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Market Archive

Market

Appeals court issues ruling in Wells Fargo overdraft case

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FRANCISCO (12/28/12)--The U.S. Court of Appeals for the Ninth Circuit has reversed in part a lower court's order requiring Wells Fargo Bank to cease charging overdraft fees based on its posting debit-card transactions in high-to-low order.

The San Francisco-based court also reversed the lower court's order that Wells Fargo pay $203 million in restitution to its debit card customers.

The lower court had held that the bank's actions were unfair and fraudulent under California's Unfair Competition Law.

The appeals court reversed in part, but upheld claims that Wells Fargo had affirmatively misrepresented to its customers its posting order of debit card transactions. The court also remanded in part for the district court to determine the appropriate relief regarding the claims it upheld.

"The bank was shielded by the National Bank Act and implementing regulations regarding its decisions to post debit items in a particular order," Mary Dunn, deputy general counsel for the Credit Union National Association, told News Now. "However, the court determined that the California Unfair Competition Law was not pre-empted regarding the claims for fraudulent misrepresentations."

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News of the Competition (12/28/2012)

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MADISON, Wis. (12/28/12)

  • BankPlus in Belzoni, Miss., made a decision four years ago to compete with payday lenders, which is uncharacteristic of a bank, said American Banker (Dec. 26). Today it offers thousands of people a small-dollar loan product with substantially better terms and outcomes than payday lenders provide, said the Banker. The impetus of the product was to not only help anyone mired in the payday lending cycle, but also to assist the underbanked who want to enter the commercial banking system, Bill Ray, president/CEO of the $2.3 billion asset BankPlus, told the Banker. Its loan product, CreditPlus, offers loans of $500 or $1,000 on one-year or two-year terms, with a 5% annual percentage rate to underbanked and unbanked customers, after they complete a required three-hour financial literacy course, the Banker said  …
  • BBCN Bancorp--the biggest Korean-American bank--is looking to expand from a community bank to a regional bank, Alvin Kang, BBCN president/CEO, told American Banker (Dec.26). That goal comes after the bank started this year merging $3 billion asset Nara Bancorp with $2.3 billion asset Center Financial into its fresh brand--the $5.3 billion asset BBCN, the Banker said. BBCN agreed to purchase a Seattle bank and paid off that bank's Troubled Asset Relief Program debts. Today it is surpassing rivals in many financial metrics, and has become one of the biggest Small Business Administration lenders in the U.S., the Banker said ...

Market News (12/28/2012)

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MADISON, Wis. (12/28/12)

  • Initial claims for U.S. unemployment benefits dropped last week to their lowest level in nearly four-and-a-half years, a sign of improvement in the labor market (The Wall Street Journal, The New York Times, Bloomberg.com and Moody's Economy.com Dec. 27). Claims fell 12,000--to a seasonally adjusted 350,000 for the week ended Dec. 22-- from the prior week, the Labor Department said Thursday. The four-week moving average of claims--which smooths out weekly volatility--declined 11,250--to 365,750. The claims level indicates firms have sufficient demand to maintain staffing levels--an essential development before hiring can increase, Bloomberg said. Although the labor market has shown resiliency the past several months in a struggling economy, a large number of estimates that were made because some state offices were closed for the holidays, and seasonal volatility make it hard to come to solid conclusions, Tom Simons, an economist at Jefferies Group Inc., New York, told Bloomberg. Meanwhile, continuing claims for U.S. unemployment benefits decreased 32,000--to 3.21 million for the week ended Dec. 15 from the previous week …
  • U.S. consumer confidence last week remained near a four-year high, with people indicating less negativity about the economy, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com Dec. 27). The index dipped to -32.1 for the week ended Dec. 23 from -31.9 the prior week. The measure was less than a point away from an April reading that was the highest since March 2008, Bloomberg said. A real estate recovery--buoyed by record-low borrowing costs and higher property values--is boosting household confidence, while less-expensive gasoline is providing relief to consumer budgets, Bloomberg said. However, pending government budget cuts and tax increases could derail consumer sentiment and spending, Bloomberg added …
  • Worldwide business sentiment has been on an upswing in recent weeks despite ongoing political battles over the looming fiscal cliff of increased consumer taxes and government spending cuts, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Dec. 26). Although businesses and investors seem to think policymakers will reach an accord on the fiscal cliff, business sentiment remains tenuous and will likely dissipate if policymakers fail to come to an agreement, Moody's said. Expectations about the economy's prospects heading into 2013 still are weak, with a significant one-third of survey respondents saying they think the economy will weaken through spring of next year, Moody's added …

News of the Competition (12/27/2012)

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MADISON, Wis. (12/27/12)

  • Wells Fargo--the fourth-biggest U.S. bank by assets--said it will pay attorneys' fees of up to $2.5 million to settle two lawsuits arising from its purchase in 2008 of Wachovia (American Banker Dec. 21). In a Friday filing with the Securities and Exchange Commission (SEC), Wells Fargo said it would enhance some of its governing practices as a component of the proposed agreement. Those improvements would resolve shareholders' claims that Wachovia purchased Golden West Financial in 2006 without properly reviewing the mortgage lender's portfolio, the Banker said. U.S. District Judge Yvonne Gonzalez Rogers in Oakland, Calif., is expected to review the proposed settlement by March 5. That settlement would not involve any payment by former officers or directors of Golden West or Wachovia to Wells Fargo or the shareholders who filed the lawsuit, the Banker said …
  • In a key step in its conversion to a public company from a mutual, Lawrence, Ind.-based United Community Bancorp, parent of United Community Bank, Friday announced that members of the mutual holding company that owns 60% of United Bancorp's stock--along with shareholders of the remaining 40%--approved a plan to reorganize in a completely public form. The conversion is contingent on regulatory approval and the sale of about three million shares in the new company, the Banker said …
  • Toyota Motor Corp. forecast that its worldwide sales will increase 2% to a record level in 2013--an indication that the company likely has fully rebounded from the nosedive in business in the aftermath of last year's earthquake and tsunami in Japan, and a lack of interest from consumers in China (The Wall Street Journal Dec. 26). The Japanese automaker also estimated Wednesday that it would sell a record 9.7 million vehicles in 2012--vaulting it back into the No.1 global sales position ahead of General Motors Co. and Volkswagen AG …

Market News (12/27/2012)

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MADISON, Wis. (12/27/12)

  • U.S. home prices increased more than expected in October, signaling that a bounce-back in the housing market will, for the first time in seven years, strengthen the economy, according to the Standard & Poor's/Case Schiller Home Price Indexes (Bloomberg.com, The Wall Street Journal and Moody's Economy.com Dec. 26). The index of property values in 20 cities rose 4.3% from October 2011--the largest 12-month gain since May 2010. Economists had forecast a 4% advance, according to a Bloomberg survey. An improving economy, record-low mortgage rates and a growing population will boost demand for housing, which likely will keep property values rising, Bloomberg said …
  • Although mortgages in the U.S. showed better performance in the third quarter than in third quarter 2011, their quality has eroded since the second quarter, according to a report issued Friday by the Office of the Comptroller of the Currency (OCC) (American Banker Dec. 21). Of the more than $5 trillion in mortgages outstanding at the biggest banks, 88.6% in the third quarter were current and performing, as indicated in the OCC Mortgage Metrics Report. That constitutes an increase from 88% one year ago, but is a one-basis-point decline from the second quarter--brought on by an uptick in early-stage delinquencies. The percentage of mortgages that are 30 days to 59 days delinquent surged more than 10% from the second quarter and 3.6% from a year earlier …
  • U.S. holiday sales for the eight weeks from Oct. 28 through Dec. 24 increased 0.7%--down from a 2% pace in the same period a year ago, according to MasterCard Advisors SpendingPulse unit (The Wall Street Journal Dec. 25 and Bloomberg.com Dec. 26). SpendingPulse monitors total U.S. sales at stores and online through all payment forms. Hurricane Sandy and the impending fiscal cliff of spending cuts and higher taxes were the two main detractors, Bloomberg said. Sandy disrupted shopping after it struck the East Coast, and media coverage of the fiscal cliff created a downturn in consumer confidence and spending, Michael McNamara, a SpendingPulse vice president, told Bloomberg. In a related matter, the International Council of Shopping Centers (ICSC) Chain Store Sales Index increased 0.7% in the week ended Dec. 22, following a 4.3% gain the prior week (Moody's Economy.com Dec. 26) …

Market News (12/26/2012)

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MADISON, Wis. (12/26/12)

