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News of the Competition (10/31/2012)

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MADISON, Wis. (11/1/12)

  • Looking forward, in the wake of Hurricane Sandy, U.S. bankers are realizing that some of their branches and many of their customers could be nonfunctioning for some time (American Banker Oct. 30). Because Sandy hit at the end of the month, it was especially disruptive to banks that were processing their business clients' payroll payments--which made restoration of that process a No.1 priority of some bank-management teams, the Banker said. Banks' business continuity plans should include making sure that ATMs are fully stocked with cash and having emergency staff ready to help with any post-storm needs, Vivica Ware, the senior vice president of regulatory policy for the Independent Community Bankers of America, told the Banker
  • U.S. consumer groups are asking that fair lending data--race, ethnicity and geography--be used to decide whether the five largest mortgage servicers are offering appropriate relief to communities most severely impacted by foreclosures (American Banker Oct. 30). The Foreclosure Working Group of Americans for Financial Reform sent a letter last week to Joseph A. Smith, the independent monitor of the national mortgage settlement, asking him to put into the settlement a new metric that would gauge fair lending compliance, the Banker said. The metric would require that consumers in communities with high foreclosure rates be provided with principal reductions, the Banker said …
  • The Basel Committee on Banking Supervision released its fourth status report on Basel III--a grouping of capital and liquidity rules--this week. The report indicates eight of the more than two dozen countries involved have adopted it (American Banker Oct. 30). Progress on the nonbinding plan--created by the 27-member committee to bolster capital standards for banks that are active worldwide--was released this week, the Banker said. Although it is anticipated countries will start adopting the rules Jan. 1, there will be a series of phase-in stages for countries to gradually comply with all requirements by 2019, the publication added …

Market News (10/31/2012)

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MADISON, Wis. (11/1/12)

  • U.S. mortgage applications declined by 4.8% for the week ended Oct. 26 from the prior week, according to the Mortgage Bankers Association (MBA) Market Composite Index (Moody's Economy.com and cnbc.com Oct. 31). The overall index was pulled down by a fourth consecutive weekly decline in refinance applications, which declined 6% from the prior week. Refinancing has dropped 24%, compared with four weeks ago, but still remains 26% above its year-ago level. Small but consistent rises in mortgage interest rates are stifling refinancing activity, MBA said. Also, purchase applications remain flat, with the Purchase Index increasing just 0.5% from the previous week, MBA added. Although the Market Composite Index is 21% lower than four weeks ago, it has risen nearly 21% during the past year, MBA said …
  • Business activity in the U.S. unexpectedly shrank in October for a second consecutive month, according to the Institute for Supply Management (ISM)-Chicago Index, intensifying indications that manufacturing is slipping from its prominent position in the economic recovery (Bloomberg.com and Moody's Economy.com Oct. 31). The ISM-Chicago gauge climbed to 49.9 last month from 49.7 in September. A reading of 50 is the divider between expansion and contraction. Economists had predicted a reading of 51, according to a Bloomberg survey. U.S. manufacturing is hurting because worldwide economic weakness is dampening exports, Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Fla., told Bloomberg. Also, uncertainty about the rapidly approaching fiscal cliff may keep consumers cautious and wary of spending more, he added …
  • U.S. workers' compensation--in the form of pay and benefits--modestly grew in the third quarter, implying that an unsettled labor market still is holding down compensation (The Wall Street Journal Oct. 31). The employment-cost index increased 0.4%  from the second quarter, the Labor Department said Wednesday. Economists had forecast a 0.5% gain, according to a Dow Jones Newswires survey. Worker compensation increased 0.5% in the second quarter ...

Sandys impact on economy could be 20B

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MADISON, Wis. (11/1/12)--Hurricane Sandy's impact on the economy may result in $10 billion to $20 billion in total economic damages and $5 billion to $10 billion in insured losses, according to estimates from catastrophe-risk modeling company Eqecat. 

Sandy cut a destructive swath across a region inhabited by 60 million people, accounting for roughly a quarter of the $13.6 trillion U.S. economy, according to estimates provided by Eric Lascelles, the Toronto-based chief economist at RBC Global Asset Management Inc., to Bloomberg.com (Oct. 31).

The storm's short-term damage is likely to result in the economy growing more slowly during the fourth quarter than it did during the summer when it grew at a slow 2% annual pace (The Wall Street Journal Oct. 30).

Sandy may slash output of the U.S. economy by $25 billion in the fourth quarter, Gregory Draco, a U.S. economist at IHS Global Insight, told Bloomberg.  If that happens, it would cut the fourth- quarter growth rate to between 1% and 1.5% from IHS Global Insight's earlier forecast of 1.6%.

In the short term, economic activity will be shifted or delayed--such as when money not spent in a fast-food restaurant this week is spent at a movie theater next week, the Journal said. Other commerce will be on the upswing as homeowners purchase products and materials to repair storm damage and construction crews rebuild properties.

Also, as people prepared for the storm, home-improvement stores and grocers saw higher-than-normal sales, the Journal said.

"The effects are very far reaching due to the size of the storm," Risk Management Solutions (RMS) said in a statement (PropertyCasualty360.com Oct. 30).  "Expect to see a lot of building damage and auto damage due to tree-fall over a wide area. Business interruption, fire-following damage, coastal surge damage, and inland flooding will all contribute to the total losses."  

More than seven million people across 15 states are without power, said RMS, a catastrophe modeler.

In total, nearly 284,000 residential properties among the coastal Mid-Atlantic states valued at roughly $88 billion are at risk for damage from the storm surge, according to estimates from real estate market observer CoreLogic (USA Today Oct. 30).

A huge number of insurance claims adjusters have arrived or are on their way to the hardest-hit areas to confront the gigantic task of evaluating damage, calculating costs for it, and determining whether insurance covers it (USA Today Oct. 31).

USA Today said insurance companies have sufficient money to cover the enormous costs of damage done by one of the most severe storms to hit the East Coast, according to a consensus of experts.

News of the Competition (10/30/2012)

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MADISON, Wis. (10/31/12)

  • Wells Fargo is sending refund offers to nearly 10,000 Federal Housing Administration  (FHA) borrowers who were directed into FHA loans from 2009 through 2011 (American Banker Oct. 29). Wells--the top U.S. originator of home loans--admitted that those borrowers could have qualified for less costly conventional financing. After an internal review discovered the errors, Wells began mailing letters and refund checks to borrowers in September, Vickee Adams, Wells spokeswoman told the Banker. The refunds were not spurred by any regulatory actions nor were they related to a lawsuit filed by the U.S. Attorney's office in Manhattan earlier this month. The suit alleges Wells engaged in more than 10 years of misconduct in originating and underwriting FHA loans  …
  • Citigroup is in the process of revamping its credit card program, including a makeover of Private Pass--Citi's long-time rewards program that organizes tickets and special events for Citi credit and debit card customers (American Banker Oct. 29). The program was introduced a year ago with a focus on concerts, but in recent months events connected to family activities, sports and food were added, the Banker said. For 2012, Citigroup said it has 10,000 Private Pass events on the agenda--a 23% increase from 2011 …
  • Ford Motor Co. reported a flat third-quarter profit of $1.63 billion--down 1.1% from $1.64 billion in third quarter 2011, with the automaker's North American unit posting record profits that helped mitigate higher taxes and losses in Europe (The Wall Street Journal, The New York Times and Bloomberg.com Oct. 30). Ford's worldwide revenue dipped to $32.1 billion from $33.1 billion a year ago. The results highlight Ford's domestic successes, but also its growing problems in Europe--where the auto market is seeing its lowest sales levels in nearly 20 years, the Times said  …

Market News (10/30/2012)

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MADISON, Wis. (10/31/12)

  • Home prices in 20 U.S. cities--for the year ended in August--rose by the most in two years, an indication that housing will continue to power economic growth, according to Standard & Poor's Case-Shiller Home Price Indexes (Bloomberg.com, The Wall Street Journal and Moody's Economy.com Oct. 30). The index increased 2% from August 2011--the largest year-to-year gain since July 2010. The index also rose 0.9% in August from July. Following the downswing in home prices that started in 2006 and triggered the recession, the solidifying of home values is helping to boost consumer confidence and laying a foundation for more spending, Bloomberg said. There has been modest momentum in the housing recovery, Anika Kahn, a senior economist at Wells Fargo Securities LLC in Charlotte, N.C., told Bloomberg. There still is room for improvement and that trend should continue, she added ...
  • The International Council of Shopping Centers (ICSC) Chain Store Sales Index increased 0.5% for the week ended Oct. 27, reversing a part of the prior week's 0.7% decline (Moody's Economy.com Oct. 30). Total consumer traffic was lower than during the same week in 2011, ICSC said.  However, apparel and grocery stores saw strong sales because consumers in the Northeast were preparing for Hurricane Sandy. Year-over-year growth was 2.7%--marking the seventh consecutive week below 3%, ICSC said …

News of the Competition (10/29/2012)

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MADISON, Wis. (10/30/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced a bank closing Friday, bringing total bank failures this year to 47. That compares with 92 for the entire year in 2011. The failed bank is NOVA Bank in Berwyn, Pa., closed by the Pennsylvania Department of Banking and Securities, which appointed the FDIC as the receiver. The closed bank held about $483 million in assets as of June 30. The FDIC estimated the latest failure will cost its Deposit Insurance Fund roughly $91 million …
  • Ford Motor Co. and General Motors (GM) collectively incurred about $1 billion--more than $500 million each--in operating losses in Europe during the third quarter (Bloomberg.com Oct. 28). Ford will shutter three factories in Europe and cut 6,200 jobs--13% of its European work force, according to an Oct. 25 release. GM announced last week it will develop vans, sports utility vehicles, and small and mid-sized cars with PSA Peugot Citroen. GM assumed a 7% stake in the foreign company, entering into an alliance geared at minimizing losses by sharing costs, Bloomberg said. Both companies are slated to post third-quarter results this week  …

Market News (10/29/2012)

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MADISON, Wis. (10/30/12)

  • U.S. stock exchanges will remain closed today because of Hurricane Sandy's impacts on the East Coast, said the New York Stock Exchange (NYSE) Euronext, the parent of the NYSE. The closure will be coordinated with all U.S. equities, bonds, options and derivatives markets, the company said in a release. The intention is to reopen on Wednesday, conditions permitting, the NYSE said (MarketWatch Oct. 29) ...
  • U.S. consumer spending rose more than expected in September--by the fastest rate since late winter--with incomes increasing. The increase indicates the biggest part of the U.S. economy was gaining momentum as third quarter came to an end  (Bloomberg.com, MarketWatch, The New York Times and Moody's Economy.com Oct. 29). Consumer spending increased 0.8% last month--the most since February, following a 0.5% gain in August, the Commerce Department said Monday. Economists had forecast a 0.6% rise in spending for September, according to a Bloomberg survey of economists. However, the spending increase came at a cost to personal savings, MarketWatch said. The September aggregate savings rate of U.S. citizens fell 3.3% in September from 3.7% in August and 4% in July. That steep decline in savings suggests the recent rate of spending may not be sustainable, MarketWatch said. Also, personal income rose 0.4% in September--the fastest growth since March--from 0.1% in August …
  • Business confidence worldwide has solidified, but at a low level, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Oct. 29). Although sentiment has stabilized in recent weeks, it significantly weakened this summer and is as low as it was in the summer of 2011 during the debate about raising the Treasury debt ceiling. Worries about the rapidly approaching fiscal cliff are the current cause of concern, Moody's said. Although consumer sentiment does not point to a recession, it is consistent with an economy that is on the verge of stalling, Moody's said  …
  • Small businesses are trimming their work forces because of declining revenues, according to the Intuit Business Employment index, released by Intuit (Moody's Economy.com Oct. 29). The index dropped to 93.62 in October from a revised 93.67 (previously 91.19) in September. Small-business payrolls dropped by 0.05%--which translates to roughly 10,000 jobs, the index showed. Also, compensation dipped in October for the first time since late 2008, Intuit said. Employee hours worked fell by the most since Intuit began tracking small-business data, the company said …

