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News of the Competition (03/31/2011)

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MADISON, Wis. (4/1/11)
* The Federal Reserve Monday will offer $5 billion in 28-day term deposits through its Term Deposit Facility. Competitive bids submitted at the stop-out rate will be pro-rated and will be rounded to multiples of $10,000. Normal rounding convention will be used, except that awards under $10,000 will be rounded to $10,000. Non-competitive bids will be allowed and will be automatically awarded in full at the stop-out rate of the competitive auction. The minimum amount for a non-competitive bid is $10,000; the maximum amount is $5 million and should be submitted in increments of $10,000. Non-competitive bids must be submitted between 10 a.m. ET and 2 p.m. ET on the auction date. For the Fed notification, use the link … * For the first time in seven months, U.S. automobile sales likely declined in March because the highest gas prices in more than two years and the natural disaster in Japan eroded consumer confidence (Bloomberg.com March 31). Statistics slated for release today on March light-vehicle deliveries may have run at a 12.9 million annual rate, according to estimates by nine analysts in a Bloomberg survey. Although that figure tops the year-ago mark of 11.7 million, it is less than February’s seasonally adjusted rate of 13.4 million, according to Autodata Corp. ...

Market News (03/31/2011)

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MADISON, Wis. (4/1/11)
* Initial claims for U.S. unemployment benefits slightly declined last week, a sign that the labor market is continuing a gradual recovery (The Wall Street Journal and Bloomberg.com March 31). Claims dropped 6,000 to a seasonally adjusted 388,000 for the week ended March 26, the Labor Department said Thursday. The previous week’s figures were upwardly revised to 394,000 from an originally reported 382,000. Expanding payrolls and a slowing of job cuts may further strengthen consumer spending--which constitutes 70% of the world’s biggest economy, Bloomberg said. Meanwhile, continuing claims for unemployment benefits also dropped, decreasing 51,000 to roughly 3.71 million for the week ended March 19 (Moody’s Economy.com March 31) … * For the first time in five weeks, U.S. consumer confidence increased with U.S. citizens saying their finances had improved (Bloomberg.com March 31). The Bloomberg Consumer Comfort Index improved to -46.9 for the week ended March 27 from a seven-month low of -48.9 the previous week. Historically--during recessions--readings tend to be this low, said Gary Langer, president of Langer Research Associates in New York, which creates the index for Bloomberg. The U.S. labor market, which is starting to solidify, may help consumers mitigate pressure from the highest gasoline prices in more than two years and escalating food prices, Bloomberg said. However, for the fourth consecutive week, sentiment from people making more than $100,000 annually declined, signaling that wealthier households are skittish about stock price fluctuations and declining home values, Bloomberg said ...

News of the Competition (03/30/2011)

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MADISON, Wis. (3/31/11)
* Because U.S. federal curbs on debit card fees will be delayed or modified, Visa Inc. and MasterCard Inc.--the two largest U.S., payment networks--Wednesday posted their biggest gains in 2011 (Bloomberg.com March 30). Visa went up $3.04 per share--or 4.2%. MasterCard surged $8.86 per share--or 3.5%. Tuesday, Federal Reserve Chairman Ben Bernanke said the Fed would not meet an April 21 deadline to fashion a financial rule for a cap on debit-card interchange fees. The fee limit, which is mandated by the Dodd-Frank law that revamped the financial industry in 2010, must be finalized by July 21. “We appreciate that the Fed is spending the time necessary to ‘very carefully’ consider the issues raised by the comment letters--and is holding off on issuing final interchange standards on April 21,” Bill Cheney, president/CEO of the Credit Union National Association, said Tuesday. “Nevertheless: The Fed’s admission that it cannot meet the deadline imposed on it by Congress is further proof that Congress must take action now to postpone this entire matter” ... * The United Automobile Workers (UAW) union may permit automakers to place new workers on a lower second-tier pay level to create more jobs and reopen idled plants, a UAW official said Tuesday (The New York Times March 29). Adding more jobs to carmakers’ payrolls is a primary goal of the UAW entering this fall’s negotiations with the Detroit auto manufacturers, Joe Ashton, vice president in charge of UAW’s negotiations with General Motors, told the Times. The union will ask GM to reopen plants in Janesville, Wis., and Spring Hill, Tenn., and keep open a plant in Shreveport, La., slated for shutdown in mid-2012, Ashton added …

Market News (03/30/2011)

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MADISON, Wis. (3/31/11)
* Mortgage loan application volume decreased 7.5% for the week ended March 25 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index declined 7.2%. The Refinance Index dropped 10.1%. The seasonally adjusted Purchase Index fell 1.7%. The unadjusted Purchase Index dipped 1.5% and was 21.9% lower than the same week one year ago. “Treasury and mortgage rates increased towards the end of last week, as global markets calmed following the recent crises in Japan and the Middle East,” said Michael Fratantoni, MBA vice president of research and economics. “Refinance volume predictably fell in response to these rate increases. As rates climb back to 5%, fewer homeowners have both the incentive and the ability to refinance. Purchase volume remained roughly flat as we enter what is typically the peak home-buying season.” For the MBA report, use the link. In a related matter, roughly 1.8 million homes with delinquent mortgage payments or that are in foreclosure could add to the “shadow inventory” of homes--resulting in a nine-month supply of properties as of January, according to CoreLogic Inc. (Bloomberg.com March 30) ... * In an indication the labor market may be gaining momentum, U.S. companies added more workers in March, according to a private report released Wednesday that compiles information from payrolls (Bloomberg.com March 30). Employment rose by 201,000 workers in March, following a revised 208,000 rise in February, according to ADP Employers Services. Gains in consumer spending and capital investment are encouraging companies to add staff, Bloomberg said. Also, the number of announced job cuts dropped in March to 41,528, from 50,702 in February, according to the Challenger Report, released Wednesday by Challenger, Gray and Christmas Inc. (Moody’s Economy.com March 30) …

News of the Competition (03/29/2011)

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MADISON, Wis. (3/30/11)
* State attorneys general are trying to make U.S. banks reduce the amounts owed to banks by borrowers facing foreclosure, but the banks are resisting the efforts (The Wall Street Journal March 28). However, mortgage companies have already cut home loan balances for more than 100,000 borrowers, the Journal said. Officials from Bank of America Corp., Citigroup Inc., JPMorgan Chase &Co., Wells Fargo & Co, and Ally Financial Inc.’s GMAC unit were summoned to Washington, D.C., today to meet with state attorneys general and at least three federal agencies, said sources familiar with the matter. It is likely that the focus of the meeting will be geared to attaining a settlement to the nationwide investigation of mortgage-servicing practices, the Journal said … * Goldman Sachs Group Inc. Special Situations Group (SSG) invests the company’s money in the debt and equity of troubled companies and also lends to high risk borrowers. That lending component may keep it from having to shut down under the Volcker Rule approved by Congress last year (Bloomberg News via American Banker March 29). The Volcker Rule is a proposal by American economist and former Federal Reserve Chairman Paul Volcker to restrict U.S. banks from making certain kinds of speculative investments if those investments are not on behalf of their customers. Goldman’s effort to defend the SSG shows how important it is to the company and could be a test for how much leeway federal regulators will afford companies in defining proprietary trading, Bloomberg said …

Market News (03/29/2011)

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MADISON, Wis. (3/30/11)
* U.S. consumer confidence dropped to a three-month low in March--after reaching a three-year high in February--in part because fuel costs jumped to their highest level in more than two years (Bloomberg.com and Moody’s Economy.com March 29). The Conference Board’s index of consumer confidence decreased to 63.4 from a revised 72 reading in February, the private research firm said Tuesday. Higher energy prices, Middle East political unrest and the natural disasters in Japan overrode labor market improvement, Moody’s said. Higher prices at grocery stores and gas stations could use up a greater percentage of consumers’ incomes, resulting in consumer sentiment remaining suppressed, Bloomberg said ... * For a sixth consecutive month, prices of U.S. homes declined in January, with average prices regressing back to summer 2003 levels, according to the Standard & Poor’s Case-Shiller Home Price Index for 20 large cities (The New York Times and The Wall Street Journal March 29). The data indicate the housing market recession still is ongoing, and no statistics portend any type of sustained recovery, David M. Blitzer, chairman of S&P’s index committee, said in a statement. A steady supply of foreclosures and high U.S. unemployment likely will continue to depress home sales and prices, the Journal said. Most housing experts said home prices are expected to decline 5% to 10% by June and then begin a gradual recovery, according to the Times. Just two metro areas--San Diego and Washington, D.C.,--had home prices above last year’ levels, while 11 metro areas posted new cyclical lows (Moody’s Economy.com March 29) …

News of the Competition (03/28/2011)

