Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

Market Archive

Market

News of the Competition (06/30/2011)

 Permanent link
MADISON, Wis. (7/1/11)
* U.S. District Judge Richard Berman in Manhattan approved a $153.6 million pact by JPMorgan Chase & Co.’s securities business to settle civil charges arising from a complex structured investment connected to mortgages, ruling it “fair and reasonable” (Dow Jones via American Banker June 29). As part of the settlement, JP Morgan did not admit or deny any wrongdoing. The judge’s approval clears a path for the Securities and Exchange Commission to attempt to levy penalties against other Wall Street firms because of transactions it said helped cause the financial crisis, Dow Jones said … * Lehman Brothers Holdings Inc. agreed to a $65 billion liquidation plan with derivatives creditors that include Goldman Sachs Group Inc. and bondholders led by hedge fund Paulson & Co. (Bloomberg News via American Banker June 30). The agreement ended a dispute that could have delayed Lehman’s exit from bankruptcy, Bloomberg said. The new plan provides more money to holders of guaranteed claims against the defunct company’s derivative and treasury units. Since it entered bankruptcy nearly three years ago, Lehman has twice changed its proposals to pay claims in response to creditor challenges, Bloomberg said ... * Bank of America Corp. (BofA) and Goldman Sachs Group Inc. are some of the financial companies cutting more than 1,300 jobs in attempts to curtail expenses and match revenue while equity and bond trading are slowing (Bloomberg.com June 30). BofA--the largest U.S. bank--eliminated roughly 60 positions in its equity-sales and trading division in June. And Goldman Sachs--the fifth largest U.S. bank by assets--plans to cut 230 jobs in New York beginning in September, according to a filing with the state’s Department of Labor …

Market News (06/30/2011)

 Permanent link
MADISON, Wis. (7/1/11)
* Initial claims for U.S. unemployment benefits declined last week, but the drop was too minimal to indicate a change in the stubbornly weak job market (The Wall Street Journal June 30). Claims fell 1,000--to a seasonally adjusted 428,000--for the week ended June 25, the Labor Department said Thursday. In recent months, weaker demand for goods and services has induced some companies to cut their work forces, which has added to worries that a waning labor market will further dampen consumer spending that constitutes roughly 70% of the economy (Bloomberg.com June 30). Meanwhile, continuing claims for unemployment benefits dropped by 12,000--to 3.697 million--for the week ended June 18. That figure excludes millions more on extended and emergency benefits (Moody’s Economy.com June 30) ... * U.S. consumer sentiment rose by 1 point, to -43.9 for the week ended June 26, according to the Bloomberg Consumer Confidence Index (Moody’s Economy.com June 30). Three key areas of the survey showed improvement: buying climate, personal finance, and state of the economy. Sentiment was mixed across regions, with the Northeast (-42.4) posting the biggest decline--down by 1.8 points. Sentiments in the Midwest and South improved. The slight improvement in the overall index still indicates consumers remain unsure about the economy because of obstacles such as higher gasoline prices and a sluggish housing market, Moody’s said … * U.S. business activity grew at a faster pace than expected in June because business orders and production accelerated, indicating manufacturing will continue to push growth in the world’s biggest economy (Bloomberg.com June 30). The Institute for Supply Management-Chicago Inc. said Thursday its business barometer rose to 61.1 from 56.6 in May. Economists polled in a Bloomberg News survey had forecast a decline to 54. Figures greater than 50 indicate economic expansion …

News of the Competition (06/29/2011)

 Permanent link
MADISON, Wis. (6/30/11)
* Bank of America Corp. (BofA) confirmed Wednesday morning it had agreed to pay $8.5 billion to settle claims by investors who lost money on their purchases of mortgage-backed securities before the U.S. housing implosion (The Wall Street Journal June 29). BofA’s payment is the biggest settlement of this type by a financial services firm--exceeding the profits of the bank since the beginning of the financial crisis in 2008, the Journal said. The settlement caps a nine-month battle with a group of 22 high-profile investors who hold mortgage-backed securities that had an original value of $105 billion. The settlement encompasses not only the 22 investors, but also investors in 530 separate bond deals. For all bonds covered by the deal, the original face value is $424 billion … * Through the use of social networks, credit card companies are creating ads that deliver valuable consumer data and are more interactive, say major card brands (American Banker June 29). Social media can be useful in helping identify consumers’ interests such as which brand and businesses they follow. When consumers indicate on Facebook that they “like” a company or product, it can create substantial brand presence and strength--providing marketers an inside track to target those consumers, the Banker said. Businesses that ignore social media are making a mistake because nearly everyone uses it in some form, and as it increasingly evolves into the main communications avenue for businesses and consumers alike, it can be extremely influential, Megan Bramlette, director of knowledge management at Auriemma Consulting Group, told the Banker … * A quarterly report by the Office of the Comptroller of the Currency and the Office of Thrift Supervision states, in part: “The performance of first-lien mortgages serviced by large national banks and federal thrifts improved during the first quarter of 2011 … (The quarterly report) … showed that 88.6% of the 32.7 million loans in the portfolio were current and performing at the end of the first quarter of 2011. While delinquencies and foreclosures remained elevated from historic norms, delinquencies improved across all risk categories and for all investors. Mortgages that were 30-59 days delinquent fell to 2.6% of the portfolio, the lowest level in three years. Mortgages more than 60 days past due and delinquent loans to bankrupt borrowers declined for the fifth consecutive quarter to 4.8% of the portfolio, the lowest level since the first quarter of 2009” …

Market News (06/29/2011)

