign exchange trading evolved over the last 10 years?

It has been only since Congress passed the Commodity Futures Modernization Act of 2000 that NFA has been actively involved in the regulation of retail off-exchange foreign currency trading. That legislation required any firm acting as a counterparty to retail forex trading to be an “otherwise regulated entity” (i.e., a bank, insurance company, broker-dealer or futures commission merchant). Many forex firms chose to register with the CFTC as FCMs and become Members of NFA. It was at that time that we developed a new category of membership – Forex Dealer Members. Since then, we have developed a series of rules and interpretive notices that govern many areas of a Forex Dealer Member’s business activities.

Can you explain new regulatory changes,particularly those surrounding stops and limits.

I think the best explanation for our recent rules regarding certain trading strategies (e.g., so-called “hedging”) is the rule submission letter we sent to the CFTC. Use this link to read it: http://www.nfa.futures.org/news/PDF/CFTC/CR2_43_ForexPriceAdj_112408.pdf

How have recent NFA changes impacted retail forex trading?

We receive data on a weekly basis from our Forex Dealer Members regarding the amount of customer funds they currently hold. Since our latest rules went into effect on August 1, we have seen a minimal (4%) decline in customer funds at our 17 Forex Dealer Members.

Are there any regulatory changes on the immediate or not so immediate horizon?

There are no major regulatory changes from NFA in the near future. However, it’s important to remember that the CFTC Reauthorization Bill of 2008 gave the CFTC anti-fraud authority over forex firms. That means that all forex fund managers, pool operators, introducing brokers and their associated persons will be required to register with the CFTC and, most likely, become Members of NFA. Because the CFTC has not published its forex rules yet, it’s difficult to say what the impact will be on the forex industry.

How do you suggest a perspective retail forex trader research potential firms to trade with?

Since most U.S. forex firms are registered with the CFTC and Members of NFA, one of the first things a prospective forex trader should do is visit NFA’s website (www.nfa.futures.org) and conduct a background check. By accessing NFA’s Background Affiliation Status Information Center (BASIC), you can find out how long the firm has been registered, who the principals of the firm are, whether the firm has been the subject of any NFA disciplinary actions and other pertinent information.

How important is net excel capital in regards to a potential FCM?

In 2007, NFA President Dan Roth testified at a hearing before the Subcommittee on General Farm Commodities and Risk Management Committee on Agriculture regarding the need for a higher minimum capital requirement for forex dealers. He stated, “The second trait that marks the problem firms in retail forex is that most, though not all, have been thinly capitalized. Congress long ago recognized that acting as a dealer involves greater risk than acting as an agent in futures trading, the way a traditional FCM does. That is why Congress in 1978 imposed a $5 million net worth requirement for firms granting dealer options and why the CFTC created a $2.5 million capital requirement for leverage transaction merchants in 1984. Congress should amend Section 2(c) of the Act to require FCMs acting as counterparties to retail forex transactions to maintain minimum capital of at least $20 million. NFA has raised the capital requirements for forex dealers several times but this congressional action could ensure that firms can meet their obligations to their customers and have a significant financial stake in their business.” Subsequently, the CFTC Reauthorization Act of 2008 imposed a $20 million capital requirement on retail forex counterparties that are Retail Foreign Exchange Dealers or that are FCM-only firms primarily or substantially engaged in on-exchange futures activities. Following the requirements outlined in the legislation, NFA amended its Financial Requirements to increase Forex Dealer Member capital requirements to $20 million, on a gradual basis, by May 16, 2009.

Would you recommend spot fx through a registered FCM or fx options through an exchange like the CME to a new trader?

Pages 10-11 of NFA’s brochure, “Trading in the Retail Off-Exchange Foreign Currency Market – What Investors Need to Know,” explains the differences in trading off-exchange forex and on-exchange foreign currency futures and options contracts.

Are there any resources you can suggest to someone who is interested in learning more about retail foreign exchange trading?

NFA does not make specific recommendations regarding forex educational materials. However, we strongly encourage potential forex traders to get as much information and training as possible before actually opening an account.

What does it taking to become a registered FCM and an NFA approved member?

Our website has an extensive section related to the registration process. Click here for a summary of FCM registration issues.

What oversight is there for registered members?

Our Forex Dealer Members are subject to a set of rules that cover every aspect of their business, including sales practices, promotional material and anti-money laundering programs. They are subject to periodic audits and examinations. As mentioned earlier, our Forex Dealer Members are also required to submit weekly financial reports.

