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News of the Competition (01/31/2012)

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MADISON, Wis. (2/1/12)

  • U.S. banks are less optimistic about asset quality this year than they were a year ago, according to a Federal Reserve Board survey released Monday (American Banker Jan. 30). However, they do anticipate some improvement in asset quality across some loan categories. Loan quality for commercial and industrial loans made to middle- and large-market companies should improve some during the next year, said nearly 60% of the 55 banks surveyed in the Fed's senior loan officer survey. Another 36% said loan quality would remain the same. Last year, 73% of survey respondents said they expected similar commercial and industrial loans to improve in 2011 …
  • Banks in the U.S.--already dealing with the national robo-signing mortgage scandal--may be susceptible to claims of shoddy record-keeping in other consumer lending areas, including the credit card market, according to an increasing number of academics, consumer attorneys, federal agencies, judges and state attorneys general (American Banker Jan. 30). If banks are unable to defend themselves against claims of poorly managed records, they could see a new regulatory clampdown and litigation about the validity of claims that involve tens of billions of dollars in unsecured debt, the Banker said. Robo-signers don't read the documents placed in front of them, and the notaries and witnesses that are supposed to watch them as they sign are not present. Robo-signing sometimes involves forgeries or fake titles affixed to signatures  …

Market News (01/31/2012)

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MADISON, Wis. (2/1/12)

  • U.S. home prices decreased more than expected in November, indicating distressed properties and more stringent mortgage requirements are a drag on the U.S. housing market and mitigating the effect of lower home prices and interest rates (The Wall Street Journal and Bloomberg.com Jan. 31). The Standard & Poors/Case Shiller index of property values in 20 cities fell more than 3.7% from November 2010, following a 3.4% decrease in the year ended in October. Economists had forecast a 3.3% decline for November, according to a survey by Bloomberg News. After showing some signs of bottoming, home prices took a turn for the worse, and more downside is coming, Ellen Zentner, a senior economist at Nomura Securities International Inc. in New York, told Bloomberg. Stronger wage and job growth would help reduce some of the foreclosures in the pipeline that haven't happened yet, she added …
  • With jobs hard to find and gasoline prices rising, U.S. consumer confidence unexpectedly fell in January, according to the Conference Board Consumer Confidence Index (Bloomberg.com and Moody's Economy.com Jan. 31). The index fell to 61.1 last month from a revised 64.8 in December, the New York-based private research group said Tuesday. Economists had forecast a December rise to 68, according to Bloomberg News. The decline ran counter to expectations of increasing confidence and indicated consumers are uncertain about an economic recovery, Moody's said …
  • For the fourth consecutive year, the U.S. federal budget deficit for fiscal year 2012 likely will exceed the $1 trillion mark because the economy still is growing listlessly, the nonpartisan Congressional Budget Office (CBO) forecast Tuesday (The Wall Street Journal and Bloomberg.com Jan. 31). The deficit is expected to modestly shrink to $1.1 trillion from $1.3 trillion last year. However, the CBO said its projection is based on budget and policy choices--such as spending cuts and tax increases--that lawmakers will decide on this year …

News of the Competition (01/30/2012)

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MADISON, Wis. (1/31/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced four bank closures Friday, bringing the year's total to seven. That compares with 92 for 2011. The FDIC estimated the latest failures will cost its Deposit Insurance Fund roughly $607 million. The banks are: Tennessee Commerce Bank, Franklin Tenn., assumed by Republic Bank &Trust Company, Louisville, Ky.; First Guaranty Bank and Trust Co. of Jacksonville, Fla., assumed by CenterState Bank of Florida, N.A., Winter Haven, Fla.; BankEast, Knoxville, Tenn., assumed by U.S. Bank, N.A., Minneapolis; and Patriot Bank Minnesota, Forest Lake, Minn., assumed by First Resource Bank, Savage, Minn. The closed banks held about $2.13 billion in assets ...
  • New York State's Department of Financial Services has issued subpoenas seeking information regarding force-placed property insurance to at least 18 mortgage servicers, 12 insurers and 20 affiliated insurance agencies (American Banker Jan. 27). Banks purchase force-placed property insurance on behalf of uninsured borrowers. It is coverage that protects creditors if the uninsured borrower's property is damaged, and it is a substantial business, the Banker said. Assurant Inc.--a big insurer--gets paid roughly $2 billion in annual premiums for the coverage, the publication said. New York State's Department of Financial Services did not comment on the matter, the Banker said … 

Market News (01/30/2012)

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MADISON, Wis. (1/31/12)

  • U.S. consumer spending was flat in December, even as personal income rose, because citizens decided to bolster their depleted savings rather than spend more (The Wall Street Journal and Bloomberg.com Jan. 30). Consumer purchases stalled last month after rising 0.1% in November, the Commerce Department said Monday. Meanwhile, personal income gained 0.4% in December after inching up 0.1% in November. Last month's figures demonstrate the importance of ongoing improvements in jobs and wages to ensure household purchases grow, Bloomberg said. A spending lull is OK if it has income backing it up, Jonathan Basile, an economist at Credit Suisse in New York, told Bloomberg. The main generator of future spending is household savings, he added …
  • Business confidence worldwide still is wary, consonant with a global economy that is growing at the low end of its potential, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Jan. 30). During the past three months, there has been no substantial change in sentiment, Moody's said. Businesses' assessments of current economic conditions and sales strength were the most positive responses to the survey. Specific questions about hiring and office-space demand garnered less positive responses. Also, equipment investment has been slow during the past several months. The survey's index of business confidence dropped to 19.1% for the week ended Jan. 27, from 23.5% the prior week …
  • Five big U.S. banks have significant exposure to the most economically stressed nations in the European debt crisis (The New York Times DealBook Jan. 29). The banks--JPMorgan Chase, Goldman Sachs, Bank of America (BofA), Morgan Stanley and Citigroup--collectively have more than $80 billion in exposure to Greece, Ireland, Italy, Portugal and Spain. Citigroup has the greatest percentage of protection against exposure at 47%, while BofA has the least, at 12%, according to an analysis of the banks' financial disclosures by the Times ...

News of the Competition (01/27/2012)

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MADISON, Wis. (1/30/12)

  • Discover Financial Services is preparing for a joint enforcement action--concerning the marketing of its credit card payment products--from the Consumer Financial Protection Bureau (CFPB) and the Federal Deposit Insurance Corp., according to a regulatory filing (American Banker Jan. 26). The action would constitute the first enforcement action against a bank concerning its payment protection product and perhaps the newly formed CFPB's first enforcement action, the Banker said. Payment protection plans are fee-based products that consumers can purchase to suspend credit card debt or else cancel it--in the event of unemployment, illness or death  ...
  • In an effort to correct an error connected to failed bank acquisitions, Enterprise Financial Services Corp. in St. Louis will restate six quarters' worth of financial statements in 2010 and 2011 (American Banker Jan. 26). The revised statements will be for the first, second and third quarters in 2010 and 2011. An accounting mistake related to an "inadvertent overstatement" of income on loans covered by a loss-sharing agreement with the Federal Deposit Insurance Corp. was discovered by the $3.4 million asset Enterprise. The company estimated that diluted earnings per share for 2010 will drop 20 cents to 25 cents as a result of the restatement …
  • MasterCard Inc. on Wednesday said it is testing a mobile payments system--the QkR app--that will allow users in Australia to choose between an embedded payment chip or bar code (American Banker Jan. 26). By scanning a QR (quick response) code--a square-shaped bar code typically used in print ads and posters--users can make purchases and pay for food. When scanned by a smartphone camera, the bar code provides information or launches an app. The system also can be used with a near-field communication chip or a typed code …

Market News (01/27/2012)

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MADISON, Wis. (1/30/12)

  • In the fourth quarter last year, the U.S. economy expanded at its fastest pace in more than a year and a half--since the second quarter of 2010--although questions remain on how sustainable the expansion will be this year (The Wall Street Journal and The New York Times Jan. 27). The U.S. gross domestic product--the value of all the products and services produced--increased at a 2.8% annualized rate in the quarter--up from a 1.8% gain in third quarter and 1.3% in the second quarter--the Commerce Department said Friday. However, all those rates are below the rate of economic expansion in the U.S. since World War II. Unemployment will not be reduced at those growth rates, Justin Wolfers, an economist at the University of Pennsylvania told the Times. The recovery of the economy has again been postponed, he added.  A positive sign is that consumers continued to increase their spending, with more citizens obtaining jobs and having their disposable incomes rise, while price increases eased, the Journal said. In a related matter, the Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--dropped to 122.8 for the week ended Jan. 20 from a revised 123.3 the prior week (Moody's Economy.com Jan. 27) …
  • The Thomson Reuters/University of Michigan Consumer Sentiment Index increased to 75 for January from 69.9 at the end of December (Moody's Economy.com and Bloomberg.com Jan. 27). The gain was driven by improvement in views of current conditions and in expectations for the future. The report also indicates that inflation expectations are mixed. Also, the Bloomberg Consumer Comfort Index inched up one point in the week ended Jan. 22 to -46.4 (Moody's Economy.com Jan. 26). All three segments of the index--views of the state of the economy, perceptions of the buying climate and personal finances--rose, amid jobless claims exhibiting a downward trend, Moody's said ….

