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News of the Competition (11/30/2012)

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MADISON, Wis. (12/3/12)

  • The National Advertising Division, a self-regulatory body that monitors advertising accuracy and that companies frequently ask to settle marketing disputes, ruled in favor of JPMorgan Chase & Co. in a case it brought against Bank of America (BofA) (American Banker Nov. 29). The division issued its non-binding decision Thursday, ruling that BofA's claims regarding cash rewards available to some of its credit card customers are not clear and should be more prominently disclosed. The decision constitutes JPMorgan Chase's third successful challenge in 2012 of the validity of credit card advertising claims made by its competitors, the Banker said ...
  • A legal dispute over proceeds from foreclosure sales in Illinois between banks and contractors has evolved into a legislative battle (American Banker Dec. 1). Bankers are trying to stop a proposed bill they say would hurt construction lending in the state. That legislation looks to overturn a 2011 Illinois Supreme Court decision favoring banks, based on a disputed interpretation of law that governs foreclosure-sale proceeds, the Banker said. Illinois law currently creates two pools of foreclosure sale proceeds, construction law lawyers told the Banker. The first--which indicates the proportional value of the unimproved land--typically goes to banks. When the second pool is divided, mechanics lien claimants--usually contractors, materials suppliers and subcontractors--argue that they have precedence, the Banker said. The Illinois Supreme Court ruling in 2011 awarded a share of the second pool to LaSalle bank, reasoning that its loan had been used to pay some contractors on a project and LaSalle should have equal standing with mechanics line claimants. The rule was mostly lauded by bankers, but rejected by contractors, who are trying to get it reversed in the state legislature, the Banker said … 

Market News (11/30/2012)

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MADISON, Wis. (12/3/12)

  • U.S. consumer spending declined in October because personal income did not grow and Hurricane Sandy impacted the Northeast at the end of the month (The Wall Street Journal, The New York Times and Bloomberg.com Nov. 30). Spending fell 0.2%--the weakest reading since May--following a 0.4% rise in September, the Commerce Department said Friday. When Sandy made landfall Oct. 29, it shut down hundreds of retail establishments, temporarily eroding the benefits of improving consumer sentiment, which had bolstered the holiday shopping prognosis, Bloomberg said. Although consumers are not shopping with top vigor, some factors in their favor include lower gasoline prices and a better housing market, Chris Christopher, an economist at IHS Global Insight Inc., in Lexington, Mass., told Bloomberg
  • Personal income in the U.S. stayed constant in October--marking the slowest growth since April--after rising 0.4% in September (Moody's Economy.com Nov. 30). Wage income fell 0.2% in October--the first decline since May--after rising 0.3% in September. Factors helping growth were dividend, interest and rental income, while proprietors' and transfer income declined and were considered detriments. Real spending dropped 0.3%--the largest decline since September 2009, while savings rose to 3.4% from 3.3% in September ...
  • The Economic Cycle Research Institute's (ECRI) Weekly Leading Index--which measures economic growth--increased to 126.3 for the week ended Nov. 23 from 125.4 the previous week (Moody's Economy.com Nov. 30). Decelerating for a sixth consecutive week, the smoothed, annualized growth rate fell to 3.4% from 3.6% the previous week. The differing paths of the two indicators is indicative of moderate growth in the U.S. economy, mitigated by uncertainty engendered by the rapidly approaching fiscal cliff and worsening economic situation in Europe, ECRI said …

News of the Competition (11/29/2012)

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MADISON, Wis. (11/30/12)

  • U.S. banks are looking for growth opportunities in Canada--mostly in commercial banking--to better meet the needs of customers on both sides of the border, but also in niche business lines where they can expand their existing proficiency (American Banker Nov. 28). As an example, Wells Fargo this month announced intentions to grow its Canadian wholesale banking operations. The bank has about 35 employees in three Canadian offices and wants to add up to 65 more, Rick Valade, head of Wells Fargo's Canadian operations, told the Banker. That expansion is the most recent incidence of a U.S. bank growing its operations in Canada to mitigate slow growth at home, the Banker said …
  • Wells Fargo is offering its mobile check-deposit service to customers nationwide, the bank announced Wednesday (American Banker Nov. 28). By taking pictures of the front and back of checks, customers throughout the country can deposit checks in their accounts. The mobile-deposit service was available in 15 states during the introduction of the service from June through October, the Banker said …

Market News (11/29/2012)

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MADISON, Wis. (11/30/12)

  • The U.S. economy grew faster than originally estimated in the third quarter, driven by rises in business inventories, federal spending and exports. The growth has caused the government to upwardly revise its gross domestic product (GDP) reading (The Wall Street Journal, The New York Times, Bloomberg.com and Moody's Economy.com Nov. 29).  GDP--the broadest gauge of goods and services produced in the U.S.--increased at a 2.7% annualized rate in the quarter--up from a previously reported 2% gain, the Commerce Department said Thursday. Growth in corporate profits helped push the upswing in economic activity, with profits from third-quarter production--business income but not items such as capital gains that revalue existing assets--up 8.7% from a year earlier, the Journal said. The third-quarter GDP growth is a significant increase from the 1.3% in the second quarter and is the fastest expansion since the 4.1% growth in fourth quarter 2011, the Times said …
  • Sales at 16 U.S. retail stores open at least one year saw an overall 1.6% increase in November, but sales at major chain stores--including  Kohl's, Macys, Nordstrom and Target--decreased, causing concern among the nation's retailers (The New York Times Nov. 29). The official kickoff of the holiday shopping season--Thanksgiving and Black Friday--was included in the reporting period, the Times said. Analysts had forecast a 3.3% gain. In a related matter, U.S. chain store sales slowed in November, falling short of expectations, according to the International Council of Shopping Centers (ICSC) Chain Store Sales Index. November saw 1.7% year-over year-growth--down from October's 5% and below the target of 4.5% to 5.5%, centered on retailers' plans, ICSC said …
  • Pending home sales in the U.S. rose strongly in October with mixed regional results, according to the National Association of Realtors (NAR).The Pending Home Sales Index--a forward-looking indicator based on contract signings--increased 5.2% to 104.8 in October from an upwardly revised 99.6 in September. The index is 13.2% above October 2011, when it was 92.6. The data reflect contracts but not closings. Lawrence Yun, NAR chief economist, said buyers are responding to favorable market conditions. "We've had very good housing affordability conditions for quite some time, but we're seeing more impact now from steady job creation and rising consumer confidence about home buying now that home prices have clearly turned positive," he explained. Outside of a few spikes during the tax credit period, pending home sales are at the highest level since March 2007, when the index also reached 104.8. On a year-over-year basis, pending home sales have risen for 18 consecutive months. For the NAR report, use the link …
  • Initial claims for U.S. unemployment benefits declined last week, as disruptions in the labor market caused by Hurricane Sandy abated (Bloomberg.com and Moody's Economy.com Nov. 29). Claims fell 23,000--to 393,000--for the week ended Nov. 24, the Labor Department said Thursday. Job creation not engendered by storm-related damage likely will be dampened because of the U.S. fiscal prognosis and the worldwide economic slowdown, Bloomberg said. Meanwhile, continuing claims for U.S. unemployment benefits decreased by 70,000 for the week ended Nov. 17--to 3.29 million. Also, the four-week moving average increased 6,250--to reach 3.3 million ...

Fed IBeige BookI Economy expanding at measured pace

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WASHINGTON (11/29/12)--The nation's economic activity expanded at a "measured pace" in recent weeks, with consumer spending growing moderately and manufacturing conditions weakening in most of the 12 Federal Reserve Districts, according to the Federal Reserve's Beige Book, released Wednesday.

Hurricane Sandy and the fiscal cliff are impacting some of that growth, said the book, which was prepared by the Federal Reserve Bank of Richmond. The Beige Book, a summary of current economic conditions, is released eight times a year and provides an anecdotal snapshot of business conditions in each of the Fed's 12 districts.

Districts in Cleveland, Richmond, Atlanta, Chicago, Kansas City, Dallas and San Francisco reported modest growth, while St. Louis and Minneapolis saw a stronger increase in activity. Boston experienced a slower growth rate. Hurricane Sandy was attributed as impacting weaker conditions in New York and Philadelphia, said the book.

The book also noted that "contacts in a number of districts expressed concern and uncertainty about the federal budget, especially the fiscal cliff."

Consumer spending "grew at a moderate pace in most districts, while manufacturing weakened, on balance.  Seven of the 12 districts reported either slowing or outright contraction in manufacturing, and two others gave mixed reports," said the summary.

Several districts reported slight gains in residential and commercial real estate. Travel and tourism varied by district. Non-financial services differed among districts.

Moderate improvements in hiring were reported by most districts, but Richmond reported labor markets in general were weaker than in the last report.

In banking and financial services, higher demand for home mortgage loans and auto loans increased consumer lending in some districts. However, small business loan demand was weaker to moderately higher, depending on the district.

Loan demand was generally either mixed or slightly stronger across most districts, said the report. New York reported that demand for consumer and especially commercial and industrial loans weakened, but commercial and residential mortgage demand was steady.  Small business loan demand in Chicago saw modest growth, but a decrease in credit demand occurred among middle-market customers.