Is there anything else you would like to add?

I have nothing more to add other than reiterating that prospective forex traders should do as much research as they can into the firm they are considering opening an account with. They should also learn as much as they can about how the forex markets work and the risks involved in trading forex.

Larry Dyekman is the Director of Communications and Education for National Futures Association. He is responsible for all external and internal NFA communications as well as educational materials for NFA Members and the investing public. He has developed regulatory guides for NFA Members, educational brochures for futures investors, video programs describing NFA’s corporate mission and multimedia programs to help train NFA arbitrators. He is a graduate of Illinois State University and a member of the International Association of Business Communicators.

The information in this report is based upon careful scrutiny of the bill, which was enacted in February 2009. Purchasers should consult a tax consultant to verify eligibility and all provisions of the 2009 First-Time HomebuyersTax Credit. The government does not participate in pre-authorization practices for 2009 Tax Credit.

The 2009 bill provides an $8,000.00 tax credit to first-time homebuyers for the purchase and title transfer of a principal residence on or after January1, 2009 and before December 1, 2009.

Unlike the 2008 First-Time Homebuyer Tax Credit, the 2009 credit does not require repayment.

Every dollar of the 2009 first homebuyer tax credit reduces income taxes by a dollar. The credit can be claimed on the purchaser’s 2008 or 2009 tax return in order to reduce the purchaser’s income tax liability.

In the 2008 Homebuyer Tax Credit, purchasers who obtained financing by means of mortgage revenue bonds were ineligible for the $7,500 credit. The 2009 tax credit does not disqualify purchasers using this method of financing.

The 2009 First-Time Homebuyers Tax Credit is deemed a “refundable” credit. If the purchaser’s total tax liability is less than the tax credit, the unused amount will be refunded in a check payable directly to the purchaser. Therefore, if the qualified purchaser’s total tax liability is $6,000 and the tax credit is $8,000, the purchase will receive a check for the balance or $2,000.

The 2009 First-Time Home buyers Tax Credit has filing flexibility.

There are basically four flexible ways for qualified homebuyers to capture the tax credit. For qualified primary residences closed after January 1, 2009, and before December 1, 2009, the credit can be claimed on either a 2008 amended return or on the 2009 tax return filed on or before April 15, 2010.

• If the real estate purchase closed after January 1, 2009, and before April 15, 2009, the tax credit can be claimed on the 2008 return.

• The 2008 income tax filing can be extended until October 15, 2009, but the taxpayer must apply for the extension, which is automatically granted once the application is received.

• If the home was purchased after the 2008 tax return was filed, the filed return can be amended by completing and submitting form 1040x.

• The 2009 First-Time Homebuyers Tax Credit can be claimed on the 2009 tax return filed in April 2010.

Under the program, a first-time homebuyer is defined as a purchaser who did not own another primary residence at any time during the three years prior to the date of purchase.

For example, if primary residence was purchased on January 15, 2009, the purchaser may not take the first-time tax credit if the purchaser owned or had an ownership interest in another home at any time since January 15, 2006.

Therefore, if the last time the purchaser owned a home was in 2005, the purchaser is eligible for the 2009 first-homebuyer tax credit even though the home is not actually the first home the purchaser has owned.

The 2009 First-Time Homebuyer Tax Credit can be claimed on the 2008 tax return filed before April 15, 2009, an amended 2008 Tax Return or on the 2009 Tax Return filed ion 2010. The same flexible options exist for purchasers who file jointly.

The following taxpayers are not eligible to take the 2009 First-Time Homebuyer Tax Credit:

• Purchasers whose income exceeds the bill’s stated phase-out range. Joint filers whose Modified Adjusted Gross Income (MAGI) exceeds $170,000.00 or single filing taxpayers whose MAGI exceeds $95,000.00 are ineligible for the tax credit.

• Transactions must be “arms-length” and do not apply to residences acquired from close relatives, spouses, parents, grandparents, children or grandchildren. Only arms-length acquisitions are eligible for the 2009 tax credit.

• The purchaser must be a resident of the U.S.

The following conditions apply to eligible real estate transactions:

• The first-home must remain the primary residence for three years after the closing date.

• The home cannot be sold before the end of three years. If the home is sold prior to the three-year anniversary of the purchase date, the tax credit must be repaid.

• Eligible transactions must transfer title before December 1, 2009.

• For new construction, the purchase date is considered the date the home becomes occupied by the purchaser, which, in some cases may be differ from the date money is exchanged. That date must be prior to 12-01-09.

