China Foreign Debt Approaches $1 Trillion
"I see the debate about interest rates as a distraction from the real problem, which is the amount of debt," said Mark Kantrowitz, founder of FinAid.org and senior vice president and publisher of Edvisors.com. "Each year the average cost of graduation goes up by about $1,000 or more. And having less expensive debt is going not going to make much of a difference if the total amount owed keeps on going up." A study done this spring by economists at the Federal Reserve Bank of New York found that the share of 25-year-olds with student debt has increased from just 25 percent in 2003 to 43 percent in 2012. The average student loan balance among those 25-year-olds with student debt grew by 91 percent over that time, from $10,649 in 2003 to $20,326 in 2012. The amount of debt has risen as tuition, room, board, fees and other college expenses have soared. The cost of attending college has risen about 4 percent in the past year aloneand has far outpaced the rate of inflation in recent years. All-America Survey: College Worth the Cost? According to the results of a current CNBC survey, Americans now have overwhelming doubts about the value of a four-year education, reports CNBC's Steve Liesman. Total charges for a full-time undergraduate at an in-state public college rose from $17,136 in 2011-2012 to $17,860 in 2012-2013, according to the College Board. Private college costs for one year totaled $39,518 in the past year, up from $37,971 the previous academic year. "Grants are not keeping pace with the increases in college costs," Kantrowitz said. "When grants are relatively stagnant or even going down that causes students to borrow more." But many families don't plan or try to calculate the total cost of attendance for a student's college and graduate studiesand that may be at the crux of the student debt crisis. Sallie Mae CEO Jack Remondi said poor planning exacerbates a borrower's burden, regardless of the rate on the loan. Sallie Mae is the largest provider of private student loans. "If you overborrow, whether the rate is 4 percent or 7 percent, you're still going to encounter difficulties," Remondi said. "A plan that takes into consideration what your income potential is going to be when you graduate and what that debt burden is going to be is critical." Unfortunately, many students and parents have failed College Planning 101. Less than a third of low-income parents said they knew how they would pay for their child's college education before they enrolled, according to a Sallie Mae study. Only 37 percent of middle-income families had a plan. Among high-income families, only slightly more than half said they had a plan to pay for college before their children enrolled.
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Jefferson County Files to End Bankruptcy, Adjust Debt
total debt obligations are over $17 trillion. It is unclear exactly what get out of debt are Chinas overall debt obligations. Investors have bee mildly concerned over Chinas debt levels, from federal to municipal to corporate debt. This year, for the first time ever, a Chinese solar company defaulted on a $531 million debt. Suntech Power is now in bankruptcy protection. Over the last week, China investors got another scare with the Peoples Bank of China Bank of China , their central bank, said it would not be helping out small to mid-sized lenders who took on too much credit risk. The market panicked. Stocks fell. And then the Bank said that it would indeed help with liquidity where needed, and has even offered banks some cash protection over the last forty eight hours, according to published reports quoting Central Banker Zhou Xiaochuan . On Saturday, the Chinese Banking Regulatory Commission smoothed over the liquidity crunch concerns when it added its voice to the chorus and said that there was adequate reserves set aside at banks to cover problems with non-performing loans. Commission chairman Shang Fulin said the recent liquidity crisis which sent money market rates soaring to 11% in a country used to rates around 3% would not affect the stable operation of Chinese banks. He acknowledged that some banks needed to improve their liquidity and risk management and promised to strengthen regulation for wealth management products and commercial banks. He urged banks to improve transparency of the wealth management products being offered, which suggests an ongoing concern in the capital city with municipal level shadow banking and investment that invests pension fund money into government pet projects and assets that have zero return. All is clearly not well in China banking. But many close China watchers at banks like Barclays Barclays Capital believe the country can weather this. They have faith in China regulators and Beijing leaders to keep financial problems under control. Huang Yiping, chief economist for Barclays in China, described the economic policy framework of Premier Li Keqiang as no stimulus, de-leveragingand structural reform. These are key components of what Huang calls Li-Economics. We think Li- Economics is exactly what China needs to put its economy on a sustainable path, which we estimate is around 6 to 8 percent annual growth for the next 10 years, Huang said during the Global Think Tank Summit in Beijing this week.
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Hedge Funds Hedge funds owed about $872 million will collect more than 80 cents on the dollar, according to the agreements. The hedge funds will also help backstop the refinancing to ensure that the county can raise all of the money it needs. The funds include Brigade Capital Management LLC, Claren Road Asset Management LLC, Fundamental Advisors LP and Monarch Capital Master Partners LP, according to court records. Insurers, including Assured Guaranty Municipal Corp., Syncora Guarantee Inc. and Financial Guaranty Insurance Co., will get $165 million. They claimed to be owed $315 million. The county will also pay as much as $25 million in any claims filed against the insurers by creditors seeking to recover losses, according to the agreements. Under the plan, the county will raise sewer rates 7.4 percent annually for four years. Those rates may go slightly higher if interest rates rise before the refinancing is completed. Warrant holders who are owed more than $500 million arent part of the deal. They will have a choice of collecting 65 cents on every dollar they are owed, or 80 cents on the dollar if they give up their right to collect money from the insurers. Political Corruption The bankruptcy is tied to a sewer refinancing tainted by political corruption. In 2009, JPMorgan agreed to a settlement with the U.S. Securities and Exchange Commission over payments its bankers allegedly made to people tied to county politicians to win business. JPMorgan, based in New York , paid the county $75 million in that settlement and has given up more than $657 million in swaps claims it held. Jefferson County supplanted Orange County, California , as the largest municipal bankruptcy. Orange County entered court protection in 1994 after losing $1.7 billion on interest-rate bets. While its petition initially listed more debt than Jefferson County, much of that liability was reduced in the early weeks of the case. Thanks partly to lawsuits against the financial firms, Orange County creditors were paid in full.
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