St. Louis reported overall lending was essentially unchanged. Used-car loan demand was weak in Dallas, although mortgage and energy-related lending rose. San Francisco saw weak-to-moderate business loan demand, while consumer lending expanded, largely through auto loans and refinances of home mortgages. But as a whole, lending was unchanged, said the San Francisco district. Most of the rest of the districts saw moderate increases in total loan demand.  Philadelphia district banks reported widespread bank and ATM closings during Hurricane Sandy.

Several districts reported that credit standards and credit quality were "somewhat improved, on net, since the last report." Chicago, St. Louis and Kansas City saw no changes on credit standards for most types of loans. In the Dallas district, credit standards loosened and contributed to competitive loan pricing.  Underwriting standards in Atlanta were more restrictive and burdensome, both in credit scores and information requests, said the report.

Delinquency rates in New York rose for consumer and commercial and industrial segments but were steady for residential and commercial mortgages. Philadelphia indicated a "moderate improvement," while Cleveland and Richmond saw delinquency rates improve across consumer and business loans. Richmond, however, said some banks were increasing their risk exposure by making longer-term loans to try to obtain higher yields.  Kansas City and San Francisco also noted loan quality improved moderately.

Full the full report, use the link.

News of the Competition (11/28/2012)

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MADISON, Wis. (11/29/12)

  • The Securities and Exchange Commission (SEC) has sent a Wells notice to SAC Capital Advisors LP, indicating the SEC is considering filing civil charges against the hedge fund company for its alleged role in an insider trading case (The Wall Street Journal Nov. 28). The case already has involved a former SAC portfolio manager. Federal prosecutors have charged Wall Street portfolio manager Matthew Martoma with obtaining secret data from a University of Michigan professor conducting a clinical trial for an Alzheimers drug--while Martoma worked at SAC Capital (The Wall Street Journal Nov. 20). The complaints allege that Martoma traded after being advised and given information by Steve A. Cohen, a prominent and successful hedge fund manager. Cohen is referred to as the fund owner but not named in the civil and criminal complaints. He was not charged, the Journal said …
  • Discover Financial Services Inc. plans to allow its employees to pay for their lunches in the company's cafeteria and convenience store at its corporate headquarters in Riverwoods, Ill., by having their fingerprints read (The Chicago Tribune Nov. 28).  Working with Natural Security, a French biometrics firm, Discover intends to test the fingerprint-payment system with 300 to 350 employees, the Tribune said. Natural Security will use a fob key kept on a key chain or in a purse that stores a user's payment information, with the fingerprint serving as authentication when a consumer makes a payment, the Tribune said …

Market News (11/28/2012)

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MADISON, Wis. (11/29/12)

  • U.S. mortgage loan application volume for the week ended Nov. 23 declined 0.9% 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 decreased 24%. The Refinance Index dropped 2%. The refinance share of mortgage activity remained unchanged at 8% of total applications from the previous week. The seasonally adjusted Purchase Index increased 3%. The unadjusted Purchase Index fell 24% and was 8% higher than the same week one year ago. The adjustable-rate mortgage share of activity decreased to 4% of total applications. The government share of purchase applications declined to 33%--its lowest share in the survey since early 2009. Conducted weekly since 1990, the survey covers more than 75% of all U.S. retail residential mortgage applications. Respondents include mortgage bankers, commercial banks and thrifts. For the MBA report, use the link …
  • New-home sales in the U.S. unexpectedly dipped in October, while September's sales were less than originally estimated, indicating the recovery in the housing market is limited and uneven (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Nov. 28). New single-family home sales dropped 0.3% last month to an annualized 368,000 pace, following a revised 369,000 (originally 389,000) rate in September, the Commerce Department said Wednesday. In the past six months, purchases have risen 2.8%--a sign that access to credit and restrained job growth still are holding back the residential real estate market, Bloomberg said. The key element in the housing market is better job growth, Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Fla., told Bloomberg. In the aftermath of the recession there is a lot of ground to be made up, he added …
  • New orders for U.S. durable manufactured goods in October remained unchanged from September. However, demand for core capital goods such as machinery and electronics--excluding defense goods such as aircraft--increased 1.7% last month, the most since May, the Commerce Department said Tuesday (Bloomberg.com and Moody's Economy.com Nov. 27). Core capital goods orders are considered a proxy for future business development. Also, total shipments fell 0.6% last month, while inventories increased 0.4 % …

News of the Competition (11/27/2012)

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MADISON, Wis. (11/28/12)

  • Lehman Brothers--in a deal worth roughly $6.5 billion in cash and stock--agreed Monday to sell Archstone, an apartment complex company, to its two main real estate competitors, Equity Residential and Avalon Bay Communities (The New York Times DealBook Nov. 26). The sale will rid Lehman's estate--as it continues to wind itself down--of its single largest asset. The action also ends the estate's plans to take Archstone public--which was anticipated to raise about $3.45 billion in an initial public offering on the New York Stock Exchange, the Times said …
  • JPMorgan Chase intends to offer instant-issue debit cards--mostly in Chicago, Los Angeles and New York--in about 2,000 branches (American Banker Nov. 26). Beyond  its initial focus on debit, JPMorgan Chase also plans to offer instant-issue cards to credit and prepaid  customers, the Banker said. The bank plans to install instant-issue technology in 800 additional branches next year, the Banker added ...

Market News (11/27/2012)

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MADISON, Wis. (11/28/12) 

  • U.S. consumer confidence increased in November to the highest level in more than four years--an indication that household spending will continue to rise, according to private research firm The Conference Board's Index of Consumer Confidence (Bloomberg.com and Moody's Economy.com Nov. 27). The index reached 73.7--the highest level since February 2008 and the third consecutive monthly gain--from a 73.1 reading in October. The report indicated consumers intending to purchase a house rose to a record high, signaling that escalating property values and a recovering job market are paving the way for households to make long-term financial commitments, Bloomberg said. That, in turn, may help sustain consumer spending, which constitutes 70% of the economy, and allay worries about the approaching  fiscal cliff--the government  spending cuts and tax increases set to begin early next year, Bloomberg said …
  • U.S. existing-home prices in September increased from August--another indication of a recovering housing market--according to Standard & Poor's Case-Shiller home-price indexes (The Wall Street Journal and Moody's Economy.com Nov. 27). The Case-Shiller composite index of 10 major metropolitan areas and the 20-city index increased 0.3% in September from August. On a year ago basis, the 10-city index is up 2.1% from last year, and the 20-city index rose 3% during the same period.  In a related matter, the monthly Federal Housing Finance Agency (FHFA) Purchase-Only Price Index increased 0.2% in September from August and is 4.4% higher than September 2011 (Moody's Economy.com Nov. 27) ...
  • The International Council of Shopping Centers (ICSC) chain store sales index jumped 3.3% for the week ended Nov. 24---the largest weekly upswing  since the end of March (Moody's Economy.com Nov. 27). Good weather helped bolster robust Thanksgiving weekend sales, ICSC said. Compared with the same week last year, growth roughly doubled this year, resulting in year-over-year growth surging to 4%--the most since mid-May, ICSC said. However, since Thanksgiving weekend sales are not always a good indication of total holiday spending, the strength of overall holiday shopping still is difficult to assess, ICSC said …

Market News (11/26/2012)

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MADISON, Wis. (11/27/12)

  • There was a big surge in consumer spending during the Thanksgiving weekend, with shoppers rushing to stores, repeatedly visiting malls and taking advantage of online discounts (The Wall Street Journal Nov. 25).  That resulted in more than $59 billion in estimated sales from Thursday through Sunday--up from $52.4 billion last year, according to a BigInsight survey conducted for the National Retail Federation (USA Today Nov. 26). However, a robust kickoff to holiday  shopping doesn't  necessarily translate to overall sales increases during the season, because sales can head  in either direction despite a good beginning, Beryl Raff, CEO of Hertzberg Diamonds, a jewelry-store chain owned by Berkshire Hathaway Inc., told the Journal.  For the average person nearly 41% of total spending was online, the BigInsight survey indicated. The figures do not include the surge in spending online during Cyber Monday.  In a related matter, the International Council of Shopping Centers (ICSC) chain store sales index declined 0.3% for the week ended Nov. 17 from the prior week, although year-over-year growth improved to 2.5% (Moody's Economy.com Nov. 20) ...
  • The Conference Board's Index of Leading Economic Indicators rose 0.2% in October, following a revised 0.5% increase in September (Moody's Economy.com Nov. 21).  That constitutes gains for two consecutive months; the index has alternated going up and down each month since April.  September's increase was led by a rise in the interest rate spread and by gains in leading credit  index components, Moody's said.  However, Institute of Supply Management reported new orders and building permits fell slightly, Moody's said. Also, the Chicago Fed National Activity Index fell to -0.56 in October from zero in September (Moody's Economy.com Nov. 26).  Hurricane Sandy was the main factor in lost economic activity, Moody's said …
  • Worldwide business confidence fell last week, according to Moody's Analytics Survey of Business Confidence. However, it recorded fewer responses than normal to the survey, likely because of the Thanksgiving holiday (Moody's Economy.com Nov. 26).  The index fell to 11.9 for the week ended Nov. 23 from 17.7 the prior week. Despite that factor, it is evident that businesses are worried, particularly about the economy's prospects heading into 2013--likely a reflection of the rapidly approaching fiscal cliff and Treasury debt ceiling, Moody's said. In particular, pricing power is weak. While business sentiment does not indicate a recession, it is consistent with a struggling economy, Moody's concluded ...

