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News of the Competition (03/30/2012)

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MADISON, Wis. (4/2/12)

  • Because 24 North Carolina banks still are mired in the Troubled Asset Relief Program (TARP), the state could become a hotbed for merger and acquisition activity (American Banker March 29). Although North Carolina has the same ongoing real estate problems and credit deterioration as its neighboring states in the Southeast, it has more banks involved in TARP than any other state in the region, the Banker said. However, because North Carolina has fewer anticipated failures than Florida and Georgia, acquirers will need to consider buying out those banks, say industry observers. Just four states have more than 20 TARP participants remaining: North Carolina, California, Illinois and Missouri …
  • Regions Financial is offering alternative financial services to attract unbanked customers that want to manage their money and cash flow on a pay-as-you-go basis (American Banker March 29). Those customers include more than just the young, low-income or immigrant populations, John Owen, Regions senior executive vice president of consumer services, told the Banker. More than half the customers using Regions' check-cashing, money transfer and expedited bill pay services, and prepaid cards make more than $50,000 per year, he added. And more than 20% of those customers earn more than $100,000 per year …
  • In a cautionary tale, consumer Karen Stevens spent roughly $1,900 in 2006 to pay Bank of America (BofA) for delinquent credit card debt. She then spent another three years battling collections agencies that demanded she repay the debt--again (American Banker March 29). The collectors were not satisfied even when she produced a cancelled check and a creditor's letter proving she had paid off her obligations. She counter-sued the collectors, ending the financial imbroglio, the Banker said. Although BofA was not directly involved in the legal actions, it sold the rights to Stevens' account after informing her she had paid in full. While BofA and other big financial institutions have sold groups of charged-off accounts for the past several years to outside collections agencies, the Stevens episode is an example of what can happen when banks sell batches of accounts without properly eliminating errors and discrepancies from them, the Banker said …

Market News (03/30/2012)

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MADISON, Wis. (4/2/12)

  • U.S. consumer spending increased by the most in seven months during February, indicating the largest segment of the U.S. economy is gaining momentum (Bloomberg.com March 30). As spending rose, incomes increased modestly--partially reflecting escalating energy costs and reduced savings (The Wall Street Journal March 30). Personal spending climbed 0.8% in February--the biggest gain since July--while incomes rose 0.2%, the Commerce Department said Friday. With the largest payroll gains since 2006 fortifying consumer confidence, households may be ready to take a more active role in the economic expansion, Bloomberg said. Although wages are rising, other forms of income such as interest are lagging. That could raise the risk that rising energy costs--which increased 3.6% in February, the largest gain in nearly a year--will hamper increases in consumer spending, which constitutes 70% of the U.S. economy, Bloomberg said …
  • For a seventh consecutive month, U.S. consumer confidence rose in March (Bloomberg.com and Moody's Economy.com March 30). The Thomson Reuters/University of Michigan index of consumer sentiment increased to 76.2--the highest level since February 2011--from 75.3 in February. Income and employment increases are helping to maintain an improvement in confidence that may push up consumer spending. However, gasoline prices, which have risen 20% so far this year and are heading toward $4 per gallon, could place a bigger damper on household spending, Bloomberg said. The report indicated one-year-ahead inflation expectations rose to 3.9% from 3.3%, and five-year-ahead expectations increased to 3% from 2.9%, Moody's said …
  • Business activity in the U.S. remained near a 10-month high in March, indicating the economy has been able to flourish in the face of increasing fuel costs, according to the Institute for Supply Management (ISM)--Chicago Inc.'s  index  (Bloomberg.com and Moody's Economy.com March 30). The index dropped to 62.2 from 64 in February. Readings above 50 indicate growth. Growing business investment in new equipment, along with the strongest auto sales since 2008, may continue to drive demand throughout all manufacturing industries, which comprise 12% of the U.S. economy, Bloomberg said …

News of the Competition (03/29/2012)

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MADISON, Wis. (3/30/12)

  • The revised Home Affordable Refinance Program--known as HARP 2.0--should help mortgage profits in the second quarter for the largest mortgage-servicing banks, said American Banker (March 28). The biggest banks, including Bank of America, JPMorgan Chase and Wells Fargo, have been flooded since January with a surge in refinance applications for HARP 2.0, the Banker said. Those banks are charging relatively high interest rates to borrowers that qualify for the program, the publication said. HARP 2.0 was created to help mostly underwater borrowers whose loans are guaranteed by Freddie Mac or Fannie Mae to improve their finances by obtaining low interest rates. Although banks will mostly offer refinancing to their existing borrowers, servicers are not lowering their rates as much as they could to many new borrowers, the Banker said ...
  • Smaller U.S. banks are finding ways to compensate for the loss of overdraft fee income because of overdraft fee regulations such as Reg. E (American Banker March 28). Some avenues they are pursuing include moving clients into more efficient services, innovating in non-lending activities and increasing other fees. Although large banks have access to multiple fee-income sources--such as insurance, investment banking and trust departments--small banks don't have those other products that generate fees, Brad Smith, president/CEO of Abound Resources, a community-bank consulting firm in Austin, Texas, told the Banker
  • Beginning in May, MasterCard will make available a new tool to help merchants assess whether an online transaction is fraudulent (American Banker March 28). The company's Expert Monitoring Fraud Scoring for Merchants will provide predictive fraud scores for businesses to card-not-present purchases in real time …

Market News (03/29/2012)

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MADISON, Wis. (3/30/12)

  • The U.S. economy in the fourth quarter expanded at a 3% annual rate--in line with expectations. However, corporate profits rose at the slowest pace in three years, indicating the possible risk that hiring and business investment will slow down (Bloomberg.com and Moody's Economy.com March 29). The gain in gross domestic product was the largest in more than a year and followed a 1.8% increase in third quarter 2011, the Commerce Department said Thursday. Fourth-quarter corporate earnings rose 0.9% from the third quarter--the smallest increase since fourth quarter 2008. When it comes to investing in new equipment and hiring permanent staff, businesses will stay very restrained, Mark Vitner, a senior economist at Wells Fargo LLC in Charlotte, N.C., told Bloomberg. The situation likely raises concerns that economic growth has not taken hold as hoped, he added …
  • Initial claims for U.S. unemployment benefits fell to their lowest level in four years last week, indicating the labor market is continuing to get stronger this year (The Wall Street Journal and Moody's Economy.com March 29). Claims decreased 5,000--to a seasonally adjusted 359,000--for the week ended March 24, the Labor Department said. For the past several weeks, new claims have remained near levels seen before the beginning of the recent financial crisis. New claim levels have stayed below the 400,000 level since October. When claims are below that spot, the economy usually adds jobs, economists say. Meanwhile, continuing claims for unemployment benefits for the week ended March 17 declined to 3.34 million from 3.38 million the prior week …
  • Last week, U.S. consumer confidence hit the second-highest level in four years with more consumers deciding to go shopping, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com March 29). The index measured -34.7 for the week ended March 25--just below the -33.7 reading two weeks prior--which was the strongest since March 2008. At least 30% of households indicated they had a favorable view of the buying environment--the longest stretch since early 2008, Bloomberg said. The unemployed are becoming more positive than at any time since January 2008 because of an improving labor market, Bloomberg added ...

News of the Competition (03/28/2012)

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MADISON, Wis. (3/29/12)

  • A hybrid reverse mortgage loan--which will begin with a fixed-rate term before switching to a variable rate--will serve many financial needs of seniors, an industry official told a regional meeting in New York of the National Reverse Mortgage Lenders Association (American Banker March 27). The association has discussed with members of the White House staff the possibility of creating such a hybrid loan, Peter Bell, association president/CEO, told the meeting. White House interest in the idea has spurred the group to pursue the new product, Bell said ...
  • Recent federal regulation has caused a rising backlog of real estate appraisals that is making it more expensive and time-consuming for bankers to obtain valuations (American Banker March 27). The regulation has changed the fee structure and necessitated more independence between bankers and appraisers, the Banker said. Consequently, many appraisers have abandoned their vocation, leaving bankers with a glut of appraisals still pending. In some instances, the changes have resulted in bankers losing real estate loans, the publication said  …

Market News (03/28/2012)

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MADISON, Wis. (3/29/12)

  • The Mortgage Bankers Association (MBA) said mortgage applications decreased 2.7% for the week ended March 23 from a week earlier, according to its Market Composite Index, part of MBA's Weekly Mortgage Applications Survey. During February, the investor share of applications for home purchases was at 6.1%, a decline from 6.4% in January. The change was led by a drop in the New England region. Also, the share of purchase mortgages for second homes fell to 5.8% in February from 5.9% in January. On an unadjusted basis, the index decreased 2.6%. The Refinance Index declined 4.6%. The Refinance Index has dropped for six consecutive weeks, falling to its lowest level since December and is 24.2% lower than its 2012 peak in February. The decline in the Refinance Index this week was driven largely by a 12% drop in government refinance activity, while conventional refinance applications fell by less, decreasing 3.4% from the previous week. For the MBA report, use the link …
  • For the fourth time in five months, orders for U.S. durable goods--products meant to last at least three years--increased in February, indicating the manufacturing sector remains a driving force behind the economic recovery (The Wall Street Journal and Bloomberg.com March 28). Orders rose 2.2% to a seasonally adjusted $211.17 billion--following a 3.6% decline in January, according to Commerce Department figures released Wednesday. The new-orders uptick was broad based--with a surge in demand for electronics, machinery, metals, cars and computers, and gains in the volatile  commercial aircraft sector--that helped spur the uptick, Bloomberg said. Although not as strong as last year, business spending still will be an important factor in pushing the U.S. economy ahead, Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, told Bloomberg. Strong demand appears to be causing a comeback in the auto industry, he added …
  • The International Council of Shopping Centers (ICSC) Chain Store Sales Index dropped 0.5% for the week ended March 24 from the prior week (Moody's Economy.com March 27). That forced year-over-year growth down to 2.7% from 3.3% the previous week. The combination of pent-up demand and warm weather boosted sales, although rising gasoline prices hampered them, ICSC said. Discount stores reportedly saw more customer traffic, while apparel and department stores saw less, ICSC said …