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MADISON, Wis. (3/29/11)
* One bank was taken over Friday by regulators and entered into a purchase-and-assumption agreement with another bank, according to the Federal Deposit Insurance Corp. (FDIC). The failure brings the total bank failures for 2011 to 26. That compares with 157 for all of 2010. The bank is The Bank of Commerce, Wood Dale, Ill., assumed by Advantage National Bank Group, Elk Grove Village, Ill. The closed institution held roughly $163 million in assets as of Dec. 31. The FDIC estimated that the failure will cost the Deposit Insurance Fund about $42 million. Bank failures so far this year have cost the fund about $1.15 billion ... * Several major U.S. banks no longer are offering debit-card rewards programs (CNNMoney.com March 28). Wells Fargo on Friday said it has ended its debit rewards program to new customers. Closures began Sunday at Wachovia, with an April 15 closure to follow at Wells Fargo. For the time being, existing customers will not be affected, the bank said. Also, JPMorgan Chase last week told its customers that their debit rewards program will end July 19, and Sun Trust, a big regional bank, said it no longer will grant awards points to customers, starting April 15. Eliminating debit rewards programs is one way banks can recoup revenue they anticipate losing if the Federal Reserve’s proposed rule to eliminate “swipe fees” for using debit cards goes into effect, the publication said … * Last month, Freddie Mac increased its purchases of home mortgages from its sellers/servicers to $38.9 billion--a slight gain from January and a 33% gain compared with February 2010, according to figures released Friday (American Banker March 28). Freddie also said it has seen improvements in delinquencies, with late payments declining on its single-family product to 3.78% from 3.82% in January and from 4.2% a year ago …

Market News (03/28/2011)

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MADISON, Wis. (3/29/11)
* U.S. consumer spending increased for an eighth consecutive month in February because consumers dipped into their savings to pay for higher food and energy prices (The New York Times March 28). Spending increased 0.7% in February, following a 0.3% rise in January, and inflation quickened its pace to the fastest rate since June 2009, according to Commerce Department figures released Monday. Consumer spending is proceeding at a moderate pace, putting the U.S. on a good pace of growth, said Julia Coronado, chief economist for North America at BNP Paribas in New York (Bloomberg.com March 28). The February savings rate dipped to 5.8% from an upwardly revised 6.1% in January (Moody’s Economy.com March 28). Total inflation accelerated to a 0.4% rate, but core inflation remained at 0.2% … * Pending home sales increased in February but with notable regional variations, according to the National Association of Realtors (NAR). Based on contracts signed in February, the Pending Home Sales Index, a forward-looking indicator, rose 2.1% to 90.8, from 88.9 in January. The index is 8.2% below the 98.9 recorded in February 2010. The data reflect contracts and not closings, which normally occur with a lag time of one or two months. It’s important to look at the broader trend, said Lawrence Yun, NAR chief economist. “Month-to-month movements can be instructive, but in this uneven recovery it’s important to look at the longer term performance,” he said. “Pending home sales have trended up very nicely since bottoming out last June, even with periodic monthly declines. Contract activity is now 20% above the low point immediately following expiration of the home buyer tax credit.” Yun noted that weather may have affected the February data. “All of the regions saw gains except for the Northeast, where unusually bad winter weather may have curtailed some shopping and contract activity,” he said. For the MBA report, use the link …

Market News (03/25/2011)

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MADISON, Wis. (3/28/11)
*A surge in consumer spending helped the U.S. economy grow at an inflation-adjusted 3.1% annual rate in terms of gross domestic product (GDP) in the fourth quarter, while company profits remained robust (Bloomberg.com and The Wall Street Journal March 25). The GDP number is a revision from the 2.5% figure estimated last month, according to a report issued by the Commerce Department Friday. Corporate profits increased 2.3%--not annualized--from the third quarter to the fourth quarter because businesses are prospering from stronger demand and lower labor costs and interest rates (Moody’s Economy.com March 25). In a related matter, unemployment declined in 27 states in February, indicating the labor market is gaining momentum, according to figures released Friday by the Labor Department … * The Federal Reserve has revised its index of industrial production (IP) and the related measures of capacity and capacity utilization. Although the revisions affect these data for January 1972 through February 2011, the most significant effects are for the period from 2008 through 2010. Measured from fourth quarter to fourth quarter, total IP is now reported to have declined 1.4 percentage points and 1.7 percentage points more sharply in 2008 and in 2009, respectively, and to have risen 0.5 percentage point more rapidly in 2010. However, the broad contour of total IP in recent years is similar to previous estimates, and the dates of the recent peak (September 2007) and the recent trough (June 2009) are unchanged from the earlier estimates. However, the peak-to-trough decline in total IP, at 17.1% is 2.0 percentage points larger than previously estimated. As of February, total IP is now shown to have reversed about 55% of its peak-to-trough decline--less than previously reported. For the Fed report, use the link … * U.S. consumer sentiment fell more than expected in March because of the effects of the natural disaster in Japan, Middle East unrest and rising gasoline costs, according to the Thomson Reuters/University of Michigan consumer sentiment index (Bloomberg.com and Moody’s March 25). The index fell to 67.5--the lowest level since November 2009--from 77.5 in February. Economists surveyed by Bloomberg News had forecast a reading of 68 for March. Consumers’ view of current conditions declined 4.4 points. Inflation expectations--especially short term ones, which rose more than a percentage point to 4.6%--surged, Moody’s said …

News of the Competition (03/25/2011)

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MADISON, Wis. (3/28/11)
* Hewlett-Packard Co. (HP) is expanding its business through its new HP prepaid card services group, which was launched March 21 (American Banker March 25). The new venture is an extension of the Palo Alto, Calif.-based information technology company’s HP cards and payments services portfolio. HP is entering the prepaid sector now when consumers are flocking to the payment form and financial institutions are looking for ways to make money on the market’s growth, Robt Sadeckas, HP director of global card strategy, told the Banker. The continuing issue of potentially lower debit card interchange rates presents an opportunity, Sadeckas said. For banks, reloadable prepaid cards are a possible alternative to traditional debit cards because they are precluded from restrictions in the Durbin amendment to the Dodd-Frank Act, the Banker said ...

News of the Competition (03/24/2011)

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MADISON, Wis. (3/25/11)
* Best-practices recommendations for integrated payments through automated teller machines (ATMs) are being established by payment industry experts who are volunteering their time for the endeavor (American Banker March 24). The effort is being made in concert with the ATM Integrated Payments Standards Forum organized by the ATM industry Association’s International Payments Forum. The goal of the initiative is to assemble key industry stakeholders and develop best-practice standards for message and communications protocols, mobile and card-less transactions, use-case recommendations, and security and compliance, the Banker said … * The biggest U.S. banks are aiming to obtain a larger share of the nation’s retirement savings--which could balloon to $4 trillion during the next four years from its level of $2.9 trillion as of September (Bloomberg News via American Banker March 24). Bank of America Corp., JPMorgan Chase & Co., and Wells Fargo & Co, are competing on fees and creating more user friendly technology to take more of the vast 401(k) market from traditional account managers such as Vanguard Group Inc. and Fidelity Investments, the Banker said …

Market News (03/24/2011)

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MADISON, Wis. (3/25/11)
* In a sign the labor market is healing, initial claims for U.S. unemployment benefits declined 5,000--to 382,000--for the week ended March 19, according to Labor Department figures released Thursday (Bloomberg.com March 24). Also, the total number of people receiving unemployment benefits fell to the lowest level in nearly three years. A rise in hiring and dissipating job cuts have helped ensure gains in consumer spending, which constitutes 70% of the U.S. economy, Bloomberg said. Continuing claims for unemployment benefits also are decreasing, as they fell 2,000--to roughly 4.72 million for the week ended March 12 (Moody’s Economy.com March 24). However, that figure does not include millions more on extended and emergency benefits, Moody’s said … * U.S. small businesses are beginning to increase hiring 21 months after the steepest recession since the 1930s, according to Paychex, Inc., which manages payroll accounting for companies that employ fewer than 100 workers (Bloomberg.com March 24). The firm said checks per client rose 2.8% from a year ago in the quarter ended Feb. 28--the largest gain in at least two years. The positive momentum is good, Jim O’Sullivan, chief economist at MF Global Inc. in New York, told Bloomberg, adding that the small-business sector disproportionately adds to job growth, which is crucial to a self-sustaining economic expansion …

News of the Competition (03/23/2011)

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MADISON, Wis. (3/24/11)
* In 2010, follow-on enforcement actions by federal regulators hit a high of 256--among orders that were originally issued since 2008, according to data compiled by Foresight Analytics, a division of Trepp LLC (American Banker March 23). The actions are defined as any order or action followed by another, and they increased almost 170% from 2009. Generally speaking, if a bank’s financial condition worsens or if it improves in certain areas but regulators want more actions taken elsewhere--order can be revised or reissued, the Banker said. Even so, analysts claimed shock in a recent case where the consent order of a chronic offender was terminated, and followed on by another with a great level of detail and heightened requirements. Don Mann, an independent bank consultant and former Michigan state bank regulator, compared the situation to when police stop every driver on a freeway for going even one mile over the speed limit. Regulators are using the follow-up actions to prevent another financial crisis, some industry observers told the publication … * Some banks are providing their customers more of a roll in charitable giving, reported American Banker (March 23). For example, JPMorgan Chase Co. has used Facebook to create a social network initiative that allows consumers to elect charities to receive grants from Chase. And, Bank of America began a program this past holiday season to prompt customers to donate to organizations it is closely associated with--Feeding America and the Boys and Girls Club of America …

Market News (03/23/2011)