  • Consumers' spending in the U.S. for November rose 0.4%, on target with economists' expectations after spending in October was revised to 0.1% decrease that was smaller than previously estimated, said the Commerce Department Friday. Consumer spending makes up 70% of the economy. The increase will help sustain the economic expansion and some are calling the increase a "rebound" (Bloomberg.com Dec. 21). Consumer spending will help mitigate the effect on the economy by businesses reining in their investments and by a softer global demand. However, consumers also face challenges without fiscal cliff action in Congress, said economists …
  • Mass layoffs for November rose to 1,759 from October's 1,360 layoffs and September's 1,316, according to data released Friday by the Bureau of Labor Statistics (Moody's Economy.com Dec.  21). In November the number of claimants rose to 173,558 from 131,173 in the previous month.  November recorded 413 mass layoffs, defined as nearly simultaneous layoffs of at least 50 workers from a single company. The increase does not represent a shift in the job market, Moody's said, because Superstorm Sandy affected the November report. Because of Sandy, some of November's increase in layoffs is temporary. Most data regarding the labor market have improved, Moody's added …
  • New orders for durable goods increased during November by 0.7%, down from the 1.1% increase seen in October, reported the Census Bureau Friday (Moody's Economy.com Dec. 21). Moody's noted the numbers mark two consecutive months of good news for business investment and indicates that this year's lull is coming to an end. Excluding transportation, new durable goods orders were up 1.6%. Orders in the transportation industry dropped 1.1%, mainly in nondefense aircraft, which declined 13.9%. Total shipments grew 1.5%, with transportation shipments up 2.2%, while inventories increased 0.2%.  Core capital goods were up 2.7% in November, the second month in a row that growth increased. Shipments of core capital goods also climbed 1.8% in November, compared with a 0.6% increase in October  …

News of the Competition (12/26/2012)

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MADISON, Wis. (12/26/12)

  • Discover Financial Services (DFS) says it is expanding its payments business and will begin offering checking accounts in early 2013.  DFS, based in Riverwoods, Ill., is steering some of its revenues from its strong credit card business this year into the venture (American Banker Dec. 20). It had $151 million in net income for fourth quarter, the company said Thursday. Its credit card loan portfolio earnings for the quarter totaled $49.6 billion, a 6% increase from fourth quarter 2011.  In discussing the move to offer checking accounts, Discover said there was a limit as to how much more income it could get from its mature card business. It attributed its growth to spending more in marketing. The company had higher expenses, with marketing expenses up 33% over third quarter 2011, and employee compensation and benefits were up by 21%. Its earning per diluted share was $1.07, up from 95 cents for the same period a year earlier …
  • ESET, a security firm in Slovakiais warning financial institutions that a new malware, dubbed Linux/Chapro.A, can steal online banking credentials by injecting a file into certain Web browsers that display a request for the three- or four-digit verification code on the back of the cards (American Banker Dec. 20). The malware relays the security code and the user's credentials to cybercriminals' computers. It avoids detection by scanning servers of potential targets before injecting itself into systems. Before the software inserts itself into a computer, it embeds a file on the victim's browser to ensure the malware won't leave digital footprints. ESET said the malware can even erase messages that banks post warning their customers that the bank will never ask them to enter their card data. It is not clear whether the malware is the work of a single operation or multiple gangs collaborating …

Market News (12/20/2012)

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MADISON, Wis. (12/21/12)

  • Third quarter personal income growth rose 0.5% to $13.4 trillion--the slowest growth rate since the fourth quarter of 2011, said the Bureau of Economic Analysis (Moody's Economy.com Dec. 19). Adjusted for inflation, personal income increased 0.1%. That compares to a second quarter growth of 0.7%. Regionally, the Southwest saw the fastest growth rate--0.8%, with Texas and Oklahoma receiving a boost from strong construction earnings, said Moody's.  The two states accounted for more than half the growth in the construction industry's earnings during third quarter. The Mid-Atlantic region reported the slowest growth rate, with financial services earnings falling 2.7% in New York, bringing industry earnings to their lowest level since first quarter 2010. The decline of $3.6 billion in finance earnings in New York accounted for more than one-fourth of the nationwide decline.  State income growth was fastest in North Dakota, at 1.4% and slowest in South Dakota, at -1.6%, said Moody's …
  • Intercontinental Exchange (ICE) will buy New York Stock Exchange's (NYSE) NYSE Euronext, ICE announced Thursday (MarketWatch Dec.20). The boards of both companies unanimously approved the stock and cash transaction, which is valued at $8.2 billion or $33.12 per share. The combined company will serve diverse markets such as credit derivatives, equities and equity derivatives, agricultural and energy commodities, foreign exchange and interest rates …

News of the Competition (12/20/2012)

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MADISON, Wis. (12/21/12)

  • An article in the Dec. 20 issue of The New York Times takes a look at how UBS, the Swiss bank, scrambled to avoid becoming the first large, global bank in 20 years to have one of its subsidiaries plead guilty to charges of fraud--but failed in its bid with the U.S. Justice Department for leniency. The article says that Attorney General Eric Holder supported his department's criminal division's assessment that the bank's alleged actions to rig rates were too egregious to merit a lighter touch by the government.  So on Wednesday, UBS announced it would enter a guilty plea to a count of felony wire fraud, which the article noted was part of a broader settlement involving federal prosecutors, British, Swiss and American regulators and which secured approximately $1.5 billion in fines for rate manipulation. The Times article says prosecutors want to send a warning with UBS; the government cannot and will not tolerate misconduct by Wall Street. The article reports that the Commodity Futures Trading Commission cited more than 2,000 instances of illegal acts involving dozens of UBS employees across the world, with the most egregious practices reportedly taking place with UBS' Japanese unit. There, it says, traders not only allegedly worked to control rates, but celebrated their schemes …
  • The website of the nation's fourth largest bank by assets, Wells Fargo, was flooded Tuesday with an unusally high volume of traffic, the bank said. Some online customers were experiencing slow or intermittent access to the site. As of Wednesday, Sitedown.co., which records website outages, counted 494 reports of people unable to log into their accounts in the preceding 24 hours. That compares to 509 in the past seven days. Earlier this week security firms warned that hactivists were planning cyberassaults against 30 of the largest U.S. banks (American Banker Dec. 20) …
  • Web search giant Google has a branding problem when it comes to getting the click-throughs in searches to compare financial services such as mortgage options, credit cards and car insurance, says Greenlight, a digital marketing and research agency with offices in New York and London (American Banker Dec. 18). A Greenlight study in the United Kingdom indicated that other brands that advertise heavily are better known to borrowers searching to compare different mortgage options. That means Google's mortgage comparison does not appear at the top of sponsored search results for all mortgage-related items. Google's entry into credit cards and car insurance had less than a 1% impact on what people clicked on when they searched Google for those products. Google's service is good and works well, but doesn't get the click-throughs said Greenlight. In the U.S., Google's mortgage search site limited its operations to certain markets, but faced competition from other mortgage search brands such as LendingTree.com,  Bankrate, My Bank Tracker and Zillow. Google shut its mortgage search site down earlier this year, said Greenlight …

News of the Competition (12/19/2012)

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MADISON, Wis. (12/20/12)

  • U.S. banks are unlikely in the near future to reclaim the credit ratings they had before the financial crisis, even though the economy is on the upswing, according to a report released Tuesday by ratings agency Moody's (American Banker Dec. 18). A combination of financially stressed governments and economic uncertainty still will continue to dampen independent assessments of the credit risk banks present--despite efforts by regulators to enhance bank safety, and measures taken by banks to improve their own balance sheets, the report said. As long as governments and the macroeconomic environment "remain under stress," banks' financial strength still will be vulnerable, the report said …
  • U.S. credit-card issuers remain reluctant to offer credit to those less likely to repay, even though consumers still are cautious about over-extending their spending as suggested by sustained low credit card delinquency rates (American Banker Dec. 18). In November, U.S. credit-card holders continued to pay down their balances at historically solid rates--running counter  to forecasts that delinquencies would increase as the economy got better and card issuers assumed more risk, the Banker said …
  • General Motors Co. (GM) announced Wednesday it will purchase $5.5 billion of its stock--200 million shares--from the U.S. Treasury in GM's initial step toward the federal government's exit within the next 12 to 15 months from the bailout of the automaker (The Wall Street Journal, Bloomberg.com  and The New York Times DealBook Dec. 19). The deal is anticipated to close by the end of this year. The purchase would trim the Treasury's stake in GM to 19% from 26.5% …

Market News (12/19/2012)

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MADISON, Wis. (12/20/12)