 Permanent link
MADISON, Wis. (6/30/11)
* U.S. mortgage loan applications decreased 2.7% for the week ended June 24 from the previous week, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index declined 3%. The Refinance Index dropped 2.6%. The seasonally adjusted Purchase Index fell 3%. The unadjusted Purchase Index went down 3.8%, compared with the previous week and was 4.5% higher than the same week one year ago. The four-week moving average for the seasonally adjusted Market Index is up 0.7%. The four-week moving average is down 1.5% for the seasonally adjusted Purchase Index, and is up 1.5% for the Refinance Index. For the MBA report, use the link … * Pending home sales rose strongly in May with all U.S. regions experiencing gains from a year ago, pointing to higher housing activity in the second half of the year, according to the National Association of Realtors (NAR). The Pending Home Sales Index--a forward-looking indicator based on contract signings--rose 8.2% to 88.8 in May from an upwardly revised 82.1 in April and is 13.4% higher than the 78.3 reading in May 2010. The data reflect contracts but not closings, which normally occur with a lag time of one or two months. This is the first time since April 2010 that contract activity was above year-ago levels. The monthly gain was the strongest increase since November, when the index rose 10.6%. Lawrence Yun, NAR chief economist, said the improvement bodes well for home prices. “Absorption of inventory is the key to price improvement, and this solid gain in contract signings implies that home values in many localities are or will soon be stabilizing as inventories get absorbed at a faster pace,” he said. “Some markets have made a rapid turnaround, going from soft activity to contract signings rising by more than 30% from a year ago, including areas such as Hartford, Conn.; Indianapolis; Minneapolis; Houston; and Seattle.” For the NAR report, use the link … * The International Council of Shopping Centers (ICSC) U.S. chain stores sales index spiked 2.9% for the week ended June 25--the biggest weekly improvement since March 2010 (Moody’s Economy.com June 28). Although sales also increased steeply in the comparable week a year ago, year-over-year growth rose to 3%--the strongest performance in five weeks, ICSC said. Lower gasoline prices and hot weather reportedly sparked consumer shopping at retail malls--especially apparel stores, ICSC said …

News of the Competition (06/28/2011)

 Permanent link
MADISON, Wis. (6/29/11)
* Falling loan volumes and rising expenses hurt profits at small U.S. mortgage banking companies in the first quarter (American Banker June 28). Profits per loan fell 66% because the refinancing surge abruptly ended in late January, and managers were quick to reduce payrolls and other expenses, the Banker said. Average per-loan profit in the first quarter was $346, down from a $1,082 profit in the fourth quarter and $608 in the first quarter a year earlier, according to a survey by the Mortgage Bankers Association. Meanwhile, expenses per loan rose to $5,837 in the first quarter from $4,930 in the fourth quarter ... * To offset a significant decline in loan origination volumes, some U.S. mortgage lenders have marginally eased underwriting requirements (American Banker June 28). The biggest percentage of changes are to “overlays” that mortgage bankers place on loans that are being sent into the secondary market for sale, the Banker said. An overlay requires that an originator add above and beyond what the loan’s purchaser demands. For instance, a buyer may accept certain loans that have a FICO score as low as 600, while the originator would not make loans to borrowers with scores below 640, the publication said. Also, some lenders are permitting higher total debt-to-income ratios and higher combined loan-to-value ratios, Brian Simon, CEO of Caliber Funding LLC in Irving, Texas, told the Banker … * The New York State Court of Appeals--New York’s highest court--Tuesday overturned a Jan. 11 ruling by an intermediate state appeals court and revived a lawsuit brought by several big banks challenging bond insurer MBIA Inc.’s 2009 restructuring (The New York Times June 28). The banks claimed MBIA’s restructuring--approved by Eric Dinallo, New York’s insurance superintendent at the time--was unfair to policyholders. The restructuring was implemented to protect Armonk, N.Y.-based MBIA’s municipal bond business from its troubled structured finance unit--which had incurred large losses arising from insuring mortgage-related debt, the Times said. The Court of Appeals ruled 5-2 that state insurance law did not give the superintendent “broad pre-emptive powers” to block the banks’ claims …

Market News (06/28/2011)

 Permanent link
MADISON, Wis. (6/29/11)
* U.S. consumer confidence unexpectedly declined in June to a seven-month low, signaling that weak employment gains are dampening consumers’ outlooks on the economy (Bloomberg.com June 28). The Conference Board’s index dropped to 58.5 from a 61.7 reading in May, the New York-based private research firm said Tuesday. Economists in a Bloomberg News survey had predicted the index would rise to 61 in June. The percentage of survey respondents anticipating a rise in the availability of jobs declined to the lowest level in 11 months. Rising inflation, an unemployment rate hovering around 9% and falling share prices could keep sentiment depressed, raising the risk that consumer spending will stagnate, Bloomberg said. A reading of 90 reflects a healthy economy on the Conference Board’s index, which measures how citizens feel about the job market, business conditions and the economic environment in the next six months (The New York Times June 28). Since consumer spending constitutes 70% of the U.S. economy, economists closely monitor consumer confidence, the Times said … * U.S. home prices in the year ended in April fell by the most in 17 months, indicating the housing market remains an impediment to the nation’s economic recovery, according to the S&P Case Shiller home-price index (Bloomberg.com June 28). The index of 20 U.S. cities decreased 4% from April 2010--the largest decline since November 2009, the group said Tuesday. However, home prices increased in April from one month earlier for the first rise in eight months--although most of that gain can be attributed to the beginning of the spring-summer home-buying season (The Wall Street Journal June 28). A glut of foreclosed properties and declining sales raise the specter that home prices could fall further--which could discourage builders from taking on new construction projects, Bloomberg said ...

Market News (06/27/2011)

 Permanent link
MADISON, Wis. (6/28/11)
* U.S. consumer spending in May was at its weakest pace in 20 months because employment prospects dimmed, rising inflation caused consumers to be more cautious and high gas prices had a negative impact (The New York Times and Bloomberg.com June 27). Consumer spending was essentially unchanged--the weakest outcome since June 2010--after a revised 0.3% gain in April, the Commerce Department said Monday. Some retailers, including Walgreen Co., said higher gasoline and grocery prices, along with a 9.1% unemployment rate, are causing shoppers to cut back on purchases of less essential goods, Bloomberg said. Personal income growth in May was 0.3% for the second consecutive month, although wage and salary growth slowed to 0.2% in May from 0.4% the prior month because job growth slowed (Moody’s Economy.com June 27). Slow wage growth harms the broader economy because consumers don’t have as much money to spend--and consumer spending constitutes 70% of the U.S. economy, the Times said … * Worldwide business confidence held firm for the week ended June 24--mirroring a global economy that is growing at the high end of its potential, according to Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com June 27). Sentiment has eroded from its peak early in 2011 because of less robust responses to the most general questions regarding current business conditions and expectations for the economy at the end of 2011, Moody’s said. U.S. and Japanese businesses remain the most tentative, while German and South American businesses are the most positive …

News of the Competition (06/27/2011)

 Permanent link
MADISON, Wis. (6/28/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday the closing of a bank, bringing the total bank failures so far this year to 48, compared with 157 for the entire year in 2010. The failed bank is Mountain Heritage Bank, Clayton, Ga., assumed by First American Bank and Trust Co., Athens, Ga. The closed bank held roughly $104 million in assets as of March 31. The FDIC estimated the newest failure will cost the Deposit Insurance Fund about $41 million ... * Freddie Mac said it will pay $53.5 million to the bankruptcy estate of Taylor Bean & Whitaker Mortgage Co.--a Florida mortgage lender--to settle a lawsuit threatened by creditors of the troubled mortgage lender (Dow Jones via American Banker June 27). The settlement obviates several ongoing disputes between Freddie and Taylor Bean emanating from the bankrupt lender’s servicing of many of Freddie’s mortgages before Taylor Bean imploded due to multibillion-dollar fraud in the summer of 2009, Dow said. After federal regulators froze its accounts and suspended its authority to make loans insured by the government, Taylor Bean filed for bankruptcy protection in August 2009 and eventually was forced to shutter its business after federal regulators and the Federal Bureau of Investigation raided its Ocala, Fla., offices ...