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MADISON, Wis. (3/24/11)
* Sales of new U.S. homes fell in February to the lowest level in on record going back nearly a half-century, and prices dropped to the lowest level since December 2003 (The New York Times and Bloomberg.com March 23). Sales decreased 16.9% last month to a 250,000 annual pace and are 28% below the year-ago level, according to figures released Wednesday by the Commerce Department. The decline constitutes the third consecutive monthly decline and is well below the 700,000-per-year pace that economists rate as healthy, the Times said. Home prices in February dropped 8.9% from the same month in 2010. The median price of a new home last month declined nearly14% to $202,100--the lowest since December 2003. Also, in a related matter, mortgage bankers originated $16.8 billion of Federal Housing Administration-backed loans in February--a 27% drop from January (American Banker March 23) … * Mortgage loan applications increased 2.7% for the week ended March 18, from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Banker Association (MBA). On an unadjusted basis, the index rose 2.8%. The Refinance Index went up 2.7 %. The seasonally adjusted Purchase Index increased 2.7 %. The unadjusted Purchase Index rose 3% and was 15.3% lower than the same week one year ago. The four-week moving average for the seasonally adjusted Market Index is up 2.5%. The four-week moving average increased 1% for the seasonally adjusted Purchase Index, while this average is up 3.3% for the Refinance Index. For the MBA report, use the link …

News of the Competition (03/22/2011)

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MADISON, Wis. (3/23/11)
* Data reflecting the first 10 weeks of this year appears to define a trend in which acquirers of failed banks are choosing more often to go it alone rather than seeking a loss-sharing partnership for the Federal Deposit Insurance Corp. (FDIC). According to a March 22 article in American Banker, the data shows that a bit more than half (56%) of purchasing deals so far this year have included FDIC loss-sharing--a significant decline from the 82% for all of 2010. Pamela Farwig, the deputy director of the FDIC's division of resolutions and receiverships, has said she believes improvements in the economy have made banks more comfortable foregoing the government backstop against unforseen losses. While going it alone puts the bank in the position of taking all the risk on a loan portfolio, it also can reap all the benefits of a portfolio that performs well … * Sallie Mae Monday unveiled a no-fee student checking account through its bank subsidiary, reported American Banker (March 22). With the account, universities can now distribute financial aid and tuition refunds to the checking accounts, so students have almost-immediate access to the funds, the Banker said. There is no charge for withdrawing cash at the 35,000 ATMs nationwide that accept MasterCard and no minimum balance is required in the checking account …

Market News (03/22/2011)

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MADISON, Wis. (3/23/11)
* The U.S. Treasury Department has declared that the time has come for it to begin selling off the $142 billion in guaranteed mortgage-backed securities (MBS) the agency purchased and backed as an emergency measure in 2008 and 2009. The agency said that--starting this month--it plans to sell up to $10 billion of the MBS each month. Treasury said it would engage a gradual and orderly pace to unwind the MBS investments, and by doing so it would both preserve taxpayer dollars to the maximum amount possible, and also protect the recovering housing finance market (American Banker March 22) … * The Federal Housing Administration (FHA) has a backlog of 176,000 loans that were in the process of being foreclosed on last year before the robo-signing scandal hit (American Banker March 22). In its fiscal first-quarter report issued last week, FHA said its foreclosure inventory is 17% higher than it was a year ago and also at a historic high. Although FHA has looked into foreclosure processing problems at its servicers, the Department of Housing and Urban Development has refrained from enforcement actions while negotiations concerning a global mortgage servicing settlement are continuing … * In the fourth quarter, U.S. mortgage lenders funded about $33.2 billion of jumbo mortgages--a 57% gain form the year-ago period, according to figures from the National Mortgage News’ Quarterly data report (American Banker March 22). A jumbo mortgage is a mortgage loan in an amount above conventional conforming loan limits. The standards are set by the two government-sponsored enterprises Fannie Mae and Freddie Mac, and they set the limit on the maximum value of any individual mortgage they will purchase from a lender. The three top funders during the period were Bank of America Corp., with $3.6 billion originated, down 13%, compared with fourth quarter 2009; JPMorgan Chase & Co., $4.1 billion, up 75%; and Wells Fargo & Co., $5.3 billion, up 180% …

Market News (03/21/2011)

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MADISON, Wis. (3/22/11)
* Existing-home sales fell in February, following three consecutive monthly increases, according to the National Association of Realtors (NAR). Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, dropped 9.6% to a seasonally adjusted annual rate of 4.88 million in February from an upwardly revised 5.40 million in January, and are 2.8% below the 5.02 million pace in February 2010. Lawrence Yun, NAR chief economist, said he expects an uneven recovery. “Housing affordability conditions have been at record levels and the economy has been improving, but home sales are being constrained by the twin problems of unnecessarily tight credit, and a measurable level of contract cancellations from some appraisals not supporting prices negotiated between buyers and sellers,” he said. “This tug and pull is causing a gradual but uneven recovery. Existing-home sales remain 26.4% above the cyclical low last July.” For the NAR report, use the link … * Business confidence worldwide is solid but has moderated in recent weeks--probably due to uncertainty created by unrest in the Middle East and the earthquake and tsunami in Japan, according to the Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com March 21). A drop-off in businesses’ broad assessment of current conditions--especially in Japan and to a lesser extent in the rest of Asia--is consistent with this, Moody’s said. However, responses to more specific questions such as the strength of sales and investment intentions still are nearly as positive as they have been throughout the history of the survey, Moody’s added. Outlook expectations remain healthy, and pricing has firmed, as oil and commodity prices have risen. The worldwide economy is growing at a rate that is well above its potential, Moody’s concluded …

News of the Competition (03/21/2011)

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MADISON, Wis. (3/22/11)
* Citigroup Inc. is being sued by a trustee in charge of winding down Lehman Brothers Holdings Inc.’s U.S. broker dealer business (Dow Jones via American Banker March 21). Trustee James W. Giddens filed suit Friday in U.S. Bankruptcy Court in Manhattan and is seeking the return of roughly $1.3 billion Citi seized in the day’s following Lehman’ Chapter 11 bankruptcy Sept. 15, 2008. The suit alleges Citi and several affiliates are refusing to give back a $1 billion deposit that Lehman’s broker dealer unit presented the day its parent company filed for bankruptcy. The deposit was made to make sure Citi would continue to provide the unit with foreign exchange settlement services ... * Goldman Sachs Group Inc.--the fifth largest U.S. bank by assets--will continue to make principal investments with its own money because its executives don’t think the Volcker rule prohibits the practice, according to Guy Moszkowski, analyst for Bank of America (Bloomberg.com March 22). Mozkowski published a note to investors Monday after meeting in Hong Kong last week with four Goldman Sachs executives. Mozkowski added that New York-based Goldman Sachs doesn’t believe U.S. legislation passed in 2010 that prohibits proprietary trading and limits holdings in hedge funds and private equity funds, prevents buying stakes in companies and other assets. The Volcker rule is a proposal by American economist and former U.S. Federal Reserve Chairman Paul Volcker to restrict U.S. banks from making certain kinds of speculative investments if they are not on behalf of their customers …

News of the Competition (03/18/2011)

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MADISON, Wis. (3/21/11)
* The Federal Reserve will allow some of the biggest U.S. banks to increase or restart dividend payments this year (The New York Times via Reuters March 18). However, the Fed said Friday it will limit the payouts to 30% or less of a company’s anticipated earnings. The Fed is notifying the 19 largest U.S. banks--including Bank of America, Citigroup and Goldman Sachs--to let them know if they passed the second round of stress tests and if they have garnered approval to pay dividends. Improvement in cash positions for the biggest U.S. financial institutions and in overall economic conditions persuaded the Fed that some of the largest banks could begin reducing huge capital buffers that were developed during the financial crisis, the Times said … * General Motors (GM), the largest U.S. automaker, is considering an expansion into dealer-inventory financing by offering loans to dealers to purchase new inventory, said Dan Ammann, GM treasurer, who assumes the duties of company chief financial officer April 1 (Bloomberg.com March 18). By providing wholesale lending--also known as floor-plan financing--GM would provide dealers better rates and more borrowing options, Ammann told Bloomberg

Market News (03/18/2011)

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MADISON, Wis. (3/21/11)
* The likelihood the U.S. will be in recession six months from now dropped to 19% in February from 21% in January, according to Moody’s Economy.com (March 18). Recession probability has fallen for six consecutive months and is below 20% for the first time since 2007. However, February’s probability doesn’t completely take into account the late gasoline price spike. Also, the Japanese earthquake and tsunami on March 11 could heighten the risk of recession because of constriction in the financial markets, Moody’s said. In a related matter, the Economic Cycle Research Institute (ECRI) weekly leading index--which measures economic growth--declined to 130.4 for the week ended March 11 from a revised 130.9--previously 130.8 (Moody’s Economy.com March 18). The smoothed, annualized growth rate increased to 7.1% from a revised 6.8%--previously 6.7%. Despite recent mixed signals, the ECRI index has maintained a modest upward trend, which is consonant with continued economic recovery through 2011, Moody’s said … * In an extremely unusual effort to stabilize the value of the Japanese yen, the U.S. and other major industrialized nations will join Japan in intervening in currency markets, the Group of 7 nations announced Thursday (The New York Times March 17). The yen’s escalating value threatened to undercut demand for Japanese exports during the time in which several disasters have hurt its domestic economy, the Times said. The Group of 7 nations expressed solidarity with the Japanese people in a Friday statement, adding they would conduct a concentrated intervention in exchange markets …

News of the Competition (03/17/2011)

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MADISON, Wis. (3/18/11)
* Deposit rates have nosedived in recent years in many states that previously were hotbeds for yields in the U.S. (American Banker March 17). Although rates have fallen nationwide since the most recent boon times, the steepest drop-offs have been in Florida, Georgia and Illinois, based on data provided by Market Rates Insight for March 2005 to March 2011. The data indicate the economic recovery will be difficult in these states, and also the banks’ attempts to fund future loan growth will be problematic, said industry observers … * Fiserv Inc., a global provider of financial services technology solutions, Wednesday announced an agreement with Visa Inc. that will allow users of the ZashPay person-to-person (P2P) payments service from Fiserv to send money to, and receive money from, eligible Visa account holders through their primary financial institution. The agreement will expand the ZashPay network, with the potential to reach more than one billion Visa account holders, and can increase the speed of many payments, Fiserv said. Fiserv and its financial institution customers also will be able to extend P2P payments to eligible international account holders. ZashPay currently facilitates payments sent directly to any U.S. bank account in as little as one business day. Real-time payments will be available later in 2011 ...