News of the Competition (11/26/2012)

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MADISON, Wis. (11/27/12)

  • U.S. prepaid card issuers are looking to establish longer-term relationships with their customers, as issuers want customers to use the cards more like a traditional checking relationship (American Banker Nov. 21). The reason is that a typical prepaid card is active for six months or less, according to a recent report by the Federal Reserve Bank of Philadelphia. However, the longer the cards are in use, the more the revenue multiplies, the report said. In the past, the number of prepaid card issuers was low and prices remained fairly high, the Banker said. However, increased competition from other prepaid card issuers entering the market is creating downward pressure on prices, causing the move, the Banker said …
  • In what is called the most lucrative insider-trading scheme ever, federal prosecutors charged Wall Street portfolio manager Matthew Martoma with obtaining secret data from a University of Michigan professor conducting a clinical trial for an Alzheimers drug--while Martoma worked at SAC Capital (The Wall Street Journal Nov. 20).  However, prosecutors' real target appears to be Steven A. Cohen, one of Wall Street's most prominent and successful hedge fund managers, the Journal said. The two men allegedly purchased shares for their funds in two drug companies involved in the drug's clinical and then bet on the companies' shares to decline when Martoma  learned of negative news in 2008, the criminal complaint says …
  • Goldman Sachs Group Inc.--the top stock underwriter in Europe--declined roles in fundraising activities by banks in Italy and Spain this year because of risks that their underwriting fees could be in peril if the stock drops (Bloomberg.com Nov. 26). With Europe's debt crisis heading into a fourth year, Goldman was the only major U.S. securities firm not to participate in fundraising by Southern European lenders, Bloomberg said. Goldman sees only a "small" likelihood that the euro area will stay together, said Gary D. Cohn, Goldman president and chief operating officer …

News of the Competition (11/21/2012)

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MADISON, Wis. (11/26/12)

  • A federal judge in Manhattan ruled that most of a lawsuit alleging Barclays misled mortgage investors may proceed (American Banker Nov. 20).  In the ruling issued Nov. 12, U.S. District Judge Denise Cote of the Southern District of New York said Barclays must defend itself against Federal Housing Finance Agency (FHFA) allegations of wrongdoing in selling securities backed by residential mortgages. In prior rulings, Cote said FHFA may proceed with lawsuits accusing Bank of America's Merrill Lynch unit, Deutsche Bank, Goldman Sachs and JPMorgan Chase with misleading investors, the Banker said …
  • Credit Suisse is the target of a lawsuit that alleges it deceived investors in mortgage-backed securities (American Banker Nov. 20). The suit is the second case filed by New York Attorney General Eric Schneiderman as part of a joint effort with the federal government, the Banker said. The suit claims Credit Suisse's deception and misconduct were--at a minimum--partially at fault for more than $11 billion in losses incurred by investors in residential mortgage securitizations during the bank's boom period …
  • Citing a "usurious" payday-like loan product and lending practices in minority communities, a group of community activists Tuesday asked the Office of the Comptroller of the Currency to give Wells Fargo a failing mark on its pending Community Reinvestment Act Examination (American Banker Nov. 20). The group alleges Wells took part in "abusive, fraudulent and discriminatory practices" in its mortgage business. The group--which includes the California Reinvestment Coalition, the Neighborhood Economic Development Advocacy Project, Reinvestment Partners and the Woodstock Institute--said Wells discriminated in its mortgage business, and pointed to several federal lawsuits and settlements as evidence, the Banker said …

Market News (11/21/2012)

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MADISON, Wis. (11/26/12)

  • Initial claims for U.S. unemployment benefits decreased for the week ended Nov. 17 as Hurricane Sandy's negative impact to the labor market began to abate. However, claim levels still remained elevated (The Wall Street Journal, Bloomberg.com and Moody's Economy.com, Nov. 21). Claims fell 41,000--to a seasonally adjusted 410,000 from the prior week. New claims stayed above 400,000 in two consecutive weeks for the first time in more than a year, the Labor Department said Wednesday. The labor market is experiencing a temporary setback because of Sandy, Ryan Sweet, a senior economist at Moody's Analytics Inc. in West Chester,  Pa., told Bloomberg. Beyond Sandy's impact, the economy remains weak and will stay that way until there is some clarity about the country's fiscal situation, he added. Meanwhile, continuing claims for unemployment benefits dropped 30,000--to 3.3 million for the week ended Nov. 10. However, the four-week moving average of claims climbed 9,500--to 396,250--the highest level since late 2011 …
  • Mortgage loan applications in the U.S. decreased 2.2% for the week ended Nov. 16 from one week earlier, according to the Market Composite Index. The index is part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index declined 13%. The seasonally adjusted Purchase Index increased 3%. The unadjusted Purchase Index fell 11% and was 6% lower than the same week one year ago. The Refinance Index dropped 3%. The refinance share of mortgage activity remained unchanged at 81% of total applications from the previous week. The adjustable-rate mortgage share of activity 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) climbed to 3.54% from 3.52%. The points decreased to 0.40 from 0.41 (including the origination fee) for 80% loan-to-value ratio loans. The effective rate increased from last week. For the MBA report, use the link …
  • U.S. consumer confidence increased less than expected in November, a sign the impending fiscal cliff--with more than $600 billion in government cutbacks and tax increases slated to take effect next year--may be starting to bring down peoples' moods, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index (Bloomberg.com and Moody's Economy.com Nov. 21). The index barely changed, inching up to 82.7--a five-year high--from October's 82.6. The measure was forecast to climb to 84.5, according to a survey of economists by Bloomberg. Less consumer optimism could dampen household purchases  …
  • For a second consecutive week, U.S. mortgage rates fell to record lows, lowering borrowing costs while housing demand grows (Bloomberg.com Nov. 21). The average 30-year fixed-rate mortgage dropped to an all-time low of 3.31% for the week ended Nov. 21 from 3.34% the prior week, said Freddie Mac. The average 15-year rate dipped to 2.63%--also a record--from 2.65%. Low mortgage rates have helped spark a recovery in the housing market, as sales and home prices both are on the rise, Bloomberg said …

News of the Competition (11/20/2012)

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MADISON, Wis. (11/21/12)

  • A global financial group is asking for more stringent oversight of non-bank entities because of the ongoing growth in private equity firms, hedge funds, and other entities outside the regular banking system--the so-called shadow banking system (American Banker Nov. 19). That system expanded worldwide to $67 trillion last year--roughly half the size of assets held by the global banking system, according to a report released Sunday by an international policy body--the Financial Stability Board. The biggest shadow banking systems are: the U.S., No. 1 with $23 trillion in assets; the European Union ($22 trillion); and Great Britain ($9 trillion) …
  • Credit Suisse Group AG Tuesday announced a revamping to create a new wealth management unit (The Wall Street Journal Nov. 20). The Swiss bank will combine its asset management unit with its private bank. However, it did not take more drastic steps anticipated by analysts, after its competitor UBS AG cut the jobs of 10,000 bankers, the Journal said. After the revamp is completed, Credit Suisse will have just two units--investment banking and wealth management--which are clearly separate from each other, the Journal said  …
  • Two startup companies have unveiled mobile apps to help consumers decide which credit card to use when they check out (American Banker Nov. 16). Wallaby Financial, which supports more than 300 cards, introduced a free app to help iPhone users decide which of their cards will garner the most perks, the Banker said. Also, Glyph rolled out an iPhone app that helps consumers choose the best card to use when they are shopping. Similar to Wallaby, Glyph recommends which cards to use to obtain the most reward points on purchases--such as 5% cash back on groceries, the Banker said ...

Market News (11/20/2012)

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MADISON, Wis. (11/21/12)

  • Signaling further improvement in residential construction, U.S. housing starts in October rose to a four-year high (Bloomberg.com, The New York Times and Moody's Economy.com Nov. 20). Starts climbed 3.6% from September to an 894,000 annualized rate--the fastest pace since July 2008--the Commerce Department said Tuesday.  Building-permit applications--a proxy for future construction--dropped 2.7% to 866,000, following a 12% surge in September, to a four-year high. A lower risk of falling property values and record-low mortgage rates may continue to entice buyers and provide a boost to the economy, Bloomberg said. Housing is definitely heading upward because there's been a steady rise in demand and excess supply has been depleted, which bodes well for construction, Harm Bandholz, chief U.S economist at UniCredit Group in New York, told Bloomberg
  • U.S. mass layoffs increased to 1,360 in October, up 44 from September, according to the Bureau of Labor Statistics (Moody's Economy.com Nov. 20). Maas layoffs involve 50 or more workers laid off from the same company at about the same time. The number of individual claimants rose 8,711--to 131,173--after dropping 4,992 in September. Manufacturing layoff events last month slid down 22 from September to land at 344. Although October saw a rise in layoff  events and claimants, both are in the lower echelons of historical averages, indicating recent softness in the labor market may be due to uneven hiring rather than job losses, Moody's said …
  • The probability that the U.S. will move back into recession six months from now rose to 32% in October from 30% in September, according to the Risk of Recession gauge, released by Moody's Economy.com (Nov. 20). That constitutes the second increase in the past four months, and takes back part of a 5% decline in September. An improvement in consumer confidence and the labor market was mitigated by weakness in housing permits and stock prices--pushing the probability of recession upwards, Moody's said  …