Market News (06/24/2011)

 Permanent link
MADISON, Wis. (6/27/11)
* The U.S. economy, measured by gross domestic product (GDP)--the broadest gauge of all the goods and services produced in an economy--expanded more than originally estimated in the first quarter, the Commerce Department said Friday (The Wall Street Journal June 24). Real GDP growth was revised upward at an inflation-adjusted annual rate of 1.9% from a previously reported 1.8%. However, that is still substantially lower than the 3.1% GDP increase seen in the fourth quarter of 2010. The first-quarter revision was the result of an upward adjustment to inventory investments and a downward revision to imports (Moody’s Economy.com June 24). These were mostly offset by downward adjustments to exports, business investment and state and local government, Moody’s said. In a related matter, the Economic Cycle Research Institute (ECRI) weekly leading index--which measures economic growth--decreased to 127 for the week ended June 17 from a revised 127.7--previously 127.8--the prior week (Moody’s Economy.com June 24) … * U.S. durable goods orders increased more than expected in May, indicating manufacturing may be one of the initial areas of the economy to bounce back from the growth slowdown in the first half of 2011 (Bloomberg.com June 24). New orders for goods meant to last at least three years increased 1.9% after declining 2.7 % in April, the Commerce Department said Friday. The easing of parts shortages resulting from March’s natural disaster in Japan, the need for companies to update equipment, and record exports likely will boost manufacturing in the second half of 2011, Bloomberg said ...

News of the Competition (06/24/2011)

 Permanent link
MADISON, Wis. (6/27/11)
* The Office of the Comptroller of the Currency (OCC) says U.S. banks appear to be easing their underwriting standards following three years of widespread credit tightening, according to a survey of bank examiners released Thursday by the OCC (American Banker June 24). About 20% of banks featured in the survey relaxed their standards on commercial loans during the one-year period ended Feb. 28--up from 2% for the prior one-year period and 0% for the year before that, examiners said. For their retail loan products, only 7% of banks eased standards--still an improvement over prior years when examiners said all banks either tightened or maintained standards ... * American Express Co. is providing users of its check-in service Foursquare the capability to automatically redeem deals offered by merchants on the social media application using an enrolled Amex card (American Banker June 24). Through Amex’s tie-in with the application, its cardholders can link their cards to their Foursquare accounts. If a merchant is offering a special users want, they can link to that merchant through Foursquare’s smartphone applications and have the special automatically loaded to their card account. When they buy something with that card, they will receive the discount as a credit within three to five days on their Amex statement. After piloting a test of the service in March during the South by Southwest music festival in Austin, Texas, Amex on Thursday said it was launching the partnership with Foursquare …

News of the Competition (06/23/2011)

 Permanent link
MADISON, Wis. (6/24/11)
* Ben Bernanke, chairman of Federal Reserve Board, and Sheila Bair, chairman of the Federal Deposit Insurance Corp., Wednesday both defended new capital requirements (American Banker June 23). Bernanke said fears of new capital requirements are misguided because they would substantially lessen the threat of a huge financial crisis, and would have negligible effects on growth, in comments at a press conference following the Federal Open Market Committee’s two-day meeting. Meanwhile, Bair testified at a congressional hearing that a 3% capital surcharge on systemically risky firms would constitute a “moderate” approach, and that amounts being looked at by regulators are in a range that strives to attain a proper balance … * Bank of America Corp. (BofA) erroneously sent letters to nearly 5,000 residents of Oregon, saying they were behind on their property tax payments and facing possible foreclosures (The Oregonian via American Banker June 23). Part of BofA’s home-loan servicing division--BAC Tax Services Corp.--mistakenly sent the letters to customers in 14 Oregon counties, The Oregonian said. This was not the first time such a mistake happened, as BAC Tax Services Corp. sent 1,100 residents of Clark County, Wash., erroneous delinquency notices, according to The Columbian ...

Market News (06/23/2011)

 Permanent link
MADISON, Wis. (6/24/11)
* Initial claims for U.S. unemployment benefits rose last week, pointing to continuing weakness in the economy and indicating companies are less confident about the economic expansion than they were earlier in the year (The Wall Street Journal and Bloomberg.com June 23). Initial claims increased 9,000--to 429,000--for the week ended June 18 from the prior week, the Labor Department said Thursday. The elevated unemployment numbers still are consonant with a labor market that’s improving extremely slowly, Brian Jones, an economist at Societe Generale in New York, told Bloomberg, adding that is fits Federal Reserve Chairman Ben Bernanke’s comments Wednesday about job creation being “frustratingly” slow. Meanwhile, continuing clams declined 1,000--to roughly 3.697 million--for the week ended June 11, excluding millions more on extended and emergency benefits (Moody’s Economy.com June 23) … * For the first time in three months, sales of new U.S. homes dropped in May, indicating the housing industry is struggling to pick up steam (Bloomberg.com June 23). New-home sales fell 2.1% to an annualized pace of 319,000 last month, the Commerce Department said Thursday. Homebuilders will have to deal with the likelihood that nearly two million distressed properties will hit the market, which could take years for the market to absorb because the unemployment rate is hovering around 9%, Bloomberg said. Months of home supply held constant at 6.2 months--the lowest reading since mid-2010 (Moody’s Economy.com June 23). The median price of a new home declined 3% from one year ago. On a positive note, home sales are 13% higher than one year ago, Moody’s said … * Distressed real estate in the U.S. that has not been listed for sale--also known as shadow inventory--has decreased, falling to 1.7 million units as of April from 1.9 million units a year ago, according to the most recent data from CoreLogic (American Banker June 23). The numbers indicate that the pipeline for distressed properties is starting to unclog, Sam Khater, CoreLogic senior economist, told the Banker. That is an important development because home-price declines currently are driven by distressed sales, Khater added …