News of the Competition (10/26/2012)

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MADISON, Wis. (10/29/12)

  • Citigroup has been fined $2 million by the Massachusetts' securities regulator for not monitoring research analysts who allegedly disclosed confidential information in an improper manner concerning Facebook's initial public offering (IPO) earlier this year (The Wall Street Journal Oct. 26). Citi's investment banking arm--Citigroup Global Markets Inc.--one of several underwriters for the Facebook IPO--concurred with the regulator's statement of facts and said it agreed to permanently cease and desist from violating securities laws in Massachusetts, the Journal said …
  • Anonymous--one of two hacker groups claiming responsibility for launching a denial of service attack on HSBC's website Oct. 18 sent several tweets Thursday that linked to a PNC Financial online banking website, but then deleted the messages (American Banker Oct. 25). The link pointed to PNC's secure online banking website, confirmed a bank spokeswoman who did not comment on the tweets, the Banker said. On Thursday, the bank's website appeared to be operating normally with no complaints tracked by Sitedown.co, which monitors website outages, the Banker said  …
  • Some U.S. banks are no longer demanding that they obtain commissions or reinsurance contracts in exchange for purchasing forced-place policies from insurers (American Banker Oct. 25). Force-placed insurance is a form of hazard coverage banks buy to protect the properties of buyers who have let their homeowners' insurance lapse. Banks then take the costs of the policies and lump them into in borrowers' monthly mortgage bills, the Banker said …

Market News (10/26/2012)

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MADISON, Wis. (10/29/12)

  • The U.S. economy grew at an annual rate of 2% in the third quarter, just above the 1.8% forecast by economists in separate polls by Dow Jones Newswires and Bloomberg. The boost in gross domestic product, compared with a 1.3% growth rate in the second quarter, was engendered by upswings in consumer spending, the housing industry and federal government spending--particularly defense spending (The New York Times, The Wall Street Journal, Bloomberg.com and Moody's Economy.com Oct. 26).  A housing bounce-back is helping consumers' confidence and finances, suggesting the rise in demand for more expensive items such as cars can be prolonged, Bloomberg said. However, growth could slow in the fourth quarter, economists warn, if export weakness continues and businesses remain wary of the fiscal uncertainty in Washington, D.C., the Times said. Exports declined 1.6% in the third quarter, compared with a 5.3% rise in the second quarter. In a related matter, the Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--increased to 126.8 from 126.6 the prior week (Moody's Economy.com Oct. 26) …
  • U.S. consumer confidence in October climbed from September to the highest level since before the recession began five years ago, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index (Bloomberg.com and Moody's Economy.com Oct. 26). The index jumped to 82.6--the highest level since September 2007--from 78.3 in September. The boost in sentiment is being helped by a decline in unemployment, falling gasoline prices and improving property values, Bloomberg said. Another report by the Commerce Department on gross domestic products indicated consumer spending--which constitutes 70% of the U.S. economy--grew in third quarter, Bloomberg said …
  • Orders for U.S. durable goods--products designed to last at least three years--surged 9.9% in September--the biggest gain in more than two-and-a-half years--with demand for defense products and aircraft recovering from a decline in August (The Wall Street Journal, Moody's Economy.com and The New York Times Oct. 25). Orders rose to a seasonally adjusted $218.24 billion last month--the biggest gain since January 2010, the Commerce Department said Thursday ...

News of the Competition (10/25/2012)

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MADISON, Wis. (10/26/12)

  • U.S. banks aren't quite ready yet to rush into issuing Europay, MasterCard, Visa (EMV) cards because of the need for new terminal technology, consumer education and the cost of distributing the smart cards to consumers (American Banker Oct. 24). American Express, MasterCard and Visa have established a 2015 compliance deadline for U.S. merchants and issuers to support chip and PIN cards. Most banks are taking a wait-and-see stance on the issue, said speakers at the recent 20th annual ATM, Debit & Prepaid Forum. The date when complete adoption of the technology will happen is uncertain--as is the case with most newer card technologies, the Banker said. Although there is a need for chip-embedded cards for travelers abroad, where magnetic card stripes are not accepted, not all foreign issuers are employing the security standard--partly because the conversion is so complex, the Banker said …
  • Visa Inc. has appointed Charles W. Scharf, head of JPMorgan Chase's retail arm, as its new CEO, to bolster the card network's No. 1 spot, in advance of the pending retirement of current CEO Joseph Saunders (The New York Times DealBook and The Wall Street Journal Oct. 24). Scharf, a former Visa board member, will assume his new position Nov. 1. Saunders will stay with the company as executive chairman until he retires March 31 …
  • Although large U.S. banks dominated the merger-and-acquisition (M&A) environment during the third quarter, they likely will play a secondary role to smaller banks in the next wave of M&A activity (American Banker Oct. 24).  Smaller financial institutions will actively seek buyers because they are confronting many strategic and financial challenges, the Banker said. Also, the banks that finished with big M&A efforts in recent years--including Capital One Financial, M&T Bank and PNC Financial Services Group--likely will be busy with integrations, the Banker added ...

Market News (10/25/2012)

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MADISON, Wis. (10/26/12)

  • Initial U.S. claims for unemployment benefits declined last week, partly because of seasonal adjustment issues, which reduced the accuracy in measuring the health of the labor market (Moody's Economy.com and The New York Times Oct. 25). Claims fell 23,000--to a seasonally adjusted 369,000--for the week ended Oct. 20 from the prior week, the Labor Department said Thursday.  Jobless claims' four week-moving average--which smooths out volatility--increased 1,500, to 368,000.  Readings below 400,000 indicate an employment increase with hiring likely running ahead of layoffs, concur most economists, the Times said. Companies are refraining from making investments because of worries that Congress may not avoid step tax hikes and spending cuts next year--which could put the economy back into recession, the Times said.  Meanwhile, continuing claims for unemployment benefits decreased by 2,000--to 3.254 million for the week ended Oct. 13 ...
  • Pending home sales were little changed in September but remain well above a year ago, according to the National Association of Realtors (NAR). The Pending Home Sales Index, a forward-looking indicator based on contract signings, edged up 0.3% to 99.5 in September from 99.2 in August and is 14.5% above September 2011 when it was 86.9. The data reflect contracts but not closings. Lawrence Yun, NAR chief economist, said pending home sales continue to hold a higher ground. "Home contract activity remains at an elevated level in contrast with recent years, but currently appears to be bouncing around in a narrow range," Yun said. "This means only minor movement is likely in near-term existing-home sales, but with positive underlying market fundamentals they should continue on an uptrend in 2013."  Pending home sales have risen for 17 consecutive months on a year-over-year basis, leading to the solid recovery seen in closed existing-home sales this year, NAR said. For the NAR report, use the link …
  • U.S. consumer confidence last week hit a six-month high because U.S. households turned less negative about the economy, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com Oct. 25). The index increased to -34.6 in the week ended Oct. 21--marking the eighth gain in the past nine weeks. It was -34.8 the prior week. U.S. consumers' views of the economy were the most positive since early May. A housing market that is on the upswing, less unemployment and falling gasoline prices may be alleviating angst as the biggest economy in the world approaches a presidential election Nov. 6, Bloomberg said …

Fed says it will maintain monetary policy for now

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WASHINGTON (10/25/12)--Credit unions had no surprise Wednesday when the Federal Reserve's policymaking group, the Federal Open Market Committee (FOMC), announced it would maintain the monetary policy it set in September regarding bond-buying, Operation Twist, and near-zero targeted funds interest rates, said a Credit Union National Association senior economist.

"The Fed's announcement comes as no surprise:  Economic metrics generally have been moving in the right direction, but the pace of improvement--particularly in labor markets--remains slow and significant risks remain," said Mike Schenk, vice president of CUNA's economics and statistics.

"The Fed's decision to stay the course will mean a continuation of recent trends in credit union operating results with marginally faster loan growth and high mortgage refinancing activity, which will continue to help buoy credit union bottom lines," he told News Now.

"In general, credit union results--by almost every measure--have returned very close to long-run norms and those slow but sure improvements should continue given the Fed's decision," he added.

The FOMC completed a two-day meeting on Wednesday, saying it would continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. It also "will continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed  securities in agency mortgage-backed securities," the committee said.

"These actions, which together will increase the committee's holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," it added.

The committee also said it expects that a "highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens."  It decided to keep the target range for the federal funds rate at 0 % to 0.25% and "currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015."

In a statement after the meeting, the FOMC noted that economic activity has continued to expand at a moderate pace in recent months and recognized that growth in employment "has been slow, and the unemployment rate remains elevated."  While household spending advanced "a bit more quickly," growth in business fixed investment has slowed.  "The housing sector has shown some further signs of improvement, albeit from a depressed level.  Inflation recently picked up somewhat, reflecting higher energy prices.  Longer-term inflation expectations have remained stable."

In discussing its statutory mandate of seeking to foster maximum employment and price stability, the committee said it "remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions." It noted strains in global financial markets "continue to pose significant downside risks to the economic outlook" and said it "anticipates that inflation over the medium term likely would run at or below its 2% objective."

The committee will monitor information and developments in coming months, and if the outlook for the labor market "does not improve substantially, the committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.  In determining the size, pace, and composition of its asset purchases, the committee will, as always, take appropriate account of the likely efficacy and costs of such purchases."

Voting for the FOMC monetary policy action were: Chairman Ben S. Bernanke; Vice Chairman William C. Dudley; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen.

Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and disagreed with the description of the time period over which a highly accommodative stance of monetary policy will remain appropriate and exceptionally low levels for the federal funds rate are likely to be warranted.

Economists surveyed had expected the committee would hold steady on actions taken at its historic meeting on Sept. 12-13, when it opened up a third round of bond-buying known as quantitative easing (QE3) and announced it was considering changing its approach to the guidelines it issues in informing the public about the Fed's targeted interest rates for the future.

Last month it indicated it would consider moving from a calendar approach to its projections of the interest-rates timeline. Some on the committee have suggested it adopt a numerical target for policy.  At September's meeting, the Fed moved its projections of keeping its near-zero (0% to 0.25%) interest-rate range until about mid-2015 from its earlier projections of the end of 2014.