Market News (03/17/2011)

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MADISON, Wis. (3/18/11)
* For the eighth consecutive month, The Conference Board’s Index of U.S. Leading Economic Indicators rose in February, indicating the economic recovery has picked up steam, in accordance with Tuesday’s Federal Reserve statement (Bloomberg.com March 17). The index increased 0.8% last month, following policymakers’ January’s 0.1% gain. The biggest forces behind these gains were better employment prospects, the interest-rate spread, and strengthening business investment and exports (Moody’s Economy.com March 17 and Bloomberg). In a related matter, U.S. consumer comfort fell last week to the lowest level since August because rising gasoline prices caused more citizens to become pessimistic about their finances and the economic outlook (Bloomberg.com March 17). The Bloomberg Consumer Comfort Index fell to -48.5 for the week ended March 13 from -44.5 the prior week … * Initial claims for U.S. unemployment benefits last week declined for the third week out of the past four, reflecting increased stability in the labor market (Bloomberg.com March 17). Claims dropped 16,000--to 385,000--for the week ended March 12, the Labor Department said Thursday. The four-week average of claims fell to the lowest level since July 2008. Fewer job cuts, elevated hiring and a lower unemployment rate could boost consumer spending, which constitutes 70% of the U.S. economy, Bloomberg said. Meanwhile, continuing claims for unemployment benefits--while still elevated--are decreasing and fell 80,000--to roughly 3.7 million--for the week ended March 5 (Moody’s Economy.com March 17). However, this figure does not include millions more people on extended and emergency unemployment benefits, Moody’s said … * U.S. consumer prices rose more than anticipated in February, spearheaded by the highest food prices since 2008 and increasing fuel costs that some companies could begin passing on to consumers. However, inflation remained subdued (Bloomberg.com and The Wall Street Journal March 17). The seasonally adjusted consumer price index rose 0.5% last month from January--the most since June 2009--according to Labor Department figures released Thursday. Economists had predicted a 0.4% gain, according to their median forecast in a survey by Bloomberg News. The core gauge--which excludes volatile food and energy prices--increased 0.2% for the second consecutive month …

News of the Competition (03/16/2011)

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MADISON, Wis. (3/17/11)
* The former CEO of mortgage finance giant Freddie Mac could face civil action brought by the Securities and Exchange Commission (SEC) as it gears up its investigation of disclosure practices at Freddie and sister company, Fannie Mae, said sources familiar with the matter (The New York Times Deal Book March 15). Richard F. Styron, a former president of the American Stock Exchange and now an adjunct professor and trustee at Boston College, has been issued a Wells notice from the SEC--indicating it is contemplating enforcement action against him, the Times said. Styron has not been accused of any wrongdoing. As many as five other executives at the two government-sponsored enterprises may have been sent Wells notices in the government’s wide-ranging investigation, the sources said … * U.S. consumers would be willing to pay 4% more for bank products and services if they had clearer rules, simplified options and fewer hassles, according to a study, “The Global Brand Simplicity Index: 2010,” by brand strategy firm Siegel+Gale (American Banker March 16). The study surveyed more than 6,000 respondents in seven counties, including the U.S., to gather perceptions on simplicity and the impact industries and brands have on people’s lives in relation to simplicity. Banks ranked 10th overall out of 13 sectors reviewed in the study, trailed by utilities, insurance providers and credit card companies …

Market News (03/16/2011)

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MADISON, Wis. (3/17/11)
* Mortgage loan application volume declined 0.7% for the week ended March 11 from a 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 0.5%. The Refinance Index increased 0.9% and is the highest Refinance Index recorded in the survey since December 2010. The seasonally adjusted Purchase Index decreased 4% from one week earlier. The unadjusted Purchase Index decreased 3.2% and was 15.5% lower than the same week one year ago. For the MBA report, use the link. In a related matter, U.S. housing starts decreased in February to the slowest pace since April 2009, while building permits dropped to a record low, indicating the housing market recovery is struggling while the rest of the economy is on the upswing (Bloomberg.com March 16). New home constructions fell 22.5% to a 479,000 annual rate--with declines in all U.S. regions-- the Commerce Department said Wednesday … * Because of higher energy and food prices, U.S. wholesale prices jumped in February (The Wall Street Journal March 16). Food prices last month were at more than a three-decade high, rising 3.9% (Bloomberg.com March 16). The producer price index rose 1.6 % from January--the most since June 2009, according to Labor Department figures released Wednesday. Raw-materials costs are greater because growing economies in Asia and Latin America have boosted demand. Also, political unrest in the Middle East has pushed up the cost of crude oil, Bloomberg said ...

IBankrateI IFoxI CUNA explains inflation quirks

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MADISON, Wis. (3/17/11)--Bill Hampel, chief economist for the Credit Union National Association, explained some of the mechanisms of inflation Tuesday to Bankrate.com in an article that was picked up by Fox Business. Even though food prices are going up in the U.S. and worldwide, the government’s measure of inflation, the Consumer Price Index, hardly indicates a rise in the prices consumers are paying, Bankrate.com (March 15) noted. Economists don’t anticipate an inflation rise of more than 1.5% this year, “even if food goes up 3% and energy goes up 10%,” Hampel said. “Food and energy prices are quite random,” he added. “Usually our best guess of inflation going forward for the next few months is anchored at the core rate.” Still, food and energy prices have climbed at a much quicker pace than core items. Food prices increased at nearly twice the rate of core inflation during the past year--rising 1.8%, compared with the core inflation rate of 1% for the year ending in January, Bankrate said. But that pales in relation to fuel costs. “The big culprit has been energy prices, which are up 7.3% over the same time frame,” Hampel said. “If food and energy are going up faster than 1% and everything not counting them is going up at a little less than 1%, that is how we get the overall inflation rate of 1.6%. “Petroleum is a bigger slice of what people pay for in a tank of gas than wheat is in a box of cereal,” he added. “If petroleum prices double, then the cost of gas goes up by 60% or 70%.” If wheat prices double, a box of cereal won’t suddenly cost up to twice the price. “The actual wheat and corn and grain in a box of cereal (accounts for) 3% of the total price,” Hampel said. “If grains double in price and nothing else happens, that would be a 3% increase in the cost of that box of cereal from a doubling of the commodity prices.” Processing, packaging and transporting contribute much more to the cost of food than do food commodities, Bankrate said. “Commodity price changes can be the canary in the coal mine,” Hampel said. “That can tell you that there are inflationary pressures in the rest of the world.” To read the article, use the link.

Fed keeps interest rate but prepare for future hikes--CUNA

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MADISON, Wis., and WASHINGTON (3/16/11)--The Federal Reserve's policy making group Tuesday kept its targeted funds rate and its quantitative easing policies of bond buying steady. While this means "more of the same" for credit unions, they should prepare for the future when the Fed begins increasing rates again, said a Credit Union National Association (CUNA) senior economist. The decision of the Federal Open Market Committee (FOMC) was unanimous to keep the targeted funds rate range at 0% to 0.25% and to maintain its existing policy of reinvesting principal payments from its securities holdings and intending to purchase $600 billion of longer-term Treasury securities by the end of the second quarter of 2011. "The Fed’s inaction is not at all surprising," said Mike Schenk, vice president of CUNA's economics and research department. "While the Fed sees the recent oil price spike as 'transitory'--it also is keenly aware of the short-term effect of price spikes on consumer sentiment," he said. "Moreover, in addition to the political upheaval in the Middle East, the constant drumbeat of state budget battles and the earthquake/tsunami/nuclear crisis in Japan have all combined to raise volatility, fuel investor concern and underline the fact that while the economic recovery has taken hold, it is in its beginning stages and is a fragile affair," he told News Now. Although "continued low rates will mean 'more of the same' for credit unions,'" Schenk said, "it remains clear that rates will be increasing at some point in the future--most probably late this year or early next year--and that will mean that credit unions will have to be ready." He noted that recently released 2010 credit union operating results show that credit union long-term assets (investments greater than three years to maturity; mortgages greater than five years to repricing; member business loans; and fixed assets) have increased from 24% of assets in 2006 to 33% of assets at year-end 2010. "In a rising-rate environment the possibility of quickly increasing funding costs and slowly changing loan yields could translate into interest margin erosion and significant bottom-line pressure for some institutions," he said. A proposed rule addressing interest-rate-risk policy is on the agenda for Thursday's meeting of the National Credit Union Administration (NCUA). In a recent letter to credit unions NCUA Board Chairman Debbie Matz wrote that interest-rate risk is a concern for credit unions going forward and will be an area of emphasis for credit union examinations (News Now March 11 and Aug. 13). "The credit union industry continues to hold a significant amount of long-term fixed-rate loans, while shares are primarily in rate-sensitive or short-term accounts," the letter said. "Proactive structuring and proper control over loan concentrations and share products will be fundamental to the future viability of credit unions." In a statement after Tuesday's meeting, the FOMC said that "the economic recovery is on a firmer footing, and overall conditions in the labor market appear to be improving gradually." However, it noted investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Commodity prices have risen significantly since the summer, and concerns about global supplies of crude oil have contributed to a sharp run-up in oil prices in recent weeks. "Nonetheless, longer-term inflation expectations have remained stable, and measures of underlying inflation have been subdued," said the committee. "The recent increases in the prices of energy and other commodities are currently putting upward pressure on inflation," said the committee's statement. "The committee expects these effects to be transitory, but it will pay close attention to the evolution of inflation and inflation expectations. The committee continues to anticipate a gradual return to higher levels of resource utilization in a context of price stability." In keeping its bond-buying program steady, the committee noted it also will "regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability." FOMC said it "continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period." The committee also indicated it would continue to monitor the economic outlook and financial developments and employ its policy tools as necessary. Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; Elizabeth A. Duke; Charles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.