News of the Competition (03/27/2012)

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MADISON, Wis. (3/28/12)

  • New federal regulations governing the financial services industry will help resuscitate the reputations of banks, investment banks and brokerage houses, said most marketing executives responding to a survey released Monday (American Banker March 26). About 96% of marketing and public relations officials surveyed said their firms' reputations still are marred by the financial crisis, according to a survey jointly conducted by New York communications firm Makovsky and Company, and Echo Research, a London-based research company. Also, 57% of respondents gave the industry below average or failing grades in public relations. However, nearly 75% of those surveyed said they believe that new laws such as the Dodd-Frank Act will restore clients' trust in their companies …
  • Several new unrelated regulatory security requirements soon will take effect, proving costly and unpopular with banks, said American Banker (March 26). The directives include: guidance issued by the Securities and Exchange Commission for banks to publish cybersecurity and risk issues in their quarterly reports; a European Union regulation on tracking cookies; and Federal Deposit Insurance Corp. acknowledgement that bank issuers ought to comply with Payment Card Industry (PCI) standards created by MasterCard, Visa and other card brands. In particular, bankers are concerned that the PCI mandate--a data security standard created to protect card data and any organizations that handle data--is thus far mainly focused on merchants, not banks. The cost of becoming  PCI-compliant and validating that status could cost large banks hundreds of thousands to millions of dollars, Alvin Litan, a vice president and analyst at Gartner, told the Banker
  • Wells Fargo is attempting a new take on down-payment assistance programs in hopes of preventing the high default rates that have previously stymied them (American Banker March 26). The San Francisco-based bank's new Neighborhood Lift program mandates that participants attend financial education classes before they receive assistance grants. Wells Fargo is aiming to avoid past mistakes that many say led to the current foreclosure crisis because banks loaned to borrowers who could not afford the homes they purchased, the Banker said …

Market News (03/27/2012)

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MADISON, Wis. (3/28/12)

  • Home prices in 20 U.S. cities declined in January for a fifth consecutive month. Prices reached new lows--with average home prices sinking to levels they were at nearly a decade ago in early 2003 (The Wall Street Journal, Bloomberg.com and The New York Times March 27). The Standard & Poor's (S&P) Case-Shiller home-price index fell 3.8% from January 2011. Home prices continued to drop despite some positive economic signs, David Blitzer, chairman of S&P's index committee, told the Journal. The 20-city index and index of 10 major metropolitan areas are about 34% below their peak levels in 2006, Blitzer added. Home prices decreased in 17 of the 20 cities in January from January 2011. That indicates the housing market still is floundering despite the best winter for home sales in five years, the Times said.  Rampant foreclosures, high unemployment rates, and stricter mortgage requirements still plague the housing market, the Journal said …
  • The Federal Housing Finance Agency (FHFA) reported Tuesday that the national average contract mortgage rate for the purchase of previously occupied homes by combined lenders, used as an index in some adjustable-rate mortgage contracts, was 4.08%, based on loans closed in February. Beginning this month, FHFA is calculating interest rates using unweighted survey data. For January, a comparable rate based on unweighted data would have been 4.18%--a decrease of 0.10% from the previous month's corresponding unweighted rate. The average interest rate on conventional, 30-year, fixed-rate mortgage loans of $417,000 or less decreased five basis points to 4.36% from January's figure, based on unweighted data. These rates are calculated from the FHFA's Monthly Interest Rate Survey of purchase-money mortgages. For the FHFA report, use the link …
  • Because of lower employment expectations, the Conference Board Consumer Confidence Index declined in March, although a component of the index on views of the present situation increased to the highest level since 2008 (MarketWatch and Moody's Economy.com March 27). The overall gauge of consumer confidence dropped to a reading of 70.2 in March from 71.6 in February--previously estimated at 70.8. A less-than-favorable short-term outlook caused the slight drop in the index, Lynn Franco, director of the Conference Board's consumer research center, told MarketWatch, adding that consumers do not perceive the economy to be losing momentum …

News of the Competition (03/26/2012)

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MADISON, Wis.  (3/27/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced two banks closed Friday for a total of 15 closures so far in 2012. There were 92 bank closures in 2011. Premier Bank, Wilmette, Ill. was assumed by International Bank of Chicago, and Covenant Bank & Trust, Rock Springs, Ga., was assumed by Stearns Bank, N.A., St. Cloud, Minn. The two banks had roughly $364 million in assets as of Dec. 31. The FDIC estimates the most recent failures will cost its Deposit Insurance Fund about $96 million …
  • Efforts to make investing in small U.S. banks more attractive to outside investors is gathering momentum because of one group's efforts (American Banker March 23). The Conference of State Bank Supervisors has garnered support from private investors, investment bankers and lawyers to review current legislation. One of the most salient issues confronting smaller banks is diminished access to capital, Joshua Siegel, CEO of StoneCastle Partners, a New York fund that invests in community banks, told the Banker, adding that community banks have a $90 billion need for capital …
  • U.S. banks are monitoring their swaps and other derivatives because they are worried that ratings agencies will conduct another round of downgrades. That would induce counterparties to demand the banks post additional collateral because they would be considered as riskier partners (American Banker March 23). Banks are more able to withstand a downgrade shock than most people think, industry observers told the Banker. In the meantime, banks have been lessening their exposures as a component of a broader downscaling of their balance sheets, the Banker added …

Market News (03/26/2012)

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MADISON, Wis. (3/27/12)

  • Pending home sales were down slightly in February but remain notably above the sales pattern in the first half of last year, according to the National Association of Realtors (NAR). The Pending Home Sales Index--a forward-looking indicator based on contract signings--dipped 0.5% to 96.5 in February from 97 in January, but is 9.2% above February 2011's 88.4. The data reflect contracts but not closings. Lawrence Yun, NAR chief economist, said the U.S. is seeing the continuation of an uneven but higher sales pattern. "The spring home buying season looks bright because of an elevated level of contract offers so far this year," he said. "If activity is sustained near present levels, existing-home sales will see their best performance in five years. Based on all of the factors in the current market, that's what we're expecting with sales rising 7% to 10% in 2012." For the NAR Report, use the link …
  • Business confidence worldwide indicates a global economy that is growing at the low end of its potential--where it has resided since the start of 2012, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com March 26). Sentiment is not much different than it was a year ago. However, it has become better since late last year when the worldwide economy weathered the U.S. Treasury debt ceiling imbroglio and the European debt crisis, Moody's said.  Businesses are most positive about their assessment of current business conditions. Also expectations about their performance moving through 2012 have improved. Conversely, most businesses still are guarded when answering specific questions about hiring and investment, Moody's said. In a related matter, the Bloomberg Consumer Comfort Index changed its trajectory for the week ended March 18, sliding to -34.9 from -33.7 the prior week (Moody's Economy.com  March 22). Although there were improved views of the state of the economy, they were more than mitigated by declining perceptions of the buying climate and personal finances …
  • Although last year was a good one for large U.S. companies, it was a surprisingly average one for their CEOs (The Wall Street Journal March 26). For 65 company CEOs at the helm for at least two years, total direct compensation--which included salary, all bonuses, and the value of stock-option grants at the time of the grant--increased just 1.4% in 2011, despite solid gains in the companies' revenue and profit, according  to preliminary results from a survey conducted by the Journal and Hay Group. That compensation level is down from an 11% gain in 2010, according to that year's Journal/Hay Group survey of 350 companies …

News of the Competition (03/23/2012)

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MADISON, Wis. (3/26/12)

  • Although Discover Financial Services' (DFS) Pulse debit network saw substantial first-quarter growth, new regulations forbidding network exclusivity arising from an amendment to the Dodd-Frank Act could be an obstacle down the road, Discover executives told American Banker (March 22). For the fiscal quarter ended Feb. 20, DFS' pretax income from processing transactions rose 21% to a record $52 million from the previous year. The Pulse network grew because it processed more debit transactions, resulting in 129 new customers signed up last year, the Banker said …
  • The biggest U.S. mortgage servicers are trying to cut expenses to make up for weak revenue growth this year, but a wave of new mortgage refinance applications--partly because of a revised Home Affordable Refinance Program known as Harp 2.0--is complicating their fiscal austerity efforts (American Banker March 22). Mortgage servicers frequently lay off and rehire workers. However, the glut of new demands on banks' mortgage operations that is occurring at the same time they are trying to meet company-wide orders to slash costs, has created an internal struggle at banks with resources that already are stretched thin, the Banker said …
  • Bank of America (BofA) is set to test a rental program with a small number of customers that would allow them to rent and remain in their homes if they are about to undergo foreclosure (The New York Times March 22). The program underscores the rising interest of investors in becoming landlords of distressed properties, the Times said. The pilot program will initially be offered to 1,000 consumers in Arizona, Nevada and New York. To obtain bank forgiveness of their mortgage debt, participating homeowners must turn over the title of their property to BofA. Participants would then be allowed to rent the properties--for less than their monthly mortgage payment, and at or below market rates--for up to three years …

Market News (03/23/2012)

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MADISON, Wis. (3/26/12)

  • For the second consecutive month, sales of new U.S. homes unexpectedly declined in February, indicating the housing market remains unsteady after its implosion and a recovery may be uneven (The Wall Street Journal, Bloomberg.com and Moody's Economy.com March 23). Sales fell by 1.6% to a seasonal adjusted rate of 313,000 from January--the lowest reading since October 2011, the Commerce Department said Friday. Economists had forecast February sales of 325,000, according to separate surveys by Dow Jones Newswires and Bloomberg News. With increasing competition from foreclosed properties, which are lowering property values, new-home sales are fighting to gain traction, Bloomberg said. However, rising personal incomes, an uptick in hiring and mortgage rates hovering near record lows are creating more affordable homes, which may fortify the housing market, Bloomberg said. Months of home supply on the market in February was 5.8--just up from 5.7 in January. The median home price is up 6.2% year over year …
  • Mass layoff events--the number of layoffs involving at least 50 workers from a single establishment--decreased by 141 to 1,293, involving 119,463 employees in February--10,457 fewer than in January, according to the Bureau of Labor Statistics (Moody's Economy.com March 23). The decline in mass layoffs reflects more positive news from more current data, indicating a drop in unemployment claims and quicker net job expansion during the month, Moody's said …
  • The Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--climbed to 125.7 for the week ended March 16 (reaching its highest level in nearly seven months) from a revised 125 the prior week (Moody's Economy.com March 23). The rate of decline in the smoothed annualized growth rate slowed to -0.4 from -1.4 the prior week. Both gauges continued their recent improvement trends--indicating an expanding recovery, ECRI said ...