News of the Competition (11/19/2012)

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MADISON, Wis. (11/20/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced a bank closing Friday, bringing total bank failures this year to 50. That compares with 92 for the entire year in 2011. The failed bank is Hometown Community Bank, Braselton, Ga., which was assumed by Certus Bank, N.A., Easley, S.C. The closed bank held about $125 million in assets as of Sept. 30. The FDIC estimated the latest failures will cost its Deposit Insurance Fund roughly $37 million …
  • Per terms of a federal and state settlement for foreclosure processing violations earlier this year, five of the biggest U.S banks have provided $26 billion in homeowner relief to roughly 300,000 borrowers--including about $6.3 billion worth of mortgage-related write-downs, according to an independent monitor's report released Monday (The Wall Street Journal Nov. 19). Bank of America (BofA), which is required to provide most of the relief, has accounted for most of the principal write-downs--with roughly $3.7 billion worth of homeowner debt written off, the Journal said. As of Sept. 30, there was another $2.7 billion in loan-forgiveness modifications in a trial stage, BofA said …
  • Wells Fargo must resume processing loan-modification requests for borrowers in states that Hurricane Sandy impacted, according to demands made in a letter from New York's Attorney General (American Banker Nov. 16). Wells Fargo said the situation is due to a misunderstanding and that it has operated in the best interests of borrowers affected by Hurricane Sandy. The bank temporarily suspended reviews of loan modification requests until it obtains direction from the Federal Emergency Management Agency, said Eric Schneiderman, New York attorney general …

Market News (11/19/2012)

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MADISON, Wis. (11/20/12)

  • Sales of existing U.S. homes increased in October, despite regional impact from Hurricane Sandy, while home prices continued to rise due to lower levels of inventory, 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--rose 2.1% to a seasonally adjusted annual rate of 4.79 million in October from a downwardly revised 4.69 million in September. The sales are 10.9% above the 4.32 million-unit level in October 2011. Lawrence Yun, NAR chief economist, said there was some impact from Hurricane Sandy. "Home sales continue to trend up and most October transactions were completed by the time the storm hit, but the growing demand with limited inventory is pressuring home prices in much of the country," he said. "We expect an impact on Northeastern home sales in the coming months from a pause and delays in storm-impacted regions." For the NAR report, use the link …
  • Boosted by the biggest sales jump in a decade, U.S. homebuilders' confidence unexpectedly rose in November to a six-year high, indicating the real estate market is gaining momentum, according to the National Association of Home Builders (NAHB)/Wells Fargo index of builder confidence (Bloomberg.com and Moody's Economy.com Nov. 19). The index jumped to 46--the highest level since May 2006--from 41 in October, NAHB said Monday. Economists in a Bloomberg survey had forecast no change in the index. Buyers are being enticed into the market by record-low mortgage rates and more affordable properties, Bloomberg said. Lower credit, fewer foreclosures and quicker hiring would solidify a sustained recovery in the industry that was at the heart of the financial crisis in 2008, Bloomberg added …
  • U.S. gross domestic product (GDP) likely rose roughly 2.9% in the third quarter, according to economists at Barclays Plc and Goldman Sachs Group Inc. That means it is set to withstand headwinds from Hurricane Sandy and year-end battles over the federal budget in Washington, D.C. (Bloomberg.com Nov. 18). GDP increased 2.9% last quarter--the fastest quarterly growth this year and ahead of the Commerce Department's initial estimate of 2%. Because private sector fundamentals are getting better, the momentum of the economy has improved, Jan Hatzius, chief economist at Goldman Sachs in New York, told Bloomberg. Third-quarter growth could be upwardly revised to 2.8%, and the fourth-quarter growth could register 1.7%, he added …

News of the Competition (11/16/2012)

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MADISON, Wis. (11/19/12)

  • The New Mexico Regulation and Licensing Department announced Wednesday that Capitol Bancorp--a multi-state holding company based in Lansing, Mich.--has until Dec. 20 to address capital shortfalls at its Sunrise Bank of Albuquerque or else face seizure (American Banker Nov. 15). The state regulator said Sunrise is substantially undercapitalized and operating in an unsound manner, without a quorum of outside directors ...
  • Last week, the National Advertising Division issued a ruling in a large-cash dispute between two of the credit card industry's biggest advertisers--Capital One Financial and JPMorgan Chase. Although Chase won the ruling, Capital One said it would appeal (American Banker Nov. 15). The division, a mostly unknown 10-person agency based in New York, investigates allegations--usually after a competitor makes a complaint--that competitors are creating deceptive marketing, the Banker said. The organization is part of a self-regulatory system that give firms the option to circumvent more costly, time-consuming battles concerning marketing rights, which may be obsolete by the time the cases are ultimately adjudicated, the Banker said …
  • By 2017, global purchase volume for mobile devices will hit $1 trillion, according to research released Wednesday by IDC Financial Insights (American Banker Nov. 15). Most of the mobile volume will result from mobile commerce. IDC defines that as digital media consumed on the mobile device, and electronic commerce conducted via a mobile Web browser, the Banker said. The IDC forecast focuses on business and consumer spending over mobile networks, and does not include service providers' spending on technology to allow such services …
  • The Office of the Comptroller of the Currency (OCC) is expected to serve a cease-and-desist order to JPMorgan Chase & Co., alleging weaknesses in the bank's anti-money laundering systems, said sources familiar with the matter (The Wall Street Journal Nov. 15). It is anticipated that OCC will require JPMorgan to enhance its procedures and scrutinize past transactions, the sources said. The order is a component of an overarching crackdown on the biggest U.S. banks, the sources added …

Market News (11/16/2012)

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MADISON, Wis. (11/19/12)

  • Industrial production in the U.S. declined 0.4% in October--after increasing 0.2% in September--in large part due to Hurricane Sandy, according to the Federal Reserve's Industrial Production and Capacity Utilization report. Hurricane Sandy, which held down production in the Northeast region at the end of October, is estimated to have reduced the rate of change in total output by nearly one percentage point. The largest estimated storm-related effects included output reductions of utilities, chemicals, food, transportation equipment and computers and electronic products. In October, the index for manufacturing decreased 0.9%; excluding storm-related effects, factory output was roughly unchanged from September. The utilities output edged down 0.1% in October, and production at mines advanced 1.5%. At 96.6% of its 2007 average, total industrial production in October was 1.7% above its year-earlier level. Capacity use for total industry decreased 0.4 percentage point to 77.8%, a rate 2.5 percentage points below its long-run (1972--2011) average.  For the Fed report, use the link …
  • U.S. consumer sentiment improved 1.3 points, reaching -33.1 for the week ended Nov. 11, with optimism rising about the state of the economy, according to the Bloomberg Consumer Comfort Index (Moody's Economy.com Nov. 15). Stronger hiring during the past several months and a recovering housing market likely improved views of the economy, Bloomberg said. However, the personal finances subcomponent of the index was forced downward because consumers' average earnings haven't kept pace with rising prices, prompting buyers to re-evaluate their personal finances, Bloomberg said. Also, consumers appear to be saving less, which is worrisome because the fiscal cliff is rapidly approaching. If households are saving less, they will have less ability to handle the impact of expiring tax savings heading into 2013, Bloomberg said …
  • The Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--hit an eight-week low, dropping to 125.4 for the week ended Nov. 9, from 126.1 the prior week. The smoothed, annualized growth rate decelerated to 4.4% from 5% the prior week--constituting the fourth consecutive week of declines. While both growth rates remain above their year-to-date averages, the decreases in the past few weeks is a concern because both rates lead changes in the business cycle, ECRI said ...