News of the Competition (03/15/2011)

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MADISON, Wis. (3/16/11)
* Because long-term interest rates fell in the second half of 2011 and flattened the yield curve, net interest margins at some U.S banks glided down for most of last year (American Banker March 15). However, margins actually rose at small and midsize banks, which saw margins overall remain healthy, compared with most of the rest of the decade, the Banker said. At present, rates have retraced the decline and the yield curve has steepened, creating a more conducive environment for banks to borrow short and lend long, the Banker said ... * Several U.S. regulators have issued subpoenas to UBS AG because they are looking into whether the Swiss bank manipulated the London Interbank Offer Rate (Libor) rates--a benchmark used to set interest rates worldwide--UBS said in its annual report (The Wall Street Journal March 15). The bank said it received subpoenas from the Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission. The subpoenas are connected to investigations regarding submissions to the British Bankers’ Association, which sets Libor rates ...

Market News (03/15/2011)

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MADISON, Wis. (3/16/11)
* U.S. homebuilders’ confidence rose in March to the highest level since May because more companies are expecting stronger sales in the next six months--an indication that the housing market is steadying (Bloomberg.com March 15). The National Association of Home Builders (NAHB)/Wells Fargo sentiment index increased to 17 this month from16 in February, the NAHB said Tuesday. Readings below 50 mean respondents believe conditions are poor. Some improvements in the overall economy could cause small housing market gains later in 2011, David Crowe, NAHB chief economist, said in a statement. The driving force behind the March index increase was an uptick in the component for single-family home sales expected to occur in the next six months (Moody’s Economy.com March 15) … * Led by gains in food and crude oil, U.S. import prices increased more than forecast in February (Bloomberg.com March 15). The 1.4% rise followed a revised January increase of 1.3%--previously 1.5%--the Labor Department said Tuesday. Economists had forecast a 0.9% rise according to a Bloomberg News survey. During the past 12 months, food costs recorded the largest gain since record-keeping began in 1977, Bloomberg said. Prices excluding fuel increased 0.3% in February. For five consecutive months, import prices have increased more than 1%. They are up 6.9% on year-ago basis (Moody’s Economy.com March 15). Import price gains don’t cause immediate changes to the forecast; inflation still will remain tame in 2011, Moody’s said …

News of the Competition (03/14/2011)

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MADISON, Wis. (3/15/11)
* Two banks were taken over Friday by regulators and have entered into purchase-and-assumption agreements with other banks, according to the Federal Deposit Insurance Corp. (FDIC). The failures bring the total bank failures for 2011 to 25. That compares with 157 for all of 2010. The banks include: Legacy Bank, Milwaukee, assumed by Seaway Bank and Trust, Chicago; and The First National Bank of Davis, Davis, Okla., assumed by The Pauls Valley National Bank, Pauls Valley, Okla. The closed institutions held roughly $274 million in assets as of Dec. 31. The FDIC estimated that the failures will cost the Deposit Insurance Fund about $70 million. Bank failures so far this year have cost the fund about $1.08 billion ... * A substantial number of small community banks in states hardest hit by the recession such as California, Georgia and Illinois have exited the Troubled Asset Relief Program (TARP) (American Banker March 14). Although the banks said the Capital Purchase Program worked as it was supposed to and produced some loan growth, they also were happy to rid themselves of the stigma associated with a federal government “bailout,” the Banker said. Illinois is one of 30 states that have fully redeemed TARP, with most of the exits beginning in late 2010, according to data compiled by SNL Financial …

Market News (03/14/2011)

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MADISON, Wis. (3/15/11)
* Businesses worldwide remain stalwart as they confront Middle East unrest, rising commodity and oil prices and the earthquake in Japan, according to the Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com March 14). Global business sentiment reached a new record high last week--40.3--on a four-week moving-average basis. Confidence is robust worldwide, with Japanese confidence trailing, even before last week’s earthquake and tsunami, Moody’s said. Businesses are the most positive about investment and sales strength, and hiring intentions also have significantly risen in recent weeks, Moody’s said. The worldwide economy is growing at a rate well above its potential, Moody’s concluded. In a related matter, total U.S. business inventories rose 0.9% in January, following December’s gain of 1.1%, according to the U.S. Census Bureau (Moody’s Economy.com March 11). The increase in inventories indicates businesses are bolstering stockpiles to meet demand, Moody’s said … * At the time of the next presidential election in November 2012, the U.S. unemployment rate will be 7.7%--the highest level for a presidential election month since 1976 when Jimmy Carter defeated Gerald Ford--according to economists’ average forecast in the most recent Wall Street Journal survey (The Wall Street Journal March 14). Although that rate is below February’s 8.9% reported by the Labor Department, it’s still high because expected employment gains will happen slowly, said economists, noted the Journal. Also, there were 2.76 million U.S. job openings on the last business day of January--down from the 2.92 million openings at the end of December, according to the Job Openings and Labor Turnover Survey (Moody’s Economy.com March 11). The drop in hires was likely due to a downturn in construction and leisure/hospitality--probably because of severe weather in January, Moody’s said …

FOMC meets today to steer monetary policy

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WASHINGTON (3/15/11)--The Federal Open Market Committee--the policymaking group for the Federal Reserve Board--will meet today to determine the course for the Fed Funds' targeted interest rate and its quantitative easing (QE2) measures it introduced to bolster the economy last year. Little change is expected. The Fed has left the target range for the federal funds unchanged at 0% to 0.25% since December 2008. QE2, the Fed's second bond-buying program for large scale assets, was launched in November to help boost the economy. Businessinsider.com (March 13) indicated the Fed committee would be unlikely to change its statement that the current economy is "likely to warrant exceptionally low levels for the federal funds rate for an extended period" or its QE2 program. News Now will provide a live update when the FOMC makes its statement this afternoon.

News of the Competition (03/11/2011)

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MADISON, Wis. (3/14/11)
*The Office of Thrift Supervision (OTS) claims that because plaintiffs lacked legal authority to file a lawsuit, the court challenge to the OTS January closing of United Western Bank, a former Denver thrift, is invalid (American Banker March 11). United Western, its holding company, and five individuals affiliated with the organization are named as plaintiffs. They alleged regulators were premature in judging the thrift a failure and were not responsive when United Western filed a recapitalization plan, the Banker said … * The Illinois Department of Financial and Professional Regulation made public 15 consent orders with community banks--mostly in the Chicago market--during January and February, reported American Banker (March 11). Although the directives in the orders haven’t changed--they many times still call for a plan to deal with problem assets, an assessment of management, and more capital--the connotation is different. Nowadays, the consent order doesn’t necessarily mean the bank is finished, Frank Bonaventure, a lawyer at Ober, Kaler, Grimes and Shiver, told the Banker. Consent orders today indicate that regulators have identified what they thinks are serious problems, and they want the bank’s management and board to resolve the issues, he added ...

Market News (03/11/2011)

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MADISON, Wis. (3/14/11)
* Sparked by job gains and more seasonable temperatures, U.S retail sales in February climbed at the fastest rate in four months (Bloomberg.com March 11). U.S. retail and food services sales rose by 1% from January to $387.12 billion, according to Commerce Department figures released Friday. However, the gain was less than expected--an indication that escalating gasoline prices could be worrying consumers (The Wall Street Journal March 11). February sales were bolstered by a jump in auto purchases and more expensive gasoline, Bloomberg said. February sales were 8.9% above their year-ago level--and growth remains robust, according to this measure (Moody’s Economy.com) … *The Thomson Reuters/University of Michigan preliminary index of U.S. consumer sentiment dropped to 68.2 in March from 77.5 in February (Bloomberg.com March 11). The decrease was probably caused by recent political unrest in the Middle East and rapidly rising gasoline prices (Moody’s Economy.com March 11). Nose-diving expectations, which dropped by 13.3 points, led the decline. Also, Inflation expectations jumped--particularly short-term expectations, which surged more than a percentage point to 4.6%, Moody’s said …

News of the Competition (03/10/2011)