News of the Competition (03/22/2012)

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MADISON, Wis. (3/23/12)

  • American Express Co. (Amex) will offer prepaid cards at some office supply stores nationwide through a partnership with Office Depot Inc. (American Banker March 21). The Amex card will be the first prepaid card that Office Depot has offered. Amex will start launching the product at more than 1,100 locations in the next few weeks, the card network said in a press release. Customers at Office Depot can buy and load a one-time temporary card for $4.95. Cards can be ordered free online …
  • Citigroup Inc. is willing to sell more than the scheduled 14% stake in Morgan Stanley Smith Barney to Morgan Stanley, contingent on Morgan Stanley making an appealing offer, said Citigroup executives (Bloomberg.com March 22). Morgan Stanley can opt to buy a 14% share of the joint venture in May--raising its ownership stake to 65%, and can purchase the business outright during the next two years. Morgan Stanley purchased a controlling stake in the venture in 2009. The companies would need to renegotiate their existing deal. Also, Morgan Stanley, which obtained approval from the Federal Reserve to acquire its stake, would need to submit a new capital plan to regulators, according to a source familiar with the matter …
  • Marathon State Bank in Marathon City, Wis., will shed some of its excess capital at the request of PSB Holdings Inc. in Wausau, Wis., to complete its sale--slated to close June 30--to PBS Holdings (American Banker March 21). Marathon State will use a special dividend to return $14.3 million of equity to shareholders--cutting its equity-to-assets ratio to 6% from 18.4%--as of Dec. 31, the Banker said. That type of deal structure was once prevalent, but fell out of favor during the financial crisis and subsequent squeeze on capital, say industry experts …

Market News (03/22/2012)

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MADISON, Wis. (3/23/12)

  • U.S. house prices were unchanged on a seasonally adjusted basis from December to January, according to the Federal Housing Finance Agency's (FHFA) monthly House Price Index. The previously reported 0.7% rise in December was revised downward to reflect a 0.1% increase. For the 12 months ending in January, U.S. prices fell 0.8%. The U.S. index is 19.2% below its April 2007 peak and roughly the same as the February 2004 index level. The FHFA monthly index is calculated using purchase prices of houses backing mortgages sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine census divisions, seasonally adjusted monthly price changes from December to January ranged from -1.7% in the West South Central division to +4.7% in the West North Central division. For the FHFA Purchase-Only House Price Index, use the link. In a related matter, U.S. mortgage rates for 30-year loans climbed above 4% for the first time in nearly five months, raising borrowing costs as fewer homeowners were looking to refinance (Bloomberg.com March 22). The average rate for a 30-year mortgage rose to 4.08% for the week ended March 22 from 3.92% the prior week, said Freddie Mac ...
  • The Conference Board's Index of U.S. Leading Economic Indicators increased in February by the most in 11 months, indicating the biggest economy in the world will improve (Bloomberg.com and Moody's Economy.com March 22). The board's measure of the outlook for the next three to six months rose 0.7%--marking the fifth consecutive monthly gain. It follows a 0.2% gain in January. An unemployment rate that held steady at a three-year low in February and increased hiring may spur consumers to increase their spending--which constitutes roughly 70% of the U.S. economy, Bloomberg said. Rising consumer demand could also propel factory production, helping to maintain the  economic expansion and allowing the U.S. to weather high oil prices, Bloomberg added  ...
  • Initial claims for U.S. unemployment benefits dropped to a four-year low last week, signaling renewed labor market strength (The Wall Street Journal, Bloomberg.com and Moody's Economy.com March 22). Claims fell by 5,000--to a seasonally adjusted 348,000--for the week ended March 17, the fewest since February 2008, the Labor Department said Thursday. Fewer unemployment claims means fewer employers are cutting jobs--an indication of growing strength in the labor market that could signal more companies will hire as sales expand, said the Journal and Bloomberg. Meanwhile, continuing claims for U.S. unemployment benefits for the week ended March 10 declined to 3.352 million from 3.361 million the previous week ...

News of the Competition (03/21/2012)

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MADISON, Wis. (3/22/12)

  • A group of U.S. banking companies of all sizes--small to large--have been gearing up their mortgage operations to fill the void left when Bank of America disassembled the Countrywide home loan juggernaut it acquired (American Banker March 20). Those banks upped the volume of loans they service for others by 20% or more in 2011, as measured by unpaid principal balance, the Banker said. They range in size from the $9 billion asset Sterling Financial Corp. to the $78 billion asset M&T Bank Corp. Of the bank holding companies that service more than $125 billion of mortgages, most are reducing their load, although U.S. Bancorp and Wells Fargo & Co. are accelerating those operations, the Banker said …
  • Citigroup Inc. has signed a long-term deal to offer credit cards to consumers who shop at more than 4,500 small businesses represented by retailer coalition BrandSource (American Banker March 19). The coalition, based in Anaheim, Calif., is a buying group for stores that sell equipment such as appliances, bedding, electronics and home furnishings. Last fall, Citigroup--after being unable to sell its retailer credit card business--recommitted to the unit and renamed it Citi Retail Services in December …

Market News (03/21/2012)

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MADISON, Wis. (3/22/12)

  • Sales of previously owned U.S. homes unexpectedly dipped last month, but they still were high enough to mark the strongest February in five years (The Wall Street Journal March 21). However, last month's decline also indicated the housing market is taking time to gain its strength, with an increase of the supply of properties on the market (The New York Times and Bloomberg.com March 21). Purchases fell 0.9% to an annualized rate of 4.59 million from a 4.63 million pace in January, according to a National Association of Realtors (NAR) report released Wednesday. Economists had forecast a rise to 4.61 million in a Bloomberg News survey. Sales in February were 8.8% higher than in February 2011, and the first two months of 2012 were the best start to a year since 2007, NAR said. The latest sales trend indicates buyers are serious this year, which gives NAR a positive outlook, Lawrence Yun, top NAR economist, told the Journal. Although a surfeit of foreclosed properties is placing more homes on the market and creating the same problems that triggered the last recession, there is hope, Bloomberg said. Home purchases still could increase because of the factors keeping affordability near an all-time high: cheaper homes, mortgage rates near a record low, and job and income growth, Bloomberg said …
  • U.S. mortgage application volume declined 7.4% for the week ended March 16 from one week earlier, according to the Market Composite Index released Wednesday by the Mortgage Bankers Association (MBA). The index is part of MBA's Weekly Mortgage Applications Survey. "With the rate increase last week, refinances are obviously slowing, and the refinance share at 73% is down to its lowest level since last July," said Jay Brinkmann, MBA senior vice president of research and education. "With rate/term refinances falling as we go forward, the Home Affordable Refinance Program (HARP) will be a bigger percentage of refinances but will be more concentrated in certain states. Some of the largest institutions are reporting that the HARP share of their refinances remained at about 30% last week, but HARP volume is not equal across the country," he said. The "sand states" with the worst delinquencies should now be called "HARP states for mortgage refinances," he added. We saw big state-level differences in refinance applications for February over January: Florida was up 49%, Arizona was up 61%, and Nevada was up 71%. Refinances in the rest of the country were generally flat or even down. For example, Texas had no change, Colorado was down 3%, Connecticut was up only 2%, and Virginia was up 1%," he said, noting that "HARP clearly is a driving force in those states that saw the most defaults and the biggest drops in home equity," he added. For  the MBA report, use the link …

News of the Competition (03/20/2012)

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MADISON, Wis. (3/21/12)

  • The $25 billion national mortgage settlement, whose final terms were announced last week, is causing mortgage bondholders to threaten legal action (American Banker March 19). The settlement provides the five biggest mortgage servicers credits for principal write-downs that the bondholders may take. The deal provides an incentive to banks to write down the principal of loans they own and of loans held in securitized trusts. However, that settlement agreement did not include the input of the investors in those trusts. Those investors are balking at being forced to absorb losses--to the benefit of the banks--as a result of final terms of the settlement, the Banker said …
  • Discover is issuing EMV mandates for acquirers and direct-connect merchants in the U.S., Canada and Mexico, following the lead of Visa and MasterCard (American Banker March 20). EMV stands for Europay, MasterCard and Visa, a global standard for inter-operation of integrated circuit cards (IC cards or "chip cards") and IC card-capable point of sale terminals and ATMs, for authenticating credit and debit card transactions. It is a joint effort between Europay, MasterCard and Visa to ensure security and global interoperability so that Visa and MasterCard cards can continue to be accepted everywhere. Discover has established an April 2013 deadline. The company said it will support all verification methods, which include chip-and-signature and chip-and-PIN; all card authentication channels, which include online and offline; and contact and mobile payments. Liability rules will be set in the coming months, Discover said … 

Market News (03/20/2012)

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MADISON, Wis. (3/21/12)