Market News (06/22/2011)

 Permanent link
MADISON, Wis. (6/23/11)
* Mortgage loan application volume decreased 5.9% for the week ended June 17 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey, released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index declined 6.2%. The Refinance Index dropped 7.2 %. The seasonally adjusted Purchase Index fell 2.8%. The unadjusted Purchase Index went down 3.9% and was 4.4% higher than the same week one year ago. The four-week moving average for the seasonally adjusted Market Index is up 0.4%. The four-week moving average is down 0.7% for the seasonally adjusted Purchase Index, while this average is up 0.8% for the Refinance Index. For the MBA report, use the link … * The number of U.S. mass layoffs--those involving at least 50 workers from a single establishment--increased in May from April, but the number of affected employees decreased--reflecting the somewhat mixed messages from more timely weekly reports on initial claims for unemployment benefits, according to the Bureau of Labor Statistics (Moody’s Economy.com June 22). Mass layoffs increased to 1,599 in May from 1,564 in April. May’s layoffs involved 143,540 employees, compared with 143,927 in April …

News of the Competition (06/22/2011)

 Permanent link
MADISON, Wis. (6/23/11)
* JPMorgan Chase & Co. has agreed to pay back $153.6 million to satisfy regulatory claims pertaining to its role in designed and selling products connected to risky mortgages when the housing market imploded in 2007 (Bloomberg news via American Banker June 22). JPMorgan Chase was the only Wall Street bank to stay profitable throughout the financial crisis, Bloomberg said. The Securities and Exchange Commission said in a Wednesday statement that any investors who incurred losses will get all their money back. The bank also agreed to improve its review and approval process for mortgage securities transactions … * Reflecting an unexpected second-quarter surge in refinancing activity, Fannie Mae revised upward its mortgage origination outlook for 2011 by nearly 3%, according to Fannie’s Chief Economist Doug Duncan (American Banker June 22). Mortgage rates have declined during the past two months, and Duncan estimates lenders will refinance $187 billion of home loans by the time the second quarter is over, compared with $221 billion in the first quarter. Second-quarter refinancings were estimated at only $108 billion in Fannie’s May housing forecast. Duncan also reduced his projections for purchase originations by 11% to $505 billion for 2011, the Banker said ...

Fed decides to keep target rate at 0 to 0.25

 Permanent link
WASHINGTON (6/22/11)--The Federal Reserve’s policymakers Wednesday decided to keep the fed funds target rate steady at 0 to 0.25% to promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate. “With this announcement, we are not likely to see the first increase in the fed funds rate until the middle of next year,” Bill Hampel, chief economist for the Credit Union National Association, told News Now after the Federal Open Market Committee (FOMC) issued its statement at the conclusion of the meeting. “This means yields on investments and member savings accounts will remain at their current extraordinarily low levels for another year. Generating net interest income will require very proactive lending promotions.” The FOMC said it will complete its purchases of $600 billion of longer-term Treasury securities by the end of this month and will maintain its existing policy of reinvesting principal payments from its securities holdings. Information received since the committee met in April indicates that the economic recovery is continuing at a moderate pace, though somewhat more slowly than the committee had expected. Also, recent labor market indicators have been weaker than anticipated. The slower pace of the recovery reflects in part factors that are likely to be temporary, including the damping effect of higher food and energy prices on consumer purchasing power and spending, and supply chain disruptions associated with the tragic events in Japan. In its FOMC policy statement, the Fed suggested that the recent slowdown in the economy is temporary, and that moderate growth is likely to resume in the second half of the year, Hampel told News Now. Because of concerns about lingering unemployment, the Fed announced that it will keep the Fed Funds rate at its current very low level “for an extended period.” The statement has used this “extended period” language for almost two years, he said. At the same time, the FOMC announced that it would end its program of “quantitative easing” at the end of the month, Hampel added. That program involved purchases by the Fed of long-term Treasury securities to keep long-term interest rates in check. Although the Fed still expects economic growth to resume in the second half, it slightly lowered its gross domestic product forecasts for the second half of 2011 and all of 2012, Hampel said. Household spending and business investment in equipment and software continue to expand, the Fed said. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Inflation has picked up in recent months, mainly reflecting higher prices for some commodities and imported goods, as well as the recent supply chain disruptions. However, longer-term inflation expectations have remained stable. Consistent with its statutory mandate, the committee seeks to foster maximum employment and price stability. The unemployment rate remains elevated; however, the committee expects the pace of recovery to pick up over coming quarters and the unemployment rate to resume its gradual decline toward levels that the committee judges to be consistent with its dual mandate. Inflation has moved up recently, but the FOMC anticipates that inflation will subside to levels at or below those consistent with the committee’s dual mandate as the effects of past energy and other commodity price increases dissipate. However, the committee will continue to pay close attention to the evolution of inflation and inflation expectations. The committee continues to anticipate 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 for an extended period. The FOMC will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate. The committee will monitor the economic outlook and financial developments and will act as needed to best foster maximum employment and price stability. Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; Elizabeth A. Duke; Charles L. Evans; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.

News of the Competition (06/21/2011)

 Permanent link
MADISON, Wis. (6/22/11)
* Many credit card issuers may realize they lack consistent retention strategies in the face of a slowdown in credit card use in some sectors because of tighter budgets and risk avoidance, according to a Celent LLC study (American Banker June 21). Celent’s research indicates that most issuers--when the opportunity arises--attempt to persuade cardholders not to cancel their card accounts by using several tactics, such as including incentives to stay. Of the participants surveyed, 45% had systems in place to predict which cardholders were most likely to leave and to prevent them from departing … * In a move to bolster capital before new international standards take effect, Bank of America (BofA) Corp. is contemplating selling a portion of its $21 billion stake in China Construction Bank Corp. (CCB) (Bloomberg News via American Banker June 21). A sale could take place later this year, two sources told Bloomberg. BofA--the largest U.S. lender by assets--may attempt to keep roughly half of its CCB shares because it plans to remain a strategic investor in the Chinese bank, the sources said …

Market News (06/21/2011)