  • U.S. mortgage loan application volume declined 12.3% for the week ended Dec. 14 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 13% week. The Refinance Index dropped 14% to the lowest level since week ending Nov. 2. The seasonally adjusted Purchase Index fell 5%. The unadjusted Purchase Index decreased 8% and was 9% higher than the same week one year ago. "Despite the Federal Reserve's announcement last week that it would purchase an additional $45 billion in Treasury securities per month as part of its continuing quantitative easing effort, rates increased in the second half of the week," said Mike Fratantoni, MBA vice president of research and economics. "As a result, refinance applications dropped sharply to the lowest level in over a month." The refinance share of mortgage activity dropped to 83% of total applications from 84% the previous week. The Home Affordable Refinance Program share of refinance applications fell to 25%. The adjustable-rate mortgage share of activity increased to 3% of total applications. For the MBA report, use the link ...
  • Although U.S. housing starts fell in November, home-builders still capped the strongest three months of residential construction in four years (Bloomberg.com, The Wall Street Journal and Moody's Economy.com Dec. 19).  Starts declined 3% to an annualized rate of 861,000, following an 888,000 pace in October, the Commerce Department said Wednesday. Building permits--a proxy for future construction--climbed to a four-year high. An improving job market and low mortgage rates are helping builders because as sales climb and inventory shrinks, they are able to raise prices, Bloomberg said. Housing has been one of the driving forces of the economic recovery, the Journal said …
  • The likelihood that the U.S. will fall back into recession in six months increased to 37% in November from 32% in October--the second consecutive monthly increase and placing the probability of recession at its highest mark since October 2011, according to the Risk of Recession gauge released Wednesday by Moody's Economy.com (Dec. 19). Although the  economy is not booming, it is not as down as the Risk of Recession gauge might indicate, since some of the increase last month likely is due to temporary disturbances caused by Hurricane Sandy, Moody's said …

News of the Competition (12/18/2012)

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MADISON, Wis. (12/19/12)

  • Morgan Stanley said it will pay a $5 million fine--levied by William G. Galvin, secretary of the commonwealth of Massachusetts--to settle allegations it improperly tried to influence research analysts right before Facebook Inc. held its initial public offering in May (The Wall Street Journal and The New York Times DealBook Dec. 17). Galvin's consent order alleges an unnamed senior Morgan Stanley banker instructed Facebook on how it should share information with stock analysts who cover the social media firm--a possible violation of a landmark legal settlement with Wall Street, the Times said. Although the banker did not directly contact the analysts, his actions placed ordinary investors at a disadvantage because they had no access to the same research, Galvin said …
  • Cerebrus Capital Management, a private-equity firm, announced Tuesday it would sell Freedom Group--a holding company that contained the firm that manufactured a gun used in last week's deadly mass shooting at Sandy Hook Elementary School in Newtown, Conn. (The Wall Street Journal and The New York Times DealBook Dec. 18). Cerebrus consolidated several of its firearm companies into Freedom Group in 2007--one of which is Bushmaster Firearms International--which manufactured the rifle that authorities said was used in the shooting on Friday, resulting in the deaths of 28 people, including 20 children ...
  • Creative Mobile Technologies is suing point of-sale terminal maker Verifone Systems and its subsidiary Verifone Media for more than $250 million over an advertising dispute (American Banker Dec. 17). Creative Mobile Technologies, a firm that sells in-taxi media, advertising and payment technology, alleges Verifone breached an exclusive agreement about placing ads on in-taxi screens in New York …

Market News (12/18/2012)

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MADISON, Wis. (12/19/12)

  • For the eighth consecutive month, U.S. homebuilder confidence increased in December, hitting its highest level in more than six years and adding to evidence that the real estate market is bolstering the economy's growth, according to the National Association of Home Builders (NAHB)/Wells Fargo index of builder confidence (Bloomberg.com and Moody's Economy.com Dec. 18). The index rose to 47--the highest level since April 2006--from 45 in November. Rising home prices and low interest rates are attracting more buyers to the market at time when a growing number of households are lifting demand, Bloomberg said. Builders nationwide say they are seeing some of the best sales conditions in more than five years, NAHB Chairman Barry Rutenberg told Bloomberg. However, one detriment to sales is the highly stringent lending standards for families who are trying to qualify for mortgages, he added …
  • The U.S. current account deficit--the widest gauge of U.S. trade with other countries--dropped to its lowest level in the third quarter, mostly due to the decreasing value of imported goods--including oil (The Wall Street Journal and Moody's Economy.com Dec.18). The current account deficit recorded a $107.51 billion shortfall last quarter--or 2.7% of gross domestic product (GDP), according to Commerce Department figures released Tuesday. That is the smallest deficit since the fourth quarter of 2010 and the least proportion of the GDP since the first half of 2009 …
  • The International Council of Shopping Centers (ICSC) chain store sales index soared last week, with the lull that characterized the post-Thanksgiving weekend coming to an abrupt end, ICSC said (Moody's Economy.com Dec. 18). The index climbed 4.3% for the week ended Dec. 15 from the previous week. Year-over-year growth rose to 3.5% from 2.5%, placing it above the 3% year-to-date average, ICSC said. Because consumers have finished less of their shopping at this time than last year, the holiday shopping season could end on a high note, ICSC concluded …

News of the Competition (12/17/2012)

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MADISON, Wis. (12/18/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced a bank closing Friday, bringing total bank failures this year to 51. That compares with 92 for the entire year in 2011. The failed bank is Community Bank of the Ozarks, Sunrise Beach, Mo., which was assumed by Bank of Sullivan (Mo.). The closed bank held about $43 million in assets as of Sept. 30. The FDIC estimated the latest failure will cost its Deposit Insurance Fund roughly $10 million …
  • American International Group Inc. (AIG) announced Monday it will sell its entire stake in Asian life insurer AIA Group, ending a 90-year association (The New York Times DealBook Dec. 16 and The Wall Street Journal Dec. 17). The move could garner AIG as much as $6.5 billion--which would constitute the second-biggest deal this year in Asia, the Journal said. AIG's 13.7% stake was worth $6.7 billion, based on AIA's most recent share price, the Times said. AIG said it would sell its AIA shares to institutional investors, using cash from the deal to fund general corporate purposes … 

Market News (12/17/2012)

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MADISON, Wis. (12/18/12)

  • Worldwide business sentiment is weak but holding steady, despite political wrangling about tax and spending issues in Washington, D.C., which some fear could push the U.S. economy back into recession, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Dec. 17). Although businesses and investors seem to think policymakers will come to a resolution on the fiscal cliff, if the matter is not resolved the tenuous sentiment could plummet, Moody's said. Still particularly weak are expectations about the economy's prospects heading into next year. A significantly high one-third of respondents said they think the economy will weaken as it moves through the spring, Moody's said ...
  • U.S. net long-term international capital inflows decreased to $1.3 billion in October from $3 billion in September, according to the U.S. Treasury Department (Moody's Economy.com Dec. 17). Tepid foreign interest in U.S. securities and fewer purchases of government agency bonds--because of optimism that the euro-zone debt crisis would be resolved--was mostly the cause of the low inflow total, the Treasury said. Increased U.S. residents' purchases of  foreign securities also added to the paltry inflow, Treasury added …
  • When Moody's Investors Service and Standard & Poor's told investors that various countries' bonds were becoming safer or more risky, investors this year ignored 56% of Moody's ratings and outlook changes and 50% of those by S&P  (Bloomberg.com Dec. 17). Sovereign securities' yields this year moved the opposite way from what those ratings indicated in 53% of 32 changes in credit outlooks, downgrades and upgrades, according to data compiled by Bloomberg

Market News (12/14/2012)

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MADISON, Wis. (12/17/12) 