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MADISON, Wis. (3/11/11)
* A proposal by state attorneys general to settle several mishandled home foreclosures by banks could harm Fannie Mae and Freddie Mac’s bottom lines, and consequently add to the U.S. fiscal deficit, said John Stumpf, CEO of Wells Fargo & Co. (The Wall Street Journal March 10). There definitely is a broader issue than just the question of principal forgiveness for troubled homeowners, Stumpf said about the draft proposal, which was circulated recently. The proposal aims to compel banks to reduce some loan balances, the Journal said. Although Wells Fargo already is deploying principal forgiveness in specific instances for delinquent borrowers, Stumpf said the bank won’t use the practice broadly because it could become an incentive for borrowers to become delinquent in their home payments …

Market News (03/10/2011)

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MADISON, Wis. (3/11/11)
* The U.S. trade deficit in January grew steeply to the highest level in seven months because a surge in imports, spearheaded by more costly crude oil prices, overwhelmed a record level of exports (Bloomberg.com and The Wall Street Journal March 10). The deficit widened 15% to $46.3 billion in January from a revised $40.3 billion in December, the Commerce Department said Thursday. Imports climbed 5.2%--the most since March 1993--while exports grew 2.7%. The trade deficit is likely to continue to widen throughout the first quarter, Chris Low, chief economist at FTN financial in New York, told Bloomberg. While spikes in oil price will cause short-term pain, companies are expecting consumer demand to continue to be robust in 2011, he added … * Initial claims for U.S. unemployment benefits increased last week from a nearly three-year low, accentuating the erratic nature of the improvement in the U.S. labor market (Bloomberg.com March 10). Claims rose 26,000--to 397,000--for the week ended March 5, the Labor Department said Thursday. Claims usually increase the week after a federal holiday, and some states in New England reported more claims filed because of school holidays, a Labor Department official told Bloomberg. Meanwhile, continuing claims for unemployment benefits declined 20,000 to roughly 3.7 million for the week ended Feb. 26--still historically on the high end (Moody’s Economy.com March 10) … * U.S. consumer confidence dropped last week to the lowest level in a month, because surging gasoline prices caused citizens’ outlook on the economy and their personal finances to worsen, according to the Bloomberg Consumer Comfort Index (Bloomberg.com March 10). The index fell to -44.5 for the week ended March 6, from -39.7 the previous week. Respondents who were unemployed, lacked a full-time job or who earned less than $50,000 per year, expressed the largest decline in confidence …

News of the Competition (03/09/2011)

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MADISON, Wis. (3/10/11)
* The Treasury Department said Tuesday that American International Group Inc. (AIG) had sent it a $6.9 billion repayment (The Wall Street Journal March 8). Treasury helped bail out AIG--a troubled insurance company--during the height of the insurance crisis. The majority of the AIG payment comprised proceeds from a $9.6 billion sale March 2 of the company’s equity stake in MetLife Inc. Through the Troubled Asset Relief Program, Treasury made about a $68 billion total cash investment in AIG … * Mary L. Schapiro, chairwoman of the Securities and Exchange Commission (SEC), is facing scrutiny from the U.S. Congress for hiring David M. Becker as SEC’s general counsel (The New York Times March 8). Becker had a financial interest in Bernard L. Madoff’s affairs, as he participated in matters regarding how victims of Madoff’s multibillion Ponzi scheme would be compensated, the Times said. Schapiro will discuss the matter when she appears before Congress today. The SEC hired Schapiro two years ago and gave her a mandate to strengthen its enforcement unit …

Market News (03/09/2011)

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MADISON, Wis. (3/10/11)
* U.S. mortgage loan applications rose 15.5%, seasonally adjusted, for the week ended March 4 from a 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 rose 16.1%, compared with the previous week, which did not include a holiday adjustment for Presidents’ Day. The Refinance Index climbed 17.2% and was the highest Refinance Index observed since the week ending Jan. 14. The seasonally adjusted Purchase Index went up 12.5% and was the highest Purchase Index recorded this year. The unadjusted Purchase Index increased 14.3% and was 14.3% lower than the same week one year ago. “Taking into account typical seasonal patterns, purchase applications rose to their highest level of the year last week,” said Michael Fratantoni, MBA vice president of research and economics. “On an unadjusted basis, purchase application activity is the highest since last May. An improving job market is beginning to pave the way for an improving housing market. Additionally, mortgage interest rates remained below 5% for a second week, maintaining affordability for buyers and leading to an increase in refinance applications.” For the MBA report, use the link … * Inventories for U.S. wholesalers increased more than predicted in January as distributors tried to keep up with sales that rose by the most in 14 months, (Bloomberg.com and The New York Times March 9). Wholesale inventories rose 1.1% in January--the 12th gain in the past 13 months, the Commerce Department said Wednesday. Also, sales at the wholesale level increased for the seventh consecutive month, rising 3.4%--the biggest gain since November 2009. Increased sales could prompt businesses to continue restocking inventories and propel factory production in the coming months, the Times said …

News of the Competition (03/08/2011)

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MADISON, Wis. (3/9/11)
* Wells Fargo & Co. said Monday it intends to hire 1,000 bankers during the next few months in Maryland, Virginia and the District of Columbia (American Banker March 8). The move constitutes a swing toward the bank’s standard cross-selling strategy--which involves relatively high staffing levels at branches, the Banker said. To date, Wells has hired 60 additional bankers in the region, and will add to its staff of tellers, store managers and private bankers, with the goal of completing its hiring by May. The hiring escalation is coming six months before Wells’ conversion of Mid-Atlantic region Wachovia branches it acquired on Dec. 31, 2008, the publication said … * In efforts to expand its mortgage and consumer financial operations nationwide, Paramount Equity Mortgage Inc. is turning to a TV infomercial (American Banker March 8). The West Coast lender is teaming with Guthy-Renker LLC, a Santa Monica, Calif.-based agency known for its infomercials promoting the Ultimate Edge with Tony Robbins motivational materials and the Proactiv line of acne treatments. Gunthy-Renker--which is acquiring a “significant,” albeit undisclosed equity stake in Paramount--will make commercials for the lender and provide it with infrastructure support, which includes operations involving customer service support and information technology, the Banker said ...

Market News (03/08/2011)

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MADISON, Wis. (3/9/11)
* Confidence among U.S. small businesses increased in February to the highest level in three years, with firms reporting positive expectations about hiring and more planning to raise their selling prices (The Wall Street Journal and Bloomberg.com March 8). The National Federation of Independent Businesses (NFIB) small-business optimism index rose to 94.5--the highest mark since December 2007 and -a 0.4 point gain from January. Hiring intentions increased to the second-highest level since September 2008, indicating employment may grow in coming months, Bloomberg said. The future looks brighter for a few more small-business owners, William Dunkleberg, NFIB chief economist said in a statement. However, he added the reading is not characteristic of a strongly rebounding economy. The index has risen in six out of the past seven months, with February’s gain placing the index up 6.5 points during the past year (Moody’s Economy.com March 8) … * The third drop in U.S. home prices in the past three years is the driving force behind an increase in home sales, with consumers eager to find bargains before mortgage rates rise--even though home values may decline further (Bloomberg.com March 8). Escalating foreclosures forced the median price for a U.S. home down to $158,800 in January--the lowest level since 2002, according to the National Association of Realtors. However, at the same time, home sales jumped 23% from October--the largest three-month gain since the end of the home-buyer tax credit April 30. The home-buying rally began when the economic recovery picked up steam and mortgage rates started to climb from record lows in November, Bloomberg said …

Consumer credit up 2.5 in January down at CUs

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WASHINGTON (3/8/11)--U.S consumer credit rose at a 2.5% annual rate or $5 billion in January, to $2.412 trillion. It was the fourth consecutive month that debt rose, although credit card or revolving debt dropped 6.5%--a six year low. Nonrevolving debt rose at 7%. The statistics, from the Federal Reserve's Consumer Credit report released Monday, were above economists' estimates of a $3.5 billion overall credit increase, said Reuters March 7). The numbers indicate the economy is gaining strength, and that consumers are less risk-averse than a year ago. For credit unions, members borrowed $225.7 billion, a decrease from $226.5 billion in December and $227.5 billion in November. In first quarter of 2010, members borrowed a total of $228 billion. Revolving credit, or credit card debt, dropped $4.2 billion to $795.5 billion in January, said the Fed's statistical report. That decrease was the 28th decline in 29 months and brought the figure to its lowest level since September 2004, said The Wall Street Journal (March 7). Credit union members' credit card debt also dropped, to $35.6 billion, from $36.3 billion in December and $35.8 billion in November. In first quarter of 2010, members' revolving debt was lower, at $34.3 billion. Nonrevolving credit--namely closed-end loans for big ticket items like cars, college education and vacations--also rose in January by $9.3 billion or 6.9%, to $1.627 trillion. Credit union members borrowed $190.1 billion in these loans, the same as in December and in fourth quarter, but less than the $193.7 billion they borrowed in first quarter 2010.

News of the Competition (03/07/2011)

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MADISON, Wis. (3/8/11)
* Some big U.S. banks are contemplating allowing debit card purchases to bounce just as checks do (Dow Jones via American Banker March 7). Usually, debit cards don’t bounce because when a debit transaction is approved, payment is guaranteed. However, banks now are confronting new rules that limit how much they can charge merchants for debit transactions, which takes away billions of dollars in revenue, Dow said. To gain some of that money back, banks may unbundle debit card services--divide services into components and charge separately for them. Unbundling would be a setback for retailers who succeeded in establishing transaction-fee limits, Dow said. While unbundling details are sketchy, merchants likely would pay a fee if the guaranteed payment feature is enforced. However, it is unclear if consumers would pay a penalty for a bounced debit transaction, Dow said … * Central banks worldwide are prepared to do what is necessary to avoid a prolonged increase in inflation expectations, Jean-Claude Trichet, European Central Bank president, said Monday (The Wall Street Journal March 7). Central bankers are unified in their goal to continue to keep inflation expectations down, Trichet said, adding that doesn’t mean the banks all will pursue the same route. Central bankers meeting in Basel, Switzerland, Sunday and Monday were more concerned about inflationary pressures than they were in January, Trichet added ...