News of the Competition (01/26/2012)

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MADISON, Wis. (1/27/12)

  • Bolstered by a one-time tax gain, Ford Motor Co. may post its most profitable year since 1998, when it reports its net income today, while problems in Asia and Europe trim fourth-quarter earnings (Bloomberg.com Jan. 26).  Ford may report net income in excess of $20 billion, owing to a roughly $14 billion gain from eliminating a valuation allowance against deferred tax benefits, corporate tax specialist Robert Willens told Bloomberg. Created in 2006 as Ford started reporting operating losses, the reserve is no longer needed by the automaker because it anticipates becoming profitable in the next few years and being able to use the tax benefits, a U.S. filing indicated …
  • In the prepaid card market, banks have an advantage over prepaid card companies, according to the American Banker (Jan. 26). Unlike banks, most prepaid card companies are marketers who do not own the technology necessary to produce the cards cheaply. Therefore, prepaid companies need to outsource nearly every component of their business--including card production, card distribution and customer service, the Banker said. That results in higher prices on cards from prepaid card companies relative to banks, the publication said  …
  • Recent cross-border deals by Sumitomo Mitsui Financial Group Inc.--the second largest bank in Japan--have U.S. investment bankers asking if the Japanese are joining Canadians banks, as some of the few foreign banks with the wherewithal and desire to acquire U.S. banking assets (American Banker Jan. 26). On consecutive days last week, the Tokyo banking conglomerate agreed Jan. 17 to pay $7.3 billion for the Royal Bank of  Scotland Group PLC's aircraft leasing division and followed up the next day by agreeing to pay roughly $93 million for a 5% stake in Moelis & Co., a New York investment bank  …

Market News (01/26/2012)

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MADISON, Wis. (1/27/12)

  • Initial claims for U.S. unemployment benefits increased last week, showing the typical volatility close to holidays that has veiled labor market improvement (Bloomberg.com Jan. 26). Claims for the week ended Jan. 21 rose 21,000--to 377,000--up from nearly a four-year low the prior week, the Labor Department said Thursday. An underlying trend of fairly low job layoffs is helping the labor market recovery remain on track, Scott Brown, chief economist at Raymond Jones & Associates Inc., in St. Petersburg, Fla., told Bloomberg. Meanwhile, continuing claims for unemployment benefits for the week ended Jan. 14 climbed to 3.554 million from 3.466 million the previous week, indicating the labor market still is on a long path to becoming healthy (Moody's Economy.com Jan. 26) …
  • For the first time in four months, U.S. new-home sales unexpectedly fell in December, culminating the slowest sales year on record since 1963 for homebuilders (Bloomberg.com and Moody's Economy.com Jan. 26). Purchases of single-family homes declined 2.2% to a 307,000 annualized rate, the Commerce Department said Thursday. Economists had forecast 321,000 home sales in December, according to a Bloomberg News survey of economists. Sales dropped 6.2% for all of 2011, compared with 2010. Months of home supply available on the housing market stood at 6.1 in December. The median new home price declined 13% year over year. In a related matter, the Federal Housing Finance Agency (FHFA) Thursday reported that the national average contract mortgage rate for the purchase of previously occupied homes by combined lenders, used as an index in some adjustable-rate mortgage contracts, was 4.15%, based on loans closed in December. That is a decrease of 0.07% from the previous month. For the FHFA report, use the link …
  • The Conference Board Index of Leading Indicators increased in December for a third consecutive month--a sign the largest economy in the world will continue to expand in early 2012 (Bloomberg.com and Moody's Economy.com Jan. 26). The New York-based private research firm's gauge of the outlook for the next three to six months rose 0.4% last month after gaining 0.2% in November. December's gain was buoyed by the interest-rate spread and jobless claims, Moody's said. Increases in consumer spending--the largest segment of the U.S. economy--and manufacturing are keeping the economic expansion moving forward, Bloomberg said …

News of the Competition (01/25/2012)

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MADISON, Wis. (1/26/12)

  • Some U.S. banks, including SunTrust Banks Inc. and Wells Fargo & Co., are increasing their non-credit card installment lending, while pursuing a new venue for growth in a fairly little-known area of the consumer banking business (American Banker Jan. 24). These typically unsecured "personal" loans are used by customers instead of credit card or home equity loans to pay for expenses such as medical bills or home improvement projects. This consumer loan niche is helping banks build their business from a broader customer base, which includes higher-risk customers that banks eschewed during the nadir of the financial crisis, the Banker said …
  • Banks providing cash management to small businesses are now seeing alternative competitors because of an existing transaction automation gap, according to the American Banker (Jan. 24).  One of those alternatives, Bill.com, offers the technology company's treasury management "command center," designed to provide businesses a single view of bills and expenses. That in turn, allows those with treasury responsibilities a way to prioritize the flow of cash in and out of an organization, the Banker said. Partly because of technology and corporate culture integration issues, most banks have not put together the different components of corporate payments to form a well-developed and tested complete business-cash management engine, the Banker said …
  • RushCard--a reloadable prepaid card developed by UniRush LLC--will lower its fees, founder and music magnate Russell Simmons announced Tuesday (American Banker Jan. 24). Specific cuts were not announced, but the RushCard's prices already were cut within the past year when in January 2011 the card-activation costs were either $3.95 or $14.95, compared with the prior cost of $19.95. The 2011 cut was in response to outrage at the celebrity-endorsed Kardashian Kard, a short-lived product, which charged up to a year's worth of fees in advance  ...   

Market News (01/25/2012)

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MADISON, Wis. (1/26/12)

  • After reaching a 19-month high, pending home sales eased in December but stayed above year-ago levels, according to the National Association of Realtors (NAR). The Pending Home Sales Index--a forward-looking indicator based on contract signings--declined 3.5% to 96.6 in December from 100.1 in November but is 5.6% above December 2010 when it was 91.5. The data reflect contracts but not closings. Lawrence Yun, NAR chief economist, said the trend line remains positive. "Even with a modest decline, the preceding two months of contract activity are the highest in the past four years outside of the homebuyer tax credit period," he said. "Contract failures remain an issue, reported by one-third of realtors over the past few months, but home buyers are not giving up." For the NAR report, use the link …
  • The Mortgage Bankers Association (MBA) said mortgage loan applications decreased 5% for the week ended Jan. 20 from one week earlier, according to its Market Composite Index, part of its Weekly Mortgage Applications Survey released Wednesday. The results include an adjustment to account for the Martin Luther King Jr. holiday. On an unadjusted basis, the index declined 13.8%. The Refinance Index dropped 5.2%. The seasonally adjusted Purchase Index fell 5.4%. The unadjusted Purchase Index decreased 9.7% and was 6.5% lower than the same week one year ago. Refinancings accounted for 81.3% of total applications, down from 82.2%. The adjustable-rate mortgage share of activity declined to 5.3% from 5.6% of total applications. The four-week moving average for the seasonally adjusted Market Index is up 4.12%. The four-week moving average for the seasonally adjusted Purchase Index rose 0.47%, while this average increased 4.85% for the Refinance Index. For the MBA survey, use the link …
  • U.S. house prices rose 1% on a seasonally adjusted basis from October to November, according to the Federal Housing Finance Agency's (FHFA) monthly House Price Index. The previously reported 0.2% decrease in October was downwardly revised to reflect a 0.7% decline. For the 12 months ending in November, prices fell 1.8%. The U.S. index is 18.8% below its April 2007 peak and roughly the same as the February 2004 index level. The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine census divisions, seasonally adjusted monthly price changes from October to November ranged from -0.2% in the Middle Atlantic division to +2.1% in the West South Central division. For the FHFA report, use the link …

Fed forecast means net-margin pressure possible lower loan losses

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WASHINGTON and MADISON, Wis. (1/26/12)--Wednesday's unprecedented actions by the Federal Reserve's monetary policymaking body--the Federal Open Market Committee--will have implications for credit unions' net margins and possibly on loan losses, according to a Credit Union National Association economist.

In its first meeting of 2012, the Federal Reserve's policymakers announced they will maintain a "highly accommodative stance for monetary policy" by keeping the federal funds target rate at near zero levels likely through at least late 2014 and by continuing with its Operation Twist program announced in September.  It also for the first time released individual panel members' projections for the long range.

"In an unprecedented move, the Federal Reserve published a forecast of its own monetary policy decisions," said Steve Rick, CUNA senior economist. "The Federal Reserve's new communication strategy is an attempt to provide more transparency regarding its goals, strategy and tools," he told News Now after the meeting.

"Greater transparency should reduce financial uncertainty on both Wall Street and Main Street, which could then encourage faster economic growth. The Fed projects the economy to expand between 2.2% and 2.7% in 2012, and roughly half a percentage point more in 2013," Rick said.

He noted the Fed "also announced an explicit long-term inflation goal of 2%, as measured by the annual change in the personal consumption expenditure price index. This should help anchor bond market inflation expectations. The implication of stable and low inflation expectations are lower long-term interest rates farther into the future.

"What does this mean for credit unions? Don't expect short-term interest rates to rise until late 2014 because the economy will be operating below potential for the next several years," Rick said.

"This will maintain downward pressure on asset yields and funding costs until most loans and deposits are repriced at today's lower interest rates. Credit union net interest margins (yield on assets minus cost of funds) are expected to decline from 3.18% in 2011 to 3.10% in 2012 as asset yields fall faster than funding costs. This eight-basis-point drop in net interest margin is expected to be offset by a 10-basis-point drop in provisions for loan losses (as a percent of assets) resulting in a slight boost to the bottom line," Rick said.

"If the Fed's actions can stimulate additional economic growth, that will mean lower credit union loan charge-offs and further reductions in loan loss provisions. So what the Fed [policymakers] may take away from us in lower margins, they may give back in lower loan loss provisions," Rick concluded.

In a statement after its two-day meeting, the FOMC noted that since it met in December, the economy "has been expanding moderately, notwithstanding some slowing in global growth."

The committee noted that while indicators point to further improvement in overall labor market conditions, the unemployment rate remains elevated. "Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable," said the FOMC statement.

In maintaining its dual mandate to foster maximum employment and price stability, the committee said it expects "economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the committee's dual mandate."

"To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the committee expects to maintain a highly accommodative stance for monetary policy." The FOMC, in deciding to keep the target range for the federal funds rate at 0% to 0.25%, said it anticipates "that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014."

The committee also decided to continue its program to extend the average maturity of its holdings of securities, the Operation Twist program announced in September. It is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities into agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability, said the statement.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen.

Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.

NEW Fed will keep near zero rates through 2014

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WASHINGTON (1/25/12--Filed at 1:15 p.m. ET)--In their first meeting of 2012, the Federal Reserve's policymakers announced they will maintain a "highly accommodative stance for monetary policy" by keeping the federal funds target rate at near zero levels likely through at least late 2014 and by continuing with its Operation Twist program announced in September.