  • Although U.S. housing starts declined in February, permits for future construction climbed to their highest level since October 2008. That indicates the uneven process of the years-long housing recovery but also shows that the industry at the heart of the most recent financial crisis is stabilizing (The New York Times, The Wall Street Journal and Bloomberg.com March 20). Housing starts dipped 1.1% from January to a seasonally adjusted rate of 698,000 units, the Commerce Department said Tuesday. New building permits--a proxy for future construction--jumped 5.1% to a 717,000-unit pace in February--outdistancing economists' forecasts of a 690,000 pace. Housing has been steadily recovering at a gradual rate, Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, told Bloomberg. The surge in permits points to gathering strength in the industry during the coming months, he added …
  • The probability that the U.S. will be in recession in six months dropped four percentage points to 22% in February from 26% in January, according to the risk of recession gauge released by Moody's Economy.com (March 20). The decline was caused by an improved job market, higher stock prices and an uptick in consumer confidence, Moody's said. February saw the fifth consecutive monthly decrease, placing the probability of recession at its lowest level since early 2011, Moody's said. Some obstacles remain, such as escalating gasoline prices, which are a cause for concern, Moody's said  …

News of the Competition (03/19/2012)

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MADISON, Wis. (3/20/12)

  • The ranks of bank trustees for collateralized loan obligations (CLOs) could be shaken up by increasing pressure on the credit ratings of some of the biggest U.S. financial institutions (American Banker March 16). Just about all CLOs assign a single bank at closing to serve as the collateral administrator, paying agent and trustee, the Banker said.  A bank's responsibilities include producing compliance and note valuation reports, maintaining a collateral database, reconciling the portfolio with the manager and distributing the proceeds to the proper parties in accordance with their investor class on the payment dates. In February, Moody's Investors Service placed its ratings on several banks and securities firms on review for a downgrade. The ratings pressure eventually could cause some banks to become ineligible to serve as a trustee--which would make it necessary for the deal's issuers to replace them, Moody's warned. The multiple actions needed to replace an institution that functions in so many roles may be too much to handle for deal parties--especially the trustee--and cause operational mistakes and servicing delays, Moody's said …
  • CitiGroup Inc. said Monday it will garner an after-tax gain of $349 million resulting from the sale of its entire 2.71% equity stake in Shanghai Pudong Development Bank (Dow Jones NewsWires via foxbusiness.com March 19). Citi also recently shed its holdings in an Indian lender for $1.9 billion. Those moves indicate the necessity for Citi to earmark more capital to contain risks from certain assets and potential financial stress to be in compliance with global banking regulations, Dow Jones said …

Market News (03/19/2012)

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MADISON, Wis. (3/20/12)

  • The sale of mortgage bonds sold at the height of the financial crisis netted the U.S. Treasury Department a $25 billion profit (The Wall Street Journal March 19). During 2008 and 2009, the Treasury bought $225 billion of mortgage-backed securities as a part of the government's reaction to an imploding housing market and the financial crisis. The sales, which started about a year ago, have generated the largest profits for any program connected to the financial crisis, the Journal said. The sales helped bolster the housing market during a crucial time for the economy as the government's emergency financial response efforts wind down, Mary Miller, assistant secretary for financial markets at the Treasury, said in a statement. The Treasury's announcement also underscores the scope of government support to help the recovery of financial markets, the Journal said …
  • In March, the National Association of Home Builders (NAHB) Housing Market Index failed to advance for the first time in five months, NAHB said (Moody's Economy.com March 19). The composite index for March remained at 28--the same as the February reading following a small downward revision. Single-family sales expected within six months was the subcomponent of the index that registered the most positive news, NAHB said. Three of the four U.S. geographic regions showed minor improvement. However, the West gave back roughly half of its large increase from last month, NAHB said …

News of the Competition (03/16/2012)

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MADISON, Wis. (3/19/12)

  • The Federal Deposit Insurance Corp. (FDIC) will auction a considerable amount of jewelry it received after Tennessee Commerce Bank in Franklin failed in January (American Banker March 15). The FDIC is partnering with Tranzon Auction Resolutions to sell the jewelry obtained from the $1.2 billion asset bank--whose collapse was Tennessee's first failure since 2002. The auction will continue through Tuesday morning to sell 150 pieces of jewelry that were collateral on a loan to a jewelry store that subsequently defaulted, said David Barr, a spokesman for the FDIC …
  • Attorney Lynn Szymoniak has earned $18 million for discovering fraud she said she found by going through mortgage documents (Bloomberg.com March 16). She is among six whistleblowers who will garner $46.5 million as part of the $25 billion national foreclosure settlement that state and federal officials brokered in February with five large U.S. banks, according to the U.S. Justice Department. Among those banks are Bank of America Corp. and JPMorgan Chase & Co.  Relying on her experience as an insurance-fraud investigator, Szymoniak's examination led her to claims made against banks for submitting bogus documents to the federal government. Those documents claimed the banks owned loans insured by the Federal Housing Administration, she said  …

Market News (03/16/2012)

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MADISON, Wis. (3/19/12)

  • U.S. consumer confidence unexpectedly fell in March, indicating that escalating fuel costs may be beginning to dampen the economic outlook, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index (Bloomberg.com and Moody's Economy.com March 16). The index dropped to 74.3--the lowest so far this year--from 75.3 in February. Economists had forecast the gauge to climb to 76, according to a Bloomberg survey. Since the start of the year, gasoline prices have risen 17% and further increases could hurt consumers' budgets even more, Bloomberg said. As the job market improves, a quicker pace of hiring and consistent upgrades in consumer confidence are necessary to boost consumer spending, which constitutes 70% of the U.S. economy. At this time, many strains on consumers, such as high gasoline prices and weak incomes after being adjusted for inflation, are limiting purchases, Scott Brown, chief economist at Raymond James & Associates, told Bloomberg
  • Consumer prices in the U.S. in February increased by the most in 10 months, mostly because of a spike in gasoline prices that spread to other goods and services--indicating rising inflationary pressures (The Wall Street Journal and Bloomberg.com March 16). The consumer price index--a broad gauge that measures how much consumers pay for goods and services--rose a seasonally adjusted 0.4%--the strongest pace since April. The largest surge in gasoline prices in more than a year constituted roughly 80% of the price increases in February, which depleted household budgets for purchases on other goods and services, Bloomberg said. Consumer prices have risen 2.9% from a year ago, the Journal said ...
  • U.S. industrial production was unchanged in February, limited by a manufacturing slowdown and a decrease in natural gas extraction, after rising 0.4% in January (Bloomberg.com March 16). Previously, industrial production was reported to be unchanged in January, according to the report from the Federal Reserve System. Manufacturing output moved up 0.3% in February. Within manufacturing, the index for motor vehicles and parts fell 1.1% after jumping 8.6% in January, but the index for manufacturing excluding motor vehicles and parts increased 0.4% in February. Production at mines fell 1.2%, while utilities output was unchanged. At 96.2% of its 2007 average, total industrial production for February was 4% above its year-earlier level. Capacity use for total industry edged down to 78.7%, a rate 1.2 percentage points above its level from a year earlier but 1.6 percentage points below its long-run (1972--2011) average. For Industrial Production and Capacity Utilization, use the link …

News of the Competition (03/15/2012)

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MADISON, Wis. (3/16/12)

  • Facing a bleak growth picture, U.S. community banks are beginning to reconsider loan participations with their competitors to wrest commercial loans away from bigger banks (American Banker March 14). Previously, loan participations were riddled with distrust when the imploding real estate market hurt alliances among bankers, the publication said. Although there is heightened interest, bankers say participations have not picked up very quickly in the aftermath of past deals not working out--which left some banks to absorb losses after the lead bank failed, the Banker said …
  • The Federal Reserve Tuesday rejected CitiGroup's plan to return capital to shareholders as part of Citi's stress tests, according to sources familiar with the matter (The Wall Street Journal March 15). The rejection was a surprise to investors and executives and created a setback to Citi CEO Vikram Pandit's effort to restore investor confidence in the bank, the Journal said. Citi executives had repeatedly stated their intentions of returning capital to shareholders through share buybacks or dividends in 2012, the sources said   …

Market News (03/15/2012)

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MADISON, Wis. (3/16/12)

  • Initial claims for U.S. unemployment benefits last week dropped to a four-year low, adding to evidence that the labor market is on the upswing (The New York Times, The Wall Street Journal and Bloomberg.com March 15). Claims declined 14,000--to a seasonally adjusted 351,000--for the week ended March 10, the Labor Department said Thursday. Companies have reduced the pace of job cuts and are upsizing their work forces because sales and confidence have risen and the threat of financial spillover from the European financial crisis lessens, Bloomberg said. Meanwhile, continuing claims for unemployment benefits for the week ended March 3 fell to 3.343 million from 3.424 million the prior week (Moody's Economy.com March 15). The four-week, moving average of claims--which smoothes weekly volatility--remained at 355,750. The pace of job increases is likely to continue, Kevin Cummins, an economist at UBS Securities LLC in Stamford, Conn., told Bloomberg ...
  • U.S. foreclosure filings dropped 8% in February--the lowest year-over-year decline since October 2010--because lenders have started unclogging the backlogged pipeline of seized properties, RealtyTrac Inc. said (Bloomberg.com March 15). Last month, 206,900 homes received notices of default, repossession or auction--a 2% drop from January, the data firm, based in Irvine, Calif., said in a report released Thursday. One in every 637 households received a filing, RealtyTrac added …
  • With increases in employment providing U.S. citizens the wherewithal to absorb rising fuel costs, the largest global economy will gather strength throughout this year, according to a Bloomberg News survey of economists (Bloomberg.com March 14). They forecast gross domestic product will rise at a 2.5% annual rate in the fourth quarter of 2012--up from 2% in the first quarter. For this entire year, the U.S. economy may grow at 2.2%--picking up from the 1.7% rate in 2011. The expansion will be driven by more hiring, improving confidence, rising stock prices and stability in the housing market, the survey indicated  …

News of the Competition (03/14/2012)

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MADISON, Wis. (3/15/12)

  • An internal review conducted by JP Morgan Chase and Co. indicated there were some procedural issues related to its collections operations, but no problems with its recordkeeping (American Banker March 13). The bank issued a statement on the matter Tuesday in response to an article in the Banker that questioned the reliability of its records in regard to collections and credit card litigation. The review was started, the Banker said, because of mortgage documentation problems at the bank and other big financial institutions last year, Chase's statement suggested. Chase declined to elaborate, the Banker said ...
  • In efforts to compete with larger rivals, SunTrust Banks Inc. intends to launch digital deposit technology by the fall to upgrade the systems used by its checking customers (American Banker March 13). With SunTrust's new remote-deposit capture system, customers can use their smartphones to take pictures of their checks and submit their deposits electronically--a capability that customers are demanding, the Banker said …