Market News (03/07/2011)

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MADISON, Wis. (3/8/11)
* Worldwide business confidence on a four-week moving average basis hit a new record high last week, according to Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com March 7). Since the start of 2011, sentiment has surged and is as robust as it was since the survey began in 2003. Confidence is strongest in Europe and South America, and has risen substantially in Asia and North America. Equipment and software investment, hiring and sales gained significantly in recent weeks, Moody’s said. Rising oil and commodity prices have caused pricing to strengthen. The economy worldwide is growing at a rate well above its potential, Moody’s concluded … * If crude oil prices rise to $110 per barrel, many U.S. CEOs would have to deal with the price’s negative effect on their bottom lines, even though a recovering economy helped them cope with crude’s jump past the $100 level (Bloomberg.com March 7). Violence in the Middle East could slow supplies of oil there more, prompting CEOs to say they are waiting to see how much prices rise and how long the increases last, Moody’s said. It is difficult to properly plan for the future when oil prices spike in a short period of time, Samuel Allen, chairman/CEO of Deere & Co.--the world’s biggest manufacturer of agricultural equipment--told Bloomberg. Such a price surge necessitates more caution for a company’s outlook and planning, he added. Crude oil prices of $110 per barrel would alter corporate assumptions, offset tax cut benefits approved by Congress in December, and start to slow economic growth, Chris Low, an economist at FTN Financial in New York, told Bloomberg ... * Because more citizens said their finances were in good shape, U.S. consumer confidence last week hovered near the highest level in nearly three years, according to the Bloomberg Consumer Confidence Index (Bloomberg.com March 3). The index registered -39.3 for the week ending Feb. 27, compared with -39.2 the prior week, according to a report issued Thursday. Respondents’ assessment of their financial situation rose to a nearly two-year high. Extra cash provided by a two-percentage point cut in payroll taxes this year and an improving job market are helping to offset the economic impact of the largest surge in gasoline prices since the Hurricane Katrina aftermath in 2005, Bloomberg said …

News of the Competition (03/04/2011)

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MADISON, Wis. (3/7/11)
* State attorneys general and several federal agencies sent U.S. banks a 27-page proposal Thursday that could make them reduce loan balances for troubled mortgage borrowers, said sources familiar with the situation (The Wall Street Journal March 4). The document was sent to the largest U.S. mortgage servicers without detailing fines or penalties. It specifies a code of conduct for how banks must treat borrowers throughout the loan modification process, the sources said … * A federal filing last week indicates Ford Motor Co. may make an accounting adjustment in 2011 to indicate Ford’s confidence in its recovery--which possibly could bolster its profit for this year by as much as $13 billion, said one tax expert (Bloomberg.com March 4). The U.S. automaker earned $9.3 billion the past two years. In the second half of 2011, Ford may eliminate a valuation allowance--a reserve created in 2006 when Ford began four years of operating losses--held against deferred tax assets from its balance sheet. That would possibly add $10 billion to $13 billion to the automaker’s net income this year, Robert Willens, a corporate tax specialist, told Bloomberg. “This is a very positive statement from Ford,” he added. “If you take the radical step of eliminating your valuation allowance, then you’ve developed a high degree of confidence in your future profit-making ability” … * Grameen Bank--Bangladesh’s central bank--removed founder Muhammad Yunus as managing director over “a legal issue,” according to a press release posted Wednesday on the microfinancing bank’s website (American Banker March 4). Yunus founded the bank in 1976. Yunus and Grameen were the recipients of the 2006 Nobel Peace Prize. Because Grameen is partly owned by the government, the 70-year-old Yunus must comply with the government’s mandatory retirement age of 60, said several news reports. Grameen is contesting this, and said it has sought legal advice on the matter, but added that it “has been duly complying with all applicable laws” ...

Market News (03/04/2011)

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MADISON, Wis. (3/7/11)
* U.S. employers added 192,000 jobs in February--following a 63,000 gain in January, the Labor Department said Friday--amid more seasonable weather, an economy showing improvement and an unemployment rate that unexpectedly dipped to 8.9% (Bloomberg.com and The New York Times March 4). Although February’s gain constituted the fastest growth in nearly a year, it was partially the result of a recovery from an unusually low hiring rate in January when winter weather closed factories and offices nationwide, the Times said. “Economic recoveries can be like a snowball rolling down a hill, in that it takes time to get some momentum,” said John Ryding, chief economist at RDQ Economics. “People hesitate until they feel that the recovery’s durable enough, and then they have a tendency to jump in. Maybe we’re finally getting to that jumping-in moment.” The Fed still expects unemployment to range from 7.5% to 8% at the end of 2012 because businesses remain cautious in hiring while the economy regains the 8.75 million jobs lost in 2008 and 2009 (The Wall Street Journal March 4) … * Orders for U.S. manufactured goods rose in January by the highest amount in four years, with demand for commercial aircraft bouncing back after a slump in December (Bloomberg.com March 4). January orders increased 3.1%--the largest gain since September 2006, the Commerce Department said Friday. “There’s a strong cyclical recovery in manufacturing in particular,” said George Mokrzan, a senior economist at Huntington National Bank in Columbus, Ohio. “It’s the one area of the economy that actually has shown a V-like recovery in the last couple of years, and I think it’s deepened.” In a related matter, the service sector, which constitutes roughly 90% of the U.S. work force, grew in February at the fastest pace in more than five years, providing the most recent indication that hiring could gather speed in 2011 (The New York Times March 3). The Institute for Supply Management’s nonmanufacturing index climbed to 59.7 last month--its highest level since August 2005--from 59.4 in January ...

News of the Competition (03/03/2011)

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MADISON, Wis. (3/4/11)
* Three large U.S. banks could incur more costs or fines after federal investigators questioned the use of a private mortgage database instead of original documents to justify home foreclosures (Bloomberg News via American Banker March 3). Bank of America (BofA), CitiGroup Inc. and PNC Financial Services Group Inc. used Mortgage Electronic Registration Systems (MERS) and could face “serious problems associated with the basic business model and legal theories of the MERS system,” Christopher Peterson, a law professor at the University of Utah, told Bloomberg. MERS, run by Merscorp Inc., tracks ownership in roughly 50% of all U.S. home mortgages. MERS records are not a legal substitute for traditional documents, argue consumer advocates … * Government-sponsored enterprise Freddie Mac Tuesday said that it would require a minimum of 5% equity in the homes of most borrowers for their loans to be eligible for sale to Freddie (American Banker March 3). At present, Freddie accepts loans with as little as 3% down. In a memo, the home lender said that although such purchases “have been minimal in recent years, the performance of these mortgages has been unacceptable.” Freddie said the only exception to the new guidelines will be loans refinanced through the federal-government-run Home Affordable Refinance Program--created for borrowers who owe more than their properties are worth … * Bank of America Corp. (BofA) Wednesday said it will use money from the federal government’s Hardest Hit Fund initiative to make mortgage payments and principal reductions on an interim basis for unemployed homeowners in Arizona. Similar programs are being developed in California and Nevada, BofA said in a release. Created a year ago by the Obama administration, the Hardest Hit Fund offers mortgage payment assistance to the unemployed for up to three years …

Market News (03/03/2011)

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MADISON, Wis. (3/4/11)
* U.S. worker productivity rose in the fourth quarter because companies shaved costs to bolster profits (Bloomberg.com March 3). A gauge of employee output per hour increased at an unrevised 2.6% annual rate, following a third-quarter gain of 2.3%, according to figures released Thursday by the Labor Department. For a second consecutive year, labor expenses declined. “Productivity remains firm and labor costs are really benign,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets Corp. in New York. “Productivity can only take you so far when output is starting to advance. To meet that demand most companies will have to start to hire.” In the quarter, there were downward revisions to worker output and hours worked (Moody’s Economy.com March 3). However, hourly compensation saw a small upward revision … * Initial U.S. claims for unemployment benefits dropped last week to the lowest level since May 2008--indicating a labor market that is strengthening as the economic recovery gains steam (The Wall Street Journal and Bloomberg.com March 3). Claims declined 20,000, to 368,000, for the week ended Feb. 26, the Labor Department reported Thursday. The prior week’s figures were revised downward to 388,000 from an original estimate of 391,000. “The trend in layoffs seems to be down, so we would think that the pace of hiring is up,” Mark Vitner, a senior economist at Wells Fargo Securities LLC on Charlotte, N.C., told Bloomberg. “[To date, job gains] are well short of what we’ve seen in previous economic recoveries.” Also, the U.S. Monster employment index--which measures online help-wanted ads--went up seven points between January and February, which nearly reversed January’s eight-point decline from December (Moody’s Economy.com March 3) … * The average rate on a 30-year fixed-interest-rate mortgage fell this week to 4.87 % from 4.95% the previous week. The rate reached a 40-year low in November of 4.17% (The Associated Press via The New York Times March 3). The average rate on 15-year fixed-rate home loan dropped to 4.15% from 4.22%. In November, it fell to 3.57%--the lowest level since 1991. Mortgage rates usually follow the yield on 10-year Treasury notes, the Times said. Concerns over the uprising in Libya and its upward effect on oil prices has caused investors to put more of their money into Treasurys, and that has lowered yields, the Times said. Lower rates have not boosted housing demand. January was the second consecutive month with a decline in the number of people signing contracts to purchase homes, the National Association of Realtors said Monday …