In a statement after its two-day meeting,  the Federal Open Market Committee (FOMC) said today that since it met in December, the economy "has been expanding moderately, notwithstanding some slowing in global growth."

The committee noted that while indicators point to further improvement in overall labor market conditions, the unemployment rate remains elevated. "Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable," said the FOMC statement.

In maintaining its dual mandate to foster maximum employment and price stability, the committee said it expects "economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the committee's dual mandate.

"To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the committee expects to maintain a highly accommodative stance for monetary policy."  The FOMC decided to keep the target range for the federal funds rate at 0% to 0.25% and said it anticipates "that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014."

The committee also decided to continue its program to extend the average maturity of its holdings of securities, the Operation Twist program announced in September. It is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities into agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The  committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability, said the statement.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen.

Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.

News of the Competition (01/24/2012)

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MADISON, Wis. (1/25/12)

  • Big U.S. banks in the fourth quarter took substantial hits from mortgage-related expenses, according to quarterly reports filed this month (American Banker Jan. 23). Banks incurred charges for complying with federal mortgage-servicing standards, resolving foreclosure and litigation costs, paying for an upcoming settlement with state attorneys general and costs of repurchasing soured loans, the Banker said. The situation prompted JPMorgan Chase & Co. CEO Jamie Dimon to comment earlier this month that his company was "getting killed in mortgages."  Other banks that took big hits include U.S. Bancorp (a $130 million charge for the settlement with state attorneys general and $34 million for servicing) and PNC ($240 million in expenses for the settlement and servicing, including foreclosure costs) …
  • Bank CEOs in the U.S. are espousing caution when it comes to merger and acquisition strategy this earnings season, according to American Banker (Jan. 24). Customer growth was rated ahead of acquisitions for Huntington Banchares Inc.'s strategic objectives, company Chairman and CEO Stephen Steinour told the Banker. He added that minimizing fees and prices to attract customers is the bank's core strategy. For Fifth Third Bancorp, merger and acquisition activity will remain a closely monitored alternative that will warrant a disciplined approach, CEO Kevin Kabat told the Banker
  • A surge in consolidation among smaller U.S. banks could pique the interest of investors looking to profit from companies willing to sell (American Banker Jan. 23).  Private equity and other groups in the aftermath of the financial crisis opted to invest in banks they figured could be acquirers, the publication said. Several deals announced last week nationwide indicate smaller banks want to sell amid escalating regulatory costs and difficulties in achieving revenue growth, the Banker said. Opportunities are good for investors to take ownership of a bank, turn it around and sell it, Matthew Kelly, an analyst at Sterne Agee Group Inc., told the Banker … 

Market News (01/24/2012)

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MADISON, Wis. (1/25/12)

  • The International Monetary Fund (IMF) Tuesday reduced its growth estimates for the global economy, citing the threat of the European debt crisis and looming recession, and slowing growth in China and India (The Wall Street Journal and Bloomberg.com Jan. 24). The IMF said the worldwide economy will grow 3.3% this year and 3.9 % in 2013, compared with September forecasts of 4% and 4.5% respectively. The near-term financial outlook has significantly eroded, said the IMF in an update to its World Economic Outlook report. It added that increased strains in Europe and fragile conditions elsewhere are threatening the global recovery ...
  • The International Council of Shopping Centers (ICSC) chain store sales index for last week still reflects a moderation in spending (Moody's Economy.com Jan. 24).  The index dropped 1.4% for the week ended Jan. 21--the second decrease in the past three weeks. Year-over-year growth dipped 2.8%, with sales posting a noticeable decline in the comparable week a year ago. Winter storms in a substantial part of the U.S. reportedly hurt sales, ICSC said ...

Historic Fed meeting marks communication change

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WASHINGTON (1/25/12)--In its first meeting of 2012, the Federal Open Market Committee (FOMC)--the Federal Reserve's policymaking body--is not expected to announce any new policies such as more quantitative easing or similar measures. However, today's meeting will mark the first time in history that the Fed will provide projections for the Fed funds rate based on individual members' forecast.

The two-day meeting that concludes this afternoon is expected to release a policy statement, with individual voting committee members offering their expectations for the direction of  future interest-rate  (Forbes Jan. 23).  The Fed is expected to disclose where committee members want rates to go in the future, including guidance on how long they expect to continue the current policy of holding short-term borrowing rates at close to zero (MSNBC.com Jan. 24).

For many years in its 94-year history, the Fed did not announce interest rate targets publicly.  But under Fed Chairman Ben Bernanke, the Fed has committed to more transparency and communication of its projections.

Also at today's meeting, the composition of the committee shifts, with four Fed Presidents rotating off and four others rotating into panel positions that vote on policy.  Rotating into the voting positions are Fed Presidents Sandra Pianalto, Cleveland; Jeffrey Lacker, Richmond; Dennis Lockhart, Atlanta; and John Williams, San Francisco.

No longer casting votes on policy moves are regional Fed presidents, Richard  Fisher, Dallas; Charles Plosser, Philadelphia; Charles Evans, Chicago; and Narayana Kocherlakota, Minneapolis.

Watch for News Now's updates this afternoon about the meeting.

News of the Competition (01/23/2012)

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MADISON, Wis. (1/24/12) 

  • The Federal Deposit Insurance Corp. (FDIC) announced the first three bank closures of the year Friday. That compares with 92 for 2011. The closed banks held about $636 million in assets. The banks are: Central Florida State Bank, Belleview, Fla., assumed by CenterState Bank of Florida N.A., Winter Haven, Fla.; The First State Bank, Stockbridge, Ga., assumed by Hamilton State Bank, Hoschton, Ga.; and American Eagle Savings Bank, Boothwyn, Pa., assumed by Capital Bank, N.A., Rockville, Md. The FDIC estimated the latest failures will cost its Deposit Insurance Fund roughly $244 million ...
  • The renewed surge in the U.S. credit card lending industry is causing American Express Co. and Capital One Financial Corp. to spend more to attract the best customers, according to their fourth-quarter earnings reported Thursday (American Banker Jan. 23). Although loans at both companies have increased, expenses also have gone up. Card-lender spending has analysts becoming more worried, the Banker said. Capital One's non-interest expenses surged 25% in the quarter to $2.6 billion from a year earlier. American Express' costs inched up only 1% to $5.6 billion from a year ago, but analysts had been saying for many quarters that the company's expenses already were too high …
  • First Niagara Financial Group Inc. in Buffalo, N.Y.,  announced Friday it is selling 27 branches to two upstate New York rivals a week after it closed a deal to sell 37 branches to KeyCorp (American Banker Jan. 23). First Niagara said it is selling 19 branches and $955 million in deposits to Community Bank System Inc. in Syracuse. First Niagara also is selling eight branches and $376 million in deposits to Financial Institutions Inc. in Warsaw, N.Y. The divestitures are part of the $31 billion asset First Niagara's planned acquisition of 195 New York and Connecticut branches from HSBC Bank USA …

Market News (01/23/2012)

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MADISON, Wis. (1/24/12)

  • In the 50 days ended Jan. 18, U.S. stock trading dropped to the lowest level since at least 2008, amid financial sector job cuts and mutual fund withdrawals (Bloomberg.com Jan. 23). During the 50-day period, about 6.69 billion shares were traded on U.S. exchanges--excluding over-the-counter locations--that began three years ago, according to Bloomberg data. One of the most volatile years on record for the Standard & Poor's 500 Index and five years of withdrawals from mutual funds that purchase U.S. securities have caused the slowdown in trading, Bloomberg said. Shaky U.S. investors need to see improvement in the U.S. economy and a plan for Europe to deal with its debt crisis before there can be an increase in trading volume, Mark Turner, head of U.S. sales at Instinet Inc. in New York, told Bloomberg  ...
  • The head of the International Monetary Fund (IMF) is urging European finance ministers to substantially augment the bailout funds available to euro-zone countries (The New York Times and The Wall Street Journal Jan. 23). Christine Lagarde, IMF managing director, said at a financial conference in Berlin that the move is necessary to create a bigger firewall to prevent destabilizing the global financial system. Identifying a definitive and feasible timetable for getting the fund to function would be in everyone's best interests, she added. Without a larger emergency bailout fund, two of Europe's biggest economies--Italy and Spain--risk becoming insolvent, Lagarde said …
  • Although business sentiment worldwide has solidified since the summer's downturn caused by U.S. political squabbling over the national debt ceiling and the re-emergence of the European debt crisis, it still remains guarded and tenuous, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Jan. 23). Sales that remain solid and business's strong view of current economic conditions are the most positive aspects of the survey, Moody's said. However, responses were more negative to questions about hiring, inventory investment and demand for office space, Moody's said …

News of the Competition (01/20/2012)

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MADISON, Wis. (1/23/12)

  • U.S. banks' allowance rates for losses from bad credit card loans are set to rebound from record lows in the first quarter, although releases of those allowances continued to hurt banks' bottom lines in recent earnings reports (American Banker Jan. 19). At four of the six biggest issuers, charge-off rates--the annualized debt amount written off as uncollectable as a percentage of outstanding receivables--declined in December, per disclosures filed Tuesday. The improvement in charge-off rates runs in contrast to the usual seasonal increase at this time of year. The decline in delinquency percentages is typical of the seasonal pattern. However, rises in delinquency percentages last fall auger increased write-off rates early in 2012, the Banker said …
  • General Motors (GM) regained its spot as the World's No. 1 automaker in 2011, after three years of finishing in second place (The New York Times Jan. 19). GM's sale grew in every global region, while Toyota's sales were diminished by major natural disasters, the Times said. GM sold 9,025,042 vehicles last year--a 7.6% increase over 2010. Volkswagen came in second place with 8.156 million vehicles sold, a 14% increase. Toyota dropped to third place, with an estimated sales decline of 6% to 7.9 million vehicles. The Japanese automaker has not released its final sales results for 2011 …
  • American Express Co. (AmEx) finished a record year for profit in 2011with fourth-quarter income that jumped 12% while customer spending spiked (Bloomberg.com Jan. 20). Net income at the world's biggest credit card issuer by purchases was $1.19 billion for the quarter, or $1.01 per share, up from $1.06 billion, or 88 cents per share, a year earlier, AmEx said in statement issued Thursday. Profit for 2011 rose 22% to $4.9 billion  …