News of the Competition (10/24/2012)

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MADISON, Wis. (10/25/12)

  • Federal prosecutors sued Bank of America (BofA) Wednesday, accusing the bank of conducting a mortgage scheme that defrauded the government during the financial crisis (The New York Times DealBook Oct. 24). The Justice Department, in filing a civil complaint in New York seeking $1 billion from BofA, is going after "hustle," a home loan program that the bank inherited when it bought Countywide Financial during the crisis, the Times said. The program was designed to issue mortgages at a fast pace without proper safeguards against wrongdoing, prosecutors allege. BofA then sold the "defective" mortgage loans to government-sponsored enterprises Fannie Mae and Freddie Mac, which then were saddled with large losses and foreclosed properties, prosecutors allege …
  • Thirty-nine percent of consumers surveyed have their mortgage with their primary bank, the bank with which they do most of their business, according to a consumer mortgage study conducted by Carlisle & Gallagher (CG) Consulting Group, a management and technology consulting firm serving the financial services industry.  And, 70% of respondents said they would prefer to have their mortgages with one of the major banks. This means that primary banks are missing an opportunity to increase their mortgage business by 79% with their current customers. CG surveyed consumers to learn about their views toward home ownership, how recent changes in the mortgage industry impacted their application experience, what factors are most important in the mortgage application process, and whether customers would be willing to pay more for a mortgage if it came with certain benefits …
  • A call for a return to subprime mortgage lending is being made by two housing advocates who in 2005 sounded some of the earliest alarms about the approaching housing crisis (American Banker Oct. 23). John Hope Bryant, CEO of Operation HOPE and who serves on the president's advisory council of financial capability, and Bob Gnaizda, general counsel for the Black Economic Council, the Latino Business Center Greater Los Angeles and the National Asian Coalition, are promoting their model of a trustworthy alternative mortgages for less-than-prime borrowers on Wall Street and in Washington, D.C., the Banker said. Although no one wants to use the word "subprime," it is what he and Gnaizda think is the future, Bryant told the Banker. That is because increased regulatory scrutiny has made lenders less likely to provide loans to borrowers without excellent credit histories and large down payments, the advocates told the Banker. That has the unintended consequence of redlining low- and moderate-income people who often are black or Hispanic, they added  …
  • A group of activist computer hackers said it would suspend cyberattacks on U.S. banks because of an upcoming Islamic religious holiday (American Banker Oct. 23). The Izz ad-Din al-Qassam Cyber Fighters Group, which claimed responsibility for recent cyberattacks on at least 10 banks, said Tuesday it would cease attacks during the next several days. The digital attacks are geared to disrupting service to banks temporarily, not to stealing or handling money, the group said in a message posted on a website …

Market News (10/24/2012)

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MADISON, Wis. (10/25/12)

  • U.S. mortgage applications decreased 12% for the week ended Oct. 19 from the prior week, according to the Mortgage Bankers Association's (MBA) Market Composite Index, which is part of its Weekly Mortgage Applications survey released Wednesday. On an unadjusted basis, the index declined 2%. The Refinance Index dropped 13% to the lowest level since late August. The seasonally adjusted Purchase Index fell 8%, while the unadjusted Purchase Index increased 2 %--or 7% higher than the same week one year ago. Refinancing decreased to 81% of total applications from 82%. Adjustable-rate mortgages rose to 4% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 3.63% from 3.57%, with points rising to 0.45 from 0.44 (including the origination fee) for 80% loan-to-value ratio loans. The effective rate increased from last week. Basically, the effective annual rate is the annual rate of interest that accounts for the effect of compounding. The 30-year fixed rate went up three consecutive weeks to the highest level since late September. For the MBA report, use the link …
  • New-home sales in the U.S. increased in September to their highest level in more than two years, indicating the housing industry is picking up momentum amid an otherwise slow economic recovery (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Oct. 24). Sales rose 5.7% last month from August to a seasonally adjusted annual rate of 389,000--the highest level since April 2010 when first-time home buyers were trying to qualify for a government tax credit before the deadline, the Commerce Department said Wednesday. Compared with sales in September 2011, sales of new homes were up 27.1%.  Solid sales and low inventory of homes could prompt builders to boost their construction, which would bolster the overall economy, the Journal said. The good news for housing starts is that months of home supply on the market is back to pre-recession levels, Robert Kavcic, an economist at the Bank of Montreal in Toronto, told Bloomberg
  • The Federal Housing Finance Agency (FHFA) monthly Purchase-Only House Price Index rose 0.7% in August and is up 4.7% from August 2011--a rate of growth that that has exceeded expectations, FHFA said (Moody's Economy.com Oct. 24). Gains were broad-based nationwide, with only the East South Central census division experiencing a decline. The conforming mortgage portion of the U.S. housing market has passed its low mark, helping to solidify buyer and homebuilder confidence, Moody's said …

NEW FOMC works on refining policy no action taken

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WASHINGTON (FILED at 2:53 p.m. ET 10/24/12)--As expected, the Federal Reserve's policymaking group, the Federal Open Market Committee (FOMC), today said it would maintain its monetary policy on bond-buying, Operation Twist, and near-zero targeted funds interest rates.

Noting that economic activity has continued to expand at a moderate pace in recent months, the FOMC recognized the growth in employment "has been slow, and the unemployment rate remains elevated."  While household spending advanced "a bit more quickly," growth in business fixed investment has slowed.  "The housing sector has shown some further signs of improvement, albeit from a depressed level.  Inflation recently picked up somewhat, reflecting higher energy prices.  Longer-term inflation expectations have remained stable."

In discussing its statutory mandate of seeking to foster maximum employment and price stability, the committee said it "remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions." It noted strains in global financial markets "continue to pose significant downside risks to the economic outlook" and said it "anticipates that inflation over the medium term likely would run at or below its 2% objective."

The FOMC said it would continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. It also "will continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed  securities in agency mortgage-backed securities," the committee said.

"These actions, which together will increase the committee's holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," it added.

The committee will monitor information and developments in coming months, and if the outlook for the labor market "does not improve substantially, the committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.  In determining the size, pace, and composition of its asset purchases, the committee will, as always, take appropriate account of the likely efficacy and costs of such purchases."

The committee also expects that a "highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens."  In particular, it decided to keep the target range for the federal funds rate at 0 % to 0.25% and "currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015."

Voting for the FOMC monetary policy action were: Chairman Ben S. Bernanke; Vice Chairman William C. Dudley; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen.

Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and disagreed with the description of the time period over which a highly accommodative stance of monetary policy will remain appropriate and exceptionally low levels for the federal funds rate are likely to be warranted.

The FOMC met yesterday and today. It made history at its meeting on Sept. 12-13 when it opened up a third round of bond-buying known as quantitative easing (QE3) and announced it was considering changing its approach to the guidelines it issues in informing the public about the Fed's targeted interest rates for the future.

Last month it indicated it would consider moving from a calendar approach to its projections of the interest-rates timeline. Some on the committee have suggested it adopt a numerical target for policy.  At September's meeting, the Fed moved its projections of keeping its near-zero (0% to 0.25%) interest-rate range until about mid-2015 from its earlier projections of the end of 2014.

QE3 forward guidance on FOMC agenda

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WASHINGTON (10/24/12)--After its historic September meeting, the Federal Reserve's monetary policymaking group is not expected to take action on targeted fed funds rates or quantitative easing during the October meeting, which began Tuesday and will end this afternoon, say a number of analysts.

This month's meeting of the Federal Open Market Committee (FOMC) will likely be devoted to discussions of--but not actions on--two key areas, stemming from actions taken last month:

  • Whether to expand the Fed's third round of bond-buying, referred to as quantitative easing 3 or QE3.  Bloomberg News reported it surveyed 21 bond dealers who trade with the Fed  and all expect it to decide before the end of the year whether to include government securities in any expansion; however, they do not expect action on the matter today (Bloomberg.com Oct. 22).
  • Whether to change its approach to offering forward guidance for the federal funds targeted interest rates. In the past, the FOMC has used a calendar-based approach, with the latest FOMC statement announcing it would keep the fed funds targeted rate at near zero (0% to 0.25%) into mid-2015. Some on the committee are suggesting that the committee adopt a numerical target for policy (MarketWatch Oct. 22).
Good news on growth would mean the fed's policy makers would be unlikely to "respond in a hasty manner and remove stimulus," said William C. Dudley, president of the Fed Bank of New York in a speech last week" (Bloomberg.com Oct. 22).

Last month the FOMC said it was dissatisfied with the progress of the economy and announced it it would buy back mortgage-backed securities at a pace of $40 billion a month and would keep low rates in place for a considerable time.

The FOMC is expected to issue its statement at 2:15 p.m. ET today. Watch for updates today in News Now and News Now's Twitter feed, LiveWire.

News of the Competition (10/23/2012)

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MADISON, Wis. (10/24/12)

  • The banking industry's budding recovery from the financial crisis is being undermined by extremely low interest rates that are putting the squeeze on bank profits, according to The Wall Street Journal (Oct. 22). Net interest margin--a crucial measure of lending profitability--has fallen to its lowest level in three years, the Journal said. The gauge monitors how much banks earn after they borrow from depositors and then invest or lend those funds. Banks will be forced to change the services they offer in attempts to find new ways to make money, industry observers told the Journal
  • Regulators should rewrite Basel III capital rules, according to a letter sent by U.S banks to the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. Those agencies sent out Basel III proposals for a public comment period that ended Sunday (Bloomberg.com Oct. 22). The letter says the Basel III plans as written could "hinder credit availability, dampen economic growth and harm the competiveness of the U.S. banking system." In June, regulators proposed a more stringent bank-capital structure for compliance with an international agreement composed by the Basel Committee on Banking Supervision. The measures call for all U.S. banks to maintain a "loss absorbing capital" of at least 7% of weighted assets. The measures were adopted following the 2008 worldwide financial crisis and are designed to make banks less vulnerable in future financial emergencies, Bloomberg said …
  • Although SunTrust Banks recorded a third-quarter profit Monday, there still is concern about its financial situation (American Banker Oct. 22). The Atlanta-based bank posted a profit of $1.07 million, or $1.98 per share, including a large gain from one-time adjustments. Beneath those adjustments positive movement was made in lending, the Banker said. However, SunTrust fell below the consensus earnings-per-share forecast by four cents, and the plethora of real estate holdings on its books could create another special adjustment that could surprise investors, Chris Marinac, an FIG Partners analyst, told the Banker

Market News (10/23/2012)

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MADISON, Wis. (10/24/12)

  • U.S. businesses in September had 1,316 mass layoffs events--which involve 50 or more workers laid off from the same company at about the same time--which is 49 more than in August, according to the Bureau of Labor Statistics (Moody's Economy.com Oct. 23). However, despite the rise in events last month, the number of claimants declined by 4,992--to 122,462. Events and claimants are within the lower ranges of their historical averages, indicating recent erosion in the labor market may be because of lackluster hiring rather than job cuts. Although there were more manufacturing mass layoff events in September than August, they remain low historically, Moody's said …
  • The Small Business Administration (SBA) for the 12 months ended Sept. 30 provided more SBA-guaranteed loans to U.S. small businesses that export goods, the agency said Monday (American Banker Oct. 22). Loans to exporters increased roughly 1%, to $923 million in the period. The loans supported $1.7 billion in small-business exports, SBA said. SBA addressed the financial need of smaller exporters through three loan programs. Export Express has a $500,000 loan maximum, a 90% guaranty of amounts up to $350,000 and a 75% guaranty on loans up to $500,000. Export Working Capital has a $5 million loan maximum to finance export transactions, and a 90% guaranty. International Trade Loans feature a $5 million loan maximum to buy equipment or expand facilities, and a 90% guaranty …
  • The International Council of Shopping Centers (ICSC) chain store sales index dropped 0.7% for the week ended Oct. 20 from the prior week, continuing the meager results during the past several weeks (Moody's Economy.com Oct. 23). Customer traffic was lower than the same week a year ago, with small areas of strength at apparel and department stores. Year-over-year growth partially solidified at 2.9%, but stayed below the 3% threshold for the sixth consecutive week, ICSC said …

Market News (10/22/2012)

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MADISON, Wis.  (10/23/12)

  • Business sentiment worldwide has stabilized at a low level in recent weeks, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Oct. 22). With businesses worried, confidence is as unstable as it was during the Treasury debt ceiling imbroglio in the summer of 2011, Moody's said. The rapidly approaching fiscal cliff is the source of the current angst, Moody's added. Especially weak are the expectations for the economy's prospects heading into 2013. A recent slump in exports brought on by collateral damage from Europe's escalating economic and political problems is worrying manufacturers. While sentiment does not indicate a recession, it is consistent with an economy that is moving nearer to stalling, Moody's said …
  • U.S. employers are raising job benefits more than wages, according to an analysis by USA Today  (Oct. 19). Job benefits paid by employers constituted a record 19.7% of worker compensation in 2011, according to personal income data compiled by the Bureau of Economic Analysis (BEA). That level is an increase from 16.6% in 2000 and less than 10% in the 1960s. During the past decade, the shift to compensating workers through benefits rather than cash has accelerated--particularly since the economic downturn began in 2007, USA Today said. Benefits increased 10.8% to $1,302 per worker--after adjusting for inflation--from 2007 to 2011, according to BEA data. Meanwhile, wages during that period, rose $777, a 1.4% gain …

News of the Competition (10/22/2012)

