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Says the Chancellor at a party event, according to Bloomberg.

• Euro area must be built on trust
• EU aid group to Greece, Portugal, Ireland is right
• Euro area countries must do their homework
• Greece needs a state that functions properly

–To Meet W/Hill Leaders In Coming Weeks To Begin Consensus Building

WASHINGTON (MNI) – The following is the full text of U.S. Treasury
Secretary Timothy Geithner’s prepared remarks as he unveiled the Obama
administration’s framework for overhauling the U.S. corporate tax
system:

Today, the President proposes comprehensive business tax reform to
create better long-term incentives for investing in America.

The last time we fundamentally reformed the business tax code was
more than 25 years ago. That was before the Internet, before the cell
phone, before the rise of China and other emerging markets, before the
latest expansion in global investment and trade, and before a global
trend to lower corporate tax rates around the world.

The current tax code was written for a different economy in a
different era. It needs to be reformed and modernized.

Our business tax system is not just outdated. It is unfair and
inefficient.

Our corporate tax rate is now on pace to become the highest among
all developed economies.

The rate is high in order to pay for a tax code full of special
benefits for certain industries and certain activities. You can call
these tax preferences, tax expenditures, loopholes, incentives, or tax
benefits. But whatever you call them, they are subsidies. They are
spending through the tax code. And they are expensive, costing billions
of dollars a year.

Because many of these subsidies flow to certain industries and not
others, they are fundamentally unfair. Right now, companies in some
industries pay two or three times the effective tax rates as companies
in other industries. For example, the effective tax rate on an
investment in buildings or other structures by a manufacturing company
might be twice as high as the rate that applies to an oil or gas
company.

These subsidies distort choices about where companies should
invest, and they distort the allocation of capital.

For these reasons, our business tax system today is bad for
economic growth and job creation in the United States.

We want to restore a system in which American businesses succeed or
fail based on the products they make and the services they provide, not
on the creativity of their tax engineers or the lobbyists they hire.

The President’s framework for reform has five key elements.

First, the President believes we should eliminate dozens of tax
subsidies and loopholes so that we can lower the statutory corporate tax
rate to help promote economic growth and encourage investment in the
United States.

By getting rid of special preferences for special types of activity
and specific industries, we can reduce distortions that hurt
productivity and economic growth, permitting us to lower corporate tax
rates in a fiscally responsible way.

The President’s framework recommends lowering the corporate tax
rate from the current top rate of 35 percent to 28 percent, which is
close to the average of those that prevail across the other major
developed economies. This will help make our corporate tax system more
competitive and improve incentives for investing in the United States.

Second, the President believes tax reform should include strong
incentives to encourage companies to create and build things in America.
We propose a set of carefully designed, permanent incentives to lower
the effective tax rates for manufacturing. We would replace a complex
mix of temporary incentives that businesses cannot plan for or count on,
with a more limited set of long-term incentives to help provide
certainty for long-term investments.

Third, the President believes we should strengthen the
international tax system. Today’s global economy provides strong
incentives for companies to shift investment and profits to countries
with low tax rates. We want to reduce the opportunities the tax code now
provides to shift income and investment outside the United States. To do
this, we propose a new minimum tax on foreign earnings, stronger
safeguards against transfer pricing abuses, and replacing tax deductions
U.S. companies can now get for relocating overseas with tax credits for
expenses when U.S. companies bring operations back home.

Together with a lower statutory tax rate, these reforms will help
improve the incentives for investing in the United States.

Fourth, the President proposes to reduce the tax burden on small
business. We want to cut taxes on investment in and by small businesses,
and we want to simplify the tax system for small businesses so that they
can devote more of their earnings to investment and job creation and
less to tax compliance.

Finally, the President believes that business tax reform has to be
done in a fiscally responsible way so that we are not adding to future
deficits. Tax reform can help economic growth, but tax cuts do not pay
for themselves. We have to ensure that those incentives Congress chooses
to preserve as part of tax reform are paid for.

The President’s proposal is designed to start the process of
fundamental tax reform. This process will take time. It will be
politically contentious. Some will say these proposals are too tough on
business, and others will say that they’re not tough enough. Many will
fight to preserve specific tax preferences and subsidies, but every
preference Congress preserves for some requires the rest of America’s
businesses to pay a higher rate.