Market News (01/20/2012)

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MADISON, Wis. (1/23/12)

  • The probability that the U.S. will be in recession six months from now is rapidly fading because the economy is gaining strength, according to a risk of recession gauge issued by Moody's Economy.com (Jan. 20). The gauge dropped to 29% in December from 34% in November--the third consecutive monthly decline--placing the probability of recession at its lowest level since June. Rising consumer confidence and high equity prices helped the odds of another recession decline, Moody's said. In a related matter, the Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--increased to 123.4 for the week ended Jan. 13--its second consecutive weekly gain--from 121.1 the prior week (Moody's Economy.com Jan. 20). The smoothed, annualized growth rate lessened its decline to 7.5--a huge departure from the steady fall of the past few weeks, ECRI said …
  • U.S. existing-home sales continued on an uptrend in December, rising for a third    consecutive month and remaining above the year-ago level, according to the National Association of Realtors (NAR). The latest monthly data shows total existing-home sales rose 5% to a  seasonally adjusted annual rate of 4.61 million in December from a downwardly revised 4.39 million in November. The sales are 3.6% higher than the 4.45 million-unit level in December 2010. The estimates are based on completed transactions from multiple listing services that include single-family homes, townhomes, condominiums and co-ops. Lawrence Yun, NAR chief economist, said these are early signs of what may be a sustained recovery. "The pattern of home sales in recent months demonstrates a market in recovery," he said. "Record-low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market." For all of 2011, existing-home sales rose 1.7% to 4.26 million from 4.19 million in 2010.  For the NAR report, use the link …
  • The Bloomberg Consumer Comfort Index did a turnabout, dropping 2.7 points to land at -47.4 for the week ended Jan. 15--down from -44.7 the prior week (Moody's Economy.com Jan. 19). Sentiment in all three of the survey segments fell. Perceptions of personal finances (-7.5) fell the most, 4.9 points. Sentiment regarding the buying climate (-52.2) declined 2.8 points. Perceptions of the state of the economy (-82.5) inched 0.4 of a point lower. Moods were down in most U.S. geographic regions, with the Midwest seeing the only improvement. Despite improved financial market and labor conditions, perceptions have deteriorated because unresolved European debt issues and gas prices that have increased 20 cents in the past month are making consumers wary, Moody's said …

News of the Competition (01/19/2012)

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MADISON, Wis. (1/20/12)

  • Bank of America (BofA) swung to a fourth-quarter profit to put a positive finish on a troubled year, although the specter of continuing weakness on Wall Street endures (The New York Times DealBook and The Wall Street Journal Jan. 19). BofA's quarterly earnings were $2 billion, or 15 cents per share, compared with a loss of $1.2 billion in fourth quarter 2010.  Fourth quarter last year was replete with gains and one-time charges from asset sales and mortgage issues--indicating the second-largest U.S. bank by assets is struggling with the past while it seeks to position itself for the future, the Journal said …
  • Morgan Stanley reported a fourth-quarter loss largely because the investment bank was negatively impacted by a large legal charge related to a settlement, although higher equity trading revenue led the company to do better than anticipated (The New York Times DealBook and The Wall Street Journal Jan. 19). Morgan Stanley posted a loss of $227 million, or 15 cents per share, compared with a profit of $871 million, or 41 cents per share, a year ago. Analysts had forecast a loss of 57 cents per share for the quarter …
  • The Department of Justice, state attorneys general and the Department of Housing and Urban Development (HUD) are close to finalizing a legal settlement regarding "robo-signing" allegations against the top dozen or so U.S. ranked servicers, Shaun Donovan HUD secretary, said Wednesday (American Banker Jan. 18). Robo-signers don't read the documents placed in front of them, and the notaries and witnesses that are supposed to watch them as they sign are not present. Robo-signing sometimes involves forgeries or fake titles affixed to signatures. About one million borrowers will receive some manner of meaningful principal reduction on their mortgage debt, Donovan said at a U.S. Mayors Conference in Washington, D.C. …

Market News (01/19/2012)

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MADISON, Wis. (1/20/12)

  • U.S. housing starts dropped 4.1% in December, culminating the worst year for single-family home construction on record and indicating a comeback in the industry will need more time (Bloomberg.com and Moody's Economy.com Jan. 19). Starts declined to an annualized rate of 657,000 last month, reflecting stagnation in multifamily dwellings, the Commerce Department said Thursday. Building permits--a proxy for future construction--slid slightly but remained relatively unchanged. An industry-wide recovery is being thwarted by ongoing foreclosures and falling home prices, Bloomberg said. Construction work began on just 428,600 single-family homes in 2011 because new construction had to compete with a large supply of previously owned dwellings, Bloomberg said …
  • Initial U.S. claims for unemployment benefits decreased last week to the lowest level since April 2008, a sign the labor market is continuing its upward trend that began late in 2011 (The Wall Street Journal and The New York Times Jan. 19). Claims dropped 50,000--to a seasonally adjusted 352,000--for the week ended Jan. 14, according to Labor Department figures released Thursday. Last week's decline was the largest single-week decrease since Sept. 24, 2005. When initial weekly claims consistently come in below 375,000, it normally indicates that hiring is sufficient to keep the unemployment rate down. However, a Labor Department spokesman said that volatility is common this time of year, and many states estimated their claims data because of the Martin Luther King holiday, the Journal said. Meanwhile, continuing claims for unemployment benefits for the week ending Jan. 7 fell to 3.432 million from 3.647 million the prior week (Moody's Economy.com Jan. 19) …
  • In December, for the second consecutive month, the cost of living in the U.S. as indicated by the consumer price index (CPI) was relatively unchanged because fuel expenses dropped and stores reduced prices to bolster holiday sales (Bloomberg.com Jan. 19). Inflation has not registered a positive reading for three consecutive months (Moody's economy.com Jan. 19). Excluding volatile food and energy costs, the core CPI increased 0.1%. Retailers such as Macy's  and Williams-Sonoma Inc. discounted  their merchandise to entice customers who were hampered by stalled incomes and declining property values as housing market struggles continue, Bloomberg said …

News of the Competition (01/18/2012)

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MADISON, Wis. (1/19/12)

  • There could be more merger and acquisition activity among California's banks because of the growing number of small banks operating under regulatory enforcement actions (American Banker Jan. 17). In 2011, there were 116 California banks and holding companies operated under regulatory orders--about one third of all banks in the state and more than twice the number of banks with such orders in 2009, according to Trepp LLC data. Although failures have closed some troubled banks, regulators soon may begin urging stragglers to find buyers, industry observers told the Banker
  • Several U.S. banks, including PNC Financial Services Group Inc., U.S. Bancorp and Goldman Sachs, reported their fourth-quarter results Wednesday. PNC Financial Services Group saw its quarterly profit plunge 42% because the lender was beset with hefty one-time charges--related to residential foreclosure expenses and redemption of trust preferred securities--and a revenue decline (American Banker Jan. 18). U.S. Bancorp--the fifth-largest U.S. lender by deposits--announced a 39% increase in its fourth-quarter profit buoyed by falling costs related to souring loans (Bloomberg.com Jan. 18). Goldman Sachs--the fifth-biggest U.S. bank by assets--saw its deposits nosedive 58% in the quarter to $1.01 billion, or $1.84 per share, from $2.39 billion, or $3.79 per share for the same period last year, as it coped with bland economic conditions domestically and abroad (The New York Times DealBook and Bloomberg.com Jan. 18) …
  • The Federal Bureau of Investigation (FBI) Wednesday announced it filed charges against seven people in a growing probe into insider trading (The Wall Street Journal Jan. 18). The FBI in Boston arrested Todd Newman, a former portfolio manager who supervised technology investments with hedge-fund firm Diamondback Capital Management. The FBI separately arrested Jon Horvath, a technology analyst with Sigma Capital Management, an affiliate of hedge fund SAC Capital Advisors, in Manhattan.  Anthony Chiasson, a co-founder of former hedge-fund group Level Global Investors LP, surrendered to the FBI in New York. In California, agents arrested Danny Kuo, a vice president and technology-fund manager with the Whittier Trust Co. in South Pasadena.  Also charged are: Spyridon "Sam" Adondakis, a former Level Global analyst who worked under Chiasson; Jesse Tortora, an ex-Diamondback analyst who worked under Newman; and Sandeep "Sandy" Goyal, of mutual fund company Neuberger Berman Group LLC, according to a criminal complaint unsealed Wednesday …

Market News (01/18/2012)

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MADISON, Wis. (1/19/12)

  • U.S. mortgage loan application volume surged 23.1% for the week ended Jan. 13 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the Index increased 38.1%. "Interest rates dropped last week due to continuing anxieties regarding the fragile economic situation in Europe," said Michael Fratantoni, MBA vice president of research and economics. "With mortgage rates reaching new lows, refinance volume jumped and MBA's refinance index reached its highest level in the last six months. Purchase activity also increased as buyers returned to the market after the holiday season." The Refinance Index increased 26.4% to its highest level since Aug. 8. The seasonally adjusted Purchase Index rose 10.3% to its highest level since Dec. 12. The unadjusted Purchase Index jumped 28.4%, which was a 2.2% gain compared with the same week one year ago. For the MBA report, use the link …
  • Wholesale prices in the U.S. dropped in December--the second decline in the past three months--because prices that companies paid for food and energy substantially decreased (The New York Times, The Wall Street Journal and Bloomberg.com Jan. 18). The producer price index--which is a gauge of how much wholesalers and manufacturers pay for goods and materials--declined 0.1% on a seasonally adjusted basis in December from November, according to Labor Department figures released Wednesday. Excluding volatile food and energy costs, core wholesale prices rose by 0.3%--the biggest increase since July …
  • U.S. industrial production increased 0.4% in December after falling 0.3% in November, according to the Federal Reserve. The rise reflects gains in demand for automobiles, business equipment and construction materials (Bloomberg.com Jan. 18). For the fourth quarter as a whole, industrial production rose at an annual rate of 3.1%--its 10th consecutive quarterly gain. In the manufacturing sector, output advanced 0.9%, with similarly sized gains for both durables and nondurables. The output of utilities fell 2.7% because unseasonably warm weather reduced the demand for heating. The output of mines moved up 0.3%. At 95.3% of its 2007 average, total industrial production in December was 2.9% above its level of a year earlier. The capacity use rate for total industry rose to 78.1%, a rate 2.3 percentage points below its long-run (1972--2010) average. For the Federal Reserve's release, use the link ...