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MADISON, Wis. (10/23/12) 

  • The Federal Deposit Insurance Corp. (FDIC) announced three bank closings Friday, bringing total bank failures this year to 46. That compares with 92 for the entire year in 2011. The failed banks are: GulfSouth Private Bank, Destin, Fla., assumed by SmartBank, Pigeon Forge, Tenn.; First East Side Savings Bank, Tamarac, Fla., assumed by Stearns Bank N.A., St. Cloud, Minn.; and Excel Bank, Sedalia, Mo., assumed by Simmons First National Bank, Pine Bluff, Ark. The closed banks held about $427 million in assets. The FDIC estimated the latest failures will cost its Deposit Insurance Fund roughly $86 million …
  • The British government is pressuring Royal Bank of Scotland to sell its lucrative U.S. operation, which has nearly 1,500 branches in 13 states (The Wall Journal Oct. 21). As a result of the 45.5 billion-euro ($72.8 billion) bailout of the bank in 2008, United Kingdom taxpayers own 81% of RBS. The financial services authority--England's main financial regulator--and government officials recently urged RBS management to sell its U.K. operations in efforts to trim it down, bolster its capital cushion, and refocus its priorities on its home market, sources familiar with the negotiations told the Journal
  • Activist hackers who in recent weeks have been disrupting banks' websites  to keep customers from accessing their accounts, hit HSBC, the bank said last week. However, this time a second group--Anonymous--is claiming responsibility for the attacks (American Banker Oct. 19). The Izz ad-Din Al Qassam Group, which took credit for previous attacks, also said it was reponsible for this one. HSBC said Thursday that hackers inundated lines connecting the bank's websites to the Internet, and prevented customers from getting into their accounts. Although the denial-of-service attack on Thursday did not impact any customer data, it kept customers from using online services offered by HSBC, including Internet banking, HSBC said. Later, the disruptions diminished, and the bank's site started to return to normal operations, HSBC said early Friday …

News of the Competition (10/19/2012)

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MADISON, Wis. (10/22/12)

  • More cyber-attacks against some of the biggest U.S. banks continued last week, including disruptions of websites for BB&T, based in Winston-Salem, N.C., and Capital One (American Banker Oct. 18). BB&T said its customers who attempted to log onto its website Wednesday were denied access or experienced delays. Capital One said its website once again was disrupted on Tuesday. Both banks said the attacks were caused by hackers flooding their electronic access lines to keep customers from getting into their accounts …
  • James Gorman, CEO of Morgan Stanley, is slated to lose stock that once was valued at nearly $2.9 million, as a result of the bank missing targets for share-performance goals and profitability (Bloomberg.com Oct. 19). He likely will forego performance-based stock units given in 2009 that were based on the New York-based company earning 12% average return on equity, and also having shareholder gains--in his initial three years as company CEO--rank in the top half of a 10-company group. If Gorman had surpassed those goals, he could have earned shares worth nearly $6 million, Bloomberg said …
  • A new supervisor will be installed next year for euro-zone banks, after European leaders reached agreement on the matter Friday (The Wall Street Journal Oct. 19). The move is expected to open a path for the European bloc's bailout fund to channel capital straight into banks throughout the single-currency (euro) area, the Journal said. Having the bailout fund directly recapitalize banks is viewed as an essential step in the euro zone's response to its debt crisis, the Journal said. As an example, the bailout fund's direct recapitalization could help governments that cannot support their national banking systems--such as Spain--because of weak public finances, the Journal added …

Market News (10/19/2012)

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MADISON, Wis. (10/22/12)

  • U.S. existing-home sales in September declined modestly, but inventory continued to tighten and the national median home price recorded its seventh back-to-back monthly increase from a year earlier, according to the  National Association of Realtors (NAR). Total existing-home sales--which are completed transactions that include single-family homes, townhomes, condominiums and co-ops--fell 1.7% to a seasonally adjusted annual rate of 4.75 million in September from an upwardly revised 4.83 million in August. However, they are 11% above the 4.28 million-unit pace in September 2011. Lawrence Yun, NAR chief economist, said the market trend is up. "Despite occasional month-to-month setbacks, we're experiencing a genuine recovery," he said. "More people are attempting to buy homes than are able to qualify for mortgages, and recent price increases are not deterring buyer interest. Rather, inventory shortages are limiting sales, notably in parts of the West."  For the NAR report, use the link …
  • The Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--dropped to 126.7 for the week ended Oct. 12, partially taking back the prior week's gains when the index rose to 127.6. The smoothed, annualized growth rate sped up to 6.1%--its year-to-date high--from 5.7 % the previous week, and moved further into an area in which growth can be predicted, ECRI said. Both the Weekly Leading Index and the smoothed, annualized growth rate remain encouraging for the U.S. economy, ECRI said  …

News of the Competition (10/18/2012)

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MADISON, Wis. (10/19/12)

  • As part of a sting operation by federal authorities, a Bangladeshi man was arrested for allegedly plotting to blow up the New York Federal Reserve in lower Manhattan (Bloomberg News via American Banker Oct. 17). In an undercover effort, authorities provided the suspect with fake explosives for a bomb. Quazi Mohammad Rezwanul Ahsan Nafis, 21, was arrested Wednesday after he allegedly tried to detonate what is said to be a 1,000-pound bomb, according to the Federal Bureau of Investigation's Joint Terrorism Task Force. The New York Fed--which has credit unions among its clients in the area--is only a few blocks away from the Word Trade Center's former twin towers, which were destroyed in the Sept. 11, 2001, terrorist attacks …
  • Associated Banc-Corp, based in Green Bay, Wis., announced--in advance of releasing its third-quarter results--that it intends to shutter 12 branches in Illinois and Wisconsin (American Banker Oct. 17). The move is being made to reduce overhead and bolster efficiency, the company said. The consolidated branches to be closed all are roughly two miles from other branches and will be closed by early 2013, the company said. Associated operates more than 250 branches throughout the Midwest ...
  • Buoyed by strong performances in its major divisions--especially in fixed income--Morgan Stanley announced adjusted third-quarter earnings Thursday of $561 million, or 28 cents per share--four cents better than consensus expectations of analysts (The New York Times DealBook Oct. 18). Morgan Stanley saw adjusted net revenue of $7.6  billion, or $5.3 billion when a one-time charge related to its credit spreads is included …

Market News (10/18/2012)

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MADISON, Wis. (10/19/12)

  • Initial U.S. claims for unemployment benefits increased last week, indicating an undoing of adjustments for seasonal fluctuations at the start of the quarter, and also that unemployment numbers thus far this month have been distorted by technical factors (The Wall Street Journal, The New York Times, Bloomberg .com and Moody's Economy.com Oct. 18). Claims rose 46,000--to a seasonally adjusted 388,000 for the week ended Oct.13 from the prior week, the Labor Department said Thursday. In that previous week, unemployment claims had decreased by 27,000 because of an unexpected shift in one state--California. It reported fewer claims than anticipated, accounting for the large decline, said the Journal and Bloomberg. Meanwhile, continuing claims for U.S. unemployment benefits dropped 29,000--to 3.252 million--for the week ended Oct. 6.  Although the labor market is improving, it is at a very slow pace, Brian Jones, a senior U.S. economist at Societe Generale in New York, told Bloomberg. The number of claims filed is "going sideways," he added …
  • The index of U.S. leading economic indicators issued by The Conference Board, a private firm, increased in September by the most in seven months, partly bolstered by a surge in permits for home construction (Bloomberg.com and Moody's Economy.com Oct. 18). The board's measure of the outlook for the next three to six months rose 0.6%, following a revised 0.4% drop in August. The early stages of a durable recovery are being seen in the residential housing market, Joe Lavorgna, chief U.S economist at Deutsche Bank Securities Inc. in New York said in a research note, according to Bloomberg.  Because housing is a leading indicator of fundamental consumer demand, ongoing improvement in housing will help accelerate that demand over time, he added …
  • U.S. consumer confidence hit a six-month high last week because more consumers decided the time was right to shop, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com Oct. 18). The index increased to -34.8 for the week ended Oct. 14--the highest level since April--from -38.5 the prior week. Also, the monthly expectations gauge improved to -7 in October--its best reading since May. Although the bounce-back in consumer sentiment is a positive development, the consumer recovery will face challenges as this year comes to an end, elevating the chances of a potential drop in consumer confidence before a sustained upswing take effect, Moody's said …
  • Mortgage rates in the U.S. fell for the week ended Oct 18, forcing borrowing costs back toward record lows, with homebuilders accelerating the pace of construction to meet up with increasing demand (Bloomberg.com Oct. 18). A 30-year fixed-mortgage's  average rate dropped to 3.37% from 3.39% the prior week, Freddie Mac said in a statement. Also, the 15-year fixed-mortgage rate dipped to 2.66% from 2.7 %, Freddie said …

News of the Competition (10/17/2012)

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MADISON, Wis. (10/18/12)

  • Bank of America (BofA) posted a small third-quarter profit Wednesday, after being rocked by more than $4 billion in charges to settle legal and regulatory claims connected to its acquisition of  Merrill Lynch and Countrywide Financial Corp., accounting adjustments and taxes owed in the United Kingdom (The New York Times DealBook, The Wall Street Journal and Bloomberg.com  Oct. 17). Net income declined 95% to $340 million--breaking even on a per-share basis--from $6.2 billion, or 56 cents per share, from a year earlier. Also, BofA's revenue fell 28%, to $20.6 billion. If the costs of litigation were taken away, BofA's results would be good and make it competitive with Wells Fargo' quarterly results, Chris Whalen, a senior managing director at Tangent Capital Partners LLC, told Bloomberg Television
  • Goldman Sachs Group Inc. moved to a third-quarter profit, the company said Tuesday, because its fixed-income and investment banking revenue rose steeply (The Wall Street Journal and The New York Times DealBook Oct. 16).  Goldman reported net earnings of $1.46 billion, or $2.85 per share, compared with a loss of $428 million, or an 84 cents per share loss, in the year-ago quarter. The company's down performance from a year ago is attributed to losses in its private equity portfolio and wider-ranging worldwide economic issues, the Times said …
  • Bank of America (BofA) Merrill Lynch has added a feature that provides customers a new way to retrieve forgotten PIN codes (American Banker Oct. 17). Online PIN Check allows cardholders to use a secure Internet point to view their personal identification numbers, BofA Merrill Lynch said. The new feature will benefit customers--especially business travelers--who  can't afford to wait several days to receive a PIN confirmation via regular mail--a more common channel, the company said in a release …

Market News (10/17/2012)

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MADISON, Wis.  (10/18/12)

  • U.S. housing starts jumped in September--to their highest level in more than four years--indicating that the housing industry is gathering strength and becoming more of a positive factor in the overall economic recovery (The Wall Street Journal, The New York Times, Bloomberg.com and Moody's Economy.com Oct. 17). Starts increased 15% last month from August to a seasonally adjusted annual rate of 872,000--the most since July 2008, according to Commerce Department figures released Wednesday. Also, single-family-unit construction increased 11%, and apartment building construction surged 25.1%. The housing industry has turned a corner, Brian Jones, a senior U.S economist at Societe Generale in New York, told Bloomberg. Although there still is much room for improvement, the positive aspect is that increased construction will bring more employment opportunities, he added …
  • Mortgage application volume in the U.S. decreased 4.2% for the week ended Oct. 12 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 declined 14%. The Refinance Index dropped 5%. The seasonally adjusted Purchase Index increased 1%. This is the highest Purchase Index observed in the survey since early June 2012. The unadjusted Purchase Index fell 9% and was 12% higher than the same week one year ago. The refinance share of mortgage activity decreased to 82% of total applications from 83% the previous week. The adjustable-rate mortgage share of activity remained constant at 4% of total applications. The Home Affordable Refinance Program share of refinance applications rose to 22% from 18% the prior week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) went up to 3.57% from 3.56%, with points increasing to 0.44 from 0.39 (including the origination fee) for 80% loan-to-value ratio loans. The effective rate rose from last week. For the MBA report, use the link ….
  • The International Council of Shopping Centers (ICSC) Chain Store Sales Index basically remained the same for the week ended Oct. 13 from the prior week, with the tepid results of the past several weeks still in place (Moody's Economy.com Oct. 16). Although overall customer traffic was similar to the prior week, it shifted between chain store segments to the advantage of apparel, department and grocery stores and wholesale clubs, ICSC said. Traffic lessened at dollar, furniture and office supply stores. Year-over-year growth dipped to 2.7% from 2.6% the prior week--marking the fifth consecutive week of less than 3% growth …