A long-term growth strategy for the United States requires tax
reform.

The United States has only 5 percent of the world’s population. We
produce about a quarter of the output and income of the entire global
economy. And in the coming years, the most populous parts of the world
are going to grow more rapidly than the American economy.

The rising fortunes of emerging economies offer tremendous economic
opportunities for the United States. If we are going to be able to take
advantage of those opportunities, we have to encourage
companies-American companies and foreign companies-to design, create,
and build things here in the United States.

This requires tax reform–not tax reform alone, but tax reform
alongside investments in education, innovation, and infrastructure.

Our tax reform framework is designed to begin the process of
building bipartisan consensus on a better growth strategy for the long
term.

I have already spoken to Chairmen Baucus and Camp as well as
Ranking Members Hatch and Levin, and we plan to meet in the coming weeks
to begin the process of building a bipartisan consensus.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MGU$$$,MFU$$$]

WASHINGTON (MNI) – Following is the text of a press release issued
Wednesday by the U.S. Treasury Department unveiling the Obama
Administration’s framework for corporate tax reform:

ADMINISTRATION RELEASES PRESIDENT’S FRAMEWORK FOR BUSINESS TAX
REFORM TO ENHANCE AMERICA’S COMPETITIVENESS

Framework Would Simplify the Tax Code, Eliminate Dozens of Tax
Loopholes and Subsidies, and Incentivize Job Creation, Investment at
Home

The U.S. Department of the Treasury today released the President’s
framework for reforming the U.S. business tax system, which would
enhance American competitiveness by simplifying the tax code and
eliminating dozens of tax loopholes and subsidies, incentivizing job
creation and investment here at home and lowering the business rate
while broadening the tax base.

“In order to make us more competitive and create jobs here at home,
we must reform our corporate tax code,” said Treasury Secretary Tim
Geithner. “The President’s framework would boost growth and provide
American companies with incentives to invest in the U.S. while
simplifying and cutting taxes for our small businesses.”

Under the current tax system, the United States will soon have the
highest statutory corporate tax rate among developed countries, within a
system that features a large number of tax expenditures for special
interests. This puts American businesses-especially those in areas like
manufacturing that are subject to more intense international
competition-at a disadvantage. And this system is also unnecessarily
complicated for America’s small businesses.

For these reasons, the current business tax system is
uncompetitive, unfair, and inefficient-distorting choices about where to
produce, what to invest in, how to finance a business, and how to
incorporate. As a result, the U.S. business tax system does too little
to encourage job creation and investment in the United States and
creates too many opportunities that encourage shifting production and
profits overseas.

The President’s framework for reform seeks to address those
deficiencies in a way that is fiscally responsible. The details put
forward today also make clear that the Administration is committed to
working with experts, stakeholders and lawmakers on a bipartisan basis
to enact tax reform, including business tax reform that improves the tax
treatment of a range of businesses from large corporations to small
businesses and does so with fewer tax expenditures, less complexity and
lower rates without adding to the deficit.

This report describes the current state of the U.S. business tax
system and lays out a framework for reform that includes five major
elements:

1. Eliminate dozens of tax loopholes and subsidies, broaden the
base and cut the corporate tax rate to spur growth in America: The
framework eliminates dozens of different tax expenditures and
fundamentally reforms the business tax base to reduce distortions that
hurt productivity and growth. It reinvests these savings to lower the
corporate tax rate to 28 percent, putting the United States in line with
major competitor countries and encouraging greater investment.

2. Strengthen American manufacturing and innovation: The framework
would refocus the manufacturing deduction and use the savings to reduce
the effective rate on manufacturing to no more than 25 percent, while
encouraging greater research and development and the production of clean
energy.

3. Strengthen the international tax system, including establishing
a new minimum tax on foreign earnings, to encourage domestic investment:
Our tax system should not give companies an incentive to locate
production overseas or engage in accounting games to shift profits
abroad, eroding the U.S. tax base. Introducing the principle of a
minimum tax on foreign earnings would help address these problems and
discourage a global race to the bottom in tax rates.

4. Simplify and cut taxes for America’s small businesses: Tax
reform should make tax filing simpler for small businesses and
entrepreneurs so that they can focus on growing their businesses rather
than filling out tax returns.