 Permanent link
MADISON, Wis. (6/22/11)
* Existing-home sales were down in May as temporary factors and financing problems weighed on the market, according to the National Association of Realtors (NAR). Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 3.8% to a seasonally adjusted annual rate of 4.81 million in May from a downwardly revised 5.00 million in April, and are 15.3% below a 5.68 million pace in May 2010 when sales were surging to beat the deadline for the home-buyer tax credit. Lawrence Yun, NAR chief economist, said temporary factors held back the market in May, as implied from prior data on contract signings. “Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May,” he said. “Current housing market activity indicates a very slow pace of broader economic activity, but recent reversals in oil prices are likely to mitigate the impact going forward. The pace of sales activity in the second half of the year is expected to be stronger than the first half, and will be much stronger than the second half of last year.” For the NAR report, use the link … * U.S. merchants are rushing to lower their costs associated with customers paying for goods and services with plastic--debit cards and credit cards (The Wall Street Journal June 21). Although a new federal law cutting interchange fees charged to merchants will take effect in July, some merchants are limiting how much cash back customers can receive at the counter. For example, Walgreen Co.--a drugstore chain--is reducing to $20 from $40 the amount of cash customers can receive back when making a debit-card purchase at some stores. Other stores are setting minimum purchase amounts for credit card transaction amounts. Also, some dentists, restaurants and small businesses are providing discounts to customers who pay in cash, the Journal said …

News of the Competition (06/20/2011)

 Permanent link
MADISON, Wis. (6/21/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday the closing of two banks, bringing the total bank failures so far this year to 47, compared with 157 for the entire year in 2010. The failed banks are: McIntosh Sate Bank, Jackson, Ga., assumed by Hamilton State Bank, Hochston, Ga.; and First Commercial Bank of Tampa Bay, Tampa, Fla., assumed by Stonegate Bank, Fort Lauderdale, Fla. The closed banks held roughly $439 million in assets as of March 31. The FDIC estimated the newest failure will cost the Deposit Insurance Fund about $179 million ... * More card issuers are offering cash incentives to prospective customers, with overall credit card incentives having increased through April this year, said Andrew Davidson, senior vice president of Mintel Comperemedia, a direct mail tracking firm (American Banker June 20). For the first four months of 2011, 59% of card offers included some type of additional incentive--such as added miles, bonus points or cash--just for signing up for or using a card for the first time. That percentage is up from 48% of mailings during the same period in 2010, and 30% in 2007 ...

Market News (06/20/2011)

 Permanent link
MADISON, Wis. (6/21/11)
* Young adults carrying credit card and student-loan debt reported a higher sense of self-esteem than did those without it, according to a national study by sociology researchers (American Banker June 20). The study was predicated on in-person interviews every two years from 1968 through 2004, which involved 3,079 young adults ages 18 to 34. The study found that credit card debt especially contributed to higher sense of self esteem for some young adults. “Positive social psychological effects” for young adults have been attained in recent years in part from incurring debt, because the young adults may be mistakenly equating debt with higher future earnings and income levels, leading to feelings of positive self-esteem, the study found … * The University of Michigan consumer sentiment index dipped in June because the U.S. economic recovery faltered (Moody’s Economy.com June 17). The index declined 2.5 points to 71.8, reversing slightly more than half of May’s gain. Labor and stock market weakness overrode the leveling off of gasoline prices, Moody’s said. The decline was nearly even across components of the index, as expectations dropped 2.7 points, while assessments of current conditions fell 2.3 points. Compared with May, inflation expectations were mixed, and near-term inflation expectations still are elevated, Moody’s said …

News of the Competition (06/17/2011)

 Permanent link
MADISON, Wis. (6/20/11)
* Capital One Financial agreed Thursday to buy ING Group’s U.S. online banking unit for $9 billion in cash and stock. The deal is one of Capital One’s largest efforts to add offerings to consumers beyond credit cards and other consumer lending (The New York Times DealBook June 16). Capital One, currently the eighth-biggest U.S. bank by deposits, will become the fifth-biggest after the deal is completed … * Citigroup Inc. revised upward the number of consumer accounts breached and clarified the timeline in a hacker attack that placed an estimated 1% of the bank’s North American Citi-branded credit cards at risk (American Banker June 17). Citi said 360,083 card accounts were impacted--not 200,000 as it had originally said. Of the accounts affected, Citi has reissued its cards to 217,657 of those accounts. The other accounts were closed or reissued cards for other reasons. Open accounts that did not receive new cards are getting enhanced monitoring, Citi said … * Confronting weak markets and uncertainty over regulations, Wall Street’s largest firms are preparing to make deep job and cost cuts (The New York Times DealBook June 16). The cutbacks are arising even though Wall Street companies have largely recovered from the financial crisis and are recording significant profits again. However, the profits do not match the level of those before the crisis, and analysts believe it will be even more difficult to make money in the coming months, the Times said. Banks are being prompted to take action because of concerns about European debt and the final form the Dodd-Frank financial overhaul rules will take, the Times said …

Market News (06/17/2011)

 Permanent link
MADISON, Wis. (6/20/11)
* The probability that the U.S. will be in recession six months from now rose to 23% for May from 21% in April, according to Moody’s Probability of Recession gauge (Moody’s Economy.com June 17). May marks the second consecutive monthly increase, but the measure remains only marginally above its first-quarter average of 21%. Although the economy isn’t meeting expectations, few indicators are portending recession. As a reference point, in the two prior economic downturns, the probability of recession approached 60%, Moody’s said. Growth should accelerate in the second half of 2011, lowering the likelihood the economy will be in recession, Moody’s concluded. In a related matter, the index of U.S. leading economic indicators bounced back in May after dropping for the first time in nearly a year--an indication economic growth may gain momentum by the end of the year (Bloomberg.com June 17). The Conference Board’s gauge of the outlook for the next three to six months increased 0.8%, following a revised 0.4% decline in April, the New York-based private research group said. Also, the Economic Cycle Research Institute weekly leading index--which measures economic growth--rose to 127.8 for the week ended June 10, from a revised 127.6--previously 127.7 (Moody’s Economy.com June 17) … * The International Monetary Fund (IMF) Friday cut its 2011 forecast for global growth to 4.3% from 4.4%, while adding that weaker-than-expected U.S. growth and the European debt crisis constitute greater impediments to the global recovery than originally thought (The Wall Street Journal June 17). The IMF revised U.S. growth downward for the year by 0.3 percentage point to 2.5%. Overall, worldwide activity will gain momentum in the second half of the year, after slowing in the second quarter, the IMF said. It added that fundamental growth drivers remain in place. They include pent-up demand for consumer goods, expansionary government policies, and investment and strong growth potential in emerging markets. The IMF’s global growth forecast for 2012 remains unchanged at 4.5% … * U.S. industrial production increased less than forecast in May because of a decline in utility output and a shortage of auto parts coming from Japan, according to a Federal Reserve report released Wednesday (Bloomberg.com June 15). Output at factories, mines and utilities increased 0.1% after recording no change in April. Economists had predicted a 0.2% gain in May, according to a Bloomberg News survey. Factory production went up 0.4%, spearheaded by the largest gain in business equipment output in four months. For the Fed’s Industrial Production report, use the link …