News of the Competition (10/16/2012)

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MADISON, Wis. (10/17/12)

  • Morgan Stanley has been accused of encouraging subprime lenders to issue risky loans to African-American borrowers in Detroit, according to an American Civil Liberties Union (ACLU) lawsuit filed Monday (American Banker Oct. 15). The suit alleges Morgan Stanley funded subprime lender New Century Financial so it could originate loans, and then the investment bank coerced New Century into making very risky but profitable loans. The ACLU said Monday that Morgan Stanley then purchased the loans to place in securitized pools and sold them to institutional investors and pension funds. Morgan Stanley violated the Fair Housing Act and the Equal Credit Opportunity Act by disproportionately focusing the loans on African-American borrowers, the ACLU claimed …
  • During the most recent fiscal year ended Sept. 30, the Department of Veterans Affairs (VA) guaranteed the most mortgages since 1994 (American Banker Oct. 15). VA loans issued rose 50% to 540,000 loans--up roughly 300% from five years ago, The New York Times said Thursday. Of that total, roughly 338,000 were for refinancing. For qualified buyers, VA loans offer an option for no down payment--a feature that has not been as prevalent since the housing crisis, the Banker said …
  • The government of Iran may be the sponsor of recent cyber-attacks against some of the biggest U.S. banks (American Banker Oct. 15). Since September, hackers with ties to Iran may have perpetrated assaults on as many as nine U.S. financial institutions, anonymous U.S. intelligence officials told The Wall Street Journal Friday. U.S. officials, following electronic "fingerprints," have traced the assaults to Iran in the Persian Gulf. The attacks inundate traffic to banks' Web servers and slow service to customers who are trying to access account information, the Banker said …

Market News (10/16/2012)

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MADISON, Wis. (10/17/12)

  • U.S. consumer prices increased in September for a second consecutive month because of a jump in gasoline costs---although those costs did not seep into other goods and services nor significantly add to overall inflationary pressures (The New York Times, Bloomberg.com, The Wall Street Journal and Moody's Economy.com Oct. 16). The consumer price index rose 0.6% for a second consecutive month, the Labor Department said Tuesday. The core measure--excluding volatile food and energy costs--inched up 0.1%. Short-term core inflation risks are negligible, Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, told Bloomberg. A lack of demand for everyday goods and services will mean prices won't be pushed higher, he added ...
  • Industrial production in the U.S. rose 0.4% in September after falling 1.4% in August, according to the Industrial Production and Capacity Utilization report released Tuesday by the Federal Reserve. For the third quarter as a whole, industrial production declined at an annual rate of 0.4%. Manufacturing output increased 0.2% in September but moved down at an annual rate of 0.9% in the third quarter. Production at mines advanced 0.9% in September, and the output of utilities moved up 1.5%. Roughly a 0.3 percentage point decline in overall industrial production in August reflected the effect of precautionary idling of production in late August along the Gulf of Mexico in anticipation of Hurricane Isaac, and part of the rise in September is a result of the resumption of activity at idled facilities. At 97% of its 2007 average, total industrial production in September was 2.8% above its year-earlier level. Capacity use for total industry moved up 0.3 percentage point to 78.3%, a rate two percentage points below its long-run (1972--2011) average. For the Fed release, use the link …
  • For a sixth consecutive month, U.S. homebuilder confidence increased in October, adding to mounting evidence that the real estate market is solidifying (Bloomberg.com and Moody's Economy.com Oct. 16). The National Association of Home Builders/Wells Fargo builder sentiment index rose to 41 this month--the highest level since June 2006 and up from 40 in September. Homebuilders are seeing their sales buoyed in part by record-low borrowing costs, Bloomberg said. However, decelerating payroll growth and more stringent credit standards remain as impediments to the housing industry--a main component of the financial crisis, Bloomberg said …

News of the Competition (10/15/2012)

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MADISON, Wis. (10/16/12)

  • Citigroup Inc.'s third-quarter profit nosedived 88% to $468 million because the bank incurred charges for $4.7 billion loss related to its joint venture brokerage business Morgan Stanley Smith Barney (The Wall Street Journal, Bloomberg.com and The New York Times DealBook Oct. 15). However, there continued to be improvement in Citi's core revenue in its main businesses, the Journal said. Net income was 15 cents per share, compared with $3.77 billion, or $1.23 per share, a year earlier, Citi said Monday ...
  • Visa Inc. has added partners to help it expand the availability of its new "electronic wallet" (The Wall Street Journal Oct. 15). The card network said Monday it is joining forces with PNC Financial Services Group Inc. and 1-800-FLOWERS.com Inc. The electronic wallet--V.me--is an application that allows users to store account  information in a secure software program for  debit and credit cards, the Journal said. With the program, consumers can make purchases at online merchants that allow the service. Instead of entering their card number for each transaction, users type in their user name and password, the Journal said ...

Market News (10/15/2012)

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MADISON, Wis. (10/16/12)

  • U.S. retail sales increased in September because of broad-based gains from consumers purchasing more cars and gasoline, which helped bolster better than-anticipated economic growth in the third quarter (The New York Times, Bloomberg.com and Moody's Economy.com Oct. 15). Sales rose 1.1% last month, following 1.2% growth in August, the Commerce Department said Monday. Analysts had forecast a 0.3% increase last month, according to a Reuters poll. Year-over-year growth rose to 5.4% in September from 5% in August. Consumer confidence is being reinforced by a decline in unemployment and steadying home prices, Bloomberg said. However, consumer spending--which constitutes 70% of the U.S, economy--may be dampened by pending tax changes at year-end and escalating energy costs, Bloomberg added …
  • American citizens are hearing less negative news about the economy, and their perceptions of news about other economic sectors--such as the labor market--are improving, according to a report released last week by the Pew Research Center for the People & the Press. Although most citizens (62%) still are hearing a mix of good and bad news, the portion hearing mainly bad news has dipped to 28% in October from 35% in September. The percentage that is hearing mainly good news stayed the same at 8%. This most recent Pew national survey was conducted Oct. 4-7, among 1,006 adults …
  • Business inventories in the U.S increased 0.6% in August, beating the consensus forecast of 0.5%, according to the U.S. Census Bureau (Moody's Economy.com Oct. 15). The inventory-to-sales ratio remained the same at 1.28.  Business sales fell in August, rising 0.5% after increasing 0.9% in July. In a related matter, Moody's Analytics Survey of Business Confidence worldwide has solidified in recent weeks at a low level (Moody's Economy.com Oct. 15). The rapidly approaching U.S. fiscal cliff appears to be the cause of low confidence levels, Moody's said. Confidence is as low as it was during the Treasury debt ceiling imbroglio during the summer of 2011, Moody's said …

News of the Competition (10/12/2012)

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MADISON, Wis. (10/15/12)

  • Wells Fargo & Co.'s third-quarter profit surged 22% to $4.9 billion, buoyed by a robust mortgage business at the fourth-largest U.S. bank by assets, although low interest rates hurt the bank's profit margin more than anticipated (The New York Times DealBook and The Wall Street Journal Oct. 12). The bank had $952 billion in deposits--a 3%  increase from a year earlier--which grew more quickly than its $765 billion in loans--a 2% rise, the Journal said. The third quarter constituted the 11th consecutive quarter of net income gains for the San Francisco-based bank  …
  • JPMorgan Chase & Co.--the largest U.S. bank by assets--posted a record third-quarter profit, with mortgage revenue spiking 72% (Bloomberg.com, The Wall Street Journal and The New York Times DealBook Oct. 12). JPMorgan's net income increased 34% to $5.71 billion, or $1.40 per share, from $4.26 billion, or $10.2 per share, a year earlier. The bank showed indications of strength in corporate consumer lending--particularly in its mortgage business, the Times said …
  • With revenues remaining flat, Bank of America (BofA) CEO Brian Moynihan will stay the course with BofA's plan to slash more than 30,000 jobs (American Banker Oct. 11). BofA, the second-largest U.S. lender, is among several financial companies trimming expenses to bring back profitability after the 2008 crisis, the Banker said. In July, Moynihan announced $3 billion worth of cuts at BofA's investment banking, trading and wealth-management units, the Banker said …
  • Bob Kottler, executive vice president and director of retail and small business at Iberiabank, was elected by the Consumer Bankers Association as its new chairman for 2013 (American Banker Oct. 11). He succeeds Susan Faulkner, a senior vice president at Bank of America. Faulkner will continue to serve on the association's board of directors …

Market News (10/12/2012)

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MADISON, Wis. (10/15/12)

  • U.S. consumer confidence in October unexpectedly rebounded to the highest level in five years, before the start of the recession, according to the Thomson-Reuters /University of Michigan Consumer Sentiment Index--improving chances that retailers will see an upswing in their sales (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Oct. 12). The index surged to 83.1 in early October from a final reading in September of 78.3.  Economists in separate Dow Jones Newswires and Bloomberg News survey had predicted an October reading of 78. Consumers expect a healthier economy next year, better job prospects, and slightly increased income, Christopher Low, chief economist at FTN Financial in New York, told Bloomberg. And they appear to be at ease spending a little more and saving a little less, he added …
  • Wholesale (producer) prices in the U.S. increased more than forecast in September, reflecting a jump in energy costs while underlying inflationary pressures remained subdued (The New York Times, Bloomberg.com and Moody's Economy.com Oct. 12). The producer price index--which measures price at factories, farms and refineries--rose 1.1% last month, following a 1.7% gain in August, the Labor Department said Friday. Economists had forecast a September rise of 0.7% in a Reuters poll and 0.8% in a Bloomberg survey. Inflation still is not a problem, Avery Shenfeld, chief economist at the Canadian Imperial Bank of Commerce in Toronto, told Bloomberg. And it doesn't appear that will change in the immediate future, he added ...