To qualify as a Principal Residence:

• Generally, the purchaser must spend a minimum of 50% of the time residing at the home.

• The principal residence must either be a condominium, single family detached home, co-operative, townhouse or similar product.

• The residence must be located in the United States.

Additional stipulations of the 2009 First-Time Homebuyer Tax Credit:

• The First-Time Homebuyer Tax Credit is available to residents of the District of Columbia.

• Purchasers who utilize state or local revenue bond financing are eligible for the First-Time Homebuyer Tax Credit.

• If the homebuyer dies within the three-year window, there is no recapture.

• If the property is subject to an involuntary conversion, such as a fire, during the three-year window, no recapture is expected.

• There are provisions and considerations for divorce.

• IRS form 5405 may be used to file for the First-Time Homebuyer Tax Credit.

Clarification of the bill’s income limits and the phase-out stages:

• The 2009 Homebuyers Tax Credit is not available to Single Filers who have Modified Adjusted Gross Income (MAGI) in excess of $95,000.00.

• Single Filers whose MAGI exceeds $75,000.00 enter a “phase out stage.”

• Single Filers whose MAGI is $90,000.00 has an excess of $15,000.00 ($90,000 – $75,000). $15,000/$20,000 (the difference between the Phase Out Start and the Phase out Limit) = 0.75%. 75% of $8,000.00 = $6,000.00. In this instance, the Homebuyer Tax Credit would be equal to $8,000.00 – $6,000.00 or $2,000.00.

• Joint Filers whose MAGI exceeds $170,000 are not eligible for the 2009 First-Time Homebuyer Tax Credit.

* The Joint Filer Phase Out Stage begins with a MAGI of $150,000.00. Use the same process as above to determine the Joint Filer 2009 First-Time Homebuyer Tax Credit.

History of the 2009 First-Time Homebuyer Tax Credit

Congress passed a $7,500.00 first-time Homebuyer Tax Credit in 2008. The program was effective April 8, 2008. The 2008 Homebuyer Tax Credit expired January 1, 2009.

The 2008 Homebuyer Tax Credit required repayment over 15 years. It was a debt, not a benefit. These stipulations do not accompany the 2009 Tax Credit, which provides a substantial benefit and incentive for the first-home buyer.

The new 2009 First-Time Homebuyer Tax Credit was increased to $8,000 or 10% of the Purchase Price, whichever is the lesser amount.

The 2009 Homebuyer Tax Credit is refundable and not a debt. If the qualified purchaser’s tax liability in 2009 is less than $8,000, the government will send a check to the purchaser for the amount of the refund less the tax liability. There is no repayment requirement.

The NAR and the 2009 Homebuyers Tax Credit

The National Association of Realtors (NAR) has more than 1.2 million members and is the country’s largest trade organization. The NAR is involved in all aspects of the residential and commercial real estate industries.

The Association was influential in structuring the 2009 Homebuyers Tax Credit. The NAR’s chief economist, Lawrence Yun, originally advocated that the tax credit should apply to each and every home purchase in 2009, not solely to first-time homebuyers. “A homebuyer incentive is critical to help reduce housing inventory and stabilize home prices. The bigger the incentive, the faster housing can help pull the economy out of the recession. The cost to the Treasury would be far less than the additional costs of a prolonged recession with insufficient housing stimulus.”

The NAR projected that a universal tax credit would have resulted in 555,000 home sales. The NAR projected that if the 2009 Homebuyers Tax Credit were restricted to first-time homebuyers, an additional 202,000 units would be sold.

Many members of the NAR had pushed for the tax credit to be available as a downpayment. The push was based upon the belief that a vested interest in the property adds instant equity and provides the foundation for sustainable homeownership.

Not a downpayment but immediate cash

The 2009 Homebuyers Tax Credit has a provision to help first homebuyers generate immediate cash. Homebuyers who believe they are eligible for all or part of the credit can adjust their income withholding tax from their employer. If the purchaser is self-employed, the buyer can adjust their quarterly estimated tax.

Employees may request a new W-4 and file the form with their employer. The employee’s withholding will be adjusted immediately and the purchaser’s take-home pay would increase accordingly.

NYSAR Reports Tax Credit for Downpayment

At the recent real estate summit entitled Advancing the U.S. Economy at the REALTORS midyear Legislative Meetings & Trade Expo, the U.S. Department of Housing and Urban Development Secretary, Shaun Donovan, reported that under certain circumstances the c(FHA) will permit first-time home buyers to access the tax credit at the closing. These funds can be used as part of the downpayment.