News of the Competition (01/17/2012)

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MADISON, Wis.  (1/18/12)

  • MetLife Inc. announced its home loans unit will be closed down, putting 4,300 people out of work. The action indicates that U.S. banks still consider business as extremely risky five years into the national housing downturn (American Banker Jan. 17). Although it was once considered the safest asset class around, mortgages now are thought of as toxic, Bill Dallas, chairman and CEO of Skyline Financial Corp, a mortgage bank in Agoura Hills, Calif., told the Banker. MetLife will absorb a $90 million to $100 million after-tax charge for closing the business, which it put up for sale in October, the publication said ...
  • Investors like it when U.S. banks rid themselves of nonperforming assets in bulk, according to American Banker  (Jan. 17). Banks that are more aggressive in putting their  performance metrics in the best light are favored by institutional investors, Jason O'Donnell, an analyst at Boenning & Scattergood Inc, told the Banker. However, O'Donnell added he doesn't buy into that rationale because he focuses more on the long term, and believes bulk sales of assets can lessen shareholder value …
  • Citigroup Inc.'s fourth-quarter earnings dropped 11% from a year earlier and revenue declined 7% because--although the bank has experienced an ongoing recovery from the financial crisis--slow growth in lending and the industry's investment banking slump are prevailing (The New York Times DealBook and The Wall Street Journal Jan. 17). Profit for the quarter was $1.16 billion, or 38 cents per share. Also, Wells Fargo & Co.--the biggest U.S. bank by market value--recorded a 20% rise in its fourth-quarter profit--driven by an increase in mortgage financing, the bank said (Bloomberg.com Jan. 17). Net income  increased to $4.11 billion, or 73 cents per share, from  $3.41 billion, or 61 cents per share a year earlier …

Market News (01/17/2012)

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MADISON, Wis. (1/18/12)

  • About 55% of independent U.S. business owners are optimistic about the future, based on a survey of 1,000 respondents in a poll by Newtek Business Services, a CUNA Strategic Services provider. Also, 64% are positive about their 2011 year-end results. In another survey, U.S. businesses still are tentative at the beginning of 2012, according to the Moody's Analytics Survey of Business Confidence (Moody's economy.com Jan. 17). Although sentiment has solidified following the revival of the European debt crisis and U.S. political turmoil last summer, confidence remains fragile and shows no indication of making a breakthrough, Moody's said. Strong points of the survey include sales reaming solid and a good assessment of current economic conditions. Weaker responses came in the areas of office space demand, hiring and inventory investment …
  • U.S. federal prosecutors are furthering their investigation of Standard & Poor's (S&P) ratings of troubled mortgage securities during the financial crisis, according to a source familiar with the matter and former analysts questioned by prosecutors (The Wall Street Journal Jan. 17). The inquiry is centered on whether the S&P's managers ignored its own standards when it assessed the mortgage products to help banking clients that wanted to sell the securities, said former S&P analysts. Justice Department officials have contacted at least five former S&P analysts in the past few weeks as a component of a civil inquiry into the McGraw Hill Cos. unit, the former analysts said …

News of the Competition (01/13/2012)

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MADISON, Wis. (1/17/12)

  • Bank of America (BofA) told U.S. regulators that if its financial problems worsen, it would be willing to retreat from some areas of the U.S., said a source familiar with the matter (The Wall Street Journal Jan. 13). BofA executives placed that possible action on a list of emergency scenarios it provided the Federal Reserve last year, the sources said. Although no retreat is imminent, say people close to BofA, the mere possibility of a branch sell-off and loss of customers that the bank spent profusely to attract, highlights the severity of its problems, the Journal said …
  • Revolving credit in November posted a surprise increase as credit card users slipped in paying off their bills, after being vigilant in making regular payments following the financial crisis (American Banker Jan. 13). The recurrence of a steep seasonal slip in payment rates--the percentage of outstanding balances that cardholders pay off each month--could possibly be seen as a sign that consumers are rolling over their debt because they feel better about their economic futures, the Banker said. However, despite the recent dip, payment rates still are near peak levels, the publication added  ...
  • JPMorgan Chase Friday said its fourth-quarter profit plunged 23%, but the bank still saw a $19 billion profit, or $4.48 per share, for 2011. That is up 9% from $17.4 billion, or $3.96 per share, a year earlier (The New York Times DealBook Jan. 13). The bank said its commercial lending operation and credit card business showed indications of improving …

Market News (01/13/2012)

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MADISON, Wis. (1/17/12)

  • For the first time in five months, the U.S. trade deficit widened because of increased imports of crude oil and automobiles and sagging exports to Europe (The Wall Street Journal and Bloomberg.com Jan. 13). The trade gap surged 10.4%--the largest rise since May--to $47.75 billion, the Commerce Department said Friday. The October trade deficit was given a downward revision to $43.27 billion from an original estimate of $43.47 billion. U.S. exports hit a four-month low. Exports are being hurt by slower growth abroad, while imports are bolstered by an increase in inventory accumulation (Moody's economy.com Jan 13) ...
  • U.S. consumer confidence increased to its highest level in eight months, indicating household spending may continue in early 2012  (Bloomberg.com and Moody's economy.com Jan. 13).  The Thomson Reuters/University of Michigan consumer sentiment index rose 4.1 points to 74 from 69.9 at the end of December. The index showed improvement in consumers' views of current conditions end expectations, Moody's said. Cheaper gasoline and the lowest unemployment rate in nearly three years may be lifting household sentiment and boosting consumer spending, which constitutes 70% of the U.S. economy, Bloomberg said. However, declining home prices and limited wage gains may hamper larger advances in confidence, Bloomberg added …
  • Construction and sales of homes in the U.S. will recover this year, adding "modestly" to growth after dragging on economic expansion since 2006, said a Fannie Mae forecast released Friday (Bloomberg.com Jan. 13). Housing starts are forecast to increase 16%--propelled by a bounce-back in single-family house construction and improvement in apartment development. Also, sales of new and existing homes likely will rise 3.5%, according to the report by Fannie Mae Chief Economist Douglas Duncan, and Orawin Velz, a director in its economics and mortgage market analysis group. High unemployment and worries about job security have engendered weak demand that has depressed the housing market--negating the advantages afforded consumers by low borrowing costs and falling home prices, Duncan said ... 

News of the Competition (01/12/2012)

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MADISON, Wis. (1/13/12)

  • New York's insurance regulator, the Department of Financial Services, is investigating banks and insurers--including Citigroup Inc. and Assurant Inc.--about home insurance prices charged to mortgage borrowers, said a source familiar with the matter (Bloomberg Business Week Jan. 11). The department is trying to determine whether homeowners were saddled with overpriced "force-placed insurance"--which is issued to protect property securing a mortgage loan when a homeowner's original coverage lapses--the source said. The department is examining relationships among companies involved, pricing practices and whether kickbacks are being paid, the source said …
  • Although JPMorgan Chase & Co. likely will be the most profitable U.S. company when it reports its earnings today, Wells Fargo & Co. could be narrowing the gap (Bloomberg.com Jan. 12). Projections by analysts in a Bloomberg poll indicate JPMorgan will report a record $18.5 billion in 2011 earnings--a 6% gain, when adjusted for one-time items. Wells Fargo is estimated to have surged four times as much, achieving an all-time earnings high of $15.3 billion, the analysts forecast …
  • President Barack Obama's appointment of Richard Corday--allegedly made while the U.S. Senate was in recess--to head the Consumer Financial Protection Bureau (CFPB) could face legal challenges "likely to come from every quarter," Candi Wolff, Citigroup' executive vice president for community affairs, said in a blog post Wednesday (American Banker Jan. 11). Whether the U.S. Senate was in recess or not, several important questions remain, Wolff wrote, such as to what extent litigation would impact the CFPB's effectiveness, how the president's actions will affect other nominees, and what precedent has been set by the president's move ….

Market News (01/12/2012)

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MADISON, Wis. (1/13/12)

  • U.S. home seizures could surge 25% in 2012 because banks may foreclose on one million homes in the aftermath of legal scrutiny of their foreclosure practices, which stalled actions against property owners who were delinquent on their mortgage payments in 2011, according to RealtyTrac Inc. (Bloomberg.com Jan. 12). Last year, roughly 1.89 million properties received notices of default, auction or repossession--the lowest total since 2007 and down 34% from 2010, RealtyTrac said Thursday. One in 69 households received a filing last year …
  • Retail sales in the U.S. during December increased less than expected in part because holiday sales discounts and cheaper fuel prices mitigated the value of goods sold (Bloomberg.com Jan. 12). Also, a jump in auto purchases was offset by declines in sales of electronics, gasoline and groceries (The Wall Street Journal Jan. 12). Last month's 0.1% increase followed a 0.4% gain in November, the Commerce Department said Thursday. Economists had predicted a 0.3% rise for December, according to a Bloomberg News survey. Sales excluding automobiles dropped 0.2%--the first decrease since May 2010 …
  • Initial claims for U.S. unemployment benefits increased last week, pointing to the possibility that a higher-than-usual rise in temporary holiday hiring bolstered companies' payrolls in December (Bloomberg.com Jan. 12). Claims dropped 24,000--to 399,000--for the week ended Jan. 7, the Labor Department said Thursday. Retailers and package delivery companies that boosted hiring during the holidays to meet gift demand, may now be increasing dismissals as demand abates, Bloomberg said. Meanwhile, continuing claims for unemployment benefits rose to 3.628 million for the week ended Dec. 31 from 3.609 million the prior week (Moody's economy.com Jan. 12) ...