  • Consumer prices in the U.S. declined 0.3%, seasonally adjusted, during November, slightly more than the 0.2% decrease economists had expected, said the Labor Department Friday (Moody's Economy.com and MarketWatch Dec. 14). The drop was attributed to falling gasoline and energy prices. November's index reverses sharply the Consumer Price Index (CPI) averages of 0.4% the previous three months, said Moody's. The core CPI, which excludes food and energy categories, rose 0.1% as weakness in some categories undermined board price gains. Economists had expected the core CPI to rise 0.2%, where it was the previous month.  Food prices rose 0.2% while the energy index declin4ed 4.1%. For the past 12 months consumer prices have risen an unadjusted 1.8%, well below the rates of most months in 2011 and early 2012. They rose by 1.9% on a core basis …
  • U.S. industrial production for November rose 1.1%, stronger than expected, said the Federal Reserve, but there was a large downward revision to October's production related to the impact of Hurricane Sandy, especially in the beginning of the month. Production was more positive later, when production shut down by the hurricane returned on line, said Moody's Economy.com (Dec. 13).  It will still take a big jump in December to prevent output from declining for a second consecutive quarter, Moody's said.  Manufacturing production rose 1.1% in November, after declining 1% in October (upwardly revised from -0.9%).  Motor vehicle output rose 4.5%, the largest increase since January. Excluding auto production, manufacturing production rose 0.8%; however, Moody's said production is on pace to decline at an annual rate of more than 3% during fourth quarter …
  • The Economic Cycle Research Institute (ECRI) reported Friday that the ECRI Weekly Leading Index rose to 127.7 for the week ended Dec. 7, the highest level in more than 15 months. That figure is up from a revised 126.7 during the previous week. The increase translates to a 4.4% smooth, annualized growth rate.  The week's rate is far above its year-to-date average of 124, said Moody's Economy.com (Dec. 13). With the economic recovery remaining flat, both series have oscillated the past two months. Moody's said the uncertainty from the looming fiscal cliff and Europe's worsening economic situation are fueling the fluctuations.   Both series are remaining close to their year-to-date highs, which indicates the recovery's prospects are still bright, Moody's said …

News of the Competition (12/14/2012)

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MADISON, Wis. (12/17/12)

  • Major U.S. banks, including U.S. Bank and PNC Bank, continued to fend off a "hacktavist" attack to their online banking systems. The al Qassam Cyber Fighters Group claimed responsibility for the attack on five U.S. banks (American Banker Dec. 14). U.S. Bank saw high traffic volume on its website Wednesday and Thursday mornings and customers experienced intermittent delays, U.S. Bank spokesman Tom Joyce said. PNC was experiencing high Internet volume consistent with threats to U.S. banks, PNC said on its Facebook page Thursday …
  • A fee dispute involving the only state-owned bank in the nation has bolstered the case against the controversial operating model. Bankers have targeted the Bank of North Dakota, a state-owned financial institution, for paying lower assessment fees than other state-chartered banks (American Banker Dec. 14). The bank paid a flat fee to the North Dakota Department of Financial Institutions for assessments. The fee, usually about $50,000, will be replaced by the state with a formula based on a percentage of the bank's total assets, but the bank's fees will likely remain below what other banks pay for state-conducted assessments …

News of the Competition (12/13/2012)

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MADISON, Wis. (12/14/12)

  • U.S. home loan banks (FHLBs) are attempting to fill a void in correspondent lending where some of the nation's largest lenders backed off (American Banker Dec. 12). Six FLHBs are significantly ramping up purchases of home loans from their member banks and selling them to Fannie Mae. That fills a need left when big aggregators such as Bank of America left the correspondent lending business late in 2011, the Banker said. FLHBs of Boston, Chicago, Des Moines, New York, Pittsburgh and Topeka have bought $13 billion worth of loans from member banks to date this year--nearly doubling their purchases for all of 2011, the Banker said. There was a 15% rise--to 800--in the number of banks participating in the program from a year ago, the Banker added …
  • Visa President John Partridge will retire from his position at the end of March, the payments company announced Wednesday (American Banker Dec. 12). Visa did not name Partridge's successor, but said it would work with CEO Charles Scharf, who came on board in October from JPMorgan Chase, to create a smooth transition …

Market News (12/13/2012)

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MADISON, Wis. (12/14/12)

  • Initial claims for U.S. unemployment benefits fell more than expected last week to the lowest level since early October and nearly the lowest level in four years, adding to signs that the labor market is gaining momentum (Bloomberg.com, The New York Times and Moody's Economy.com Dec. 13). Claims declined 29,000--to 343,000 for the week ended Dec. 8--the fewest since claims hit a four-year low for the week ended Oct. 6--from the prior week. In the past four weeks, following a surge in claims because of Hurricane Sandy, claims have decreased by 108,000, signaling firms are more  at ease with current staffing levels, Bloomberg said. Meanwhile, continuing claims for U.S. unemployment benefits for the week ended Dec.1 dropped 23,000-- to 3.2 million. Although the labor market is functioning fairly well, expectations are being held in check to a certain extent by uncertainty about the looming fiscal cliff of federal government budget cuts and tax hikes in early 2013, Ryan Sweet, a senior economist at Moody's Analytics Inc. in West Chester, Pa., told Bloomberg  …
  • U.S. retail sales modestly climbed in November, with consumer demand for cars bouncing back and holiday shoppers purchasing electronics and clothes, but a fall-off in gasoline sales curbing overall purchases (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Dec. 13). Retail sales rose 0.3% last month, after a 0.3% decline in October, the Commerce Department said Thursday. Consumers are continuing to be the bedrock of the economic recovery, which is a key because it appears there are fewer growth sources in the U.S. economy. That means the consumer will need to shoulder an increasing responsibility to lift the economy, Ryan Sweet, a senior economist at Moody's Analytics Inc. in West Chester, Pa., told Bloomberg ...
  • Consumer sentiment in the U.S. further retreated last week, because consumers are becoming increasingly aware of the looming fiscal cliff and its potential effects on their personal finances if Congress cannot reach an accord on the matter, according to the Bloomberg Consumer Comfort Index (Moody's Economy.com Dec. 13). The index dropped 0.7 of a point--to -34.5--for the week ended Dec. 9 from the previous week. Also, perceptions of the buying climate and views of the state of the economy eroded …

Fed action will lower 2013 net interest margins for CUs

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WASHINGTON (12/13/12)--As expected, policymakers at the Federal Reserve Wednesday announced a new bond-buying program of $45 billion per month  in longer-term Treasuries and changed its guidance on its Fed funds interest-rate projections to tie in with the unemployment rate. That means credit unions can expect lower net interest margins in 2013, said a Credit Union National Association  (CUNA) economist.

"Today's announcement by the Fed could further flatten the treasury yield curve and thus cause most credit unions to experience even lower net interest margins in 2013," said Steve Rick, CUNA senior economist, Wednesday.

"Credit union net interest margins fell to 2.91% of average assets in the third quarter, down from 3.12% in the third quarter of last year, as asset yields fell faster than funding costs," he told News Now. "Credit union cost of funds are asymptotically approaching zero as maturing share certificates reprice into today's lower interest rates.  But yield on assets are falling faster as old loans reprice into today's record low interest rates," he said. 

"Offsetting the drop in net interest margins is the additional income from the mortgage refinance boom," he said, noting that "Fed actions will maintain the mortgage refinance boom that has been boosting credit union bottom lines over the last six months through increased mortgage fees and 'gains on sale' of those mortgages into the secondary market.

"Credit unions may want to lower their 2013 forecasts for the 10-year treasury interest," he said. "The Fed may keep it below 2% for the entire year."

In its two-day meeting that ended Wednesday, the fed's monetary policymaking body, the  Federal Open Market Committee (FOMC),  said that it would keep the federal funds rate at 0% to 0.25% and anticipates that "this exceptionally low range…will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the committee's 2% longer-run goal, and longer-term inflation expectations continue to be well-anchored."

That is a departure from its earlier date-based guidance. For instance, in its last meeting, the FOMC said its rates would likely be maintained "through mid-2015." In announcing the change in guidance for the rates Wednesday, the FOMC said it "views these thresholds as consistent with its earlier date-based guidance."

In determining how long it will maintain a highly accommodative stance of monetary policy, the committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments, the FOMC said in a statement after the meeting. When it decides to begin to remove policy accommodation, "it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%."

The committee also said it will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month."

In addition, it will "purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month," said the FOMC.

"The committee 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 and, in January, will resume rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," it said.

If the labor market outlook "does not improve substantially, the committee will continue its purchases" of the securities and employ other tools as well, the committee noted, adding that its "highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens."

The FOMC also recognized that economic activity and employment have continued to expand at a "moderate pace in recent months, apart from weather-related disruptions" but that the unemployment rate, although declining, still remains elevated. "Inflation has been running somewhat below the committee's longer-run objective, apart from temporary variations" stemming from energy prices. Longer-term expectations for inflation have remained stable. It expects inflation over the medium term to run at or below 2%.

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 the asset purchase program and the characterization of the conditions under which an exceptionally low range for the federal funds rate will be appropriate.