Donovan said; “We all want to enable FHA consumers to access the homebuyer tax credit funds when they close on their home loans so that the cash can be used as a downpayment.” The FHA now offers programs to “monetize” the tax credit through short-term bridge loans.

This exciting development is expected to have immediate repercussions for the slumping residential real estate market.

The 2009 first-time homebuyer tax credit has been instrumental in bringing new homeowners to the closing table. Supply of existing homes far outweighs demand, but with low selling prices, low interest rates and an $8,000 tax credit, it is an excellent time to purchase a first home.

Additional Resources on the tax credit

NAHB Fact Sheet

For more information about the federal spending to bailout banks instead of homebuyers, please visit our financial news blog.

Under the repayment applications, Goldman Sachs and Morgan Stanley would repay $10 billion each and JPMorgan would repay $25 billion. The diminishing TARP fund would increase to approximately $150 billion of taxpayer money.

The big banks want freedom from the fed. TARP funds arrive with government regulations including compensation limitations. The three big banks are seeking to reverse a bad situation and take something positive from their temporary reliance on taxpayers. Banks that repay the TARP funds are expected to launch aggressive marketing strategies that capitalize on their stability.

Treasury Secretary Timothy Geithner said on April 21st that he would accept repayments as long as regulators would agree. Regulators are obligated to decide if the repaying institutions have enough capital to keep lending if the economy hits another downturn. The availability of credit is necessary to keep the economy moving forward.

Analysts have speculated that Treasury would like to establish industry compensation guidelines before accepting any TARP repayments. On Monday, Geithner alluded to “some broad constraints” on financial incentives throughout the financial industry. A February law is awaiting determinations by Treasury on compensation caps for TARP recipients.

In the wake of the TARP repayment release, Citigroup and Bank of America jumped more than 5%. The S & P 500 posted a 0.7% gain on Monday as Lowe’s and BOA earnings came in higher than expected.

We can figure it out. There are signs and symptoms to watch for, and definitions to use in making judgments. Let’s take on the worst possible scenario. We can examine the defining points of a depression, compare our situation to those points, and find out where we are.

First there’s the commonly quoted economics joke: “A recession is when my neighbor loses his job; a depression is when I lose mine; and a panic is when my wife loses hers”. Let’s hope we don’t get to the panic point. But where are we in regards to the first two evaluation points?

Here it is in black and white, this from the Bureaus of Labor Statistics, a dot-gov site that doesn’t waste your tax dollars on flashy graphics. The columns indicate, from left to right, the third then forth quarters of last year, December of 2008, then January ’09, then February of this year. The last column indicates the Jan-Feb change.

For comparison, consider unemployment in what is called the Great Depression. Here’s a grim graph showing the peak in unemployment back then.

Do you see that spike to twenty-five percent? We aren’t nearly there yet. You can see that while many neighbors have lost their jobs, most of us have not. So that’s score one for the recession theory. Recession is ahead 1-0.

How bad was it then, and how bad is it now? Judging by the what I’m experiencing myself and hearing on the news, we haven’t hit the level of hard times it takes to make a depression. The older members of my family told me some about the Great Depression. They didn’t think it was that great. My Dad was out-of-work, as they called it, perennially so, in those time. He  worked when he could, which wasn’t often, and for what he could get, which wasn’t much. He ran a trap line and sold small animal hides. He seined the rivers for bait and set trot-lines for catfish, both to feed the family and to sell. Well, he didn’t feed those catfish to me, you understand. I came along after the War. But you get the idea. Times were hard. They had soup lines, or bread lines, full of hungry and hopeless people. It’s true we have food banks and shelters now, but nothing like this.

The people you see picking up food at the food banks are mostly driving to pick up their groceries. Not to make light of their plight, but after you’ve been out of work and money long enough, as they were back in that depression, you won’t be driving. Your vehicle, if you ever had one, will long ago have been re-acquired by the financing institution, or sold to buy groceries if you owned it. And as for gas, please, at these prices? So for severity, as bad as it is now, we have nothing like the symptoms you see in those old breadline pictures.  Looks like the recession theory is leading 2-0.

How’s production? That’s another way you can tell a recession from a depression. How is that GDP, anyway? It’s not so terrible, thank you for asking. Take a look at this graph from the bad old days of the Great Depression.