News of the Competition (01/11/2012)

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MADISON, Wis. (1/12/12)

  • The Federal Deposit Insurance Corp. (FDIC) has told five community banks they must improve their ratings on their most recent Community Reinvestment Act (CRA) examinations (American Banker Jan. 10). The banks receiving "need to improve" ratings are: OneUnited Bank in Boston, which is a designated community development lender; St. Casimir's Savings Bank in Baltimore; Bank of Hamilton in North Dakota; and two Texas banks--Fort Davis State Bank and United Central Bank in Garland. The FDIC assigned the ratings in October and made them public last week in the agency's monthly list of banks examined for CRA compliance. Five other banks received "outstanding" ratings and 54 received "satisfactory" grades ...
  • A broad range of U.S. companies have endured a tough economy and now are paying out their best dividends to shareholders since the financial crisis (The New York Times Jan. 10). That trend will persist into 2012 because companies will release more of their cash to entice investors, who still are reluctant to place their money back into stocks, the Times said. Standard & Poor's 500-stock index companies paid $240.6 billion in dividends in 2011--up from $205 billion in 2010. Last year's payout was the most since 2008--before firms were confronted by the total force of the financial crisis and paid a record $247.8 billion in dividends, the Times said …

Market News (01/11/2012)

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MADISON, Wis. (1/12/12)

  • U.S. mortgage loan applications increased 4.5% for the week ended Jan. 6 from one week earlier, according to Mortgage Bankers Association's (MBA) Market Composite Index, which is part of MBA's Weekly Mortgage Applications Survey. On an unadjusted basis, the index jumped 34.4%. The Refinance Index increased 3.3% and the seasonally adjusted Purchase Index rose 8.1%. The unadjusted Purchase Index surged 41.9% and was 17.9% lower than it was the same week one year ago. The refinance share of mortgage activity decreased to 80.8% of total applications from last week's survey high of 81.9%. The adjustable-rate mortgage (ARM) share of activity increased to 5.4% from 4.7% of total applications the previous week. The four-week moving average for the seasonally adjusted Market Index is down 0.53%. The four-week moving average declined 1.92% for the seasonally adjusted Purchase Index, while this average is down 0.09% for the Refinance Index. For the MBA report, use the link …                          
  • The International Council of Shopping Centers (ICSC) chain store sales index nosedived 5.4% for the week ended Jan. 7 (Moody's economy.com Jan. 10). Despite the frequency of volatility in January when sales tend to be low, last week saw the biggest weekly decline on record and brought the index down to a level last seen in mid-October, ICSC said. Year-over-year growth dipped steeply to 2.8%--the lowest rate in seven weeks--from 5.3% the prior week. Rising gasoline prices and warm weather increased consumer caution, ICSC said …

Fed Beige Book Economy expanded at modest to moderate pace

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WASHINGTON (1/12/12)--The U.S. economy expanded at a "modest-to-moderate" pace at the end of 2011, according to the Federal Reserve's Beige Book, a survey of business contacts in the Fed's 12 districts.  That constitutes an improvement from the mid-November report, which indicated some districts were growing at a "slow" pace.

The most recent report is based on information collected from late November through Dec. 30. The report, compiled by the San Francisco Fed, provides Fed officials with a sense of conditions as they prepare for their next monthly policy meeting Jan. 24-25.

Seven districts--Atlanta, Boston, Cleveland, Kansas City, Minneapolis, Philadelphia and St. Louis--characterized growth as modest, said the report. Of the remaining five, New York and Chicago noted a pickup in the pace of growth, Dallas and San Francisco reported moderate growth, and Richmond said activity flattened or slightly improved.

Consumer spending increased in most districts, indicating significant gains in holiday retail sales compared with last year's season. Also, activity in the travel and tourism sector grew in most areas.

Reports from financial institutions generally showed a small uptick in loan demand by businesses and improvements in overall credit quality, said the report.

Upward price pressures and price increases remained mostly limited for most categories of final goods and services because the effects of price increases in the costs of certain inputs have eased.

Overall, lending activity inched up mostly because of increased loan demand by businesses, said the Fed. Most districts that commented on lending activity indicated little or no change in overall loan demand, but the remaining districts noted increases. New York reported a substantial increase in demand for commercial mortgages.

Lending standards were mostly unchanged across all lending categories. A few reports highlighted that small businesses continued to struggle with credit access through banks.

Credit quality improved in many districts, highlighted by New York reporting a decline in delinquency rates for all loan categories. Also, Philadelphia, Richmond, Kansas City, Dallas and San Francisco all reported general improvement in loan quality.

For more information, use the link.

Fed Consumers debt in Nov. is largest hike since 2001

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WASHINGTON (1/11/12)--Consumers' debt in November totaled $2.48 trillion, rising $20.4 billion from October at an annual rate of 10%, according to the Federal Reserve's Consumer Credit report released Monday. It is the largest increase since November 2001 and the highest level of borrowing since September 2009.

The overall consumer debt increase was nearly twice as big as the highest forecast in a Bloomberg News survey of economists. The median forecast had projected an increase of $7 billion. It signals that a drop in the nation's unemployment rate is encouraging consumers to take advantage of holiday discounts, buy cars to replace their worn out vehicles, and to finance higher education, said Bloomberg  (Jan. 9) .

Credit union members also increased the amount they borrowed from credit unions. Members borrowed $225.1 billion from credit unions in November, compared with $224.6 billion in October and $226.5 billion at the end of 2010.

Overall revolving credit, which includes credit cards, rose by $5.6 billion or an annual rate of 8.5%, the biggest increase since March 2008, to $798.3 billion.  At credit unions, members borrowed $37.1 billion, compared with $36.8 billion in October and $36.3 billion at the end of 2010.

Overall  nonrevolving credit, which includes auto, mobile home and student loans, grew by $14.8 billion or 10.75% at an annual rate--the most since February 2005--to $1.679 trillion.  At credit unions, members borrowed $188.1 billion in November, compared with $187.8 billion in October and $190.1 billion at the end of 2010.

The Fed's report does not track debt secured by real estate such as first mortgages and home equity lines of credit.

News of the Competition (01/10/2012)

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MADISON, Wis. (1/11/12)

  • In attempts to comply with new regulations that cap debit card interchange fees, U.S. banks are asking card networks to provide them with more data so banks can make sure they are not receiving more fees per transaction than they are supposed to receive (American Banker Jan. 9). Capital One Financial Corp., a McLean, Va.-based bank, has requested that the card networks make more data available on an ongoing basis regarding transactions processed under the new fee caps, Candace Davis, Capital One associate general counsel, told the Banker. New Federal Reserve Board rules implemented in October capped the fees that banks can charge merchants every time their customers buy goods or services with debit cards. The Fed capped fees at roughly 24 cents per transaction, as part of a Dodd-Frank Act amendment. They had averaged about 44 cents per transaction before the law regulated debit card interchange fees …
  • Personal finance expert Suze Orman has launched a prepaid card--the Approved card--which allows users to move money into six vessels besides spending that facilitate long-term savings (American Banker Jan. 9). The card also offers ongoing access to TransUnion credit reports for one year and promotes "sticky" banking practices such as online bill payment. The long-term savings accounts are designed to facilitate an emergency fund for eight months of expenses--something that Orman has long urged consumers to do, the Banker said. The card, issued by Bancorp Bank of Wilmington, Del., is a MasterCard Inc. product that also provides users with a dashboard to monitor spending and to set alerts and notifications …

Market News (01/10/2012)

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MADISON, Wis. (1/11/12)

  • The November Job Openings and Labor Turnover Survey (JOLTS) indicated scant progress in the labor market recovery, according to the Bureau of Labor Statistics (Moody's economy.com Jan. 10). The number of job openings barely changed on Nov. 30 from Oct. 31 at roughly 3.2 million and the job opening rate slid down to 2.3% from 2.4%. The number of hires went up to 4.1 million in November from 4 million in October. November's number and pace of separations were basically unchanged from the prior month. Although private sector hiring remains slightly stronger than separations, hiring is not sufficient yet to power more robust job growth, Moody's said …
  • The confidence of small-business owners again rose in December for the fourth consecutive month, according to the National Federation of Independent Business' (NFIB) small-business optimism index (The Wall Street Journal and Moody's economy.com Jan. 10). The index increased 1.8 points to 93.8 last month from 92 in November. The index's level is consistent with weak growth despite recent gains, NFIB said, adding the index is close to readings during the recession. A greater share of small businesses surveyed said now is a favorable time to expand, while hiring plans eased in December. In a related matter, worldwide business confidence at the beginning this year is unsteady, but definitely up from the downturn it took last summer during political turmoil in the U.S. and worries about the  European debt crisis, according to Moody's Analytics Survey of Business Confidence (Moody's economy.com Jan. 9). The most encouraging  signs from the survey are businesses' strong assessment of current economic conditions and their expectations regarding the first half of this year's economic outlook, Moody's said …
  • U.S. wholesale inventories rose less than expected in November because distributors had a hard time keeping up with demand, an indication that manufacturing will help power the economic recovery (Bloomberg.com and The Wall Street Journal Jan. 10). Inventories increased 0.1% to a seasonally adjusted $468.88 billion, following a 1.2% gain in October, the Commerce Department said Tuesday. Economists had forecast a 0.5% increase, according to a Bloomberg News survey. Wholesalers kept enough available goods--the inventory-to-sales ratio--to last 1.15 months based on the current sales pace--which is near the record low of 1.13 months posted in March last year …. 