News of the Competition (11/15/2012)

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MADISON, Wis. (11/16/12)

  • A U.S. Bancorp unit will buy a provider of administration services for hedge funds so it can strengthen its business that administers funds for investment managers, the company said Tuesday (American Banker Nov. 14). U.S. Bancorp Fund Services will purchase AIS Fund Administration in a deal pending regulatory approval. The deal would double the total alternative investment assets U.S. Bancorp administers by adding about $25 billion in assets to U.S. Bancorp Fund's administration business, the Banker said …
  • Bank of America (BofA) anticipates it will meet all of its consumer relief obligations under the national mortgage settlement by the end of February--two years in advance of the federal government-imposed deadline (American Banker Nov. 14). To date, BofA has offered $15.8 billion in consumer relief under the program--most of which is in the form of short sales--and also principal reductions to delinquent or underwater borrowers, which account for roughly one third of the bank's total relief, BofA said …
  • JPMorgan & Co.'s energy trading unit was hit with a six-month suspension stemming from some of its activities in electrical markets, U.S energy-market regulators announced Wednesday (The Wall Street Journal Nov. 15). JPMorgan allegedly had submitted false information as part of the Federal Energy Regulatory Commission's probe into alleged market manipulations, the commission said …

Market News (11/15/2012)

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MADISON, Wis. (11/16/12)

  • Initial claims for U.S. unemployment benefits spiked last week because Hurricane Sandy's impact on the Northeast shut down businesses and displaced thousands of residents (The Wall Street Journal, Bloomberg .com and Moody's Economy.com Nov. 15). Claims jumped 78,000--to a seasonally adjusted 439,000--for the week ended Nov. 10, the Labor Department said Thursday. Sandy caused factories to flood, construction sites to shut down and left people without work when schools closed--resulting in an upswing in claims, said a Labor Department analyst. Meanwhile, continuing claims for U.S. unemployment benefits surged 171,000 for the week ended Nov. 3 to 3.334 million, the Labor Department said. Last week saw an unemployment claims "double whammy"  in which people filed claims that they could not previously, and then those who were displaced from their jobs because of Sandy filed additional claims, Ryan Wang, an economist at HSBC Securities USA Inc. in New York, told Bloomberg ...
  • U.S. consumer prices in October increased at the slowest rate in three months,  indicating  inflation has been reined in, according to the Consumer Price index (CPI) (Bloomberg.com and Moody's Economy.com Nov. 15). The CPI rose 0.1% last month, following a 0.6% gain in September, the Labor Department said Thursday. Strong upswings in food prices were mitigated by declining energy prices, Moody's said. Because national inflation is substantially muted, the Federal Reserve can take action to reduce unemployment and bolster job growth, Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, told Bloomberg
  • Mortgage rates in the U.S. fell to record lows this week. The lower borrowing costs come after applications for refinancing increased for the first time in six weeks (Bloomberg.com Nov. 15). For a 30-year fixed-mortgage, the average rate declined to 3.34%--an all-time low--for the week ended Nov.15, from 3.4% the prior week, Freddie Mac said. Also, the average 15-year rate dipped to 2.65%--also a record low--from 2.69%. Falling interest rates are in part causing home prices to rise because the low rates are helping buyers to afford more expensive properties,  Patrick Newport, an economist at IHS Global Insight in Lexington, Mass., told Bloomberg  …

FOMC October minutes The devils in the details

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WASHINGTON (11/15/12)--The Federal Reserve's monetary policymakers in October discussed using specific threshold values of inflation and the unemployment rate as forward guidance about the federal funds rate and indicated that additional asset purchases likely would be appropriate next year after Operation Twist expires.

But while there was general agreement on the overall policy, the devil is in the details. According to minutes of the Federal Open Market Committee's (FOMC) Oct. 23-24 meeting, released Wednesday afternoon, committee members were divided on the specifics.

Committee members discussed whether such thresholds might replace or augment the date-based guidance that the Fed has provided in its policy statements since August 2011.  (For example, the latest guidance from the October meeting indicated that the fed funds rate likely would stay steady at 0% to 0.25% through mid-2015. In September the date indicated was late 2014).

"Participants generally favored the use of economic variables, in place of or in conjunction with a calendar date…but they offered different views on whether quantitative or qualitative thresholds would be most effective," said the minutes.

Several participants "were concerned that quantitative thresholds could confuse the public by giving the impression that the FOMC focuses on a small number of economic variables in setting monetary policy, when the committee in fact uses a wide range of information," the minutes said.

"Participants generally agreed that the committee would need to resolve a number of practical issues before deciding whether to adopt quantitative thresholds to communicate its thinking about the timing of the initial increase in the federal funds rate." Issues included whether the committee should:

  • Specify the thresholds in terms of realized or projected values of inflation and unemployment rate and values they would hold;
  • Supplement inflation and unemployment rate thresholds with additional indicators that might signal a need to raise the funds rate or delay it; and
  • Provide forward guidance in its statement about the likely path of the federal funds rate after the initial increase.
The FOMC also discussed the effects of policy actions taken in September to strengthen its forward guidance and to purchase additional mortgage backed securities (MBS).

The initial effects were generally viewed as consistent with a marked easing in financial conditions. Some indicated the central bank should continue to buy bonds next year, others suggested expanding the assets might impact financial markets or make it more difficult for the Fed to tighten policy when the economy needs it. Some suggested more time would be required to assess the effects.

"Looking ahead, a number of participants indicated that additional asset purchases would likely be appropriate next year after the conclusion of the maturity-extension program in order to achieve a substantial improvement in the labor market."

The Fed's Operation Twist, which expires Dec. 31, involves swapping about $45 billion of short-term Treasuries on its balance sheet for longer-term debt. It also is purchasing $40 billion a month in MBS in a third round of so-called quantitative easing (dubbed QE3), which aims to fuel growth in the economy and reduce unemployment.

The minutes suggest the FOMC may begin outright purchases of around $45 billion a month of Treasuries to maintain the current pace, Millan Mulraine, senior U.S. strategist for TD Securities in New York, told Bloomberg.com (Nov. 14).

Such a move along with QE3 would constitute "a full- fledged quantitative easing of MBS and Treasuries of about $85 billion a month," Mulraine said. That level of buying may continue for at least six months, he said.

News of the Competition (11/14/2012)

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MADISON, Wis. (11/15/12)

  • An asset-management firm and an employee pension plan have filed a shareholder proposal asking Citigroup Inc. to consider a possible breakup of the bank (The Wall Street Journal Nov. 14). The firm is acting on behalf of a religious organization. Citigroup's shares have "consistently traded below book value since 2008," noted Trillium Asset Management--on behalf of Mount St. Scholastica--and Afscme Employee Pension Plan. Also, in March, Citigroup failed to pass the Federal Reserve's Comprehensive Capital Analysis and Review tests, the group said. Another issue is that regulators still forbid Citigroup from returning substantial capital to stockholders because of worries about the bank's financial stability, the group added. Trillium has 0.01% of Citigroup's shares  …
  • Deutsche Bank and Goldman Sachs lost their motions to dismiss lawsuits against them that allege they misled mortgage investors, according to a ruling by a federal judge in Manhattan (American Banker Nov. 13). The Monday ruling by U.S. District Judge Denise Cote of the Southern District of New York means the companies will have to defend themselves against Federal Housing Finance Agency (FHFA) allegations of wrongdoing in the selling of securities backed by residential mortgages, the Banker said. FHFA alleges Deutsche Bank and Goldman, along with other defendants, falsely claimed the underlying mortgages were in compliance with specific underwriting guidelines and standards.  The two banks in their motions to dismiss, allege FHFA failed to show that loans forming the  foundation for securitizations were different than the guidelines listed in offering documents, the Banker said ...
  • A directive by federal regulators in August urging mortgage servicers to boost awareness of foreclosure review provisions has resulted in servicers getting out the word that homeowners have roughly 48 days to request independent reviews when facing foreclosure (American Banker Nov. 13). The regulators expect that servicers will promote the reviews through online, print, radio and TV ads that tell borrowers they have until Dec. 31 to request reviews, the Banker said …
  • CitiGroup is promising partial refunds on specific credit card purchases if consumers can prove they found a better deal (American Banker Nov. 13). Citi Price Rewind, launched Tuesday, is a new service that--after a cardholder makes a purchase--will search hundreds of shopping websites for 30 days. If the service locates a price that is at least $25 less than what the consumer paid, the customer becomes eligible for a refund equal to the difference between the two prices, the Banker said …

Market News (11/14/2012)

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MADISON, Wis. (11/15/12)

  • U.S. retail sales fell in October for the first time in four months. The decline was attributed to Hurricane Sandy's impact on many businesses and on automobile sales, even though it helped others (The New York Times, The Wall Street Journal, Bloomberg .com and Moody's Economy.com Nov. 14). Retail and food service sales slid 0.3% last month to a seasonally adjusted $411.59 billion, according to Commerce Department figures. The decline follows a 1.3% rise in September. Some companies said October's sales dip should be temporary, with stronger personal finances, increasing home prices and better job prospects bolstering consumer confidence going into the holiday season at year-end, Bloomberg said. However, consumers could have growing worries about possible tax changes next year, as evidenced by their focus on buying necessities such as food, rather than non-essential items such as appliances and furniture, Bloomberg added …
  • U.S. mortgage loan applications for the week ended Nov. 9 increased 12.6% from one week earlier, according to Mortgage Bankers Association (MBA) Market Composite Index, part of the Weekly Mortgage Applications Survey, released Wednesday. On an unadjusted basis, the index rose 12%. The Refinance Index jumped 13%, ending a five-week decline. The seasonally adjusted Purchase Index went up 11%. The unadjusted Purchase Index increased 8% and was 22% higher than the same week one year ago. "Following the decrease in applications two weeks ago due to the effects of superstorm Sandy, mortgage applications in many East Coast states rebounded strongly this week," said Mike Fratantoni, MBA vice president of research and economics. "Application volume in New Jersey more than doubled over the week, while volume in Connecticut and New York increased more than 60%. In addition to the rebound in the states impacted by the storm, the 30-year fixed-mortgage rate reached a new record low in the survey." The refinance share of mortgage activity increased to 81% of total applications from 80% the previous week. The adjustable-rate mortgage share of activity remained unchanged at 4% of total applications. For the MBA report, use the link …
  • After steeply rising in the prior two months, producer (wholesale) prices decreased 0.2% in October, according to the Bureau of Labor Statistics Producer Price Index (Moody's Economy.com Nov. 14). Although the overall decline was broad-based, it was led by falling energy prices, Moody's said. The reading was significantly below consensus expectations for a slight increase in prices, Moody's added. Prices will have a tough road to advance while uncertainty continues regarding U.S. fiscal policy and worldwide economic growth, Moody's said …