Look at that dip in the ‘thirties. There were good reasons for it, that don’t come into this discussion, as we are busy comparing apples to apples, leaving the oranges out of it. Now let’s look at some records and predictions for current times. There’s a little slide, there, yes. The biggest dip came in the last quarter or 2008. Reading a bit, I found a couple of sources describing that change in dire terms. One was “alarmed” and the other called it a “plunge”. But then one of the sources was a skeptic concerning the qualities of our current leader, and the other was French. True, in the fourth quarter of last year, the GDP “plunged” a little over six percent. That’s bad. But in the Great Depression, the drop was over thirty percent. That’s really bad. Take a look at this graph of GDP over several years. Doesthat make you feel any better? Maybe it should.

It looks like our hard times, when compared to the Great Depression, might be considered only less good times. Judging by GDP numbers, it looks like recession out in front of depression 3-0.

And what is the effect, really, of the change in GDP? Well, it depends on who you are and what you value. GDP is a general measure of production, valuable to economists and other business machines, and doesn’t take into account things that matter to everyday humans, like quality of life. Look around you. What’s it like? Do you have air conditioning or heat or whatever climate control you need? Probably so. If you are reading this, you have a computer or at least access to a computer. Wow, you’re doing great! How long have you been hungry? Probably not long enough. Witness the obesity problem in the US. I could go on, with fashion, pimped rides, and bling coming into play. But look at the real depression. So many had so little, or next to nothing really. And least of all did they have any hope for change. Look at the pictures coming out of the Great Depression. Have you ever been in such a state? Have you ever seen a picture of yourself with that look of despair in your eyes? Most of us haven’t, and probably won’t.

By the effects we can feel of this slightly less prosperous GDP, I’d say recession winning by 4-0.

How long ago were the good ol’ days? Opinions vary. Some say this recession started as long ago as early ’08 or even late ’07. Trying to pin down the duration is hard. But the term depression is differentiated from recession by duration, as well as severity. A general consensus is that a recession might last eight to sixteen months and not have to be promoted to a depression. The Great Depression lasted ten years or so. Ten years ago we were partying like it was 1999. So we have some time yet to regroup and recoup our loses. I admit I’m getting tired of it, myself. But I’m not homeless, yet, or hungry to the point of standing in line for a bowl of soup.Taking a look at us now, we still look pretty prosperous. So then, recession theory advances over depression theory 5-0.

So now that we agree that we are in a recession, not a depression, what shall we do about it? I think we also agree that we’d like to see the not-so-great time get better. The answer depends on who you ask. Some believe in deficit spending. That can give a quick jolt to the economy and get an upward trend going. Well we’ve had plenty of that. The current times will likely be cited in future articles like this saying: “Look at the spending in 2009 under the Obama administration. They spent $Xtrillon and then…” We have to wait and see what they will say. Some say tax cuts that will enhance corporate wellbeing and encourage investment will do the trick. These people are often known as Republicans. Some believe in taking no action at all. That’s called laissez-faire, meaning leave-it-alone. They say the market, if left alone, will correct its ills. Many people point out that years of this policy in place have lead us into this situation. These people are often known as Democrats. And some pin their hopes on Federal Reserve action. That is happening now. The same people that will be writing those future articles about the deficit spending will be mentioning the reserve action too. Effect not yet apparent.

So we’re not in a depression. So why be depressed? Optimism may be the real key to our success. I think so. Lou Dobbs thinks so. And the President of the United States thinks so. Great minds think alike. Hang on, do what you can to help, and soon we’ll be on the sunnyslope again.

Technical Perspective:

Candlestick Analysis: Bullish pattern indicating increased downward potential

Fibonacci:  Already closed below 1.1750. Next strong support level is at1.1655. Look for little downward resistance until then. If USD/CAD closes the next session above 1.1750, reverse position with limits at 1.1819 and 1.2250

Fundamental Perspective:

As economic reports continue to come out positive, investors have less of a reason to keep funds in low yield, economic safe haven USD. If economic reports continue to surprise on the upside, look for a weakening dollar.

Positives for the US Dollar

Data shows that the US may finally be emerging from one of the work economic crisis’s since the Great Depression, but is that enough to keep the dollar as a global safehaven?

• Strong 2.2% rise in consumer spending bodes well for the dollar
• Biggest rally in the DOW in almost 4 weeks
• Interest rates are holding steady for the dollar, causing some strength for the currency

US Dollar Negatives

• US 1QGDP did grow, but far less than expected
• Potential for 6 more banks to FAIL the stress tests

Where there are fundamental reasons for the dollar to strengthen and for it to weaken, the USD is still seen as a safe haven currency and as long as there is event risk, foreign currency will continue to be pumped into the dollar.