Fed Beige Book Retailers manufacturers hiking prices

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WASHINGTON (3/3/11)--The 12 Federal Reserve Districts are reporting overall economic activity that continued to expand at a modest to moderate pace in January and early February. Manufacturers and retailers across all districts indicated that their input costs rose and they have begun hiking prices and passing those costs on to consumers. The price increases are a pre-condition for inflation, according to the Federal Reserve's Beige Book, the Fed's survey of the economic outlook. Retailers in some districts mentioned they had implemented price increases or were anticipating such action in the next few months. Home builders, however, were largely unable to pass cost increases to home buyers. Another key factor for inflation--wage increases--was not reflected in the report. In fact, wage pressures remained minimal in all districts, although Philadelphia, Dallas, and San Francisco districts reported most wage increases were for workers with specialized skills, said the report. Labor market conditions for all districts improved. The report dovetails with testimony before Congress this week by Federal Reserve Chairman Ben Bernanke, who indicated inflation expectations remained contained but Fed is monitoring increases in oil and commodities prices. He signaled the Fed would continue its $600 billion bond buying program of Treasuries through June and that the pace of the economic growth isn't strong enough to change the monetary policy (The Wall Street Journal March 2). The Beige Book, which is released eight times a year and summarizes information collected by each of the 12 Fed districts, reported that changes in loan demand remained mixed across districts, with lending standards remaining tight across most districts. Richmond, Dallas and San Francisco reported increased loan demand, while Kansas City saw a decrease. Demand for residential real estate loans rose in Philadelphia, Atlanta and Dallas but was weaker in New York, Cleveland, St. Louis and Kansas City. Credit standards were unchanged to tighter. Kansas City reported lending standards were unchanged for all types of loans. New York saw tighter commercial loan standards but little change for other loans. Atlanta reported increased standards for residential mortgage loans. St. Louis saw tighter standards for commercial mortgages but said standards were unchanged for commercial and industrial (C&I) loans; also, standards were unchanged to tighter for residential mortgages. Community bankers in Chicago and Dallas districts said they were seeing increased competition for C&I lending from large banks. Atlanta noted improvements in credit conditions for all types of loans except residential construction and real estate. The districts of Cleveland, Richmond, Chicago, Kansas City and Dallas reported steady to improving credit quality, and New York reported steady to lower delinquency rates. Venture capital financing in San Francisco district improved with increased investor and initial public offering activity. To access the full report, use the link.

News of the Competition (03/02/2011)

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MADISON, Wis. (3/3/11)
* Capital One Financial Corp. warned that it could sustain $1.1 billion in additional losses on future mortgage buyback claims in a filing made Tuesday with the Securities and Exchange Commission (Dow Jones via American Banker March 2). In the filing, the card-issuer-turned-bank said there remains “significant uncertainty as to numerous factors that contribute to ultimate liability levels.” These include mortgage loan performance levels, litigation outcomes, future purchase claim levels and ultimate repurchase success rates … * The U.S. Securities and Exchange Commission (SEC) accused Rajat K. Gupta, a former director of Goldman Sachs and Procter & Gamble of illegally passing information on the two companies’ earnings and Warren Buffet’s $5 billion investment in Goldman Sachs in 2008 (The New York Times DealBook March 1). “Mr. Gupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets,” Robert Khuzami, SEC director of enforcement, said in a statement. “Directors who violate the sanctity of boardroom confidences for private gain will be held to account for their illegal actions." The most serious SEC allegation is that Gupta, in his capacity as a Goldman board member, tipped Raj Rajaratnam, founder of Galleon Group, about Buffett’s $5 billion investment in Goldman, just minutes before the market closed Sept. 23, 2008 (The Wall Street Journal March 2). That allowed Galleon to buy Goldman shares and reap a profit of $900,000, the SEC alleged …

Market News (03/02/2011)

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MADISON, Wis. (3/3/11)
* U.S. shoppers still relied on their credit cards for shopping this past holiday season, according to data from credit-monitoring company Experian (The New York Times March 1). Although the average credit card debt in December dropped 4%, compared with the same month in 2009, consumers still carried an average of $4,284 on credit card statements in December 2010, Experian said. “You’ve got people who already had good credit and were pretty much managing their credit, and because of the risk, paid down their debt even more,” said Maxine Sweet, vice president for public education at Experian. “[There also] were very dramatic increases in debt by people who, mainly, lost jobs, but also had medical emergencies, and turned to credit cards to carry them through hard times” … * Led by a surge in dismissals at government agencies, job cuts by U.S. employers were 20% more in February than in the same month a year ago (Bloomberg.com March 2). Planned firings rose to 50,702 last month from February 2010, according to the Challenger Report released Wednesday by Challenger, Gray & Christmas Inc. Cuts announced at federal, state and local government offices nearly tripled from last year, the report indicated. “More job cuts at the federal level are expected in the months ahead as pressure mounts to cut costs and rein in the soaring national debt,” John A. Challenger, CEO of the outplacement company, said in a statement. Consumers could be forced to make big changes to their spending habits if gasoline goes above $4 per gallon in the next few weeks, which could be a very harmful setback during this stage of the economic recovery, he added. In a related matter, U.S. private-sector jobs increased 217,000 in February, according to a national employment report issued by payroll behemoth Automatic Data Processing Inc. and consultancy Macroeconomic Advisers (The Wall Street Journal March 2) ... * Mortgage loan application volume decreased 6.5% on a seasonally adjusted basis for the week ended Feb. 25 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). The results do not include an adjustment for the Presidents’ Day holiday. On an unadjusted basis, the index declined 5.5%. The Refinance Index fell 6.5%. The seasonally adjusted Purchase Index dropped 6.1%. The unadjusted Purchase Index went down 3.5% and was 19.6% lower than the same week one year ago. The four-week moving average for the seasonally adjusted Market Index is down 2.5%. The four-week moving average for the seasonally adjusted Purchase Index is down 2.2%, while this average is down 2.7% for the Refinance Index. For the MBA report, use the link …

News of the Competition (03/01/2011)

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MADISON, Wis. (3/2/11)
* JPMorgan Chase & Co. said it could pay as much as $4.5 billion in legal costs--which is beyond its established litigation reserves--if its worst-case legal situation ensues (Dow Jones via American Banker March 1). Saying the additional losses constitute a range of possible losses, the New York bank made the disclosure Monday in its annual filing with the Securities and Exchange Commission. Although JPMorgan said the additional losses could tally zero, they also could be higher because the bank is unable to estimate costs of the more than 10,000 legal proceedings it faces, Dow Jones said … * With rising consumer confidence sparking purchases, new U.S. auto sales in February rose substantially, but political unrest in the Middle East and spiking gasoline prices are imperiling the auto industry’s post-recession economic recovery (The New York Times March 1). Industrywide, sales were expected to climb about 20% from a year ago. General Motors said Tuesday its sales increased 46% from February 2010. “The measures in the consumer confidence surveys that relate to autos have picked up more than the overall index,” George Magliano, a New York-based senior economist for IHS automotive, told Bloomberg.com (Feb. 28). “The consumers with jobs are feeling better about the economy and have held off purchases for quite a bit.” Sales of new cars in 2010 increased 11% to roughly 11.4 million, the Times said … * Bank of America Corp. (BofA) is conducting a mobile payments trial that will allow it to use multiple payments brands’ cards--an expansion of a test last fall intended to provide a deeper understanding of the ways customers like to “enable their phones to serve as a wallet,” Tara Burke, a BofA spokeswoman said Monday. The trial, slated to begin March 28, will involve an undisclosed number of customers in Atlanta, New York and San Francisco and will last three months, Burke added …

Market News (03/01/2011)

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MADISON, Wis. (3/2/11)
* U.S. manufacturing expanded in February at the fastest pace since May 2004 because factories hired more workers and ramped up production, reflecting increased momentum for the economic expansion (Bloomberg.com March 1). However, U.S. factories face a significant uptick in the prices of raw materials, sparking worries about rising inflation (The Wall Street Journal March 1). The Institute for Supply Management’s factory index rose to 61.4 last month from 60.8 in January. Readings greater than 50 indicate growth. “New orders and production, driven by strength in exports in particular, continue to drive the composite index,” Norbert Ore, who directs the survey, told the Journal. “New orders are growing significantly faster than inventories, and the customers’ inventories index indicates supply chain inventories will require continuing replenishment,” he added … * Triggered by the largest slump in commercial projects in 17 years, U.S. construction spending dropped more than expected in January--an indication that the industry will continue to lag the economic recovery (Bloomberg.com March 1). The 0.7% decline brought the value of all projects to a $791.8 billion annual rate--the lowest since August--according to Commerce Department figures released Tuesday. Compared with one year ago, construction spending is down 5.9% (Moody’s Economy.com March 1). During January, construction of hospitals, hotels, office buildings and power plants declined because tight credit and high vacancy rates hampered investment, Bloomberg said …