Market News (03/14/2012)

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MADISON, Wis. (3/15/12)

  • The Mortgage Bankers Association (MBA) said U.S. mortgage applications declined 2.4% for the week ended March 9 from one week earlier. According to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by MBA, the refinance share of mortgage activity decreased to 75.1% of total applications. This is the fourth consecutive weekly decline in refinance share, which is at its lowest level since Nov. 25. The adjustable-rate mortgage share of activity increased to 5.8% from 5.4% of total applications. "Applications for home purchase increased again last week, coinciding with another strong job market report," said Michael Fratantoni, MBA vice president of research and economics. "Purchase applications are now almost 12% above the level one month ago, even after adjusting for typical seasonal patterns. However, this level of purchase activity, adjusted or unadjusted, was essentially unchanged when compared to the same time last year," he said. "Purchase activity remains subdued and within the narrow range we have seen since the expiration of the homebuyer tax credit in 2010. Refinance application volume fell last week. Although rates were unchanged on average, they trended up through the course of the week, and this likely discouraged many potential refinance applicants. Home Affordable Refinance Program (HARP) volume continued to grow as a share of total refinance volume, reaching roughly 30% of refinance activity in the last two weeks. Typical HARP loans had loan-to-value ratios above 90%, indicating that lenders are reaching out to underwater borrowers," said Frantantoni. For   the MBA report, use the link …
  • The U.S. current account deficit--the broadest gauge of U.S. net exports to the rest of the world--grew more than forecast in the fourth quarter to $124.1 billion--the largest amount in three years (Bloomberg.com and Moody's Economy.com March 14). That constitutes a 15% rise from a $107.6 billion shortfall in the previous quarter, the Commerce Department said Wednesday. U.S. imports may keep increasing because of an improving job market, which is the foundation of consumer spending, and as businesses replace antiquated equipment, Bloomberg said. The widening of the current account deficit indicates the relative rate of growth of the U.S economy, compared with other countries' economies, Jeffrey Lawson, a senior U.S. economist at BNP Paribas in New York, told Bloomberg. Because U.S. imports are on track to outpace exports, there is a good chance the deficit will again widen, he added …
  • For the first time in three months, import prices in the U.S. climbed 0.4% in February, suggesting possible inflationary pressures (The Wall Street Journal March 14). However, the rise was less than forecast because of the largest decline in food costs in three years (Bloomberg.com March 14). Economists had forecast the measure would increase 0.6%, according to a Bloomberg News survey. Prices excluding fuel dropped 0.1%. That indicates well-controlled non-energy costs, and also how the strength of the dollar has kept import prices down, Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., told Bloomberg

Feds stance on low rates has consequences for CUs--CUNA

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WASHINGTON (3/14/12)--The Federal Reserve's stance on the continued low targeted range of the federal funds rate at 0% to 0.25% has consequences for credit unions, including a possible historic low net interest margin,  according to a Credit Union National Association (CUNA) economist.

The Federal Open Market Committee (FOMC)--the Fed's monetary policymaking group--Tuesday announced it would keep the federal funds rate at that low level and that conditions likely would warrant exceptionally low levels for the rate "at least through late 2014."

"Even though the Fed's FOMC statement was slightly more optimistic regarding economic activity and the labor market, it also reiterated that  'economic conditions….are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.' The big question facing credit unions today is whether the Fed can wait until late 2014 to raise short-term interest rates if the economy improves faster than expected," said Steve Rick, senior economist at CUNA.

"The answer to this question will help determine the term structure of their credit union's investment portfolio.  Credit unions who believe the Fed will raise short-term rates sooner rather than later have shortened their investment portfolio's average maturity," Rick told News Now

He noted the Fed has kept the short-term interest rates in the 0% to 0.25% range since December 2008--close to 40 months.

"This is still having a negative impact on credit union net interest margins (yield on assets minus cost of funds)," he said. "During the fourth quarter of 2011, credit union net interest margins fell to 3.03% from 3.12% in the third quarter of 2011 and 3.22% in the fourth quarter of 2010.  More than likely we will see credit union net interest margins fall below 3% for the first time in credit union history in the first quarter of 2012."

Another consequence of the Fed's expansionary monetary policy is the very rapid growth in the nation's money supply, he said. "Currently, the monetary aggregate M1, defined as currency plus checking deposit, is growing at a year-over-year growth rate of 19.3%, significantly above its 20-year average 4.5% growth rate.  This has raised concern among some of rapid future inflation even though market-based inflation expectations remain stable.  The low interest rate environment has significantly changed the mix of credit union deposits, from higher cost share certificates to low cost money market accounts and regular shares," Rick added.

In its post-meeting statement Tuesday afternoon, the FOMC said it would continue its Operation Twist program to extend the average maturity of its holdings of securities as announced in September. It will "maintain its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction," the statement said. It also will regularly review these holdings' size and composition and "is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability."

Noting that the economy has been expanding moderately, with labor market conditions improved and unemployment rate declined, with advances in household spending and business fixed investments, the FOMC also said that "inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable." 

The committee "expects moderate economic growth over coming quarters and consequently anticipates that the unemployment rate will decline gradually toward levels that the committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices will push up inflation temporarily, but the committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate," said the committee.

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

Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.

News of the Competition (03/13/2012)

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MADISON, Wis. (3/14/12)

  • An all-encompassing review by federal investigators revealed that managers at big U.S. banks ignored extensive errors in overseeing the foreclosure process, to the extent that they instructed--in some instances--employees to take on phony titles and rush documentation through the system despite internal protests (The New York Times March 12). Low-level employees have been blamed for mistakes, as the banks ascribe a significant number of the problems to the spike in foreclosures following the implosion of the housing market and the weakening of the economy in 2008. However, managers knew of the problems and took no action to correct them, the report by the inspector general of the Department of Housing and Urban Development concluded …
  • With fewer customers regularly making trips to their local bank branches, as online banking grows, bankers are divided on how to address the problem (American Banker March 12). While some bankers predict the extinction of physical brick-and-mortar storefronts, others see a place for them in the future--although the traditional branch model must adapt to stay relevant, some say. For instance, Umpqua Bank's branches often feature activities such as yoga classes and video-game sessions to lure customers, Raymond Davis, Umpqua CEO, told the Banker. However, although customers generally say they want a physical banking location--because of the psychological need to have someone to talk to if there is a banking problem-- most are not visiting branches, Brett King who recently founded a branchless online institution, told the Banker. A physical location won't be needed for the new generation of bank customers, he added. King will be a keynoter at the Credit Union Association of New York's annual meeting in June (News Now March 19) …

Market News (03/13/2012)

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MADISON, Wis. (3/14/12)

  • U.S. consumers are more confident that the real estate market will start its recovery as soon as next year, according to a Prudential Real Estate survey conducted in February and released Tuesday (Bloomberg.com March 13). About 60% of survey respondents had positive views about the housing market, and 70% said they think property values will improve during the next two years. Roughly 63% of respondents said real estate is a sound investment--up from 52% last year. This is the second consecutive year that consumer confidence in housing has improved, indicating the market may be coming out of it deep malaise, said Stephen Van Anden, chief marketing officer for Prudential Real Estate …
  • With spending on the rise at auto dealerships, clothing stores and gas stations, U.S. retail sales in February grew at the fastest pace in five months (The Wall Street Journal, Bloomberg.com and Moody's Economy.com March 13). Retail and food services sales climbed 1.1% from January to a seasonally adjusted $407.81 billion, the Commerce Department said Tuesday. Year-over-year sales increased 6.5%. Auto sales led the way in February, rising 1.6% from January, and they were 6.9% higher than a year earlier. Higher gasoline prices have not daunted consumers, Jonathan Basile, an economist at Credit Suisse in New York, told Bloomberg, adding that it is a nice surprise for the overall economy's outlook. In a related matter, the International Council of Shopping Centers (ICSC) chain-store sales index rose 0.7% for the week ended March 10 from the prior week (Moody's Economy.com March 13). Pent-up demand and warm weather combined to help boost sales, ICSC said ...
  • Small businesses in the U.S. have more confidence in the economy, which is a positive trend for hiring and growth late in the first quarter and into the second quarter, according to the National Federation of Independent Business (NFIB) Index (Moody's Economy.com March 13). The index rose to 94.3 in February from 93.9 in January--the sixth consecutive monthly gain. The index is at its highest level since February 2011 and well above its fourth quarter average, NFIB said. One of the noteworthy aspects of the report was an improvement in the net percentage of companies looking to increase worker compensation, NFIB said …

NEW Fed holds steady on low rates

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WASHINGTON (Filed 3/13/12 at 2:50 p.m. ET)--The Federal Reserve's monetary policymakers today announced the Fed would keep the target range for the federal funds rate at 0% to 0.25% and that conditions likely would warrant exceptionally low levels for the rate "at least through late 2014."

The Federal Open Market Committee (FOMC) also said it would continue its Operation Twist program to extend the average maturity of its holdings of securities as announced in September. It will "maintain its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction." It also will regularly review these holdings' size and composition and "is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability."

Noting that the economy has been expanding moderately, with  labor market conditions improved and unemployment rate declined, and advances in household spending and business fixed investments, the FOMC also said that "inflation has been subdued in recent months, although prices of crude oil and gasoline have increased lately. Longer-term inflation expectations have remained stable."  

The committee "expects moderate economic growth over coming quarters and consequently anticipates that the unemployment rate will decline gradually toward levels that the committee judges to be consistent with its dual mandate. Strains in global financial markets have eased, though they continue to pose significant downside risks to the economic outlook. The recent increase in oil and gasoline prices will push up inflation temporarily, but the committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate," said the FOMC in its statement after  today's meeting.

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

Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.