News of the Competition (12/12/2012)

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MADISON, Wis. (12/13/12)

  • Wells Fargo is being sued by a Woodland Hills, Calif., law firm, as the San Francisco-based bank confronts new allegations that it denied loan modifications to eligible homeowners, breaching a multimillion-dollar legal settlement (American Banker Dec. 11). Wells denies the charges, saying the lawsuit is full of factual inaccuracies and other errors, according to the Banker. At issue are Pick-a-Payment mortgages originated by World Savings Bank between 2003 and 2008. World Savings Bank once was a subsidiary of Golden West Financial, which was acquired by Wachovia in 2006, and then was purchased by Wells Fargo two years later, the Banker said …
  • U.S. manufacturing companies say they will invest more in 2013 than in this year. They will invest their accumulating cash as demand bounces back next year after spending lagged during Europe's recession and an economic slowdown in China, according to the Institute for Supply Management's semiannual survey released Tuesday (Bloomberg.com Dec. 12).  In October, orders for capital equipment, excluding aircraft and defense, increased 2.9%--the largest gain since February, the Commerce Department said Nov. 27. Similar upbeat growth outlooks by companies were evident in a survey conducted by American Express Co. from Nov. 12 through Nov. 21, Bloomberg said. The survey indicated 75% of senior executives polled predict sales will increase next year, and 69% forecast profits will grow. Also, 59% of those surveyed said they plan to invest to spark growth, compared with 37% who said they would concentrate on saving to guard their earnings …

Market News (12/12/2012)

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MADISON, Wis. (12/13/12)

  • U.S. mortgage loan applications increased 6.2% for the week ended Dec. 7 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 rose 6%. The Refinance Index jumped 8% and is at its highest level since the week ending Oct. 12. The seasonally adjusted Purchase Index went up 1% from one week earlier. The unadjusted Purchase Index decreased 4% and was 9% higher than the same week one year ago. "Continued uncertainty due to the lack of resolution regarding the fiscal cliff led interest rates lower last week, with mortgage rates reaching a new low in our survey," said Mike Fratantoni, MBA vice president of research and economics. "Refinance activity increased, with the refinance index hitting its highest level in two months, and the refinance share reaching its highest level since January 2009. Applications for purchase increased for a fifth consecutive week, and are running nearly 10% above their level at this time last year." For the MBA report, use the link …
  • U.S. Wholesale inventories increased more than expected in October, an indication that goods are accumulating because of slow demand (Bloomberg.com and Moody's Economy.com Dec. 11). The 0.6% rise in inventories followed a 1.1% gain in September, the Commerce Department said Wednesday. Economists had predicted a 0.4% increase in October stockpiles, according to a Bloomberg survey. Also, sales fell 1.2%--the biggest decline since June. Uncertainty about pending U.S. tax and spending changes, and a worldwide economic slowdown may dampen business orders, signaling distributors may keep a close watch on inventories, Bloomberg said …
  • The International Council of Shopping Centers (ICSC) Chain Store Sales index is continuing its post-Thanksgiving weekend decline (Moody's Economy.com Dec. 11). The index fell 0.7% for the week ended Dec. 8--hitting its lowest level since late October--from the prior week, ICSC said. Year-over-year growth decreased to 2.5% from 3.2% the previous week--which places growth below the 3% year-to-date average. Although there has been stronger overall customer traffic than last year, less holiday shopping has been finished than at the same point last year, ICSC said …

NEW Fed announces new bond buying rate guidance

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WASHINGTON (Filed 12:30 p.m. ET 12/12/12)--As expected, policymakers at the Federal Reserve today announced a new bond-buying program of $45 billion per month  in longer-term Treasuries and changed its guidance on Fed funds interest rate projections to tie with the unemployment rate.

In a meeting Tuesday and today, the Federal Open Market Committee (FOMC) said that it would keep the federal funds rate at 0% to 0.25% and anticipates that "this exceptionally low range…will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the committee's 2% longer-run goal, and longer-term inflation expectations continue to be well-anchored."

That is a departure from its earlier date-based guidance. For instance, in the last meeting, the FOMC said its rates would likely be maintained "through mid-2015." In a statement today, the FOMC said it "views these [new] thresholds as consistent with its earlier date-based guidance."

In determining, how long it will maintain a highly accommodative stance of monetary policy, the committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments, it said in a statement after the meeting. When it decides to begin to remove policy accommodation, "it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%."

The committee also said it will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month."

In addition, the committee will "purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month," said the FOMC.

"The committee 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 and, in January, will resume rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," it said.

If the labor market outlook "does not improve substantially, the committee will continue its purchases" of the securities and employ other tools as well, the committee noted, adding that its "highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens."

It also recognized that economic activity and employment have continued to expand at a "moderate pace in recent months, apart from weather-related disruptions" but that the unemployment rate, although declining, still remains elevated. "Inflation has been running somewhat below the committee's longer-run objective, apart from temporary variations" stemming from energy prices. Longer-term expectations for inflation have remained stable. It expects inflation over the medium term to run at or below 2%.

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 the asset purchase program and the characterization of the conditions under which an exceptionally low range for the federal funds rate will be appropriate.

News of the Competition (12/11/2012)

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MADISON, Wis. (12/12/12)

  • In a move to close the books on the largest government bailout during the 2008 financial crisis, the U.S. government Monday announced it is selling its remaining shares of American International Group (AIG) stock (washingtonpost.com Dec. 10). The U.S. Treasury said it started a sale in a public offering of 234.2 million shares of common stock in the insurance company. The government's shares constitute a 16 % ownership stake in AIG. Treasury's original bailout of AIG was $182.3 billion. Treasury and the Federal Reserve already have recovered more than that--receiving $197.4 billion as of September ...
  • If federal tax cuts are allowed to expire, savings at U.S. financial institutions would plummet, according to an analysis by Market Rates Insight released Monday (American Banker Dec. 10). Average household deposits into financial institutions would nosedive nearly 55% to $2,182 from $4,782--a $2,600 decline Market Rates Insight said. That $2,600 is the amount of additional annual federal tax an average household would have to pay, according to Tax Policy Center estimates, said Market Rates Insight. If Democrats and Republicans in Congress cannot draft a plan to reduce the federal budget deficit, the prior tax cuts will expire in January …
  • Britain's Standard Chartered Bank has agreed to pay $327 million to settle charges it violated U.S. money laundering laws (American Banker Dec. 10). The British bank allegedly laundered millions of dollars for banks and other entities in Iran and Sudan. Per terms of several settlements announced Monday, Standard Chartered Bank will pay $227 million to the U.S. Department of Justice, the Treasury Department and the Manhattan District Attorney's Office. The bank also will pay $100 million to the Federal Reserve Board …

Market News (12/11/2012)

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MADISON, Wis. (12/12/12)

  • The U.S. foreign trade gap widened in October, with the largest export slump in nearly four years and record trade deficit with China trumping a decline in imports--indicating a worldwide slowdown in economic growth (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Dec. 11). The U.S. deficit in international trade of goods and services grew by 4.9% to $42.2 billion from $40.3 billion in September, according to Commerce Department figures released Tuesday. The trade gap with China increased 1.4% to a record $29.5 billion in October. The drought in the Midwest that caused soybean sales to nosedive may have accentuated the decline in U.S. exports, Bloomberg said. However, the export fall-off was broad-based, signaling that economies from Asia to Europe are slowing, draining demand for U.S. goods--which once was a key component in the economic recovery, Bloomberg said …
  • U.S. small-business confidence plunged in November--recording one of its biggest declines on record, according to the National Federation of Independent Business' (NFIB) Small Business Optimism Index (The Wall Street Journal and Moody's Economy.com Dec. 11). The composite index fell 5.6 points--to 87.5 in November from October. That decline sends the index back to readings recorded during the last recession. Last month's presidential elections and Hurricane Sandy were the two key events that produced November's results, said the NFIB report …
  • The October data from the Job Openings and Labor Turnover Survey (JOLTS) are indicative of a job market that is steadily improving (Moody's Economy.com Dec. 11). The number of job openings rose to 3.68 million from 3.55 million in September. For every available job there were 3.3 unemployed workers, and the number of people hired rose to 4.34 million from 4.2 million in September, JOLTS said. On the downside, more people left their jobs--4.08 million, up from 4.02 million …

Consumers members borrowed more in October

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WASHINGTON (12/11/12)--Consumers--including credit union members--borrowed roughly $2.753.5 trillion during October--a 6.2%  or $14.2 billion gain over September, reported the Federal Reserve's Consumer Credit report, released Friday.

The increase was more than the median $10 billion increase forecast by economists surveyed by Bloomberg (Bloomberg.com Dec. 7). Estimates in the Bloomberg survey for consumer credit ranged from gains of $5 billion to $16.5 billion. In September, consumers' debt increased a revised $12.2 billion--originally reported as an $11.4 billion gain.