News of the Competition (01/09/2012)

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MADISON, Wis. (1/10/12)

  • Wells Fargo & Co. allegedly released the Social Security numbers of economically stressed New England customers who asked for public assistance from the Connecticut Department of Social Services, according to a letter sent by the Connecticut attorney general George C. Jaspen to James M. Strother, senior executive vice president and general counsel at Wells Fargo (American Banker Jan. 6). The Connecticut department had listed the customer information on at least two subpoenas issued to Wells Fargo because the department was trying to verify those customers' assets before providing them with food stamps. Wells then allegedly sent unredacted copies of those documents to reportedly more than 100 customers that were named in the legal proceedings, the Banker said. The Connecticut Attorney General's letter said that he is looking for further information from Wells about the matter …
  • Maryland residents who lost their homes to foreclosure after receiving "Pick-a-Payment" mortgages originated by lender Wells Fargo &Co. will receive remuneration (American Banker Jan. 6). Wells Fargo will pay nearly $1 million to residents, per an agreement with the state Consumer Protection Division announced Thursday by the Maryland Attorney General's office. The bank also agreed to look for ways to help "at-risk" borrowers who signed "Pick-a-Payment" contracts and still possess their homes. The loans originally were written by either Wachovia Corp. or Golden West Financial. Wachovia acquired Golden West in 2006, and Wells took over the troubled Wachovia in 2008 …
  • Although he denied wrongdoing in a scandal involving currency trades he and his wife allegedly carried out last year, Philipp Hildebrand, president of Swiss National Bank (SNB), resigned Monday ending his two-year tenure (The Wall Street Journal Jan. 9). SNB announced his resignation days after Hildebrand had said he would not resign following disclosures that he and his wife made currency trades in 2011--about the time the Swiss central bank was interceding in foreign-exchange markets to rein in the rise of the value of the Swiss franc, the Journal said …

Market News (01/09/2012)

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MADISON, Wis. (1/10/12)

  • Although the U.S. job market is gaining momentum and is indicating a sustained recovery may be in the works, the long-time battle with unemployment will leave wounds that will take years, if not generations, to overcome (The Wall Street Journal Jan. 9). December saw a bright spot with the U.S. economy adding 200,000 new jobs, but economists at the American Economic Association's annual convention said the recession already has caused a lasting effect on a generation of workers, the Journal said. Long-term unemployment rates have been unprecedented and could negate recent gains because the longer people are unemployed, the less likely they are to procure new jobs, research indicates. Also, even if the employment rate were to rebound to a healthy level by the end of 2012--which experts say isn't likely--the length and depth of the economic and unemployment crisis will have a lasting effect on individuals, the labor market and the economy as a whole, the Journal said …
  • An international organization of financial regulators--the Basel Committee on Banking Supervisions' oversight panel--Sunday said that while more liquidity was always better for banks, that did not mean they could dip below required levels (The New York Times Jan. 8). Since the financial crisis, regulators have urged large banks to raise their capital levels and ensure short-term liquidity to side-step cash flow problems that nearly brought the financial system down in 2008, the Times said. The panel said it would issue more details to clarify the liquidity coverage ratio, or LCR, rules "to state explicitly that liquid assets accumulated in normal times are intended to be used in times of stress"  …

News of the Competition (01/06/2012)

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MADISON, Wis. (1/9/12)

  • U.S. bankers will confront more challenges than ever in 2012 to manage their balance sheets because deposits have far exceeded weak loan growth and the Federal Reserve Board has said it will keep interest rates low through next year (American Banker Jan. 5). That will put the onus on bank managers to come up with methods to bolster net income, the Banker said. Bankers need to find a balance between the need to make loans in the short term versus a long-term situation in which more than a tenth of low-cost deposits will be gone when better investment opportunities reappear, say industry observers …
  • Small-business owners in the U.S. are becoming more positive about the prospects that their revenue growth will pick up in the first quarter of 2012, according to a TD Bank survey of 300 business owners issued Thursday (American Banker Jan. 5). Roughly 75% said they anticipated meeting or exceeding revenue projections in the quarter, compared with 61% in a previous survey in which respondents said they believed they would meet or exceed revenue projections during the fourth quarter of 2011. However, less than half the respondents in the most recent survey said they were optimistic about the U.S. economy's condition …

Market News (01/06/2012)

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MADISON, Wis. (1/9/12)

  • The U.S. economy added 200,000 non-farm new jobs in December, according to Labor Department figures released Friday, a strong showing that indicates the economic recovery may be hitting its stride (The New York Times and The Wall Street Journal Jan. 6). Private companies added 212,000 jobs, while the public sector--which includes local, state and federal governments--shed 12,000 jobs. The 200,000 gain follows a revised 100,000 increase in November that was smaller than originally estimated, the Labor Department said. The addition of jobs helped the U.S. unemployment rate drop to 8.5% last month--the lowest since February 2009--from 8.7% in November. In a related matter, the U.S. Monster Employment Index--which measures online help-wanted ads placed by U.S. employers--fell seven points in December from November--a 5% drop-off, according to Monster Worldwide Inc. (Moody's economy.com Jan. 6) …
  • The Economic Cycle Research Institute (ECRI) future inflation gauge rose in December to 98.6 from a revised 98.4--originally 98.3--constituting the second consecutive month of minimal change since the measure reached its lowest level of 2011 in October (Moody's economy.com Jan. 6). The gauge has been in a downswing since hitting its cyclical peak in March. Last month's uptick does not change the consensus that U.S. inflation pressures are abating, ECRI said. Also, the ECRI weekly leading index--which measures economic growth--decreased to 120.2 for the week ending Dec. 30 from a revised 120.7 the prior week. The decline is the fourth consecutive one and indicates that risks ahead are significant and warrant caution, ECRI said. In a related matter, the International Monetary Fund (IMF) lowered its global forecast for growth in 2012 to below the 4% level it predicted in its September World Economic Outlook (The Wall Street Journal Jan. 6) …

Europe will drag economic growth CUNA tells ICNBCI

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MADISON, Wis. (1/6/12)--The situation in Europe can continue to slow economic growth. However, it would not lead to a recession, a Credit Union National Association (CUNA) economist told CNBC in a story posted on its website Thursday.

"We've had a lot of really good economic news over the past couple of months, but what troubles me most is that we do face a lot of uncertainty (and) volatility going forward from Europe," said Mike Schenk, CUNA's vice president of economics and statistics.

"Europe will continue to be a drag on economic growth this year, but won't necessarily drag us into a recession," he told CNBC.com.

He noted that the road to recovery in Europe continues to be bumpy and could produce a domino effect there that could impact consumer confidence in the U.S.

Stocks have been under pressure this week with the nervousness  over the European debt crisis and the decline of the euro to its lowest level since September 2010, the article said.

Use the link to access the full article.

News of the Competition (01/05/2012)

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MADISON, Wis. (1/6/12)

  • Worldwide business confidence slipped during the last week of 2011, likely because the holidays caused a low survey response rate, according to Moody's Analytics Survey of Business Confidence (Moody's economy.com Jan. 3). Businesses are positive about present business conditions and expectations for the outlook during the first half of 2012. Conversely, they are less optimistic about hiring, inventory investment and office-space demand. Overall, business sentiment--although fragile after recovering from the fallout during the political battles over the U.S. Treasury's debt ceiling this summer--is consonant with a worldwide economy that is expanding at the bottom end of its potential, Moody's said …
  • The hiring of a new CEO by Yahoo Inc. could mean it will no longer be the sole major Internet brand without a payments service (American Banker Jan. 4). Scott Thompson from PayPal Inc. has been tapped to fill the position left vacant since September when Carol Bartz was fired. Thompson has extensive payments experience and basically developed a new network for PayPal, so payments should become a priority at Yahoo, Beth Robertson, director of payments research at Javelin Strategy and Research, told the Banker

Market News (01/05/2012)

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MADISON, Wis. (1/6/12)

  • Initial U.S. claims for unemployment benefits decreased last week, indicating the labor market is in better shape at the start of the new year, than in last year (Bloomberg.com Jan. 5). Claims dropped 15,000--to 372,000--for the week ended Dec. 31, the Labor Department said Thursday. A decline in job cuts shows that employers may feel better about the size of their work forces and their economic outlooks at the start of the new year, Bloomberg said. Meanwhile, continuing claims for unemployment for the week ended Dec. 24 fell to 3.595 million from 3.617 million. Also, the number of people impacted by job cut announcements in December declined to 41,785 from 42,474 in November, according to the Challenger Report, issued by Challenger, Gray and Christmas Inc. (Moody's economy.com Jan. 5). In a related matter, U.S. companies added more workers in December than anticipated--a signal the U.S. labor market was gaining steam as it headed into 2012, according to a private report issued by payroll company Automatic Data Processing (The Wall Street Journal and Bloomberg.com Jan. 5). The 325,000 gain was the most in records dating back to 2001 …
  • The Institute for Supply Management's (ISM) index of nonmanufacturing industries increased to 52.6 in December from 52 in November--the first monthly gain since August (Bloomberg.com and Moody's economy.com Jan. 5). New orders inched up to 53.2 from 53. The business-activity index stayed the same, and backlog order dropped to 45.5 from 48. However, the index still is below its third-quarter average of 53. Nonmanufacturing industries constitute roughly 90% of the U.S. economy. The ISM survey monitors industries such as finance, health care, retailing and utilities ...
  • Although holiday sales in December were respectable for retailers, they weren't sufficient to constitute a blockbuster shopping season (The New York Times Jan. 5). Even though sales at stores open at least one year at major retail chains increased 3.4%, as indicated by Thomson Reuters, those sales were mostly made through large discounts that probably will lead to lower retailer profits, the Times said. Also, for the third consecutive week, the International Council of Shopping Centers' (ICSC) sales index showed robust growth (Moody's economy.com Jan. 4). The index went up 1.2% for the week ended Dec. 31, preceded by gains of 0.9% and 3.4% in the prior two weeks …

News of the Competition (01/04/2012)

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MADISON, Wis. (1/5/12)