5. Restore fiscal responsibility and not add a dime to the deficit:
Business tax reform should be fully paid for and lead to greater fiscal
responsibility than our current business tax system by either
eliminating or making permanent and fully paying for temporary tax
provisions now in the tax code.

** Market News International Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

US short T- bills actually have a yield these days.

After a string of auctions in which investors agreed to swap cash for paper for a month for a rate of 0.00%, Mr. Market is now demanding 0.06% from Uncle Sam for the use of his funds. Last week’s auction when off at a yield of 0.11%!

I guess we can conclude that markets are returning (somewhat to normal), these days.

• Will go to parliament for a final vote tomorrow

Fears no are that Greek banks will need even more money than expected for recapitalizations after the PSI was upped to 53.5%.

• Would lower top corporate tax rate to 28% from 35%
• Imposes global minimum tax
• Eliminates oil and gas tax breaks
• Lengthens depreciation schedule

Imposing a minimum global tax would be a great way to dive US domiciled business overseas…

New Democracy Party head Samaras says the second Greek bailout is different than the first. This time Greece won on the Eurogroup decision, he says. The second Greek bailout lacks a growth plan though he says (just like the first).

New elections will be held in the next two months, he says and will be definitive for the future.

Headlines via Bloomberg.

PARIS (MNI) – In helping to seal Greece’s second bailout Tuesday,
European Central Bank President Mario Draghi struck a balance between
the need to stabilize the Eurozone by supporting Athens and his vow to
avoid any “legal tricks” in order to do so.

The ECB, according to Barclays Capital estimates, will eventually
distribute to national central banks about E5 billion in profits on the
Greek bonds it purchased under its Securities Markets Program (SMP). The
funds will be remitted to governments and, over time, channelled back to
Greece.

Another E7 billion in coupon payments the ECB stands to earn over
the life of the bonds will be distributed, bringing the total amount of
debt relief coming from the SMP to around E12 billion — or nearly 10%
of the E130 billion rescue package.

Eurozone national central banks will also contribute, with coupon
payments on an estimated E13 billion in Greek debt holdings expected to
find their way back to Athens. This will reduce financing needs during
the second Greek program period by E1.8 billion, the Eurogroup statement
said.

Draghi tipped his hand at the bank’s Feburary 9 news conference
that this kind of deal would be a way for the Eurosystem to participate
in the Greek rescue without violating the ECB charter’s ban on using
monetary policy to finance governments.

“All the talk about the ECB sharing the losses is unfounded,” he
said. “The idea that the ECB could actually give money to the program
would violate the prohibition of monetary financing.”

But “if the ECB redistributes parts of its profit to euro area
member countries (via the euro area national banks) according to its
capital key, that is not monetary financing,” Draghi added.

The ECB steadfastly had refused to be drawn into the PSI
negotiations, with officials arguing that the SMP bonds were bought for
policy reasons — to address dysfunctional markets — and not for
investment. Critics say this rationale stretches a bit thin when
extended to the investment portfolios of national central banks.

The deal struck in Brussels reflected a compromise, however,
between Draghi’s seeming desire to support Athens and the need to
protect the ECB’s independence and the damage to its credibility that
would have resulted from any resort to legal or accounting tricks.

In handing over profits to national governments, the Eurosystem is
simply following standard central bank policy. The Eurogroup statement
takes pains to show that the ECB is not locked into any deal, saying
only that central bank profits and revenues “may be allocated by Member
States to further improving the sustainability of Greece’s public debt.”

But in working closely with Eurozone leaders to help put a package
together, Draghi went further into the kind of late-night dealmaking
than some on the bank’s 23-member governing council would have
preferred.

From a market perspective, the one drawback of the ECB’s stance
over the PSI was that it effectively made the central bank a senior
creditor in European debt markets. As Ireland and Portugal face a return
to the debt markets this year and next, knowing that the Eurosystem will
be exempt from any future restructurings could making enticing foreign
investors back into peripheral debt markets more difficult.

–Paris newsroom, +33142715540; jduffy@marketnews.com

[TOPICS: M$$CR$,MGX$$$,M$X$$$,M$$EC$]

Margin requirement on Irish government bonds cut to 15% from 25%.