Credit union members also borrowed more--$239.6 billion, up $3.1 billion from September's $237.5 billion and more than the $223.9 billion borrowed in October 2011, the report noted.

Nationwide revolving credit, which includes credit card debt, was up 4.7%  or $3.38 billion in October--to $857.6 billion, compared with $854.2 billion borrowed in September. October's revolving debt was also higher than the $847.7 billion borrowed during third quarter 2011, said the report.

For credit unions, revolving credit totaled $38.2 billion--up from $38.1 billion in September and from $36.3 billion in third quarter last year.

The 6.9% growth in October for nonrevolving debt--to $1.895.8 trillion from $1885.1 trillion in September--was attributed largely to consumers taking out more in student loans and auto loans. The debt compares with $1,745.8 trillion borrowed during third quarter last year.

Credit union members borrowed $201.4 billion in nonrevolving debt in October, compared with $199.4 billion in September and $187.6 billion in third quarter last year.

The report does not provide data on debt secured by mortgages and other real estate debt. For the full report, use the link.

FOMC expected to announce QE4 on Wednesday

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WASHINGTON (12/11/12)--The Federal Reserve's policymakers will set the tone for the Fed's monetary policy for 2013 during the Federal Open Market Committee (FOMC) meeting today and Wednesday, with Wall Street economists expecting the committee to announce a possible fourth round of quantitative easing (QE4).

The FOMC's Operation Twist program, in which the Fed buys back $45 billion of long-term Treasury bonds each month to push down long-term interest rates while selling short-term notes to "sterilize" the purchases--thus keeping the overall balance sheet even--is set to expire on Dec. 31 (Bloomberg.com and USA Today Dec. 10).

The committee announced an open-ended QE3 in September, adding $40 billion a month in purchases of mortgage-backed securities to expand the central bank's balance sheet. Economists say the Fed policymakers may fill that hole by continuing to buy the same amount, but since it does not have enough short-term treasuries to continue the program it would not be sterilizing the transactions with short-term note sales. Such a measure has been dubbed "QE4."

That would expand the Fed's bond portfolio--with some estimating it would double the expansion rate of the balance e sheet--and inject more cash into the economy, but it would be more difficult to sell the bonds later to curb inflation, said Business Insider (Dec. 10).

The committee also has been discussing how it communicates the economic thresholds it uses to signal when it plans to raise short-term interest rates, which are at near zero and are expected to stay there until mid-2015.

The Fed will announce the outcome of the December meeting on Wednesday afternoon. News Now will provide updates on action taken.

News of the Competition (12/10/2012)

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News of the Competition

MADISON, Wis. (12/11/12)

  • Investors, insurers, prosecutors and regulators are filing lawsuits against the biggest U.S. banks that sold more than $1 trillion of poorly designed residential mortgage-backed securities (RMBS) that the banks sold (The New York Times Dec. 9). Dozens of new claims have been filed against Bank of America, Citigroup, JPMorgan Chase and others, the Times said. Although there is significant divergence in estimates of what the lawsuit could cost banks, some in the banking industry are concerned that the costs could hit $300 billion if the financial institutions lose all the litigation, the Times said. The National Credit Union Administration is among the regulators that have sued several entities over RMBS …
  • SAC Capital Advisor LP is under an intensifying federal investigation, with the U.S. government ramping up scrutiny of SAC's trades in InterMune Inc. and Weight Watchers International Inc., according to a source familiar with the situation (Bloomberg.com Dec. 10). The SAC trades are under review by the Securities and Exchange Commission (SEC) and the Federal Bureau of Investigation, the source told Bloomberg. SAC told its clients Nov. 28 that the SEC had issued the $14 billion hedge fund a Wells notice--a warning that the SEC may sue--related to Mathew Martoma, an SAC ex-portfolio manager charged Nov. 20 with insider trading related to two other stocks by federal prosecutors.The Wells notice cited control-person liability and fraud related to the unit that Martoma worked for, the source said …

Market News (12/10/2012)

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MADISON, Wis. (12/11/12)

  • U.S. consumer spending, one of the few sources of economic strength during the past few months, is showing indications of weakening (The Wall Street Journal Dec. 9). Although consumers helped buoy the economy when it slowed in the spring and seemed to drive a summer revival, government data in recent weeks indicate spending was less during the summer than previously estimated, and confidence began the final quarter of the year on an even flimsier foundation, the Journal said. Now a slew of influences--ranging from the specter of higher taxes because of the approaching fiscal cliff, to a high unemployment rate--are a threat to reducing consumers' capacity to spend at a time when other areas of the economy likely are too fragile to make up the difference, the Journal said …
  • Business confidence worldwide inched up in early December, although overall sentiment remains weak, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Dec. 10). Confidence registered a 24.5 reading for the week ended Dec. 7 from 19.7 the prior week. Survey responses have improved in a broad-based fashion, which is encouraging, Moody's said.  However, if federal legislators fail to address the serious fiscal issues facing the U.S. such as the fiscal cliff, confidence will decline, Moody's said. Nearly one third of survey respondents think the economy will weaken, going through spring of next year, Moody's added  ...
  • China will overtake the U.S. as  the leading economic power worldwide before 2030, according to a new assessment in a study by the National Intelligence Council  (The New York Times Dec. 10). However, the U.S. still will be an indispensable world leader, partially because of the era of energy independence, the report said. Countries dependent on oil for revenues, along with Russia, will see their influence decline, the report added. The report, which predicts worldwide trends through 2030, forecasts a growing affluence that will create a bigger middle class that is more educated with wider access to communications technologies such as the Internet and smartphones, as well as health care  …

News of the Competition (12/07/2012)

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MADISON, Wis. (12/10/12)

  • The Securities and Exchange Commission (SEC) has charged an investment banker at Wells Fargo with being part of an insider trading scheme that netted $11 million or more (American Banker Dec. 6). John Femenia, a banker in Wells' industrial investment banking group, allegedly misused his position to convey private information about mergers and acquisitions involving Wells clients to his friends who traded, based on the information, Wells said. The abuses allegedly took place during a two-and-a-half year period, starting in March 2010, the SEC said in a civil complaint filed Wednesday in U.S. District Court in Charlotte, N.C. …
  • The most recent bank to use a simplified disclosure notice on its retail checking accounts is SunTrust Bank in Atlanta (American Banker Dec. 6). SunTrust joins several other banks, including JPMorgan Chase, Fifth Third and Bank of America that have begun simplifying descriptions of account fees and rules in recent months, the Banker said. The disclosure is based on Pew's Safe Checking in the Electronic Age Project recommendations, SunTrust said  ...

Market News (12/07/2012)

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MADISON, Wis. (12/10/12)

  • The U.S. economy added more jobs than anticipated in November, and the unemployment rate fell to nearly a four-year low as the labor market rebounded from the limited effects of Hurricane Sandy, indicating a steady but gradual economic recovery (The Wall Street Journal, The New York  Times, Bloomberg.com and Moody's Economy.com Dec. 7). U.S. nonfarm payrolls added 146,000 jobs last month, the Labor Department said Friday. Economists had forecast an 85,000 job gain, according to a Bloomberg survey. The November unemployment rate dropped to 7.7%--the lowest since December 2008, as the labor-force size contracted. The payroll growth pace is not fast enough to significantly reduce the number of unemployed, but it is persistent and steady, James Glassman, senior economist at JPMorgan Chase & Co. in New York, told Bloomberg. That situation should improve next year, he added. In a related matter, the U.S. Monster Employment Index--which measures online job advertisements--increased to 158 in November from 156 in October (Moody's Economy.com Dec. 7) ...
  • U.S. consumer confidence declined more than expected in December, with consumers' expectations dropping to a one-year low, according to the Thomson Reuters/University of Michigan Preliminary Consumer Sentiment Index (Bloomberg.com and Moody's Economy.com Dec. 7). The index fell to 74.5--the lowest in four months--from 82.7 in November. Economists had predicted a preliminary reading of 82 in December, according to a Bloomberg survey. Inflation expectations increased, with the one-year measure rising 3.3% from 3.1%, while the five-year measure crept up to 2.9% from 2.8%. The looming fiscal cliff is dampening consumers' optimism, Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Conn., told Bloomberg
  • The Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--increased to 126.8 for the week ended Nov. 30 from 126.2 the prior week, the second consecutive weekly gain (Moody's Economy.com Dec. 7). The smoothed, annualized growth rate quickened to 3.5%, putting an end to six consecutive weeks of deceleration, ECRI said. Both rates have fluctuated during the past two months because economic growth is neither rising nor falling significantly, ECRI said. In a related matter, the ECRI's U.S. future inflation gauge was at 102.5 in November, a decline from October's 103.6 (Moody's Economy.com Dec. 7). ECRI said it forecasts fairly tame inflationary pressures in the next six to nine months …