News of the Competition (03/12/2012)

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MADISON, Wis. (3/13/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced one bank closure Friday for a total of 13 closures so far in 2012. There were 92 bank closures in 2011. New City Bank, Chicago, was closed by the Illinois Department of Financial and Professional Regulation--Division of Banking, which appointed the FDIC as the receiver. The FDIC was unable to find another financial institution to take over the banking operations of New City Bank. The bank had roughly $71.2 million in assets as of Dec. 31. The FDIC estimates the most recent failure will cost its Deposit Insurance Fund about $17.4 million …
  • Mortgage industry employment nationwide declined by 3,200 full-time jobs in January--to 262,100 from 265,300 in December, according to the U.S. Bureau of Labor Statistics (American Banker March 9). Overall, the number of jobs in the mortgage banking and broker sector declined nearly 4% from one year ago ...
  • If they receive passing grades on the Federal Reserve's annual stress test, Citigroup Inc. and Wells Fargo & Co. may join other banks paying out more than $9 billion in dividend increases and share buybacks (Bloomberg.com March 12). Of the 19 biggest U.S. lenders, 13 say they'll distribute $3.79 billion in extra dividends in 2012 and purchase $5.52 billion of additional shares, according to six analysts' estimates compiled by Bloomberg. Investors are urging lenders to restore buybacks and dividends to levels that existed before the financial crisis. They were essentially eliminated under the U.S. bailouts' terms …
  • After several months of negotiation, 49 state attorneys general and the federal government have reached agreement on a joint state-federal settlement with the country's five largest loan servicers: Ally/GMAC, Bank of America, Citi, JPMorgan Chase and Wells Fargo. The settlement will provide as much as $25 billion in relief to distressed borrowers and direct payments to states and the federal government. It's the largest multistate settlement since the Tobacco Settlement in 1998. The documents for the national mortgage settlement  were filed in the U.S District Court for the District of Columbia Monday …

Market News (03/12/2012)

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MADISON, Wis.  (3/13/12)

  • Business confidence worldwide may finally be improving, according to the Moody's Analytics Survey of Business Confidence (Moody's Economy.com March 12). Businesses are more optimistic in broadly assessing current business conditions. Expectations about their performance later in 2012 also are on the upswing, Moody's said. However, businesses still are cautious when answering specific questions about hiring and investment, which doesn't fit with the significantly better employment numbers in the U.S., Moody's said. Businesses are reporting that pricing pressures are building for the first time since the oil-price increases occurred. Survey results are consonant with a worldwide economy growing at the low end of its potential, Moody's concluded …
  • In the first two months of 2012, U.S. banks purchased more government and related debt than they did in all of 2011 (Bloomberg.com March 12). In January and February, commercial lenders bought $72.8 billion worth of Treasuries and securities of agencies, compared with $62.6 billion in 2011. High unemployment, the scheduled end of the Bush-era tax cuts, the presidential election campaign and a mandatory $1 trillion reduction in the  federal budget over 10 years have made banks reluctant to increase lending, Bloomberg said. Rather than providing credit, banks are cashing in the gap between the Fed's target interest rate of overnight loans and Treasury yields, Bloomberg said …
  • A rebound in car sales is allowing banks to boost their profits as their auto-lending operations search for ways to grow still-lethargic consumer loans (American Banker March 9). Companies that include Capital One Financial Corp., Huntington Bancshares Inc., JPMorgan Chase & Co. and Wells Fargo & Co. are seeing more auto loan originations, while more competition among lenders is pushing their profit margins down, the Banker said. With no opportunity in other consumer products, banks are returning to auto lending, Nick Stanutz, Huntington president of auto finance, told the Banker

News of the Competition (03/09/2012)

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MADISON, Wis. (3/12/12)

  • Wells Fargo & Co. will expand a pilot program that will result in more customers being charged a monthly fee on their checking accounts (American Banker March 8). This spring, Wells Fargo will begin charging customers in six additional states--Connecticut, Delaware, Georgia, New Jersey, New York and Pennsylvania--a monthly fee of $7 to use its Essential Checking account, unless those customers maintain  a minimum balance or make monthly direct deposits, according to a Thursday CNNMoney report. Customers in 23 other states have been paying the $7 fee since last year (Pennsylvania Credit Union Association's Life is a Highway March 9). The bank has branches in 39 states …
  • With the Federal Deposit Insurance Corp. (FDIC) seeking billions in damages from former executives for their roles in the failure of banks, the burden of proof lies on the FDIC to show that a bad business strategy justifies legal culpability for a bank's failure (American Banker March 8). Although a U.S. Supreme Court case from the 1990s and federal law figured to provide guidance, states still have the power to set the FDIC's requirement for establishing legal blame, the Banker said. The state courts are moving in different directions, because of varying analyses for each state's applicable rule, Kevin N. LaCroix, an attorney and executive vice president at OakBridge Insurance Services, told the Banker. The two main accusations that FDIC levies against failed bank officers and directors are at issue: "simple negligence" and "gross negligence," the Banker said. The former implies someone meant to act in the bank's best interest but made careless decisions that hurt the institution. The latter--which is more difficult to prove--indicates decisions were intentional and reckless …
  • Bank of America (BofA) negotiated a side deal--as part of the recent $25 billion settlement between U.S. government officials and five large lenders for alleged foreclosure abuses--that will provide more than 200,000 financially troubled households an opportunity to steeply cut their mortgage balances (The Wall Street Journal March 8).  BofA will make deeper and broader cuts in balances than other banks, and it could avoid as much as $850 million in penalties, the Journal said …

Market News (03/09/2012)

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MADISON, Wis. (3/12/12)

  • U.S. employers added 227,000 jobs in February--constituting the third consecutive month of job gains of more than 200,000. The gains culminated in the best six-month run of job growth since 2006 and one of the economy's best periods in the nearly three-year recovery (The New York Times, Bloomberg.com and The Wall Street Journal March 9). Last month's gain follows a 284,000 increase in January that was larger than originally estimated, the Labor Department said Friday. Private companies drove the hiring, adding 233,000 jobs last month, which more than mitigated the 6,000 job cuts by government, Labor Department figures indicated. In the past few months, the labor market has hit its stride, and it appears there is enough of a broad base for sustaining momentum, Julia Coronado, chief economist for North America at BNP Paribas in New York, told Bloomberg. In a related matter, the U.S. Monster Employment Index--which measures help-wanted ads placed online by U.S. employers--rose 10 points to a level of 143 between January and February, which is an 8% gain  (Moody's Economy.com March 9) …
  • The trade gap in the U.S. widened in January to its largest amount in more than three years because imports climbed to a record high, while exports to China and the debt-ridden euro zone nose-dived (The Wall Street Journal and Bloomberg.com March 9). The national trade deficit in international goods and services increased 4.3% to $52.57 billion from $50.42 billion in December, the Commerce Department said Friday. In January, imports of autos and auto parts, beverages, capital goods and food hit historical highs, the Journal said. Strengthening consumer spending on cars and trucks is one of the causes of the increase in imports, suggesting a promising time for autos, Omar Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Conn., told Bloomberg. U.S. exports also are doing well and are a major component of the economic recovery, he added ...
  • The Economic Cycle Research (ECRI) Weekly Leading Index--which measures economic growth--increased to 124.3 for the week ended March 2 from a revised 124.1 the prior week (Moody's Economy.com March 9). The smoothed, annualized growth rate climbed to -2.6% from -3%. Both those stronger readings are consonant with improving data, suggesting the U.S. economy should be able to avoid slipping back into a recession, ECRI said. Also, ECRI's Future Inflation Gauge registered a 101.4 reading in February--unchanged from the revised January figure--previously 101.2 (Moody's Economy.com March 9). The  index's overall level reflects modest inflationary pressures, ECRI said …

News of the Competition (03/08/2012)

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MADISON, Wis. (3/9/12)

  • If Federal Reserve officials decide to implement measures to boost the U.S. economy in the coming months, they will consider a new type of bond-buying program aimed at calming concerns about future inflation (The Wall Street Journal March 7). With the new program, the Fed would print money to purchase long-term mortgage or U.S. Treasury bonds, but also effectually quarantine that money by borrowing it back at low rates for short periods of time. The goal of the approach is to quell a broadly voiced worry by critics of the Fed's past efforts to boost the  economic recovery--that printing more money could stimulate inflation later …
  • U.S. banks still are keeping credit card lines of credit in check nearly a year after credit card loans bottomed out (American Banker March 7). In mid-2008, the total of revolving debt and unused credit card lines hit their zenith at $5.7 trillion before nose-diving more than 30% in the third quarter of 2011. Overall, unused lines of credit have declined in 12 of the 14 past quarters, according to data compiled by the Federal Deposit Insurance Corp. While credit line issuers have returned to seeking loan growth, the industry seems to be keeping borrowers on a strict diet, the Banker said …

Market News (03/08/2012)

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MADISON, Wis. (3/9/12)

  • For the third consecutive week, initial claims for U.S. unemployment benefits increased, indicating the labor mark remains unsteady, although the overall unemployment level remained low enough to suggest the labor market is getting stronger (The Wall Street Journal, The New York Times and Moody's Economy.com March 8). Claims rose 8,000--to a seasonally adjusted 362,000--for the week ended March 3, the U.S. Labor Department said Thursday. The four-week moving average of claims--which evens out week-to-week volatility--crept up to 355,000--250 more than the prior week. Even with the slight rise in claims last week, the downward trend in claims is being sustained, Eric Green, chief market economist at TD Securities Inc. in New York, told Bloomberg. The shift to an increased level of job activity is in place, he added. In a related matter, the Challenger Report for February indicated layoffs totaled 51,728 in February--down 3.3% from January (Moody's Economy.com March 8). Meanwhile, continuing claims for unemployment for the week ended Feb. 25 rose to 3.416 million from 3.406 million the previous week ...
  • U.S. consumer confidence rose to a four-year high last week, because more citizens said the economy was improving and then purchased more, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com March 8). The index was -36.7 for the week ended March 4--the highest level since April 2008--up from -38.8 the prior week. Consumer moods improved in all three segments of the survey: views on the buying climate, the state of the economy, and perceptions of personal finances, Moody's said. The recent rise in gasoline prices has been mostly mitigated by consumers becoming more comfortable about their personal financial matters, Joe Brusuelas, a senior economist at Bloomberg LP in New York, told Bloomberg. However, from a historical  perspective, consumer confidence still is at the low end of the spectrum, he added …

Borrowers get 2 billion more in Jan. from CUs

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WASHINGTON (3/8/12)--Consumers increased their borrowing in January by an annual rate of 8.5% to $2.51 trillion--higher than  expected, according to the Federal Reserve's Consumer Credit report released Wednesday. Members borrowed $2 billion more from credit unions than they did in December.