News of the Competition (10/11/2012)

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MADISON, Wis. (10/12/12)

  • Douglas Braunstein, J.P. Morgan Chase & Co.'s chief financial officer, is expected to leave his post sometime during the next two quarters, but stay at JP Morgan to take on a different job, according to sources familiar with the matter (The Wall Street Journal Oct. 12).  Braunstein, 51, has been in his current position at the biggest U.S. bank, by assets, since 2010. In the aftermath of an executive shakeup in July, his status was lessened, the Journal noted. Since then, he has reported to Matt Zames, JP Morgan's chief operating officer, rather than Chairman/CEO James Dimon, the Journal said. Braunstein is one of one of the company's executive being scrutinized after JPMorgan's $5.8 billion trading loss in the first half of 2012, the Journal article said   …
  • Because of pending new capital rules, H&R Block announced Tuesday it is contemplating ending its status as a savings and loan holding company (American Banker Oct. 10). In addition to its well-known tax preparation business, the Kansas City, Mo.-based company operates a $1.2 billion-asset bank. In a Tuesday filing with the Securities and Exchange Commission, H&R Block said it is in the early stages of investigating differing paths to no longer being a savings and loan holding company, and cannot predict the certainty or timing of any potential moves and how such action would  affect its business, the Banker said …

Market News (10/11/2012)

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MADISON, Wis. (10/12/12)

  • Initial claims for U.S. unemployment benefits last week fell to their lowest level in more than four-and-a-half years, which could be a reflection of adjusting data for seasonal shifts at the beginning of a new quarter (Bloomberg.com and The New York Times and Moody's Economy.com Oct. 11). Claims declined 30,000--to 339,000--for the week ended Oct. 6, the fewest since February 2008, the Labor Department said Thursday. Diminishing job cuts may open a path for large hiring gains, with any improvement in consumer demand, Bloomberg said. Although layoffs are at low ebb, hiring remains subdued, Guy Berger, a U.S. economist at RBS securities Inc. in Stamford, Conn., told Bloomberg.  Meanwhile, continuing claims for unemployment benefits declined 15,000--to 3.273 million for the week ended Sept. 29 ...
  • U.S. consumer sentiment remained near a three-month high last week because more consumers decided it was the right time to make purchases, even though they became more negative about the economy, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com Oct. 11). The index dipped 1.6 points--within the gauge's margin of error--to -38.5 from -36.9 the prior week. Although at historically low levels, consumer sentiment seems to have stabilized, said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. A decline in gasoline prices since mid-September likely bettered household views of the buying climate, even with distinct indications of unhappiness over the direction of the economy being prevalent, he added …
  • The U.S. trade deficit widened in August because of reduced demand for U.S exports--particularly for agricultural and industrial goods (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Oct. 11). The trade gap expanded 4.1% to $44.2 billion from $42.5 billion in July, the Commerce Department said Thursday. Demand for U.S. products is being hampered by a stagnating financial environment in Europe and slower economic expansion in China and other emerging markets, Bloomberg said. The U.S.--for the first time--is beginning to absorb the effect of a worldwide growth slowdown, Harm Bandholz, chief economist at UniCredit in New York, told Bloomberg. The U.S. will feel that effect in the third quarter, he added ...

Beige Book Economy grew modestly in Aug.Sept.

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WASHINGTON (10/12/12)--Reports from the 12 Federal Reserve Districts indicated that economic activity generally grew modestly for the latter half of August and September, according to the Fed.

"Consumer spending was generally reported to be flat to up slightly since the last report," said the Federal Reserve's Beige Book, which was released Wednesday. "A number of districts characterized retail sales as expanding at a modest pace, while reports from New York, Chicago and Kansas City indicated flat or softening sales. Vehicle sales were also generally characterized as stable but up from a year earlier and generally at favorable levels."

The New York District saw a leveling off in economic activity, and Kansas City indicated some slowing in the pace of growth. In general, other districts reported that growth continued at a modest pace.

Residential real estate conditions improved since the last report. Most districts reported strengthening in existing home sales, while prices were described as steady to increasing, with declining inventories noted in the Boston, Atlanta, Minneapolis, Dallas and San Francisco districts.

"Conditions in the manufacturing sector were mixed but, on balance, somewhat improved since the last report," said the Beige Book. "The Boston, Richmond, Atlanta, St. Louis, Kansas City and San Francisco districts reported some expansion in activity, whereas New York, Chicago and Minneapolis reported some weakening in activity."

Overall loan demand was steady to stronger in most districts. Credit standards were little changed since the last report, and several districts noted improvements in loan quality or steady to declining delinquency rates. Agricultural conditions were mixed, with drought conditions continuing to adversely affect much of the mid-section of the nation. Activity in the energy sector remained robust.

Consumer spending was mixed but generally reported to be flat to up slightly over the latest reporting period.

"In general, retail sales were reported to be running only modestly ahead of a year ago. A number of reports noted various factors affecting sales, such as rising gasoline prices, political uncertainty, concerns about the 'fiscal cliff' and weather," the Beige Book said.

Residential real estate showed widespread improvement since the last report. All 12 districts reported that existing home sales strengthened, in some cases substantially. Selling prices were steady or rising.

"Conditions in the manufacturing sector were mixed since the last report, though on balance, more districts reported that conditions had improved than worsened," said the Beige Book." The Boston, Richmond, Atlanta, St. Louis, Kansas City and San Francisco districts reported that activity expanded, though growth was generally seen as modest. Activity was reported as mixed in the Dallas district, while the New York, Chicago and Minneapolis districts reported that activity weakened, though declines were mild for the latter two.

Employment conditions were little changed since the last report. Most districts reported that wage pressures remained modest since the last report, the Beige Book said.

News of the Competition (10/10/2012)

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MADISON, Wis. ((10/11/12)

  • In an environment in which net interest margins are falling to unprecedented lows, U.S. banks are looking for any way to grow earnings--from cutting deposit rates and releasing loan-loss reserves, to cutting expenses and booking securities gains, industry observers told American Banker (Oct.9). Lackluster loan demand and artificially low interest rates have hampered banks' margins for more than a year and no relief is on the horizon, the Banker said. The third quarter could be the end-game for some bank directors and management teams in determining whether to keep battling margin pressure or to begin attempts to find a buyer, the Banker said. For a long time, analysts have predicted that flat-lining earnings would bring about another round of bank consolidation, the Banker said  …
  • There is substantial room to improve personal financial management (PFM) tools and integrate them better with online banking, by using more advanced data sourcing and analytics to include actionable information, said speakers at this year's BAI Retail Delivery Conference in Washington, D.C. (American Banker Oct. 9). Consumers want more control of their financial relationships derived through digital tools. Also, many existing bill payment and online banking applications may need to be bolstered with fresh capabilities to allow banks to vie with payments startups and garner new customers, Mark Schwanhausser, director of multi-channel financial services at Javelin Strategy & Research, told the conference …

Market News (10/10/2012)

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MADISON, Wis. (10/11/12)

  • U.S. mortgage applications decreased 1.4% for the week ended Oct. 5 from a week earlier, according to the Market Composite Index--a gauge of mortgage applications volume released Wednesday by the Mortgage Bankers Association (MBA). The index is part of MBA's Weekly Mortgage Applications Survey. On an unadjusted basis, the Index decreased 1%. The Refinance Index decreased 2%. The seasonally adjusted Purchase Index increased 2%. The unadjusted Purchase Index increased 3% and was 12% higher than the same week one year ago. "Refinance applications declined somewhat last week although volume is still near three-year highs, and purchase applications increased to the highest level since June, with both conventional and government volumes increasing," said Mike Fratantoni, MBA vice president of research and economics. "Rates on 30-year fixed-rate loans remain historically low, benefitting both prospective homebuyers and those seeking to refinance." The refinance share of mortgage activity remained unchanged at 83% from the previous week. The adjustable-rate mortgage share of activity decreased to 3.9% of total applications, matching the lowest level since December 2009. The government share of purchase applications was unchanged at 35.5%, the lowest level since the beginning of the series. For the MBA report, use the link …
  • Wholesale inventories in the U.S. increased in August, although stockpiling did not keep up with the distinct bounce-back in sales (The Wall Street Journal and Moody's Economy.com Oct. 10). Inventories rose 0.5% to seasonally adjusted $487.53 billion--after rising 0.6% in July, according to Commerce Department figures released Wednesday. In several industries such as farm products and machinery wholesalers kept more goods available, the Journal said. In the U.S., wholesalers constitute roughly one-third of all business inventories, with manufacturers and retailers accounting for the rest. Businesses that anticipate increasing demand often stockpile goods, the Journal said …
  • The August Job Openings and Labor Turnover Survey (JOLTS)  was mixed, with improved hiring compared with prior months, while the number of available jobs slightly dropped, according to the Bureau of Labor Statistics (Moody's Economy.com Oct. 10). Also, a rise in layoffs drove an uptick in the number of separations. In August, 4.39 million workers were hired, and 4.35 million left their jobs (separations). The number of  job openings fell to 3.56 million from 3.59 million in July …

News of the Competition (10/10/2012)

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MADISON, Wis. (10/11/12)

  • In an environment where net interest margins are falling to unprecedented lows, U.S. banks are looking for any way to grow earnings--from cutting deposit rates and releasing loan-loss reserves, to cutting expenses and booking securities gains, industry observers told American Banker (Oct. 9). Lackluster loan demand and artificially low interest rates have hampered banks' margins for more than a year and no relief is on the horizon, the Banker said. The third quarter could be the end game for some bank directors and management teams in determining whether to keep battling margin pressure or to begin attempts to find a buyer, the Banker added. For a long time, analysts have predicted that flat-lining earnings would bring about another round of bank consolidation, the Banker said  …
  • There is substantial room to improve personal financial management (PFM) tools and integrate them better with online banking, by using more advanced data sourcing and analytics to include actionable information, said speakers at this year's BAI Retail Delivery Conference in Washington, D.C. (American Banker Oct. 9). Consumers want more control of their financial relationships derived through digital tools. Also, many existing bill payment and online banking applications may need to be bolstered with fresh capabilities to allow banks to vie with payments startups and garner new customers, Mark Schwanhausser, director of multi-channel financial services at Javelin Strategy & Research, told the conference …

News of the Competition (10/09/2012)

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MADISON, Wis. (10/10/12)

  • Ahead of a pending federal rule regarding what constitutes a qualified mortgage (QM), many U.S. lenders are writing their own tougher rules (American Banker Oct. 5). Lenders are being particularly stringent about debt-to-income ratios--which are preventing some borrowers from procuring a home loan, the Banker said. It is anticipated that the Consumer Financial Protection Bureau (CFPB) will issue a final rule in January that requires lenders to verify the ability of a borrower to repay a loan, unless the loan is classified under the definition of a QM, the Banker said. It is also expected that the QM provision will set general guidelines for a borrower's capacity to repay a mortgage, which will include employment status and debt ratios, the Banker said. QM is part of the ability to repay proposal and it does apply to credit unions, according to the Credit Union National Association (CUNA). CUNA is urging the CFPB to include a safe harbor in the final rule that may protect creditors from lawsuits if they are making good faith efforts to comply with the regulation. The banks also are supporting the safe harbor approach, CUNA added ...
  • Walmart now is offering a Bluebird card--American Express' checking account alternative, making Walmart more competitive with banks (American Banker Oct. 8). The account, the first non-Serve card to be added onto Amex's digital wallet platform, allows users to pay billers electronically, send cash to friends, and deposit checks by taking a picture from their smartphones--all for free, the Banker said. For Bluebird transactions, merchants will be charged Amex's prepaid merchant discount rate, the Banker added ...
  • The U.S. government Tuesday filed a civil mortgage fraud lawsuit in the U.S. District Court in Manhattan against Wells Fargo Bank in New York, alleging that the country's largest home-mortgage originator caused thousands of loan defaults over the last 10 years (NBC News wire services Oct. 9). The suit charges that Wells Fargo, based in San Francisco, falsely certified that mortgages it wrote met government standards for eligibility for government insurance …

Market News (10/09/2012)

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MADISON, Wis. (10/10/12)

  • The International Monetary Fund (IMF) has cut its forecasts for worldwide growth because of threats to the economy and policy uncertainties in the U.S. and Europe (The New York Times, Bloomberg.com and The Wall Street Journal Oct. 9). IMF's forecast calls for a 3.3% expansion of the world's economy this year and 3.6% in 2013--down from the 3.5% in 2012 and 3.9% next year predicted in IMF's July report. New IMF estimates indicate a 15% chance for recession in the U.S., 25% in Japan and above 80% in Europe. "A key issue is whether the global economy is just hitting another bout of turbulence in what was always expected to be a slow and bumpy recovery or whether the current slowdown has a more lasting component," the IMF said in its World Economic Outlook report, according to Bloomberg. "The answer depends on whether European and U.S. policy makers deal proactively with their major short-term economic challenges"  …
  • U.S. small-business confidence dipped in September, with fewer firms indicating they intend to invest in new equipment or to hire, according to the National Federation of Independent Businesses' (NFIB) optimism index (Bloomberg.com and Moody's Economy.com Oct. 9). The index slid to 92.8 from 92.9 in August. That constituted the fourth decline in the past five months, signaling that business leaders may be postponing some investment and hiring decisions because of uncertainties with regulatory and tax policy, Bloomberg said. Meanwhile, more firms anticipate improved economic conditions six months down the road, suggesting an upswing in employment and sales could take time to develop, Bloomberg said …
  • Business sentiment worldwide steeply eroded in August, and although it has stabilized in recent weeks, it is at the same low ebb it has been at since the summer of 2011 when the debate over the Treasury debt ceiling was in full force, according to Moody's Analytics Survey of Business confidence (Moody's Economy.com Oct. 8). The current cause of worries appears to be the rapidly approaching fiscal cliff, Moody's said. Views of the economy's prospects heading into next year are particularly weak, Moody's added. Manufacturers are concerned about the repercussions from Europe's economic and political problems as they worsen, said Moody's  ...