News of the Competition (12/06/2012)

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MADISON, Wis. (12/7/12)

New Citigroup CEO Michael Corbat Wednesday said he intends to cut 11,000 jobs, shutter 84 branches and back off from consumer banking in some countries, accentuating his efforts to control costs (The Wall Street Journal Dec. 5). When Corbat took over for Vikram Pandit in October, plans were apace to reduce the bank's work force, sources familiar with the matter told the Journal.  However, Corbat escalated the austerity, demanding in November that some heads of Citi's business units raise the cost-cutting targets by a third, the source said …

Market News (12/06/2012)

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MADISON, Wis. (12/7/12)

  • Initial claims for U.S. unemployment benefits fell last week--the third consecutive weekly decline--dropping back to levels seen before Hurricane Sandy wrought its damage and caused disruptions, which have since diminished (The New York Times, The Wall Street Journal and Bloomberg.com Dec. 6). Claims decreased 25,000--to a seasonally adjusted 370,000 for the week ended Dec.1 from the prior week, the Labor Department said. Sandy temporarily increased the number of claims filed, but the number pretty much has gone back to pre-recession levels, Guy Berger, an economist at RBS Securities Inc. in Stamford, Conn., told Bloomberg. Layoffs are mired in the same spot, but hiring is feeble, he added. Meanwhile, continuing claims for U.S. unemployment benefits for the week ended Nov. 24 fell to 3.21 million from 3.31 million the prior week. The four-week moving average, which levels off weekly volatility in data, rose 2,250--to 408,000 ...
  • U.S. consumer sentiment is toggling up and down at relatively low levels, according to the Bloomberg Consumer Confidence Index  (Bloomberg News via Moody's Economy.com Dec. 6). The index fell 0.8 points--to -33.8 in December from -33 in November. During the past four weeks, the composite index has shifted between -33 and -34--a sign consumers still are cautious during times of slow earnings and job growth, in combination with escalating prices, Bloomberg said. Also, data indicate consumers may be tapping into their savings to finance their purchases, which may account for their sour mood about finances, Bloomberg said  …
  • Service industries in the U.S. unexpectedly grew at a quicker rate than predicted in November, signaling the economy is hold steady as the fiscal cliff looms, according to the Institute for Supply Management's Nonmanufacturing Index (Bloomberg.com and Moody's Economy.com Dec. 5). The index increased to 54.7 last month from 54.2 in October. Economists had forecast the index to dip to 53.5 in November, according to a Bloomberg survey. Readings above 50 indicate expansion …

News of the Competition (12/05/2012)

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MADISON, Wis. (12/6/12)

  • With the U.S. housing market gradually picking up steam, community banks are slowly displaying an interest in making construction and development loans (American Banker Dec. 4). Residential real estate construction seems to be on the upswing, with housing starts increasing 3.6% in October from a year earlier, to an annualized rate of 894,000--a four-year high, according to data compiled by Bloomberg. However, despite the favorable statistics, only a small portion of community banks will be able to capitalize, Christopher Marinac, an analyst at FIG Partners, told the Banker. That's because many banks still are burdened by nonperforming residential development loans, with regulators discouraging them from issuing new credit in that arena, he added ...
  • Citigroup Inc.--in efforts to cut costs--announced Wednesday it will eliminate 11,000 jobs, which will trim its work force by about 4% (The New York Times DealBook and Bloomberg.com Dec. 5). About 1,900 of the cuts will be in the bank's institutional clients division. Another 6,200 jobs will be slashed from Citigroup's consumer banking business, with an additional 2,600 positions eliminated from the bank's operations and technology group, the Times said …

Market News (12/05/2012)

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MADISON, Wis. (12/6/12)

  • Companies in the U.S. hired fewer workers in November than October partly because Hurricane Sandy struck the East Coast and temporarily shut down some businesses, according to a national employment report issued Wednesday by payroll processor Automatic Data Processing Inc. (ADP) and forecasting firm Moody's Analytics (The Wall Street Journal, Bloomberg.com and Moody's economy.com Dec. 5). Private-sector jobs rose 118,000 last month, following a revised 157,000 gain--originally 158,000--in October, ADP said. Sandy's impact resulted in 86,000 jobs cut from payrolls, the report indicated. Sandy especially hit hard the job sectors in leisure and hospitality, manufacturing, retailing, and temporary help, Mark Zandi, chief economist at Moody's Analytics Inc., said in a statement …
  • U.S. mortgage loan applications for the week ended Nov. 30 increased 4.5% from the previous week, according to the Mortgage Bankers Association (MBA) Market Composite Index--part of its Weekly Mortgage Applications Survey. On an unadjusted basis, the index jumped 49%. The Refinance Index rose 6%, and the seasonally adjusted Purchase Index went up 0.1%. The unadjusted Purchase Index increased 36% and was 0.1% lower than the same week one year ago. The refinance share of mortgage activity rose to 83% of total applications from 81% the previous week. The Home Affordable Refinance Program share of refinance applications inched up to 27% from 26% the prior week. The adjustable-rate mortgage share of activity decreased to 3% of total applications. For the MBA report, use the link …
  • Some people in the construction industry worry that a multifamily-market housing bubble is forming, which in a few years could create a glut of empty apartments that will leave developers unable to repay their bank loans (American Banker Dec. 4).  However, others who diligently monitor the rental housing market say those fears about a bubble are overstated because--with the exception of a few geographic areas--there is a balance between supply and demand. The reasons for the worries are that new-apartment-unit construction is rapidly rising,  multifamily housing prices nationwide are escalating back toward their prerecession peaks, and low interest rates that no one believes are sustainable for the long term are boosting the housing market, the Banker said …
  • U.S. nonfarm worker productivity in the third quarter rose more than previously estimated because companies reduced labor expenses to bolster profits (Bloomberg.com and Moody's Economy.com Dec. 5). The gauge of employee output per hour increased at a 2.9% annualized rate--the largest gain in two years and up from 1.9% in the second quarter, the Labor Department said Wednesday. Economists had forecast a 2.8% gain in a Bloomberg survey. Also, costs per worker declined at a 1.9% annual rate. Companies' profit margins should be buoyed by the productivity gains, Kevin Cummins, an economist at UBS securities LLC in Stamford, Conn., told Bloomberg.  Given the high unemployment rate, there will be ongoing downward pressure on labor costs, he added …

Court upholds dismissal of MBS suit vs ratings agencies

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CINCINNATI (12/5/12)--An Ohio appellate court has upheld the dismissal of  a lawsuit filed against three Wall Street credit rating agencies over $457 million in losses from mortgage-backed securities (MBS) sold to five pension plans for state public employees.

The U.S. Sixth Circuit Court of Appeals in Cincinnati upheld a ruling dismissing the lawsuit against Fitch, Standard & Poor's, Moody's and Moody's parent company, McGraw-Hill Cos. (Toledo Blade Dec. 4).

The pension funds had accused the agencies of having a vested interest in ensuring that MBS maintain their high AAA ratings and becoming "intimately involved" with financial institutions selling the securities. The pension funds alleged the ratings agencies had misrepresented their independence from the banks selling them the securities.

The appeals court said the lawsuit's claims were too vague and that the pension funds had not alleged any fact connecting the 308 MBS purchased to any particular rating given by an agency for a security bought during the period. The funds had drawn its allegations from publicly available reports and media explaining problems with the agencies' business model from 2005 to 2008.

In a similar lawsuit, filed by the California Public Employees Retirement System over $1 billion in losses, a California Superior Court judge rejected S&P and Moody's request to dismiss that suit.