The sharp increase of $17.8 billion--mostly due to consumers taking out more auto and student loans--was more than the $10.5 billion median forecast of economists surveyed by Bloomberg News (Bloomberg.com March 7) and the $10 billion increase expected by economists surveyed by Reuters (Reuters.com  March 7) .

Credit unions saw their members borrow $225.4 billion, up from $223 billion in December and up from $218.1 billion in first quarter of 2011, according to the Fed's report.

Nonrevolving credit, which includes auto loans and student loans made by the government, rose $20.7 billion or at an14.75% annual rate to $1.711.4 trillion. That is the largest increase, dollarwise,  since November 2001, when credit surged after the Sept. 11 terrorist attacks, said Reuters.

Federal student credit outstanding rose to $453 billion from December's $425 billion in loans. January's figure is a four-fold increase from 2008, indicating that the recessions' high jobless rate has prompted many people to return to school, said Bloomberg.

The Fed's report does not track loans generated by real estate, such as home equity lines of credit.

At credit unions,  nonrevolving credit for January totaled $188.2 billion, up from $185.1 billion in December and $183.1 billion in first quarter of 2010.

Revolving credit, which measures credit card use, decreased at a 5.4% annual rate to $800.9 billion for January, said the Fed.  It was the first decline in five months, down by $2.95 billion from December's $803.8 billion.

At credit unions, revolving credit totaled $37.4 billion, down from $37.9 billion in December  but higher than first quarter 2011's revolving credit totaling $35 billion.

Bloomberg said consumers may be paying down credit cards after running up debt during the holidays, or they may be holding back some purchases because of unease about the economy.

News of the Competition (03/07/2012)

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MADISON, Wis. (3/8/12)

  • January foreclosure sales surged because banks and government agencies began to reduce the glut of properties that had been stuck in the foreclosure pipeline for several years, according to data released Tuesday by Lender Processing Services Inc. (American Banker March 6). Foreclosure sales jumped 29% in January from a year earlier, while the number of newly initiated foreclosures increased 28% in the same period. The foreclosure sales spike comes in the wake of the five biggest U.S. mortgage servicers agreeing to a $25 billion settlement with state and local officials, the Banker said. After wide-ranging robo-signing  practices were uncovered in 2010, banks slowed down their foreclosure processes …
  • By 2016, the number of annual contactless or proximity mobile payments made will be close to 9.9 billion, according to research firm NPD In-Stat (American Banker March 6). That would constitute nearly a tenfold jump from the estimated 1.1 billion contactless mobile payments forecast to be transacted in 2012. This year, remote mobile payments are expected to account for nearly $226 billion worth of business …

Market News (03/07/2012)

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MADISON, Wis. (3/8/12)

  • U.S. mortgage application volume declined 1.2% for the week ended March 2 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). Last week's results included an adjustment for the President's Day holiday. The index dropped 1.2% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index increased 10.2%. The Refinance Index fell 2%. The seasonally adjusted Purchase Index rose 2.1%. The unadjusted Purchase Index climbed 14.7% and was 7.8% lower than the same week one year ago. The refinance share of mortgage activity decreased to 77% of total applications, the lowest since December, from 77.9% the previous week. Adjustable-rate mortgages increased to 5.4% from 5% of total applications. For the MBA report, use the link …
  • Private businesses in the U.S. added more jobs than expected in February, propelled by small-business hiring, according to a report released Wednesday by payrolls processor Automatic Data Processing Inc. (ADP) and consultancy Macroeconomic Advisers (The Wall Street Journal, The New York Times and Bloomberg.com March 7). The private sector added 216,00 jobs last month, ADP said, which exceeded economists' forecasts for a gain of 208,000, the Times said. Also, January's private payroll tally was revised upward to a 173,000 gain from 170,000. All the components in the labor market are suggesting broader employment gains, Troy Davig, a senior U.S. economist at Barclay's Capital in New York, told Bloomberg. More consistent incomes for consumers will spawn more consumption going forward, and that will begin creating a stronger foundation for growth, he added …
  • With confidence in the economy rising to the highest level in a year, U.S. companies are primed to increase hiring, according to a quarterly survey of chief financial officers released Wednesday (Bloomberg.com March 7). A measure of the executives' optimism in the U.S. economy increased to 59.2 for the first quarter from 53.3 in the fourth quarter of 2011, said a report from Duke University/CFO Magazine. Managers surveyed intend to boost payrolls by 2.1% during the next 12 months--the largest gain since mid-2006. A 2.1% gain would represent an increase of 2.32 million private payroll jobs. In 2011, companies bolstered staff levels by 2.09 million workers …
  • Nonfarm business productivity in the U.S. climbed at a slower rate in the fourth quarter, and labor costs surged--a sign that businesses are at the limit of squeezing their work forces for more efficiency (Bloomberg.com and Moody's Economy.com March 7). The gauge of employee output per hour increased at a 0.9% annual rate following a 1.8% rate in the third quarter, the Labor Department said Wednesday. Expenses per worker rose at a 2.8% rate--more than twice what was previously estimated. As businesses gain more confidence in the economic expansion and hire more workers to keep pace with consumer demand, productivity likely will remain muted, Bloomberg said. Climbing labor costs and slowing worker efficiency may place downward pressure on corporate profits, Bloomberg added …

News of the Competition (03/06/2012)

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MADISON, Wis. (3/7/12)

  • Hundreds of municipalities have passed ordinances forcing mortgage servicers to pay higher fees, post bonds of $10,000 or more for every vacant property to cover repairs, and register homes that could be involved in foreclosure proceedings. Municipalities claim the ordinances help them collect data while keeping vacant and foreclosed homes in good repair to prevent neighborhood blight (American Banker March 6). However, the financial institutions, investors and government-sponsored entities that must pay the fees claim the ordinances add millions to their costs, which could increase to billions as other municipalities follow suit. Chula Vista, Calif., was the first city to pass an ordinance that set fees and required bonds in 2007 and raised $77,000 in fees and $850,000 in citations in the first year. California and Florida each have more than 100 municipalities that passed such ordinances. The highest fees are charged in Minneapolis where owners who commit code violations must pay $6,000 to register a vacant property. The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, challenged the constitutionality of the Chicago's vacant property registration fee in a lawsuit filed in December …
  • Consumers who carry Barclaycard US's Ring MasterCard will have access to the product's monthly profit-and-loss statement, along with the ability to see how pricing is impacted by adopting or removing features such paper statements. Cardholders also will gain the opportunity to vote on proposed changes, such as increases to late fees or interest rates (American Banker March 6). Barclaycard US even expects to share profits after the product's earnings reach a pre-set threshold, which has yet to be released. Cardholders will access information by going to Barclaycard's website and then visiting a private social network. The Ring MasterCard will be targeted to consumers who tend to carry a balance, and will be promoted on Facebook and Twitter …

Market News (03/06/2012)

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MADISON, Wis. (3/7/12)

  • Tornadoes that swept a 12-state area of the Midwest last week caused insured losses estimated to be at least $1 billion and potentially as much as $2 billion. The initial loss estimate by catastrophe modeler EQECAT is the result of two storm systems that generated 150 tornadoes as well as hail and strong winds from Feb. 28 to March 3. The modeler shows 272 tornadoes occurred as of March 4, which compares with a seven-year average of 123 during the same time period. The hardest hit states were Tennessee, Kentucky, Indiana, Illinois and Alabama, according to EQECAT, with most of the 49 deaths taking place on March 2 in Kentucky and Indiana. Snow fell in both states within a few days, complicating recovery efforts (NU Online News Service March 6). The record for costliest tornado damage was set by the May 2011 tornado in Joplin, Mo., where the National Weather Service set total damages at $2.8 billion …
  • The European auto market remains mired in a slump, with most manufacturers' sales lower than expected as consumers respond to the sovereign debt crisis by reining in spending. Toyota and BMW recently projected a European sales decline of 5% in 2012, for a fifth consecutive year of sliding sales. The European Automobile Manufacturers Association reported that deliveries declined 6.6% to one million vehicles in January, which follows a 1.4% decrease in 2011 (Bloomberg.com March 6). Ford predicts a 2012 European loss of up to $600 million, while General Motors (GM) had a 2011 European loss of $747 million. Overcapacity remains a problem for European manufacturers, with Ford halting production on some days to reduce inventory. Manufacturers hope to use alliances to consolidate operations. GM recently announced an alliance with PSA Peugeot Citroen. Fiat, which owns a controlling interest in Chrysler Group LLC, is in discussions with Suzuki Motor Corp. and Mazda Motor Corp. Automakers also have increased European incentives and lowered prices to stimulate sales. Volkswagen remains Europe's largest manufacturer, increasing its share of sales to 23.3% this year from 21.3% in 2011 …

News of the Competition (03/05/2012)