Hampel provides ICNBCI with economic analysis

 Permanent link
MADISON, Wis. (6/17/11)--Bill Hampel, Credit Union National Association chief economist, provided analysis of economic news for an article on CNBC’s website. In the article, “Futures Fall Further After Economic News,” Hampel addressed a New York state gauge of manufacturing, which showed the sector had unexpectedly contracted in June, falling to minus 7.79 from a positive 11.88 the month before. This was a sign the economic slowdown could be further extended, according to the New York Federal Reserve (cnbc.com June 16). The prices of futures had fallen partly as a result of the survey, Hampel indicated. Because the overall direction of the economy has been positive but anemic, the pause is most likely a reflection of supply chain disruptions resulting from the earthquake and tsunami in Japan, rather than a reversal in momentum, he said. The financial crisis in Greece also is pressuring U.S. stocks, Hampel said. He expects a resolution on Greece’s situation eventually.

News of the Competition (06/16/2011)

 Permanent link
MADISON, Wis. (6/17/11)
* Interest-only (IO) lending is on the rise in the U.S., as evidenced by a 60% first-quarter gain in IO loans funded by mortgage bankers, according to data compiled by National Mortgage News and the Quarterly Data Report (American Banker June 16). U.S. mortgage bankers funded $11.3 billion of IO loans in the quarter. However, many loans are in reality jumbo mortgages and roll over within five to seven years, the Banker said. In the first quarter, Wells Fargo & Co., San Francisco, ranked first among all IO lenders, originating $3.1 billion of the product--a 55% climb from a year ago. PHH Mortgage, Mt. Laurel, N.J., ranked second with $2.3 billion (up 95%), and Union Bank, San Francisco, ranked third with $1.8 billion, a 120% jump from last year. Among the top five IO lenders, the gains ranged from 16% to 120% ... * U.S. foreclosure filings in May fell to the lowest level in nearly four years because banks delayed processing defaults because of the increasing volume of seized homes, according to RealtyTrac Inc. (Bloomberg.com June 16). In May, 214,927 properties received default, auction or repossession notices--the fewest since November 2007--the data company said Thursday. Also, filings declined 33% from a year earlier, and 2% from April, with one in 605 households receiving a notice. Because banks are reconstituting their documentation procedures--after claims were made that they improperly repossessed homes-- foreclosure filings have declined for eight consecutive months on a year-over-year basis, Bloomberg said … * Worldwide demand for U.S. stocks, bonds and other financial assets increased in April from the prior month because China upped its holdings of Treasuries, following five months of declines, the Treasury Department reported Thursday (Bloomberg.com June 15). In April, net buying of long-term equities, notes and bonds hit $30.6 billion, compared with net buying of $24 billion in March, according to Treasury statistics …

Market News (06/16/2011)

 Permanent link
MADISON, Wis. (6/17/11)
* Initial claims for U.S. unemployment benefits declined last week, but remained elevated, indicating continuing weakness in the labor market (The Wall Street Journal June 16). Claims fell 16,000--to a seasonally adjusted 414,000--for the week ended June 11, according to Labor Department figures released Thursday. However, claims stayed above the 400,000 level where they’ve been stuck since early April. When weekly claims fall below 400,000, economists say the economy is adding more jobs than it is losing, the Journal said. Bad weather, a late Easter holiday, and Japan’s earthquake and tsunami hurting U.S. car production have skewed claims in the most recent data, a Labor Department analyst told the Journal. Meanwhile, continuing claims for unemployment benefits--a proxy for hiring--declined 21,000--to roughly 3.67 million for the week ended June 4 (Moody’s Economy.com June 16) … * U.S. housing starts increased more than anticipated in May--with the highest jump in the West--but any recovery in the industry will be hindered by an abundance of pre-owned homes, economists cautioned (The New York Times June 16). Housing starts rose 3.5% to a seasonally adjusted rate of 560,000 units, mitigating nearly half of April’s decline, the Commerce Department said Thursday. April’s starts were upwardly revised to a 541,000-unit pace from a previously reported 523,000. Residential construction was down 3.4%, compared with May 2010. Home builders are not building many homes overall because they aren’t making profits, said Patrick Newport, an economist at IHS Global Insight in Lexington, Mass. (Bloomberg.com June 16). The housing market is not improving because of uncertainty about housing prices and the economy, he added … * The views on the economy’s outlook by U.S. consumers turned negative in June, indicating that inflation, the housing slump and unemployment are causing concern (Bloomberg.com June 16). The Bloomberg measure of economic expectations fell to minus 31--the lowest level since March 2009--from minus 16 in May. Also, the Bloomberg Consumer Comfort Index--issued weekly--improved to minus 44 for the week ended June 12--the highest level since mid-April--from minus 45.9--in part due to declining fuel prices, Bloomberg said. The most prominent concerns of consumers are jobs and income, Chris Low, chief economist at FTN Financial in New York, told Bloomberg. People are making sacrifices now because income is not keeping with inflation, he added …

News of the Competition (06/15/2011)

 Permanent link
MADISON, Wis. (6/16/11)
* Borrowing against the equity one has accumulated in a home should be done only as a last resort in an emergency, according to a survey of 1,000 homeowners in May by Ipsos Marketing on behalf of the Consumers Bankers Association (American Banker June 15). The purpose of the survey, released Monday, was to ascertain whether equity lending still is relevant in the current depressed housing market, the Banker said. About 25% of those surveyed said they expect a need to borrow money at some time in the next five years, Ipsos found. Roughly half of those said they would consider using home equity-based products for borrowing needs, but also would consider other lending options … * In efforts to encourage sales of real estate-owned (REO) properties, Fannie Mae has expanded incentives it offers through its HomePath Program (American Banker June 15). Fannie said it will pay up to 3.5% of the final sales price toward closing costs for qualified borrowers. Two caveats: the offer is provided only to buyers who intend to live in the home, and sales must close no later than Oct. 31. The incentive was offered once earlier this year and twice last year, because the government-sponsored enterprise is trying to reduce an increasing inventory of REO properties, the Banker said …