News of the Competition (11/13/2012)

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MADISON, Wis. (11/14/12)

  • On Nov. 7, the day after the presidential election, yields on 10-year Treasuries fell to 1.62%--the most in one day since May--highlighting concerns that President Barack Obama and Republicans in the House of Representatives will not be able to avoid $607 billion in mandatory spending cuts and tax increases that are slated to begin Jan. 1 (Bloomberg.com Nov. 13). A yield rate below 1.7% is a sign investors anticipate gross domestic product to contract by 0.3% next year--when the fiscal cliff commences if federal elected officials take no action, according to JPMorgan Chase & Co …
  • To resolve several lawsuits by clients who allege they suffered losses in the Bernard Madoff Ponzi scheme, Bank of New York Mellon Corp. will pay out $210 million, New York Attorney General Eric Schneiderman said Tuesday (The Wall Street Journal Nov. 13). The bank's settlement was made with Ivy Asset Management LLC and resolves legal action by the New York Attorney General's office, investors and the U.S. Department of Labor, the Journal said. Other individual defendants in the case will pay an additional $9 million to resolve the litigation, the Journal added …
  • Strike Debt, a movement that evolved out of the Occupy Wall Street Movement, will raise money to purchase and cancel consumer debt by holding a telethon and staging a variety show, the group announced Friday  (American Banker Nov. 9). The event is scheduled for Thursday, organizers said, with proceeds going to "The Rolling Jubilee," a project aimed at elevating awareness of what the group labels as debt resistance, predatory debt practices and mutual aid …

Market News (11/13/2012)

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MADISON, Wis. (11/14/12)

  • Worldwide economic growth will slow in 2013 to 3% from 3.2% in 2012, according to a forecast from U.S. private research group the Conference Board (The Wall Street Journal Nov. 13). The deceleration comes after a growth rate of 3.8% in 2011, and indicates the world's emerging economic markets no longer are compensating for the U.S. and Europe as they recover from their financial crises, the report said. The best hope to prevent this scenario is if the U.S. economy--which is in the best position to prevent a global slowdown--recovers more quickly, the report said. The pace of U.S growth is expected to decline 1.8% next year from 2.1% this year, and to average 2.3% each year between 2013 and 2018 …
  • U.S. small businesses became slightly more optimistic in October, according to the National Federation of Independent Business (NFIB) Optimism Index (Moody's Economy.com Nov. 13). The index gained a 0.3 point to settle at 93.1 in October--up from 92.8 in September, NFIB said. The index has been moving within a fairly narrow range of 88 to 94--where it has been mired since the Great Recession, NFIB said. Although most subcomponents of the index remained the same from the previous month, the number of businesses saying uncertainty about whether business conditions would improve or become worse six months from now increased, which likely indicated their uncertainty before the elections, NFIB said …
  • The International Council of Shopping Centers (ICSC) chain store sales index recorded a moderate bounce-back last week, in the wake of Hurricane Sandy (Moody's Economy.com Nov. 13). The index increased 0.7% for the week ended Nov. 10, more than reversing the 0.2% decline a week earlier, ICSC said. However, year-over-year growth regained a small portion of its decline, rising to 1.8%--the second week below 2% since June--from 1.4% the previous week. While customer traffic was better than in recent weeks at grocery stores, consumer spending still is modest, ICSC concluded …

News of the Competition (11/09/2012)

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MADISON, Wis. (11/13/12)

  • Chinese banks have not rushed into the U.S. market in the wake of the Federal Reserve Board's decision to allow a big Chinese bank, Industrial and Commercial Bank of China, to buy a majority interest (80%) in a U.S. bank--Bank of East Asia in New York in May (American Banker Nov. 8). Although Chinese banks are planning to expand into the U.S., they are proceeding cautiously to circumvent errors made by some other foreign banks desiring to move into the U.S., banking industry observers told the Banker. It can be difficult for foreign banks to be successful in the U.S., Ernest Patrikis, a partner at White & Case who worked on the initial Chinese acquisition of U.S bank, told the publication. Such a move must be made with patience and caution because many foreign banks have failed in the past, he added ...
  • Mobile banking is important, according to 80% of respondents to a new survey of 200 consumers, published by Verve Mobile, a U.S mobile advertising company specializing in location powered solutions (American Banker Nov. 8). Survey results also indicate that 73% of consumers desire communications based on their financial profile; and 70% of consumers said expense- and budget-tracking are the most essential mobile- banking tools ...

Market News (11/09/2012)

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MADISON, Wis. (11/13/12)

  • U.S. consumer confidence increased more than expected in November--hitting a five-year high--signaling that the labor market is gaining momentum, according  to the Thomson Reuters/ University of Michigan Consumer Sentiment Index (Bloomkberg.com and Moody's Economy.com Nov. 9). The index rose to 84.9 for the month--the fourth consecutive gain--and the highest reading since July 2007--from 82.6 in October. Economists had forecast an 82.9 reading for November, according to economists surveyed in a Bloomberg poll. Cheaper gasoline, escalating home values and employment gains are boosting consumers' moods and spending intentions--which constitute roughly 70% of the U.S. economy, Bloomberg said …
  • After lifting the U.S. labor market for the first six months of 2012, temporary employment is contributing less to job creation--an indication employers are more upbeat about the durability of the economic recovery (Bloomberg.com Nov. 9). For the July through October period, the monthly change in the number of people on payrolls for temporary-help service businesses averaged 2.2% of monthly increases in total nonfarm payrolls, according to seasonally adjusted Labor Department data. That percentage is significantly below the nearly 19% in the first half of 2012, the Labor Department said …
  • The Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--decreased to 126.2 for the week ended Nov. 2 from 126.6 the prior week, hitting a five-week low (Moody's Economy.com Nov. 9). The smoothed annualized growth rate slowed to 5.1% from 5.9% the prior week--the third consecutive weekly decline. The significant decline in the index and the noticeable slowing in the smoothed annualized rate are cause for concern, Moody's said, even though it anticipates moderate economic growth during the rest of the year and into next year …

News of the Competition (11/08/2012)

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MADISON, Wis. (11/9/12)

  • JPMorgan Chase & Co.--the largest U.S. bank by assets--has reached an agreement in principle to settle a Securities and Exchange Commission (SEC) investigation into its Bear Stearns home loan business--specifically how the bank packaged and sold mortgage securities to investors (The Wall Street Journal and Bloomberg.com Nov. 8). JPMorgan plans to buy back up to $3 billion of its stock in the first quarter of 2013, the bank said in its third-quarter SEC filing. At issue is whether Bear Stearns--acquired by JPMorgan at the onset of the 2008 financial crisis--received money from lenders for soured loans it bought to bundle into mortgage securities, but then neglected to forward that cash to investors in the securities, the Journal said …
  • Bank holding company Capital One Financial Wednesday announced that Capital One 360 would be the new name for ING Direct--which Capital One purchased in February for about $12 billion in cash and stock (American Banker Nov. 7). That acquisition made Capital One the sixth-biggest U.S bank by assets, the Banker said. Capital One 360 said it will continue to offer free checking and savings accounts without fees and minimum-balance requirements (American Banker  Nov. 7) …

Market News (11/08/2012)

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MADISON, Wis. (11/9/12)

  • Initial claims for U.S. unemployment benefits declined last week because the impacts of Hurricane Sandy began to manifest themselves (Bloomberg.com, The Wall Street Journal and Moody's Economy.com Nov. 8). Claims dropped 8,000--to a seasonally adjusted 355,000--for the week ended Nov. 3, the Labor Department said Thursday. The storm-engendered loss of electricity suppressed claim filings in one state, while others started to see workers who lost their jobs because of the severe weather begin to file claims, said a Labor Department spokesman. The full effect of Sandy may not be seen for three to four weeks, the spokesman added, suggesting claim levels may rebound in coming weeks as more storm-related unemployment applications start to get processed, Bloomberg said. Meanwhile, continuing claims for unemployment benefits fell 135,000--to 3.127 million for the week ended Oct. 27 …
  • Buoyed by a record level of exports, the U.S. trade gap unexpectedly shrank in September to the lowest level in nearly two years (Bloomberg.com, Moody's Economy.com and The Wall Street Journal Nov. 8). The gap narrowed 5.1% to $41.5 billion--the smallest amount since December 2010--from $43.8 billion in August, the Commerce Department said Thursday. Rising sales to foreign buyers was wide-ranging--with gains in everything from civilian aircraft and fuel, to soybeans, Bloomberg said. Largely due to higher fuel prices, imports jumped 1.5% in September, while exports spiked 3.1% from the prior month, Moody's said. Emerging markets in Central and South America are boosting demand for U.S. goods, a trend that may trump an economic slowdown in China and Europe, Bloomberg said …
  • U.S. consumer confidence inched up last week because perceptions of the state of the economy improved, based on an improving housing market and gradual gains in the housing market, according to the Bloomberg Consumer Comfort Index (Moody's Economy.com Nov. 8). The index increased 0.3 points to hit -34.4 for the week ended Nov. 4 from -34.7 the prior week. Although that constitutes improvement from the late summer when readings were stuck below -40, it is a long way from the index's long-run prerecession average of -9.5, Moody's said ...