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MADISON, Wis. (3/6/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced one bank closure Friday for a total of 12 closures so far in 2012. There were 92 bank closures in 2011. The FDIC estimates the most recent failure will cost its Deposit Insurance Fund about $17.9 million. Global Commerce Bank, Doraville, Ga., was assumed by Metro City Bank, Doraville, Ga. The bank had roughly $143.7 million in assets as of Dec. 31 …
  • The European Banking Authority (EBA) has asked the Internet Corporation for Assigned Names and Numbers (ICANN) to halt its intentions to allow new top-level domains or new endings for Web addresses--typically .com, .org, .edu or .gov (American Banker March 2). The EBA said these new domains could be employed as a component of a phishing attack and other crimes that deceive users into providing their personal information. In 2011, ICANN said it would allow a potentially limitless range of Web address endings. The EBA is a network of European Union and national organizations that advises regulators about financial stability, investor protection and market transparency …
  • The American International Group (AIG) Monday began attempts to raise roughly $6 billion by selling its share in Asian life insurer AIA Group Ltd. as it proceeds with plans to repay another part of its 2008 federal bailout (The Wall Street Journal March 5 and The New York Times March 4). AIG is putting up roughly 1.7 billion shares--about 14% of AIA--for sale with institutional investors and expects them to be priced by today. The shares are less than half the 32.9% stake AIG holds in AIA, according to a term sheet …

Market News (03/05/2012)

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MADISON, Wis. (3/6/12)

  • Businesses worldwide remain cautious on economic conditions, staying where sentiment has been since the end of 2011, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com March 5). Confidence has bounced back from the blow it took last summer during political wrangling over the U.S. Treasury debt ceiling and the European debt crisis, but still is subdued, Moody's said. Although businesses deem current economic conditions to be quite good, they are less positive about specific questions regarding hiring and investment. The recent spike in oil prices has not yet affected pricing pressures, Moody's said. Results of the confidence survey indicate the worldwide economy is growing at the low end of its potential,  Moody's concluded …
  • U.S. service industries unexpectedly grew in February at the fastest rate in a year, according to the Institute for Supply Management's (ISM) nonmanufacturing index (Bloomberg.com and Moody's Economy.com March 5). The index rose to 57.3 from 56.8 in January. Readings above 50 indicate expansion. Because service industries constitute about 90% of the U.S. economy, a rise in that sector would help economic expansion and drive more labor market gains that will help buoy household demand, Bloomberg said. However, escalating gasoline prices remain a risk to a recovery termed "uneven and modest" last week by Federal Reserve Chairman Ben S. Bernanke, Bloomberg said ...
  • U.S. factory orders in January fell for the first time in three months reflecting a decline in demand for machinery, steel and other big-ticket items and indicating manufacturing is leveling off at the beginning of the year (The Wall Street Journal, Bloomberg.com and Moody's Economy.com March 5). Orders declined 1%, and shipments of durable goods recorded 0.4% growth. Unfulfilled orders increased 0.6%, while inventories rose for the 25th consecutive month, Moody's said. Although manufacturing remains the strongest part  of the economic recovery, it is being threatened by a steep climb in energy prices and the uncertainty of future oil prices, Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pa., told Bloomberg

News of the Competition (03/02/2012)

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MADISON, Wis. (3/5/12)

  • Small U.S. banks are trying to have rules reinstated that they claim helped keep business deposits in local communities (American Banker March 1). The Dodd-Frank Act repealed a ban that prohibited banks from paying interest on business-checking accounts. Small businesses supported the repeal--enacted during the Great Depression--because they were frustrated by their inability to earn a return from their checking accounts, the Banker said. Business deposits now are primed to move to big banks such as Capital One--which pays interest on business checking accounts to fund its credit card lending, Cliff McCauley, senior executive president of Frost Bank, a $19 billion asset institution based in San Antonio, told the Banker. Large banks can pay a higher interest rate on deposits because of the high interest rates they obtain from their credit cards. Those banks will use this new higher-interest-rate tool in the future to attract deposits, he added …
  • Fannie Mae's secondary market purchases declined by 20% in January, while its competitor Freddie Mac saw a 10% gain. That may be a signal that the Fannie situation with Bank of America (BofA) could be affecting the businesses of the two government-sponsored enterprises, said American Banker (March 1). Fannie canceled an acquisition contract with BofA in late January, except for new purchase money orders, the Banker said. In January, Fannie bought $64 billion, compared with $80 billion in December. Freddie bought $34 billion of loans from its seller/servicers, compared with  $31 billion in December, the Banker said ...
  • About two dozen retailers--including Target Corp. and Wal-Mart Stores Inc.--are collaborating to develop a mobile payments system that would compete with similar products from big cell phone companies and Google, said sources familiar with the matter (The Wall Street Journal March 2). The move is an effort by merchants who have been stymied in dominating the quickly evolving market that turns cellphones into payment devices. That competition is pitting retailers against financial institutions, credit-card networks technology companies and telecommunications firms, the Journal said ... 

Market News (03/02/2012)

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MADISON, Wis. (3/5/12)

  • The Economic Cycle Research Institute (ECRI) weekly leading index climbed to 124.2 for the week ended Feb. 24 from a revised 123.1 the prior week (Moody's Economy.com March 2). The rate of decline of the smoothed annualized rate continued its improvement by slowing to -3--its highest level since early August--from -3.5 the prior week, and -6.6 a month ago. The U.S. economy currently is in vulnerable condition. However, improvements to the economy in December and January combined with robust performance of the stock market in February suggest the economy has the potential to make solid progress, ECRI said. Despite substantial  improvement in its own indexes, ECRI is standing by its September forecast that another recession is imminent  …
  • U.S. manufacturing grew at a slower rate than expected in February because factory orders slackened, according to the Institute for Supply Management's (ISM) factory index  (Bloomberg.com and Moody's Economy.com March 1). The index decreased to 52.4 from 54.1 in January. Readings above 50 indicate growth. Economists had forecast an increase to 54.5, according to a Bloomberg News survey. New orders led the decline, falling to 54.9 from 57.6, Moody's said. There is a good likelihood that manufacturing growth will slow heading into midyear, because energy prices are rising and the lift from increased inventories is fading, Aaron Smith, a senior economist at Moody's Analytics Inc. in West Chester, Pa., told Bloomberg ...
  • Ford Motor Co. and Chrysler Group reported significant auto sales growth in February despite escalating gasoline prices, the automakers and analysts said Thursday (The New York Times March 1). Chrysler said its sales jumped 40% from February 2011 aided by a doubling in passenger car sales--boosted by a high-impact Super Bowl ad featuring actor Clint Eastwood. Ford reported a 14% gain during that period, with sales of its compact car, the Focus, spiking 115%. Those sales increases occurred despite gasoline prices increasing for 23 consecutive days through Thursday, according to the AAA motor club. The national average for regular gasoline is 10% more than a year ago at about $3.74 per gallon …

News of the Competition (03/01/2012)

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MADISON, Wis. (3/2/12)

  • Bank of America Corp. (BofA) is considering a wholesale revamping of its fee structure that would require many of its basic checking account users to pay a monthly fee unless they agree to maintain specific balances in their accounts, use online banking or buy more products from the bank (The Wall Street Journal March 1). The intentions of the second-biggest U.S. bank by assets reflect the pressures the banking industry is expecting during times of slow economic growth, low interest rates and new rules that limit many categories of service charges, the Journal said. Several other big banks such as JPMorgan Chase & Co.--the largest U.S. bank--and Wells Fargo & Co. have revealed plans to raise fee revenue or incentivize customers to do more business with them, the Journal said …
  • To attract emerging affluent investors, Bank of America (BofA) has added a new investment offering to its Merrill Edge program for mass-affluent investors, BofA announced Wednesday (American Banker Feb. 29). Merrill Edge Select portfolios, aimed at the "middle class and emerging affluent investor'' give customers access to actively managed diversified portfolios--ranging from conservative to aggressive--the Banker said. The minimum investment required is $20,000, and the management fee is annualized at 1% …

Market News (03/01/2012)

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MADISON, Wis. (3/2/12)

  • Initial claims for U.S. unemployment benefits last week fell to their lowest level in four years, adding to indications that the U.S labor market is continuing to get better (The New York Times and Bloomberg.com March 1). For the week ended Feb. 25, claims declined 2,000--to 351,000--from the prior week, the Labor Department said Thursday. The four-week average of claims, which smooths out weekly volatility of data, also dropped last week to 354,000--the lowest figure in four years. As employers gain confidence in the economic growth outlook, job cuts are trending downward. Fewer job cuts also place companies in a position to hire more employees as demand for their goods and services increases, Bloomberg said. Meanwhile, continuing claims for unemployment benefits for the week ended Feb. 18 slid to 3.402 million from 3.404 million the previous week (Moody's Economy.com March 1) ...
  • U.S. consumer confidence remained close to a four-year high last week because there was less negativity about the economy's performance, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com March 1). The index was -38.8 for the period ended Feb. 26, after it hit -38.4 the prior week--the highest level since April 2008. Last week was the third consecutive week the index was above -40, which is the level associated with recessions and their aftermath. A stabilizing labor market and rising stock prices seem to mitigate escalating gas prices, Joe Brusuelas, a senior economist at Bloomberg LP in New York, told Bloomberg. However, consumer confidence likely will erode if gasoline prices continue to rise, he added …
  • Consumer spending increased less than expected in January, even though personal incomes rose, indicating people may still be uncertain about the gradually recovering economy (The Wall Street Journal and Bloomberg.com March 1). Purchases went up 0.2% while incomes climbed 0.3%, the Commerce Department said Thursday. Economists had forecast a 0.4% increase in spending and incomes, according to a Dow Jones Newswires survey. Rising gasoline prices and declining home prices may make households--whose spending constitutes 70% of the U.S. economy--reluctant to increase their purchases, Bloomberg said. Larger rises in employment and wages may be necessary to provide consumers with the confidence to increase their spending, Bloomberg added …
  • Contrary to foreign governments and banks, individual foreign buyers are capitalizing on the U.S. housing market implosion to buy U.S. properties at a record pace (American Banker Feb. 29). Foreign buyers bought $41 billion worth of U.S. houses and apartments during the year-long period ending in March 2011--about the same as the prior year, according to figures provided by the National Association of Realtors. However, if the $41 billion spent by immigrants who moved here in the past two years and individuals with visas of more than six months is added to the mix, the total dollar amount of U.S. real estate taken off the market by international buyers is $82 billion--up from $66 billion the prior year, the Banker said …