Market News (06/15/2011)

 Permanent link
MADISON, Wis. (6/16/11)
* The U.S. cost of living went up more than expected in May because of across-the-board higher prices--indicating raw material expenses are seeping through to other goods and services (Bloomberg.com June 15). The consumer price index rose 0.2%, compared with a 0.1% increase forecast by economists in a Bloomberg News survey, according to figures released Wednesday by the Labor Department. The core measure--which excludes volatile food and energy costs--increased 0.3%, the largest increase since July 2008. The Federal Reserve has to be more forceful in its role as an inflation fighter, because there is a broad-based flow of energy and commodity prices into components throughout the core, John Hermann, a senior fixed-income specialist at State Street Markets in Boston, told Bloomberg … * Homebuilder confidence in the U.S. fell to a nine-month low in June, dropping three points to post the lowest reading since September 2010, according to the National Association of Home Builders/Wells Fargo Housing Market index (MarketWatch June 15). The index dropped to 13 from 16 in May. Economists surveyed by MarketWatch had predicted a 16 reading for June. More foreclosures in the pipeline and continuing declines in real estate values will make builders more hesitant to begin new projects (Bloomberg.com June 15). Also, a 9.1% unemployment rate portends that demand for new homes could take years to bounce back, Bloomberg said. Homebuilding will not help bolster the U.S. economy any time soon because of the surfeit of existing homes for sale, David Semmens, a U.S. economist at Standard Chartered Bank in New York, told Bloomberg … * Mortgage loan application volume increased 13% for the week ended June 13 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). The unadjusted index rose 24.5% from the previous week, which included Memorial Day. The Refinance Index went up 16.5%. The seasonally adjusted Purchase Index climbed 4.5%. The unadjusted Purchase Index jumped 14.2% and was 6.1% higher than the same week one year ago. “Mortgage rates have declined for eight of the past nine weeks,” said Michael Fratantoni, MBA vice president of research and economics. “Coming off of the Memorial Day holiday, refinance application volume increased significantly, as borrowers jumped to lock in the lowest mortgage rates since last November. The volume of refinance applications still remains 28% below levels seen at that time, as borrowers with an incentive to refinance remain constrained from doing so by lack of equity in their homes.” For the MBA report, use the link …

News of the Competition (06/14/2011)

 Permanent link
MADISON, Wis. (6/15/11)
* Bank of America Corp. (BofA) “significantly hindered” a federal investigation by the Department of Housing and Urban Development (HUD) of BofA’s foreclosure practices, a U.S. official said (The Wall Street Journal June 14). William M. Nixon, HUD assistant regional inspector general, chronicled in a seven-page statement filed June 8 in an Arizona state court in Phoenix several examples from late 2010 when BofA officials allegedly failed to cooperate with investigators. BofA attorneys refused “on a number of occasions ... to allow employers to answer questions” about changes in the bank’s foreclosure process, Nixon said … * In efforts to prevent foreclosures and disposal of distressed real estate in local communities nationwide, Wells Fargo & Co. is entering into an alliance with the U.S. Conference of Mayors (American Banker June 14). The three-year partnership aims to help mayors deal with housing challenges through strategies Wells Fargo developed in its Leading the Way Home Program--a national foreclosure-prevention effort. Using outreach initiatives, the alliance will connect mayors with ideas and best practices, and will promote sustainable home ownership and community development …

Market News (06/14/2011)

 Permanent link
MADISON, Wis. (6/15/11)
* For the first time in 11 months, U.S. retail sales fell in May, because consumers cut back on purchases of expensive items such as appliances and cars when confronting higher bills for groceries and gasoline (The Wall Street Journal June 14). The month’s retail and food sales declined 0.2% from April--to $387.12 billion, the Commerce Department said Tuesday. The May report was slightly better than anticipated, with economists forecasting a 0.6% drop in May retail sales, according to a Dow Jones survey. The U.S. economy is experiencing sustained economic growth at a moderate pace, said John Silvia, chief economist at Wells Fargo Securities LLC, in Charlotte, N.C. (Bloomberg.com June 14). Although consumers are trying to economize, they have continued to spend, he added. In a related matter, the International Council of Shopping Centers (ICSC) chain store sales index dropped 0.8% for the week ended June 11, completely erasing the gains of the prior two weeks, ICSC said (Moody’s Economy.com June 14)… * The National Federation of Independent Business (NFIB) index fell in May to 90.9 from 91.2 in April, indicating an erosion in small-business confidence continues (Moody’s Economy.com June 14). May’s decline is the third consecutive monthly drop, resulting in a cumulative decline of 3.6 points. Although the May details of the index were not especially weak, they generally were not conducive to growth, NFIB said. As they reported weaker May sales, small businesses geared down their hiring plans, NFIB said. Some negativity is linked to the March earthquake and tsunami in Japan, and Middle East geopolitical tensions. However, small businesses must gain confidence soon, or growth will remain spotty, NFIB said … * A weak sales outlook caused the optimism of U.S. CEOs to fall in the second quarter from a record high the previous quarter, according to the Business Roundtable’s economic outlook index (Bloomberg.com June 14). The index declined to 109.9 from a 113 prior reading--the highest in data since 2002, the Washington, D.C.-based group said Tuesday. An index reading above 50 constitutes economic growth. In a sign that hiring and business investment may be slow to pick up momentum, 87% of the 135 CEOs surveyed said they expected a sales gain in the next six months--down from 92% in the first quarter …

Market News (06/13/2011)