News of the Competition (11/07/2012)

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MADISON, Wis. (11/8/12)

  • U.S. community banks will have to decide what to do with extra employees they hired for the mortgage refinancing boom when that market levels off (American Banking Nov. 6).  Refinance activity is running high--reaching a three-year peak at the end of September, said the Mortgage Bankers Association (MBA). Roughly 25% of refinancing applications are connected to the Home Affordable Refinance Program, or HARP, MBA said. Another  factor has been the Federal Reserve Bank's most recent round of quantitative easing, in which it purchases mortgage-backed securities, the Banker said …
  • The National ATM Council Inc. (NAC), the nation's leading trade association representing U.S. independent ATM providers, yesterday filed an objection with the U.S. District Court for the Eastern District of New York, NAC said in a release Tuesday. NAC asked the court to require that the proposed class-action settlement agreement between certain merchants and VISA/MasterCard be clarified to expressly exclude independent ATM operators and their separate antitrust claims from the class and adjudicated issues encompassed by the proposed settlement. As the basis for its objection, NAC stated that the proposed settlement was sufficiently vague to be improperly read to encompass the interests of the nation's independent ATM operators, despite the fact that ATM providers have not been parties to the case and no specific ATM issues have been raised in the proceeding or addressed by the terms of the proposed settlement.  Moreover, NAC pointed out to the court that the specific antitrust issues involving anti-competitive conduct by VISA and MasterCard in the ATM industry are the subject of separate and distinct antitrust litigation filed by NAC and a group of named plaintiffs, now pending before the U.S. District Court for the District of Columbia ...

Market News (11/07/2012)

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MADISON, Wis. (11/8/12)

  • Mortgage loan application volume decreased 0.5% for the week ended Nov. 2 from one week earlier, according to the Mortgage Bankers Association (MBA) Market Composite Index--part of the Weekly Mortgage Applications Survey released Wednesday. On an unadjusted basis, the index decreased 5%. The Refinance Index also declined 5%. The Refinance Index has dropped for five consecutive weeks and is at its lowest level since the end of August. The seasonally adjusted Purchase Index fell 5%. The unadjusted Purchase Index decreased 7% and was 3% lower than the same week one year ago. "Last week's storm had a significant impact on application volumes on the East Coast," said Mike Fratantoni, MBA vice president of research and economics. "Applications fell more than 60%, compared with the prior week in New Jersey, nearly 50% in New York and nearly 40% in Connecticut. Other East Coast states also saw declines over the week, while many states in other parts of the country had increases in application volumes."  For the MBA report, use the link …
  • Growth in metropolitan area median home prices increased in the third quarter, and more areas are showing gains, according to the latest quarterly report by the National Association of Realtors (NAR). The median existing single-family home price rose in 120 out of 149 metropolitan statistical areas, based on closings in the third quarter, compared with same quarter in 2011, while 29 areas had price declines. In the second quarter, 110 areas showed increases from a year earlier, while in the third quarter of 2011 only 39 metros were up. Lawrence Yun, NAR chief economist, said the growth in home prices is a matter of to supply and demand. "Housing inventories have been gradually trending down from a record set in the summer of 2007," he said. "Earlier this year, a broad equilibrium began to develop in most areas between home buyers and sellers, which led to a sustained upturn in home prices. We expect fairly normal appreciation patterns in 2013, but there is a risk of price acceleration if builders are unable to increase supply to meet the needs of our growing population and household formation."  For  the NAR report, use the link …
  • The International Council of Shopping Centers (ICSC) chain store sales index declined 0.2% for the week ended Nov. 3, with the index barely changing during the past six weeks, ICSC said (Moody's Economy.com Nov. 6). However, year-over-year growth nosedived 1.4%--the weakest expansion since June--because of disruptions caused by Hurricane Sandy, ICSC said. Customer traffic improved outside the Northeast region, particularly at apparel and grocery stores.  Growth in consumer spending has stayed modest, ICSC said …

U.S. consumer credit up 5 in September 4 in 3Q

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WASHINGTON (11/8/12)--U.S. consumer credit increased at an annualized rate of 5% in September, according to the Federal Reserve's Consumer Credit Report released Wednesday afternoon. However, credit union lending dipped slightly in September.

Also, total U.S. consumer credit rose 4% in the third quarter, the Fed said.

Total consumer credit roughly was in line with expectations in September, rising $11.4 billion (Moody's Economy.com Nov. 7).

U.S. non-revolving balances were the main driver of the gain, increasing $14.3 billion, while the revolving balances fell $2.9 billion.

At credit unions, total borrowing in September dipped to $237.5 billion from $238.2 billion in August.  

Nonrevolving credit--including auto loans and student loans--for credit union members was $199.4 billion--or $600 million less than in August.

Credit union members' revolving credit--which includes credit card debt--remained the same in September at $38.1 billion.

The Fed's consumer credit report data does not track mortgage and real-estate loan data.

For the full report, use the link.

News of the Competition (11/06/2012)

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MADISON, Wis. (11/7/12)

  • Lending Club--a platform started in 2007 for investing and procuring personal loans--in the third quarter generated positive cash flow and facilitated personal loans that totaled more than $1 billion, the company said Monday (American Banker Nov. 5). The company facilitated more than $82 million in personal loans last month. Lending Club has added more than 50 employees since the start of the year, hitting a total of 125 employees. The company nearly doubled the size of its risk management and technology teams, prompting it to expand its San Francisco headquarters, the Banker said …
  • More U.S. banks are taking a closer look at prepaid cards, said American Banker (Nov. 5). Slightly more than half of banks (58%) surveyed are offering or in the process of offering cards, according to a new survey of 310 banks conducted by Mercator Advisory Group.  Although many banks are upbeat about prepaid cards' potential, several banks that looked into and then rejected the idea of offering prepaid cards remain skeptical, the survey indicated. The majority  of the banks surveyed were smaller financial institutions, the Banker said …

Market News (11/06/2012)

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MADISON, Wis. (11/7/12)

  • U.S. job openings fell to a five-month low in September, indicating there has been checkered progress in the labor market (Bloomberg.com and Moody's Economy.com Nov. 6). The number of job positions waiting to be filled decreased 10,000--to 3.56 million from 3.66 million in August, the Labor Department said Tuesday. While U.S. companies retool as they confront a slowing worldwide economy and a rapidly approaching fiscal cliff, jobs may be harder to obtain, Bloomberg said …
  • Freddie Mac Tuesday posted a third-quarter $2.9 billion profit, compared with a year-earlier loss of $4.4 billion, adding to evidence that the government-sponsored enterprise (GSE) is making progress after years of big losses (The Wall Street Journal Nov. 6). The profit marks the fourth consecutive quarterly gain for the mortgage financer.  Freddie and its bigger GSE sibling, Fannie Mae, have made mortgage credit standards more stringent during the past four years, resulting in better-quality loans, the Journal said ...
  • The CoreLogic Home Price Index rose by 5% year over year in September. That is a faster growth rate than at any time during the past few months, since the onset of the housing correction (Moody's Economy.com Nov. 6). The index, on a monthly basis declined 0.3% in September, which is consistent with prior seasonal patterns, Moody's said. Despite uneven price growth for homes across U.S. geographic regions, prices for the country as a whole are beginning to rapidly recover, CoreLogic said  …

Market News (11/05/2012)

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MADISON, Wis. (11/6/12)

  • The service sector in the U.S. has outperformed manufacturing for most of 2012, but the gap tightened in October, according to the Institute for Supply Management's (ISM) index of U.S. nonmanufacturing businesses, which encompasses roughly 90% of the economy (Bloomberg.com and Moody's Economy.com Nov. 5). The index declined to 54.2 last month from 55.1 in September. Economists had forecast an October reading of 54.5. Readings above 50 indicate growth. The ISM index covers industries from retailing and utilities to finance, healthcare and housing. Released on Thursday, the ISM manufacturing index showed factories orders and production grew at a faster pace than forecast, as the gauge increased to a four-year high of 51.7 from 51.5 in September …
  • Business confidence worldwide inched higher at the end of October but still is stuck at a low level, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Nov. 5). The Treasury debt ceiling and the rapidly approaching U.S. fiscal cliff seem to be subduing business confidence, Moody's said. Also, expectations heading into next year regarding the economy's prospects are lackluster, Moody's added. Although business sentiment is not suggesting  a recession, it is in step with an economy that continues to struggle, Moody's concluded …

News of the Competition (11/05/2012)