EUR/USD firming, squeezing shorts taking trying to bust through the bottom of the range little more than an hour ago. Sellers still between 1.3280 and 1.3300, we’re told. EUR/USD now at 1.3260.

–December Revised to Slight Minus Change
–’Genuine Price Stabilization’ Possible for 2012

By Denny Gulino and Ian McKendry

WASHINGTON (MNI) – U.S. sales of existing single-family homes, town
homes, condominiums and cooperatives rose 4.3% in January to an annual
rate of 4.57 million and “genuine price stabilization” is possible this
year, particularly if household formation improves, the National
Association of Realtors reported Wednesday.

December’s change was turned into a slight minus of 0.5% as
seasonal factors were updated. The 2011 year’s total remained 4.26
million sales. January’s sales had been expected to be 4.65 million.

“The uptrend in home sales is in line with all of the underlying
fundamentals, ” NAR Chief Economist Lawrence Yun told reporters,
“pent-up household formation, record-low mortgage interest rates,
bargain home prices, sustained job creation and rising rents.”

The number of homes available for sale was down to 2.31 million in
January, the lowest since March 2005 and representing just 6.1
months supply at the current sales rate with inventory always lowest of
the year in the winter months. “Supply and demand may be coming into
balance,” Yun said.

A year ago the Miami market has six years of supply, Yun said.
“Today there is five to six months of supply, a quick change.”

Notably, he added, bank-owned properties after foreclosure are
being snapped up as they are made available in many states, particularly
in markets like Las Vegas, Phoenix, Riverside and Miami. “REO is not
lingering in the market, with multiple bids of investors, so no
problem,” Yun said.

However, in so-called judicial review states, where foreclosures
are bottled up by the need for court action, “the foreclosure inventory
is actually rising,” he said. That’s where, he said, large-scale
REO-to-rental programs by hedge funds and private equity groups “may
make sense.” Yun acknowledged, however, that the NAR is not a big fan of
the REO-to-rental proposals by the Federal Reserve and others because
Realtor members are afraid it could rob them of thousands of sales.

“A government proposal to turn bank-owned properties into rentals
on a large scale does not appear to be needed at this time,” Yun said.

The January national median price was $154,700, down 2.0% from a
year earlier. He said this year does still promise “genuine price
stabilization,” particularly if household formation “pops” back up after
four years of suppression. In years before the financial crisis, the 3
million annual increase in the general population would produce 1
million to 1.2 million new households. But with young couples living
with parents or “doubling or tripling up” the last four years have seen
households formed at half the usual pace.

“Inevitably that has to begin to pop out, like a coiled spring,”
Yun said, with the question still whether that rebound happens this
year.

Still, Realtors report supply constraints in some markets so even
without a household formation rebound, “The broad inventory condition
can be described as moving into a rough balance,” he said, between
buyers and sellers.

January sales were up in all four geographic regions with the
biggest increase the 8.8% in the West.

Contract cancellations are still at a high rate, the 33% where
they’ve been for several months, but Yun said he’s “discounting
that” because “sales are not declining at all.” Apparently
buyers are getting adept at turning around and signing another
contract immediately when one falls through because of “friction
in the market.”

Investors continued to be active in January, accounting for 23% of
home sales, up from December’s 21%. That’s should be expected because
family purchases trail off in the winter months, Yun said, to pick up in
the spring and summer when the school year is not such a big factor.

Reacting to Tuesday’s unveiling of what the regulator of
Fannie Mae and Freddie Mac said was a strategic plan for the GSEs’
future, Yun said the NAR still favors a return to the structure
pre-1970, when Fannie Mae was “a simply government corporation,”
without a profit motive. “That worked well.”

Thirty-five percent of all January transactions were of
“distressed” properties, up from 32% in December. Of those, 22% were
sales of foreclosed properties.

All-cash transaction made up 31% of the January total, a “fairly
consistent” percentage for several consecutive months.

First-time buyers made up 33% of the total, “still well below
the 40% that is normal, but inching up,” Yun said.

For 2012, Yun said he’s “very comfortable that a meaningful
percentage gain” could be achieved with perhaps “some modest price
gain.”

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$$AG$,M$U$$$,MAUDS$]

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