After Monday’s close, Goldman Sachs Group, Inc. released stellar, early 1^st quarter profit reports.  The net income gain of $1.66 billion surpassed expectations as the company announced a plan to raise private funding for a quick TARP repayment and escape.  This is welcome news to taxpayers and the Obama administration that looks to the shoring up of the financials as the key to leading the country out of the recession.

In the wake of last week’s good news from Wells Fargo, the market responded well to the financials on Monday.  JP Morgan, whose 1^st quarter results come out on Thursday, jumped 3% to $33.70, as shares in Bank of America and Citigroup, whose report card comes out Friday, also rose.  An optimistic Les Saflow of Cabot Money Management reflected the market’s view that, “these banks are clawing their way back, literally from the brink of extinction.  My view is that a key phase of this economic downturn is behind us.”

Not all investors were reading the Goldman report the same way.  Coupled with dismal GM and Chrysler activity, Boeing released a late report indicating a significant production downturn.  The market quickly reversed a positive shift and finished slightly down.

The downturn highlighted investor fears that stocks remain at risk.  The reaction caused overnight investors to move to the dollar and yen as safe havens.

Another View of Goldman Sachs

Two weeks ago Secretary of the Federal Reserve, Ben Bernanke, said that private investment returning to the markets would signal a recovery was underway.  Goldman’s plan to raise $5 billion in order to repay taxpayer TARP funds looks good on the surface.  Skeptics take a dimmer view and raise interesting issues.

The company’s first quarter results do not reflect a change in the fiscal year that conveniently removes December from the first quarter of 2009.  Previously, first quarter results would have been posted through February 27^th and would have included December 2008.  Instead, Goldman Sachs released a December, one-time, one-month loss of $1.03 billion.

Skeptics also question the receipt of a multi-billion dollar payment from AIG, who has taken $183 billion from taxpayers.  And then, there is the hard push to escape the regulatory restraints caused by the outstanding Troubled Relief Asset Program (TARP) indebtedness.

Goldman Sachs pays well, perhaps, a little too well and definitely too well by TARP standards.  The reported average first quarter income for the company’s employees was $168,901 and marks a 35% increase over the 2008 first quarter.  At this rate, average Goldman employees will earn $675,000 in 2009.  953 Goldman employees earned more than $1 million in 2008.

And, then there is Warren Buffet.  Buffet’s Goldman investment is reportedly earning $1 million a day.

Wells Fargo led the financial’s charge with an early unexpected first quarter profit report last Thursday.  Despite high mortgage volume, analysts have raised questions about the quality of the bank’s loan portfolio and the repercussions of those loans on the bank’s balance sheet.

The Obama administration met last Friday to review Treasury Secretary Tim Geithner’s stress test findings.  As the financials grope to soothe investors, they may have a more difficult time convincing the government of their solvency although mark-to-market changes should help.

Dollar and Yen Signals

Analyzing the equity market, Rebecca Patterson, global currency chief at JPMorgan, may have said it best.  “It’s not clear to me we’re out there, at the bottom.”

Explaining why she is recommending currency trading, Patterson went further.  “It’s not just a risk appetite play.  It’s also a valuation play.  And, it’s an intervention risk play.  In other words, I think if the yen strengthens too much, the government of Japan will put a halt to it.”

The dollar and yen continue to be safe plays against the equity risk.  Overnight, the yen moved higher against the euro for the fifth time in six days, closing at 1331.11.  Japan’s currency climbed 0.8% against the Aussie to 72.70.

On Monday, China reported that its economy will shrink more than at any other time in the economy’s 44 year history.  A report from Singapore indicates a 9% contraction is in the wings.  As dismal as the news from Asia remains, Germany’s Federal Statistics Office is likely to release a dismal first quarter report on today.  The European Central Bank may be forced to intervene with a higher-than-anticipated rate cut.  As a result, the euro has fallen sharply of late.

“There doesn’t seem to be much improvement in the real economies around the world.  The yen is likely to be bought and the dollar also may be bought as a safe-haven currency,” reported Toshihiko Sakai of Tokyo at Mitsubishi UFJ Trust & banking Corp.

US retail and manufacturing numbers are due this week.  Strong numbers should boost investor confidence in equities, but with the continuing struggles of GM, Chrysler and Boeing, the prospects for breaking the current trend are not promising.