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MADISON, Wis. (11/6/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced two bank closings Friday, bringing total bank failures this year to 49. That compares with 92 for the entire year in 2011. The failed banks are Heritage Bank of Florida, Lutz, Fla., assumed by Centennial Bank, Conway, Ark.; and Citizens First National Bank, Princeton, Ill., assumed by Heartland Bank and Trust Co., Bloomington, Ill. The closed banks held about $1.15 billion million in assets as of June 30. The FDIC estimated the latest failures will cost its Deposit Insurance Fund roughly $111 million …
  • Some U.S. banks flush with cash will pay out special dividends during the next few weeks as they look to stay a step ahead of an expected surge in the dividend tax rate, said American Banker (Nov. 2). Banks that are having a hard time using capital for acquisitions or loan growth are especially looking to pay out dividends because they worry that in the aftermath of the rapidly approaching fiscal cliff, taxes on dividends could increase, the Banker said. If Congress does not circumvent the fiscal cliff, the capital gains tax could jump to 23.8% from 15%, according to Bloomberg, said the Banker. That could have a large impact on capital planning for banks and investors, John Corbett, president/CEO of CenterState Bank of Florida in Winter Haven, told the Banker
  • The $25 billion multistate mortgage settlement agreed to by Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, obviates a federal lawsuit against Wells Fargo concerning its lending practices before and after the housing crisis, Wells claims (American Banker Nov. 2). The Manhattan U.S. Attorney's office filed the suit in October, accusing Wells of wrongdoing related to loans insured during a timeframe of roughly a decade, starting in May 2001, by the Federal Housing Administration (FHA), the Banker said. The settlement creates a clean slate for Wells confronting future liability (expect in very limited circumstances) to the U.S. government  for Wells' FHA mortgage loan portfolio, wrote Wells lawyers in papers filed in U.S. District Court in Washington, D.C., the Banker said …

News of the Competition (11/02/2012)

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MADISON, Wis. (11/5/12)

  • The Financial Stability Board (FSB)--an international regulatory body--said Thursday that Citigroup and JPMorgan Chase must pay a 2.5% surcharge under Basel III international capital and liquidity rules (American Banker Nov. 1). Last year, the FSB designated eight U.S. companies as global systemically important banks, mandating that they must hold extra capital of between 1% to 2.5%, the Banker said. However, Thursday was the initial instance in which FSB specified the precise requirements that each company must follow, said the Banker. Worldwide, just four firms have to pay the 2.5% capital surcharge, including Deutsche Bank and HSBC Holdings. FSB designated 28 firms as globally significant, one less than last year, the Banker said …
  • The Basel III international capital and liquidity rules are causing U.S. community banks to confront more stringent capital requirements and to consider available avenues for raising capital. Among the options is subordinated debt--an instrument that has been overlooked historically, said American Banker (Nov. 1). Issuing debt protects values for shareholders, say advocates of subordinated debt. Critics counter that because there is a limited market for reselling that debt, it is less liquid than common stock, the Banker said …

Market News (11/02/2012)

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MADISON, Wis. (11/5/12)

  • New estimates of the potential economic damages wrought by Hurricane Sandy have more than doubled to as much as $50 billion from a previous forecast of $20 billion (The New York Times Nov.1). The effects of the storm could take a half-percentage point off fourth-quarter growth in the U.S., some economists warned. Eqecat, which monitors hurricanes and analyzes damages they cause, said losses from Sandy could reach between $30 billion and $50 billion. Before the storm made landfall Monday, Eqecat predicted $10 billion to $20 billion in total economic damages. The storm's impacts on individuals and commerce are far larger than usual because of the huge geographic scope of Sandy, Tom Larsen, Eqecat senior vice president and product architect, told the Times. Power outages will intensify higher insurance losses, he added …
  • U.S. nonfarm payrolls increased more than expected in October, with employers looking beyond domestic political stalemates and slowing worldwide economic growth, although unemployment inched up because more people were looking for work (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Nov. 2). A net of 171,000 jobs were added to payrolls last month, while in a separate report unemployment  inched up to 7.9% from 7.8% in September, the Labor Department said Friday. Economists had predicted a 125,000 gain in payrolls and a 7.9% unemployment rate, according to a Dow Jones Newswires survey. Despite expressions of business caution, private jobs are growing, Maury Harris, chief economist at UBS Securities LLC in New York, told Bloomberg.  Consumers' perceptions of the job markets continue to improve, he added. In a related matter, the U.S. Monster Employment Index--which measures help-wanted ads placed online by U.S employers--increased three points in October, rising to 156 from 153 in September, according to Monster Worldwide Inc. (Moody's Economy.com Nov. 2) …
  • Manufacturing in the U.S. grew more rapidly in October than expected, with orders and production rising, indicating the industry is stabilizing, according to the Institute for Supply Management's (ISM) Manufacturing index (Bloomberg.com and Moody's Economy.com  Nov. 1). The index rose to 51.7 last month from 51.5 in September. Economists had forecast a 51 reading for October, according to a Bloomberg survey.  In a separate report, factory orders for manufactured goods increased 4.8% in September, according to the U.S. Census Bureau (Moody's Economy.com Nov. 2). In a related matter, nonfarm business productivity increased 1.9% on a seasonally adjusted annualized basis in the third quarter, according to the Bureau of Labor Statistics (Moody's Economy.com Nov. 1) ...
  • The Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--declined to 126.6 for the week ended Oct. 26 from 126.7, negating the prior week's small gains (Moody's Economy.com Nov. 2). The smoothed, annualized growth rate slowed for a second consecutive week, decelerating to 5.9% from 6% the previous week, ECRI said. Also, ECRI's U.S. Future Inflation Gauge dipped to 103.5 in October from a revised 103.6 (previously 103.4) in September (Moody's Economy.com Nov. 2). However, the gauge still is steeply higher than a few months ago and is consistent with more intense inflationary pressures triggered by recent escalations in food and energy prices, ECRI said …

News of the Competition (11/01/2012)

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MADISON, Wis. (11/2/12)

  • Ally Financial announced Wednesday it had repaid $2.9 billion received under the Temporary Liquidity Guarantee Program (TLGP) run by the Federal Deposit Insurance Corp. (American Banker Oct. 31). Ally--a provider of auto financing and other financial services--was able to obtain another source of liquidity through TLGP when banks were generally devoid of options during the financial crisis. Ally's $2.9 billion portion on its debt issued Oct. 30, 2009, was due Tuesday. Its $4.5 billion TLGP balance will be paid in December, said Ally, which is 74%-owned by the Treasury Department …
  • U.S. banks are hoping that adopting a services-oriented architecture (SOA)--in which software applications are reusable and interchangeable in chunks--for their information technology (IT) systems will help them reduce IT costs (American Banker Oct. 31). A recent survey indicated 78% of bankers polled believe that adoption will garner them a 20% to 35% reduction in IT banking costs. For vendors surveyed, 56% said they believe banks could see that type of cost reduction if they adopted SOA standards, the Banker said  …
  • Chrysler Group LLC, which is majority owned by Italian automakers Fiat SPA--saw its October sales rise 10% from a year earlier, with a 126,185 vehicles sold last month--up from 114,512 a year earlier (The Wall Street Journal Nov. 1). Truck sales increased 7.1%, while car sales surged 18% in October. Chrysler is the first major U.S. automaker to post October earnings, the Journal said. Meanwhile, General Motors (GM)--the biggest U.S. automaker--saw a third-quarter earnings loss of 14%. Like its rivals, it had large losses its European market (The New York Times Oct. 31). GM also saw less profit from its North American operations. It posted net income of $1.48 billion for the quarter--down from $1.73 billion for third quarter 2011 …

Market News (11/01/2012)

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MADISON, Wis. (11/2/12)

  • Indicating a continuing recovery, total U.S. construction spending rose 0.6% in September and is 7.8% higher than its September 2011 level, according to the U.S. Census Bureau (Moody's Economy.com Nov. 1). Private residential construction spending still is spearheading the recovery, while private nonresidential construction slowed. Public construction has been flat, Moody's said. Construction spending is suggesting a nascent economic recovery that has yet to fully blossom, Moody's said …
  • Initial claims for U.S unemployment benefits declined last week, a sign that work-force demand is robust enough to maintain current staff levels (Bloomberg.com and Moody's Economy.com Nov. 1). Claims fell 8,000--to 363,000 for the week ended Oct. 27--the fewest in three weeks, the Labor Department said Thursday. Fewer job cuts show that companies are ready to increase hiring if the economy can avoid a negative impact from the rapidly approaching U.S. fiscal cliff, Bloomberg said. Meanwhile, continuing claims for U.S. unemployment benefits inched up to 3.263 million claims for the week ended Oct. 20, compared with 3.259 million the prior week. In a related matter, several layoff announcements raised the number of planned job cuts to 47,724 in October--the highest total since May--from 33,816 in September, according to the Challenger Report, issued by Challenger, Gray and Christmas Inc. (Moody's Economy.com Nov. 1). Also, the private sector added 158,000 jobs in October, according to a national employment report compiled by payroll processor Automatic Data Processing Inc. and forecasting firm Moody's Analytics (The Wall Street Journal  Nov. 1) ...
  • The Conference Board's Index of Consumer Confidence jumped to 72.2 in October from 68.4 in September (Moody's Economy.com Nov. 1). The 3.8-point rise in the private research firm's index is mostly commensurate with consensus forecasts, the board said. The gain was driven by a substantial increase in the present-conditions component of the index, the board said. The expectations component also improved. Also, U.S., consumer confidence stayed near its six-month high, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com Nov. 1). The index dipped to -34.7 for the week ended Oct. 28 from -34.6 the prior week. For the past six weeks, the index has been above -40, a level associated with recessions and their aftermath, Bloomberg said …