Consumer credit up 8 CUs see increases as well

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WASHINGTON (10/9/12)--U.S. consumers increased their borrowing in August far more than expected, according to statistics released Friday by the Federal Reserve. Consumer credit rose $18.12 billion, or 8% seasonally adjusted, to $2.73 trillion, with both revolving and non-revolving credit rising. Credit unions, too, saw increases in member borrowing in revolving and non-revolving credit.

Economists surveyed by Bloomberg had forecast a median increase totaling $7.25 billion (Bloomberg.com Oct. 5).

Driving the increases were non-revolving loans, especially loans for automobiles and education, and the first gain in revolving credit (which includes credit card debt) in the three months.  The overall increase is the most increase in three months and compares with a revised decrease of $2.5 billion during July.

At credit unions, members borrowed $238 billion in August, up from $235.6 billion in August and up from $220.9 billion borrowed during second quarter of 2011.

Nationally, revolving debt totaled $854.9 billion in August, a 5.9% increase over July's $850.7 billion in July. The total revolving debt borrowed in second quarter of 2011 was $850.2 billion.

For credit unions, revolving credit card debt reported for August totaled $38.1 billion, an increase over the $37.4 billion recorded during the previous three months. In second quarter of 2011, credit unions said members' revolving credit totaled $35.8 billion.

Nationally, non-revolving debt for August totaled $1.87 trillion, a 9% increase over $1.857 trillion in July. That compares with $1.731 trillion borrowed during second quarter of 2011.

Credit unions reported non-revolving debt totaled $199.9 billion for August. That is an increase over the $198.2 billion they reported for July. In second quarter 2011, credit unions reported members borrowed $185.1 billion in non-revolving credit.

For the full report, use the link.

News of the Competition (10/05/2012)

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MADISON, Wis. (10/9/12)

  • A government-supported program that has been around for decades--small business investment companies, or SBICS--offers banks the opportunity to indirectly invest in small businesses at a time when they are having a difficult time finding quality loans (American Banker Oct. 4). Congress passed an economic stimulus measure in 2009 that made the program more appealing to banks and investors, and a Volcker Rule provision is anticipated to increase more investment activity, the Banker said. The Office of the Comptroller of the Currency (OCC) last week released a 24-page report to educate banks about the program, which explains what banks should know about the investments. As of July 31, there were 299 small-business investment companies with $18.3 billion in capital--derived from private sources and from Small Business Administration-backed bonds, the OCC's report said  …
  • Although the number of mutual thrifts is declining nationwide, Maine's environment for them is thriving (American Banker Oct. 4). The state's thrifts saw a rise in collective deposits by nearly 5% during the 12-month period ended June 30, according to Federal Deposit Insurance Corp. figures released last week. Currently, Maine thrifts hold nearly one third of the state's deposits. By contrast, neighboring   Massachusetts saw its thrifts' deposits decline by 20% during the period. Thrifts in Connecticut, New Hampshire and New York also lost deposits, the Banker said …

Market News (10/05/2012)

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MADISON, Wis. (10/9/12)

  • The U.S. unemployment rate dropped below 8% in September to its lowest rate in three-and-a half years, with employers taking on more part-time workers (The Wall Street Journal, The New York Times, Bloomberg.com and Moody's Economy.com Oct. 5). The national unemployment rate fell to 7.8% from 8.1% in August as the economy added 114,000 jobs last month, following a 142,000 gain in August, the Labor Department said Friday. The private sector expanded by 104,000 workers in September, while the government, which has experienced cuts that have hampered the recovery, added 10,000 jobs, the Times said. The labor market is in the process of healing, Ryan Sweet, senior economist at Moody's Analytics Inc. in West Chester, Pa., told Bloomberg. The economy will have a decent fourth quarter if the labor market can maintain its momentum, he added …
  • The Economic Cycle Research Institute's (ECRI) Weekly Leading Index--which measures economic growth--ended eight weeks of consecutive gains by dropping to 126.3 for the week ended Sept. 26 from 126.6 one week earlier (Moody's Economy.com Oct. 5). The smoothed, annualized growth rate sped up to 4.7%, heading further into territory that would predict growth, ECRI said. Despite the decline in the Weekly Leading Index, it remains near year-to-date highs, and both series of indicators--the regular and annualized--are positive news for the U.S. economy, ECRI said. In a related matter, ECRI's U.S. Future Inflation Gauge was at 103.4 in September--up noticeably from 101 in August, ECRI said (Moody's Economy.com Oct. 5). The steep increase is consonant with ECRI's anticipation of marginally stronger inflationary pressures engendered by higher food and energy prices …
  • For the sixth consecutive week, the Bloomberg Consumer Comfort Index increased, gaining 2.7 points to reach -36.9 for the week ended Sept. 30 from -39.6 the prior week (Moody's Economy.com Oct. 4). All three subcomponents of the index--perceptions of the buying climate, views of personal finances and the views of state of the economy--improved in the most recent week. Rising home values and stock prices, and reduced debt are buoying consumer spirits, Bloomberg said. However, in the coming weeks, rising food prices due to the drought and stubbornly elevated gasoline prices could temper consumer confidence, Bloomberg said …
  • Lending for U.S. apartment buildings surged 60% last year, rising roughly $40 billion from 2011, according to a Mortgage Bankers Association (MBA) report released Thursday (American Banker Oct. 4). In 2011, as measured by dollar volume, Wells Fargo, JPMorgan Chase, CBRE Group, PNC Financial and Berkadia led the list of lenders to apartment projects, MBA said …

FOMC minutes detail Feds September meeting

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WASHINGTON (10/5/12)--The Federal Reserve Board's policymaking body expressed reservations about the effectiveness of its monetary policies and communications of those policies during its Sept. 12-13 meeting, according to the minutes released Thursday.

In that meeting the Federal Open Market Committee (FOMC) lengthen the near zero interest-rate guidance to mid-2015 and introduced its third round of bond buying in quantitative easing (QE 3)--the first actions taken in a number of months. The targeted funds interest rates have been held at near 0%-0.25% since December 2008.

However, the minutes revealed divided discussion on several points in the Fed's policy.

"A number of participants highlighted the uncertainty about the overall effects of additional purchases [of Treasury securities] on financial markets and the real economy. Some participants thought past purchases were useful because they were conducted during periods of market stress or heightened deflation risk and were less confident in the efficacy of additional purchases under present circumstances," said the minutes.

"A few expressed skepticism that additional policy accommodation could help spur an economy that they saw as held back by uncertainties and a range of structural issues," the FOMC minutes said. "In discussing the costs and risks that such a program might entail, several participants reiterated their concern that additional purchases might complicate the committee's efforts to withdraw monetary policy accommodation when it eventually became appropriate to do so, raising the risk of undesirably high inflation in the future and potentially unmooring inflation expectations."

One committee member noted that "an extended period of accommodation resulting from additional asset purchases could lead to excessive risk-taking on the part of some investors and so undermine financial stability over time," according to the minutes.

Most participants, however, thought the risks could be managed since the FOMC could make adjustments to its purchases as needed and in response to developments in the economy or changes to its assessment of their costs and efficacy, the minutes continued.

The other issue involved communication of the provision of forward guidance regarding the future path of the federal funds rate.  In previous meetings, the FOMC had anticipated holding the interest rates at low levels until mid- or late 2014. However, at the September meeting, the committee extended that to mid-2015.

"It was noted that clear communication and credibility allow the central bank to help shape the public's expectations about policy, which is crucial to managing monetary policy when the federal funds rate is at its effective lower bound," the minutes said.

"A number of participants questioned the effectiveness of continuing to use a calendar date to provide forward guidance, noting that a change in the calendar date might be interpreted pessimistically as a downgrade of the committee's economic outlook rather than as conveying the committee's determination to support the economic recovery," the minutes continued. "If the public interpreted the statement pessimistically, consumer and business confidence could fall rather than rise."

The minutes said that many participants indicated they preferred "replacing the calendar date with language describing the economic factors that the committee would consider in deciding to raise its target rate…."

Reaching an agreement on specific thresholds "could be challenging given the diversity of participants' views, and some were reluctant to specify explicit numerical thresholds out of concern that such thresholds would necessarily be too simple to fully capture the complexities of the economy and the policy process or could be incorrectly interpreted as triggers prompting an automatic public response," according to the committee's minutes.

As the discussion ended, "most participants agreed that the use of numerical thresholds could be useful to provide more clarity about the conditionality of the forward guidance but thought that further work would be needed to address the related communications challenges," the minutes said.

To access the FOMC minutes, use the link.

News of the Competition (10/04/2012)

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MADISON, Wis. (10/5/12)

  • The California monitor for the multi-state mortgage settlement has received more than 200 complaints about dual tracking since April, according to a new report (American Banker Oct. 3). Dual tracking is a process in which mortgage servicers push homes toward foreclosure while the homeowner pursues a loan modification. The settlement prohibits the top five U.S. mortgage servicers from participating in dual tracking--a practice that consumer advocates have criticized, the Banker said. Appointed to monitor compliance in California, University of California-Irvine professor Katherine Porter said dual tracking persisted up to the Oct. 2 deadline for a company to apply new servicing standards, according to her first report. However, dual-tracking complaints abated in September, and she said she is optimistic the practices will end, now that the new guidelines can be enforced, she told the Banker
  • Wal-Mart stores will allow customers to reload cash onto prepaid cards backed by other brands such as First Data's Money Network, Green Dot and InComm's Vanilla Reload Network (American Banker Oct. 3). Also, the huge retail chain is simplifying the process for loading money onto the cards by permitting users to provide cash at a store register, rather than only at specialized store areas, dubbed Wal-Mart Money Centers, the Banker said. The move is being made "to make money everywhere [Wal-Mart] can," Brian Riley, a senior research director in the retail banking and cards practice at CEB Towergroup, told the Banker
  • U.S. community banks seem to be joining a growing movement to support reinstituting restrictions to separate commercial and investment banking practices, said the American Banker (Oct. 3).  Nearly all of the Banker's multiple interviews with executives of small banks revealed CEOs favor a framework that more resembles the separation mandated by the Glass-Steagall Act in 1933, which was repealed in 1999, the Banker said.  However, disagreements exist as to how the new system should be constructed and function. Some executives interviewed fretted that returning to Glass-Steagall would have unintended consequences, such as placing limits on activities of community banks that already are effectively regulated, they told the Banker  …
  • With increased regulation forcing employees to rapidly relearn banking, some small U.S. banks are shifting training to the Web from the field (American Banker Oct. 3). Many smaller banks don't have the money or the time to train their whole staff--particularly on new regulations, the Banker said. The other benefit of online courses is that banks can document and share their training requirements with regulators, and thus avoid write-ups or other penalties, the Banker said. The Credit Union National Association already offers online courses for credit unions …

Market News (10/04/2012)

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MADISON, Wis. (10/5/12)