  • Small U.S. banks will be impacted by the Federal Reserve's set of proposed Dodd-Frank rules, even though the rules target the nation's biggest financial firms (American Banker Jan. 3).  Although the 173-page proposal applies to bank-holding companies with more than $50 billion in assets, it is the descendant of prompt corrective action that applies to all banks, Margaret Thayer, a bank attorney with Davis Polk & Wardell LLP, told the Banker. As time goes by, early remediation could become a best practice at community banks--either through regulation or supervisory practices, she added. Regulators would be able to intervene based on the detection of certain triggers--including risk-management weakness, capital levels and stress-test results--under the Fed's proposed requirements for early remediation …
  • The credit card industry's total revenue in 2011 fell 5.5% to $154.9 billion from $163.9 billion in 2010, according to a report issued Tuesday by credit card advisory firm R.K. Hammer (American Banker Jan. 3). The Hammer report is a combination of estimated revenues from all U.S.-issued private-label and general-purpose credit cards. A major impetus for the downturn is consumers using their credit cards less, making their revolving debt drop during the past two years, the Banker said. Because of continuing pressures to mitigate a loss in revenues, card issuers are contemplating cutting expenses even more by cutting additional staff or outsourcing operations abroad, the Banker said …
  • U.S. automakers saw strong domestic sales in December to finish 2011 on a solid note, with expectations for more growth in 2012 (The New York Times Jan. 4). In December, sales at Chrysler surged 37%, Ford Motor Co. jumped 10%, and General Motors (GM) rose 5%. For last year, Chrysler's sales were up 26%, GM's rose 13%, and Ford's increased 11% ...

Market News (01/04/2012)

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MADISON, Wis. (1/5/12)

  • U.S. mortgage applications decreased last week, said the Mortgage Bankers Association (MBA). Applications for the week ending Dec. 30 dropped 3.7% from the week ending two weeks earlier on Dec. 16, according to MBA's Market Composite Index, part of its Weekly Mortgage Applications Survey. The Market Composite Index, a measure of total mortgage loan application volume, was 39% higher in the last two weeks of 2011 than in the last two weeks of 2010, on a seasonally adjusted basis. The refinance share of mortgage activity for the week ending Dec. 30 increased to 81.9% of total applications. That is the highest refinance share for 2011. "Mortgage application activity declined over the last two weeks, even after adjusting for the typical seasonal decline in activity," said Michael Fratantoni, MBA vice president of research and economics. "Refinance applications continue to account for the vast majority of total application volume, with the refinance share reaching its highest level in 2011. As part of legislation to extend the payroll tax holiday, guarantee fees for loans purchased by the government sponsored enterprises and mortgage insurance premiums for Federal Housing Administration loans will eventually increase. Given the announced implementation of this change, we do not expect to see an impact on mortgage rates and application activity until at least February."  For the MBA report, use the link …
  • For the first time in three months, U.S. factory orders rose in November because of increased demand for aircraft and other goods (The Wall Street Journal and Bloomberg.com Jan. 4). Orders went up 1.8% in November to $459.18 billion--following a 0.2% decline in October, revised from a previously estimated decline of 0.4%--according to Commerce Department figures released Wednesday. Economic growth in early 2012 should be buoyed by a continuing increase in manufacturing production spurred by improved consumer spending and lean inventories, Bloomberg said ...
  • The six biggest U.S. banks could see an average profit increase of 57% in 2012, according to a Bloomberg compilation of 184 analysts' estimates (Bloomberg.com Jan. 3). Last year, earnings per share likely dropped 18% because the economic recovery that analysts expected never hit its stride, Bloomberg said. That performance came after analysts had forecast that bank profits in 2011 would rise 32%. This year, lower credit costs, expense-cutting measures, better trading results and more investment banking deals should engender an earnings increase for banks that they didn't see in 2011, Bloomberg said …

Fed to release members individual forecasts FOMC minutes

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WASHINGTON (1/4/12)--In a major policy shift, the Federal Reserve's policy making body, the Federal Open Market Committee (FOMC), will begin publishing FOMC members' projections of the target Fed funds rate for years into the future.

The shift is part of Fed Chairman Ben Bernanke's advocacy for greater transparency at the central bank and was announced Tuesday in the FOMC's Dec. 13 meeting minutes. Bernanke has said that greater transparency would provide markets with more detailed information about how the Fed likely would act to change policy in the future (Financial Times Jan. 3). Communicating the Fed's intentions has been a topic at the past two committee meetings.

By announcing its  members' forecasts, the Fed likely will alter expectations or speculation about the timing of any increase in its benchmark rate, which it has kept near zero since December 2008 (Bloomberg.com Jan. 3). At the December meeting, FOM's statement repeated the view that economic conditions would  warrant "exceptionally low levels for the federal funds rate at least through mid-2013."

The FOMC minutes noted that the committee's participants "turned to a further consideration of the ways in which the committee might enhance the clarity and transparency of its public communications.  The subcommittee on communications recommended an approach for incorporating information about participants' projections of appropriate future monetary policy into the Summary of Economic Projections (SEP), which the FOMC releases four times each year."

The projections will start with the next FOMC meeting on Jan. 24-25, according to the minutes.

In the SEP, "participants' projections for economic growth, unemployment, and inflation are conditioned on their individual assessments of the path of monetary policy that is most likely to be consistent with the Federal Reserve's statutory mandate to promote maximum employment and price stability, but information about those assessments has not been included in the SEP," said the minutes.

"Specifically, the SEP will include information about participants' projections of the appropriate level of the target federal funds rate in the fourth quarter of the current year and the next few calendar years," the minutes said. "Over the longer run, SEP also will report participants' current projections of the likely timing of the first increase in the target rate given their projections of future economic conditions."  Projections will include a narrative describing key factors underlying the assessments and qualitative information about participants' expectations for the Fed's balance sheet, said the minutes.

Most committee participants agreed that the policy shift "would help the public better understand the committee's monetary policy decisions and the ways in which those decisions depend on members' assessments of economic and financial conditions," said the document.

However, "some participants expressed concern that publishing information about participants' individual policy projections could confuse the public; for example, they saw an appreciable risk that the public could mistakenly interpret" them as "signaling the committee's intention to follow a specific policy path rather than as indicating members' conditional projections …given their expectations regarding future economic development."

"Most participants viewed these concerns as manageable," said the minutes.

For the full minutes, use the resource link.

News of the Competition (01/03/2012)

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MADISON, Wis. (1/4/12)

  • Because reloadable prepaid cards constitute a different set of risks to bankers than debit cards, U.S. banks scrutinized the offering of prepaid cards in 2011 with more intensity than in past years (American Banker Dec. 30). Banks last year considered prepaid cards more as a means to reach unbanked customers or as a mechanism for mitigating lost revenue under the Dodd-Frank Act, the Banker said.  Debit cards are a perk to customers who have checking accounts and can be used to pay major bills. Conversely, prepaid cards are designed for use as an alternative to cash for online shopping and other expenditures, and are widely seen as disposable, the Banker said. Banks need to be more aware of the money being reloaded onto cards with prepaid cards, while with debit cards, banks look more at how money is spent, Phil Valvardi, Fiserv Inc.'s general manager of prepaid services unit, told the Banker
  • Independent sales organizations (ISOs) face risk and opportunity in 2012 because of competition, uncertainty and attacks (American Banker Dec. 28). Increasing renewal fees may cause some companies to stop registering as ISOs with card brands and instead opt to become sales agents for other ISOs, Duane Haskett, vice president for agent/ISO business development at Priority Payment Systems LLC, an ISO based in Alpharetta, Ga., told the Banker. Also, merchant acquirers are being attacked by competitors outside the community who are looking to take opportunities away, Paul Coppinger, president of Apriva Inc., told the publication. However, ISOs can transform themselves into being consultants, rather than just sales people, by providing value-added services, the Banker said  …

Market News (01/03/2012)

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MADISON, Wis. (1/4/12)

  • There likely won't be a large increase in consumer spending in 2012, economists say, because consumers have used their savings to pay for increases in daily living expenses, such as food, gas and rent, and also have relied on credit cards for holiday shopping (The New York Times Jan. 2). Because consumer spending constitutes 70% of the U.S. economy, it won't expand much until consumers open their wallets more, the Times said. For the first half of the year, growth should be about 2%--down from a previous estimate of 3.6% in the fourth quarter of 20l1, according to forecasting company Macroeconomic Advisers. Consumer spending is lethargic because of modest job growth and flat incomes. More than 40% of new job creation in the past two years has been in sectors with low pay such as hospitality and retail, the Times said …
  • U.S. manufacturing continued to grow in December, and construction spending increased in November (The Wall Street Journal and Moody's economy.com Jan. 3). Manufacturing last month rose to 53.9 from 52.7 the prior month, according to the Institute for Supply Management's (ISM) Manufacturing Index. Readings above 50 indicate an expansion of activity. ISM subindexes in December increased from November for new orders (to 57.6 from 56.7), production (59.9 from 56.6), and factory employment (55.1 from 51.8). Also, construction spending increased 1.2% in November to a seasonally adjusted annual rate of $807.11 billion, the Commerce Department said Tuesday. The broad-based gains included increases in residential and nonresidential construction spending. Although October spending was revised downward, construction spending still is trending up, Moody's said …
  • Although the economy has slowed down in Europe and most of the rest of the world, the U.S. economy is gaining momentum because of holiday sales gains, fewer job cuts and increasing confidence in the economy (Bloomberg.com Dec. 30). The contrast will become more obvious this year as the world's biggest economy gains steam, the 17-member European economy slips into recession and emerging markets cool off, Bloomberg said. More available credit and an improving labor market could bolster U.S. consumer sentiment and spending, while the European debt crisis engenders more fiscal austerity, Bloomberg said. In a related matter, governments of the top economies in the world will have more than $7.6 trillion of debt maturing in 2012--up from $7.4 trillion this time in 2011--with most governments confronting an increase in borrowing costs (Bloomberg.com Jan. 3). Japan has the most debt maturing this year at $3 trillion, followed by the U.S. at $2.8 trillion …