Top Story

• Fed's Hoenig urges policymakers to allow firms to fail
  Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said financial institutions, regardless of their size, should be allowed to fail if necessary. "As we look at reform and the way forward, I think the most important thing we need to do is to make, first of all, an accurate assessment of fundamental weaknesses in our financial system and then begin to create better foundations," he said. Hoenig also said "significant weaknesses" continue to plague the economy. CNBC/Reuters (11/16)

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Financial Focus

• Chinese-U.S. economic ties are uncomfortable, but unbreakable
  

  Source: CNBC

  President Barack Obama's first official visit to China comes at a time when the countries are economically intertwined. Neither appears particularly comfortable with the arrangement, but neither sees a good alternative, The Washington Post reports. The U.S. needs China to buy its debt, and China needs access to U.S. consumers to buy its exports. The Washington Post (11/16) , Los Angeles Times (11/16) , CNBC (11/16)

• Moody's: Corporate defaults to peak this month, then ease off
  Moody's Investors Service is becoming a bit more optimistic on the subject of corporate-debt defaults. Moody's warned in January that as much as 16.4% of companies carrying junk ratings could default during the next 12 months. The credit rating agency upgraded its prediction, expecting defaults to peak at 13.6% this month, then decline to 4.4% a year from now. The Wall Street Journal (11/16)

• Investors are increasingly concerned about debt sales
  The cost to investors to hedge against increasing yields on Treasuries has reached a record high, according to Barclays data. Investors are becoming increasingly worried that while inflation might remain low, yields might be pushed higher by debt sales. "The forward inflation rates show that inflation is off the agenda for the foreseeable future, with some still seeing a risk of deflation," said Moorad Choudhry of Europe Arab Bank. "However, at the same time, everyone is buying protection against higher yields." Bloomberg (11/15)

• Other News

• Should we "Europeanize" the U.S. economy?
  Forbes (11/13)

• CIT Group's bankruptcy adds to growing doubts about TARP
  The Washington Post (11/16)

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A&A Report

• EU postpones introduction of changes to accounting rules
  A major overhaul of financial institutions' accounting rules, specifically fair-value rules, came into force in much of the world last week, but the European Commission decided to postpone adoption of the rules. Analysts said the changes would disproportionately hit some European banks. Other banks in Europe are upset with the decision because they are concerned they will be at a disadvantage compared with their international counterparts. Financial Times (tiered subscription model) (11/13)

Tax Spotlight

• Military spouses get residency relief on taxes
  President Barack Obama has signed the Military Spouses Residency Relief Act, which extends to spouses of service members the same residency rules for tax purposes that apply to military personnel who change residences as part of their military duty. Under the new law, military spouses can retain their old residency or domicile, and income they earn in the new jurisdiction will not be treated as earned in that jurisdiction for tax purposes. JournalofAccountancy.com (11/15)

Market Update

• How the falling dollar feels in the U.K.
  Americans don't worry much about the foreign-exchange value of a dollar when they're at home, but going to the U.K. makes one very conscious of it, Dave Kansas writes. A pound now is equivalent to about $1.65, so when a pint of beer costs £5, one realizes one is paying about $8.25 for a beverage. Finding the best way to change U.S. dollars into pounds is also a challenge, Kansas writes. The Wall Street Journal (11/15)

• Investor demand for corporate bonds remains strong
  A sense of urgency among companies and investors to dive into the bond market before it winds down for the holidays is particularly acute this year. Companies are launching corporate bonds and investors are binging on offerings while central bankers are preparing to withdraw stimulus measures that spurred the corporate-debt rally. Some industry observers are concerned that policymakers will hurt the credit market if they pull support too quickly or sharply. The Wall Street Journal (11/16)

• Municipal bond sales to reach 7-month high
  State and local governments plan to sell $12 billion in fixed-rate bonds this week. The sales include Build America Bonds, for which the government pays more than a third of the interest expense. Michael Mundaca, the Obama administration's nominee to be the Treasury's assistant secretary for tax policy, wants the BAB program extended. "The future of the BAB program is the most important question facing the municipal bond market today," said John Dillon, a fixed-income strategist at Morgan Stanley Smith Barney. "The landscape could be permanently altered by an extension and/or expansion of the program." Bloomberg (11/16)

Policy & Regulatory

• Asian financial officials warn about Fed's rate policy
  The Federal Reserve's policy on interest rates threatens to encourage speculative capital, which could inflate the price of assets and derail recovery of the global economy, said financial officials in China and Japan. Liu Mingkang, the top banking regulator in China, said an extended period of low rates and depreciation of the dollar present "new, real and insurmountable risks to the recovery of the global economy." Bloomberg (11/16) , Financial Times (tiered subscription model) (11/16) , The Wall Street Journal (11/16)

• GM to start repaying state aid next month, source says
  Starting Dec. 31, General Motors plans to pay the government $1 billion per quarter to repay the $49.9 billion it received in state aid, a source said. By the second quarter of 2011, GM expects to have repaid $6.7 billion. The company is not obligated to start making payments until 2015. An oversight panel said in a September report that the Treasury likely will not recover all of the support it provided. Bloomberg (11/16)

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Hot Topics

Top five news stories selected by CPA Letter Daily readers in the past week.

• Understanding the tax consequences of mortgage discharge (Journal of Accountancy)

• White House might cut deficit with TARP funds, sources say (CNBC)

• Pondering the skills that young CPAs need to succeed (Journal of Accountancy)

• Need some speed from your computer? (Journal of Accountancy)

• FDIC takes over 4 more banks (TIME)

• Results based on number of times each story was clicked by readers.

AICPA News

• Register today: Free webcast on business intelligence, Nov. 19
  Business Intelligence encompasses the technologies, applications and processes for collecting and delivering crucial information for making decisions. Learn how to assess your organization's capacity to support a BI initiative and develop a successful strategy by joining a free (without optional CPE) live audio infocast, "Business Intelligence: Driving Value by Turning Data into Decisions." Thursday, Nov. 19, noon to 1:15 p.m. ET. Click here to register.

• Find AICPA on social networks; follow AICPA chairman on Twitter
  Engage with the AICPA and professional colleagues through social-media networks to build your contacts and keep in touch with like-minded professionals and friends. Find the AICPA on Twitter (AICPA News, Journal of Accountancy, CPA Letter Daily, IFRS.com), Facebook and LinkedIn. In addition, CPA Financial Literacy volunteers can share their outreach efforts and receive updates on new volunteer and consumer resources by following 360CPAVolunteer on Twitter. Members also can follow the new AICPA chairman of the board of directors, Robert Harris.

SmartQuote

Nothing is so contagious as enthusiasm." --Samuel Taylor Coleridge, English poet, critic and philosopher

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