  • Initial claims for U.S. unemployment benefits increased last week, indicating the labor market is going through an uneven recovery (Bloomberg.com and Moody's Economy.com Oct. 4). Claims rose 4,000--to 367,000--for the week ended Sept. 29 from the prior week, the Labor Department said Thursday. Last week's gain reverses only a small portion of the prior week's 22,000-claim decline, Moody's said. Progress in the labor market has not been quick, Ryan Sweet, senior economist at Moody's Analytics Inc. in West Chester, Pa., told Bloomberg. The jobs situation has remained fairly constant, with the lack of hiring--rather than layoffs--being the main problem, he added. Meanwhile, continuing claims for U.S. unemployment benefits remained constant at 3.281 million for the week ended Sept. 22. In a related matter, U.S. employers announced 33,816 job cuts in September--up 4.9% from August, according to the Challenger Report from Challenger, Gray and Christmas Inc. (Moody's Economy.com Oct. 4) ...
  • U.S. factory orders in August dropped by the most in three years, with demand for autos and aircraft steeply declining and indicating that a slowing of exports and business investment hampered the economic expansion (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Oct. 4). Manufactured-goods orders fell 5.2% to $452.81 billion in August--the largest decrease since January 2009, the Commerce Department said Thursday. Excluding the volatile transportation sector, new orders rose 0.7% in August. Companies are more cautious and less likely to bolster capital spending because of uncertainty about the fall elections, the rapidly approaching fiscal cliff and the debt ceiling, Scott J. Brown, chief economist at Raymond James & Associates, told the Journal
  • U.S. retailers reported that their sales cooled down in September, following two months of robust back-to-school purchases, as consumer buying abated and shoppers took a hiatus to gear up for holiday shopping (The Wall Street Journal and The New York Times Oct. 4). Sales at stores in business at least one year inched up 0.8% last month from September 2011, according to 19 retailers tracked by Thomson Reuters. Also, U.S. chain store sales declined in September, with escalating gasoline prices somewhat mitigating the lift provided by back-to-school shopping, according to the International Council of Shopping Centers (ICSC) Chain Store Sales Index. Last month's 3.9% year-over-year growth was a slowdown from August's 6% pace--leaving the index below the 4.6% year-to-date average for the first time since June, ICSC said …

News of the Competition (10/03/2012)

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MADISON, Wis. (10/4/12)

  • The Federal Deposit Insurance Corp. (FDIC) has released new data that indicate the largest U.S. banks have gained an even bigger share of deposits nationwide (American Banker Oct. 2). As of June 30, banks and thrifts that have at least $10 billion in assets managed 74.4% of all deposits, compared with a 72.4% a year earlier, said FDIC's summary released Tuesday. Also, total deposits increased 8.5% to $8.9 trillion collectively for the nation's 7,254 FDIC--insured institutions …
  • Investigators for President Barack Obama's mortgage task force are gearing up to bring more actions against financial institutions involved in the U.S. mortgage meltdown, New York Attorney General Eric Schneiderman said Tuesday after announcing he filed suit against JPMorgan Chase on Monday (American Banker Oct. 2). Several investigations are underway, he said. Five years after the mortgage crisis came to a head, the statute of limitations for the state securities law cited in the complaint could reduce legal options for taking action, said Schneiderman, who co-chairs the Residential Mortgage-Backed Securities Working Group …
  • Nationstar Mortgage Holdings grew during the past four years and now controls more than $200 billion in mortgages and a $3.2 billion market capitalization (American Banker Oct. 4). With a goal of delving further into the mortgage-servicing business, the company, a subprime lender, purchased the rights--after borrowing money at a high interest rate--to administer a small portfolio of problem-plagued government guaranteed loans from Fannie Mae in 2008, the Banker said. The Federal Housing Finance Administration said Nationstar and at least one other company were best positioned to assist the federal government in mitigating Fannie's servicing-related losses during a period when other companies were in no position to do so …

Market News (10/03/2012)

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MADISON, Wis. (10/4/12)

  • U.S. mortgage application volume increased 16.5% for the week ended Sept. 28 from a week earlier, according to the Market Composite Index, in the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index rose 17%. The Refinance Index increased 20%, the highest Refinance Index recorded in the survey since April 2009. The seasonally adjusted Purchase Index increased 4%. The unadjusted Purchase Index also increased 4% and was 11% higher than the same week one year ago. "Refinance application volume jumped to the highest level in more than three years last week as each of the five mortgage rates in MBA's survey dropped to new record lows in the survey," said Mike Fratantoni, MBA vice president of research and economics. "Financial markets continue to adjust to Quantitative Easing 3, as the ongoing presence of the Federal Reserve as a significant buyer of mortgage-backed securities applies downward pressure on rates. Although there was a slight decline in the Home Affordable Refinance Program (HARP) share of refinance activity, the level of HARP volume remains steady."  For the MBA report, use the link …
  • Private U.S. businesses added 162,000 jobs in September, continuing the moderate expansion of the labor force that has occurred since the end of the recession, according to a report released Wednesday from payrolls processing firm Automatic Data Processing Inc. and the Consultancy Macroeconomic Advisors (MarketWatch and The Wall Street Journal Oct. 2). Analysts in Dow Jones Newswires survey had forecast 152,000 new jobs. However, the August estimate was revised downward to 189,000 from the 201,000 initially reported last month. September's job expansion was just below this year's monthly average of 171,000 but higher than the 138,000 average for 2011, MarketWatch said. September's growth was spearheaded by the service-providing sector, which added 144,000 jobs, compared with 18,000 jobs in the goods-producing sector, MarketWatch said …
  • The Institute for Supply Management's (ISM) nonmanufacturing index unexpectedly rose in September, although the components of the overall gauge were mixed (Moody's Economy.com and MarketWatch Oct. 3). The composite index increased to 55.1 from 53.7 in August, going against ISM's forecast for a small decline. The new orders index--an indication of future demand--surged four percentage points to 57.7--the best reading since March. The prices index jumped to 68.1--the highest level since February--while the inventories gauge dropped to 48.5 from 52.5 …

News of the Competition (10/02/2012)

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MADISON, Wis. (10/3/12)

  • The Consumer Financial Protection Bureau (CFPB) Monday announced a set of coordinated orders and fines of more than $112 million against American Express for multiple violations of several laws (American Banker Oct. 1). The violations include age-based discrimination against new customers, failing to report consumer disputes to credit bureaus, and improper debt collection practices, CFPB said. The widespread action against American Express is meant as a distinct warning to other banks, observers told the Banker. Earlier this week, it was announced  that three American Express subsidiaries had agreed to pay $85 million in refunds to 250,000 customers and $27.5 million in fines as result of CFPB and other agencies finding several alleged violations of consumer financial laws (News Now Oct. 2) …
  • The U.S. Small Business Administration (SBA) has selected Wells Fargo as its servicing agent for SBA's 503/504 loan program--a portfolio of $23.6 billion, which includes more than 57,000 small-business loans (American Banker Oct. 1). The five-year servicing contract began Sept. 3. Wells replaces Bank of New York Mellon, which performed the job for the past 20 years. In a Monday press release, Wells said it created a joint partnership with PWC US--an accounting firm--to manage fees, receipt of payments, and disbursement processing associated with the program …
  • By giving out cash to some of its online sellers who need to pay for their inventories upfront, Amazon is gearing up to enter the lending business on a national level (American Banker Oct. 1). Amazon Capital Services is backing Amazon Lending, according to an online forum for Amazon Sellers, the Banker said. Although the program has existed for more than a year, it still is in a testing stage, a source told the Banker. However, Amazon is applying for lending licenses on a state-by-state basis and is waiting for approvals, the source added …

Market News (10/02/2012)

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MADISON, Wis.  (10/3/12)

  • The U.S. CoreLogic Home Price Index rose 0.3% in August and is 4.6% above its level in August 2011. The latest increase marks the best year-over-year advance since 2006 (Moody's Economy.com Oct. 2). For the excluding distress sales index, the ongoing house price recovery was even more robust, with prices rising 1% in August and up 4.9% from August 2011. The gains in house prices were widespread geographically, with only six states seeing decreases in house prices, CoreLogic said …
  • The International Council of Shopping Centers (ICSC) chain store sales index dropped 0.3% for the week ended Sept. 29 from Sept. 22, prolonging the poor result of the past several weeks (Moody's Economy.com Oct 2). Customer traffic eroded compared with last year--particularly at department stores and discounters, ICSC said. Part of the decline is normal for the season or related to more difficult comparisons than earlier in the year, ICSC said. However, it still is evident that consumers are increasing their spending by only a modest amount, ICSC said. Year-over-year growth dipped to 2.4% from 2.9% the prior week …
  • Chrysler Corp LLC and Toyota Motor Corp. recorded double-digit percentage gains in September for their U.S auto sales (The Wall Street Journal and The New York Times Oct. 2). Chrysler, the smallest automaker in the U.S., saw a 12% sales gain to 142,041 vehicles--its best September since 2007. Toyota saw a 42% jump, with sales totaling 171,910 last month, up from 121,251 a year earlier, but 8.8% below August sales. General Motors reported a 1.5% rise in sales to 210,245 for September, and Ford Motor Co. saw a 0.1% decline to 174,976 …

News of the Competition (10/01/2012)

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MADISON, Wis. (10/2/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced a bank closing Friday, bringing total bank failures this year to 43. That compares with 92 for the entire year in 2011. The failed bank is First United Bank, Crete, Ill., which was assumed by Old Plank Trail Community Bank, N.A., New Lenox, Ill. The closed bank held about $328 million in assets. The FDIC estimated the latest failure will cost its Deposit Insurance Fund roughly $49 million …
  • The U.S. Treasury Department's My MoneyAppUp Challenge contest declared a winner last week--a tool that helps consumers handle their student loans (American Banker Sept. 28). The application, called Centz, makes it simpler for student borrowers to manage their loans, by amalgamating all student loan details and then synchronizing a payment plan to a user's budget, the Banker said. To gain users, Centz would reward them for conducting specific actions such as paying bills on time and completing loan-related quizzes, the Banker added …

Market News (10/01/2012)

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MADISON, Wis. (10/2/12)

  • U.S. manufacturing increased in September, putting an end to three months of contraction and suggesting that although manufacturing remains down, it may have bottomed out, according to the Institute for Supply Management's (ISM) U.S. factory index (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Oct. 1). ISM's manufacturing purchasing manager's index inched up to 51.6 last month from 49.6 in August. Last month's performance placed the index above the neutral dividing mark (between growth and contraction) of 50 for the first time since May. The ISM panel indicated a mix among optimism about an increase of new orders, worries about soft business conditions worldwide and a volatile political environment, the Journal said ...
  • Construction spending in the U.S. for August dropped 0.6% below the July total, although it still came in 6.5% higher than the August 2011 total (Moody's Economy.com Oct. 1). Residential construction rose but was more than mitigated by a limited decline in construction spending and a significant drop in private nonresidential construction spending, Moody's said. During the past two months, the amount of construction spending still suggested a slowing economy, Moody's concluded …
  • Small-business hiring in the U.S. decelerated in September, resulting in slower growth because of weak revenues, while hours worked and compensation increased, according to the Intuit Small Business Employment Index (Moody's Economy.com and Business Wire Oct. 1). The index edged up to 91.19 last month from 91 in August. That means small businesses added 40,000 jobs in September, following a 50,000 gain in August. Last month, consumers cut back the most at bars, restaurants and retail stores--just as they did in August, Moody's said. The good news is that more people are starting their own businesses, Susan Woodward, the economist who worked with Intuit to create the indexes, told Business Wire. The bad news is that small-business revenues now are falling, after rising earlier in the lukewarm economic recovery, and employment is basically flat, she added …
  • Business confidence worldwide has weakened in recent weeks because businesses appear to be worried about the rapidly approaching fiscal cliff (Moody's Economy.com Oct. 1). Business sentiment is as low as it has been since the summer of 2011 during the imbroglio concerning the Treasury debt ceiling, Moody's said. Of particular concern is the noticeable weakness in expectations for the economy's prospects heading into next year, Moody's said. Manufacturers also are concerned about the recent drop-off in U.S. exports because of collateral damage from Europe's escalating economic and political problems, Moody's said. On the positive side, investment spending is steady and workers in the real estate sector are feeling good, added Moody's …