News of the Competition (12/04/2012)

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MADISON, Wis. (12/5/12)

  • An acquisition by consumer credit reporting agency Equifax may prompt bankers in the central U.S. to attempt to bargain with Equifax on the price they pay to determine borrowers' creditworthiness (American Banker Dec. 3).  Equifax's Atlanta credit union bureau said Monday it would pay $1 billion in cash to acquire Computer Sciences Corp.'s credit services unit--one of the last independent credit reporting agencies. Equifax's acquisition of the unit--slated to be finalized this month--takes out a middleman, and opportunistic banks and other financial institutions view this as an opportunity to bring down the price of credit reports, the Banker said …
  • Forty-eight percent of consumers surveyed said they would consider a mortgage from PayPal, while 33% said they would consider a mortgage from Walmart, according to a survey released Monday by consulting firm Carlisle & Gallagher, based in Charlotte, N.C. (American Banker Dec. 3). The survey asked consumers the factors they deemed most critical in applying for a mortgage loan, their views about home ownership, and whether they would consider turning to an alternate mortgage provider for their borrowing needs, the Banker said …
  • Bank of America (BofA) is one of the first large U.S. banks to offer a Windows 8 app to its customers (American Banker Dec. 3). BofA was preparing the app for the new operating system for desktops, PCs and tablets, as Microsoft readied its Windows 8 product in late October, the Banker said. With functionality similar to other native app offerings, BofA's Windows 8 app has the capability to conduct fund transfers via e-mail and app, make mobile check deposits and use BankAmeriDeals--BofA's merchant-funded rewards program, the Banker said …
  • Adyen, a Dutch payment services company, has created Shuttle, a card-reader that accepts card payments that comply with the Europay, MasterCard and Visa (EMV) chip-and PIN standards (American Banker Dec. 3). Adyen's technology could possibly set it a step above mobile payments companies such as Bank of America and Square, as EMV technology begins to be adopted in the U.S., the Banker said …

Market News (12/04/2012)

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MADISON, Wis. (12/5/12)

  • The U.S. CoreLogic House Price index--which is not seasonally adjusted--declined 0.2% in October, with the housing market heading into its off-season, according to CoreLogic Inc. (Moody's Economy.com Dec. 4). However, the index is 6.3% higher than in October 2011. The CoreLogic Index that excludes distress sales rose 0.5% in October and is 5.8% higher than the level in October 2008--just before the recession started. The U.S. housing market is showing a robust recovery despite the seasonal slowing, with pent-up household formation and healthier balance sheets beginning to drive up demand, CoreLogic said …
  • The International Council of Shopping Centers (ICSC) Chain Store Sales Index reported a post-Thanksgiving weekend decline, which is typical, ICSC said (Moody's Economy.com Dec. 4). The index fell 3.1% for the week ended Dec. 1, nearly wiping out the prior week's 3.3% gain. Year-over-year growth declined slightly, to 3.2% from 4%--remaining above the 3% year-to-date average, ICSC said. There is less customer traffic in many segments than last year, and holiday shopping has fallen behind last year's levels, ICSC said. The biggest detriment to spending growth is weak income growth, with disposable income up only 3% from October 2011, Moody's explained …

Banks and thrifts income up by 6 6

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WASHINGTON (12/5/12)--U.S. commercial banks and savings institutions insured by the Federal Deposit Insurance Corp. (FDIC) reported aggregate net income of $37.6 billion for third quarter, a $2.3 billion (6.6%) improvement from the $35.2 billion in profits the industry reported in third quarter of 2011.

That is the 13th consecutive quarter that banks' earnings have registered a year-over-year increase, the FDIC said.

Increased noninterest income such as fees and lower provisions for loan losses accounted for most of the year-over-year improvement in earnings. The number of banks on the FDIC's "Problem List" declined--to 694 from 732. That marked the sixth consecutive quarter that number has fallen, and the first time in three years the list had fewer than 700 banks on it. Total assets of problem institutions declined to $262 billion from $282 billion.

"This was another quarter of gradual but steady recovery for FDIC-insured institutions," said FDIC Chairman Martin J. Gruenberg. "Signs of further progress were evident in a number of indicators, such as loan growth, asset quality and profitability."

More than half of all institutions (57.5%) reported improvements in their quarterly net income from a year ago. Also, the share of institutions reporting net losses for the quarter fell to 10.5% from 14.6% a year earlier. The average return on assets (ROA)--a yardstick of profitability--rose to 1.06% from 1.03% a year ago.

Third-quarter loan loss provisions totaled $14.8 billion, which was 20.6% less than the $18.6 billion that insured institutions set aside for losses in the third quarter of 2011. Net operating revenue-net interest income plus total noninterest income--totaled $169.6 billion, an increase of $4.9 billion (3%) from a year earlier, as gains from loan sales rose by $3.9 billion. Net interest income was $746 million (0.7%) higher than in the third quarter of 2011.

Asset-quality indicators continued to improve as insured banks and thrifts charged off $22.3 billion in uncollectible loans during the quarter, down $4.4 billion (16.5%) from a year earlier. The amount of noncurrent loans and leases--those 90 days or more past due or in nonaccrual status--fell for the 10th consecutive quarter, and the percentage of loans and leases that were noncurrent declined to the lowest level in more than three years, since the first quarter of 2009.

Financial results for the third quarter of 2012 are contained in the FDIC's latest Quarterly Banking Profile, which was released Tuesday. Use the link for the full report.

News of the Competition (12/03/2012)

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MADISON, Wis. (12/4/12)

  • U.S. banks are seeing increasing criticism of their efforts to comply with the Community Reinvestment Act (CRA) (American Banker Nov. 30).  In a report issued last week, the Association for Neighborhood and Housing Development, an advocacy group, criticized New York City's banks for not making sufficient efforts in low- to moderate-income neighborhoods. The association indicated there was a fall-off in multifamily lending--which declined 28% in 2010 from 2009, based on the latest CRA data. However, the city's banks increased community lending by 73% in 2010, and more than doubled CRA-eligible investment, the report added. The report is the most recent indication that advocacy groups and some lawmakers are scrutinizing activities of banks in disadvantaged communities, the Banker said ...
  • There is a resurgence in co-branding technology for credit and debit cards--in which consumers can use a computer or smartphone to select loyalty or payment methods (American Banker Nov. 30). The way it works is when consumers make a purchase from retailers, they can select different programs by pushing a button available on the card--and sending information to the magnetic strip--or by accumulating points, the Banker said. Since the consumer is making the choice electronically at the point of sale, the card loyalty programs become more proactive, the Banker added …
  • U.S. automakers Chrysler Group, Ford Motor Co. and General Motors Co. (GM) saw increased sales in November (The Wall Street Journal Dec. 3). Chrysler posted a 14% increase, Ford a 6.5% rise, and General Motors a 3.4% gain last month. Overall, U.S. auto sales in November are expected to jump 11% from last year and rise 1.4% from October, according to car-shopping website Edmunds.com
  • A moratorium on evictions for borrowers facing foreclosures will be granted during the holidays, said government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac (nbcnews.com Dec. 3). The suspension of evictions for consumers having trouble making mortgage payments will apply to single-family homes and two- to four-unit properties from Dec. 19 through Jan. 2. Although the move allows families to avoid evictions during that time, it doesn't mean the foreclosure process will be delayed or suspended, the GSEs said …

Market News (12/03/2012)

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MADISON, Wis. (12/4/12)

  • U.S. manufacturing unexpectedly declined in November, with orders falling to a three-month low, according to an Institute for Supply Management (ISM) report released Monday (The Wall Street Journal, Bloomberg.com and Moody's Economy.com Dec. 3). The ISM factory index dropped to 49.5 last month--the lowest reading since July 2009--from 51.7 in October. Economists had forecast the index to dip to 51.4, according to a Bloomberg survey. A reading of 50 is the dividing mark between expansion and contraction. Several factors are slowing manufacturing--less corporate investment in manufacturing while lawmakers hash out the federal budget, manufacturing disturbances related to Hurricane Sandy, and fewer orders from abroad, Bloomberg said ...
  • Business confidence worldwide bounced back--as anticipated--last week after falling during the Thanksgiving week due to a low survey-response rate, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Dec. 3). Confidence rose to 19.7 for the week ended Nov. 30, from 11.9 the prior week. However, businesses still are worried, and sentiment remains mired at a low level, Moody's said. Pricing power remains weak, and expectations about the economy's prospects heading into 2013 are down--likely indicating concern about the Treasury debt ceiling and approaching fiscal cliff, Moody's said.  In a related matter, the Intuit Small Business Employment Index show small firms still are resilient, even when confronting declining revenues, Intuit said  (Moody's Economy.com Dec. 3). The index gained 0.14% in November, reaching 93.9--creating roughly 30,000 jobs for the month-- from 93.77 in October …
  • Consumer confidence in the U.S. hit a seven-month high last week because consumers said the time was right to make purchases. The increase foreshadows a better holiday shopping season, according to the Bloomberg Consumer Comfort index (Bloomberg.com and Moody's economy.com Nov. 29). The index rose to -33 for the week ended Nov. 25--the highest reading since April and the highest recorded level for a Thanksgiving week--from -33.9 the prior week, Bloomberg said. Consumers likely were induced to ratchet up their shopping to a seven-month high by a combination of discounts, online offers and expanded store hours during Thanksgiving week, Bloomberg said  …