 Permanent link
MADISON, Wis. (6/14/11)
* The two-year-old U.S. economic recovery may be unusually slow because employers are worried about regulatory and tax policy and are minimizing the size of their work forces, according to Jeffrey Lacker, president of the Federal Reserve Bank of Richmond (Bloomberg.com June 13). The apparent reluctance of many employers to add workers even though demand for goods and services is on the rise could lead to economic growth underperforming for an extended period of time, Lacker said in remarks Monday to a manufacturing conference in Virginia. That view also was supported by economists polled in the most recent Wall Street Journal economic forecasting survey. They significantly slashed the number of jobs the economy would spawn in the next few months (The Wall Street Journal June 13). The economic recovery will stall if job creation doesn’t grow quickly enough, Nicholas S. Perna, an economist with Perna Associates, told the Journal. In a related matter, the Economic Cycle Research Institute (ECRI) weekly leading index--which measures economic growth, fell to 127.7 for the week ended June 4, from a revised 128.2--previously 128.3 (Moody’s Economy.com June 10) ... * Worldwide business confidence significantly declined last week from the elevated readings of the prior week, according to Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com June 13). The gauge dropped to 30.5 for the week ended June 10 from 40.4 the prior week. Most of the decline was in response to questions regarding the economy’s present performance and outlook six months in the future, Moody’s said. Although sentiment has weakened somewhat since the spring--especially in the U.S.--it continues to hold up fairly well overall, Moody’s said. The most encouraging aspect of the survey is that hiring intentions are more solid than the official employment data, Moody’s said … * Two states’ attorneys general are looking into Wall Street’s bundling of mortgage loans into securities to ascertain if they were properly documented and valid (The New York Times June 12). The investigation is being spearheaded by Eric T. Schneiderman, New York attorney general, and Joseph R. Biden III, Delaware attorney general. Their investigation is focusing on the back end of mortgage-assembly operations, in which large banks function as trustees overseeing securities for investors, said two sources familiar with the matter ...

News of the Competition (06/13/2011)

 Permanent link
MADISON, Wis. (6/14/11)
* Running counter to high expectations for 2011, bank merger and acquisitions activity in the U.S. has been in a slump since Jan.1 (American Banker June 13). An unstable economy and regulatory uncertainty have discouraged buyers, making them uncertain and selective in their purchases, the Banker said. Operating costs are elevated and revenues are low, with no light at the end of the tunnel for a turnaround, the publication said. As of June 10, U.S. banks had announced 65 whole-bank acquisitions in 2011--an 18% decline from a year earlier, according to data from SNL Financial, which added second-quarter activity has been down 43% ... * A federal jury in Manhattan Monday convicted Zvi Goffer, former Galleon Group hedge fund trader and two others of all charges in a case of conspiracy to commit securities fraud (The Wall Street Journal and Bloomberg.com June 13). The jury, which began deliberations June 2, also found Goffer’s brother, Emanuel, and Michael Kimelman, another trader, guilty of conspiracy and two counts of securities fraud. The three defendants were charged with using tips from two attorneys to profit on trades in Axcan Pharma Inc., Hilton Hotels Corp., Kronos Inc. and 3Com Corp. Jurors heard testimony of witnesses who pleaded guilty in the case and were assisting the government, and recordings of wiretapped phone calls, Bloomberg said …

News of the Competition (06/10/2011)

 Permanent link
MADISON, Wis. (6/13/11)
* As the mortgage insurance sector continues to gather strength, the seven U.S. mortgage insurance companies wrote $13.6 billion of new policies in the first quarter--a 30% gain from first quarter 2010, according to figures in the quarterly data report and National Mortgage News, reported American Banker (June 10). However, the first-quarter growth rate was half that of the fourth quarter, when there was a 60% surge in mortgage insurance policies written, with residential fundings at $200 billion more than the first quarter … * Government-sponsored enterprise (GSE) Fannie Mae sold 62,814 foreclosed properties in the first quarter--a 65% leap from activity during the same period a year ago, according to figures released by Fannie (American Banker June 10). Also, Fannie took over 53,549 real estate units (REO)--a 15% decline year-over-year. Although the GSE prefers to sell its REO holdings to owner/occupants, it occasionally turns to bulk sales to investors to clear less-desirable units, the Banker said. Also, Tiffany Davis-Fletcher, vice president in Fannie’s REO department, resigned last week, the company said ... * Although Islamic finance is expanding, its business in the U.S. may be hampered by politics--and perhaps prejudice (American Banker June 10). Legislation to forbid courts from invoking foreign laws in rulings have been introduced in at least 20 states during the past few years, the Banker said. The legislation is perceived as a method of preventing Sharia--a code derived from Islamic law--from gaining a foothold in the U.S.--a probability that many attorneys say is nonexistent, the publication said. Arizona, Louisiana and Tennessee have enacted “Sharia ban” laws. It is not clear whether those laws would directly impact the growth of Islamic finance--which abides by the Sharia law’s tenets, such as banning the payment of interest, the Banker said …

Market News (06/10/2011)

 Permanent link
MADISON, Wis. (6/13/11)
* U.S. wholesale inventories went up by 0.8% in April after rising by an upwardly revised 1.3% in March--previously 1.1%--according to the U.S. Census Bureau (Moody’s Economy.com June 9). The increase in inventories was slightly below the consensus forecast of a 1% gain. Sales increased 0.3%--a substantial decline from March’s upwardly revised pace of 3%--previously 2.9%. The inventory-to-sales ratio increased to 1.14 from 1.13. The wholesale inventories report is in step with other economic indicators that suggest the U.S. recovery has been hampered by escalating fuel prices and supply disruptions arising from the March earthquake and tsunami in Japan, Moody’s said ... * Although the U.S. economy is experiencing a slowdown in consumer spending and employment, those setbacks will be temporary and will give way to a rebound in growth in the second half of this year, said economists in a Bloomberg News survey (Bloomberg.com June 10). The biggest economy in the world will grow at a 3.2% rate from July through December, said 67 economists polled during the first week of June. The U.S. economy expanded at a 2.3% rate this quarter. Easier lending rules, rising exports, record levels of cash held by companies, and stable fuel prices will trump one-time events such as the natural disaster in Japan and poor weather, economists predicted … * Import prices in the U.S. significantly slowed in May, rising only 0.2%, following an increase of 2% in March and April, according to the Bureau of Labor Statistics (Moody’s Economy.com June 10). May was the first month since September 2010 that import prices did not rise at least 1%. However, year-over-year growth remains elevated at 12.5%. The May drop in petroleum prices was relatively modest, Moody’s said. May’s nonfuel import prices increased 0.4%, compared with April’s 0.6% rise and a 0.8% increase in March. Reflecting a dip in U.S. growth, nonfuel import prices likely will moderate more during the next few months, Moody’s said …

News of the Competition (06/09/2011)

 Permanent link
MADSION, Wis. (6/10/11)
* Smaller banks have more invested in a single-source technology than larger banks. Therefore, the smaller banks could see a greater impact from the breach of RSA’s one-time-password tokens (American Banker June 9). It is estimated that 80% of U.S. banks use EMC Corp. unit’s SecurID tokens to safeguard online banking sessions for corporate banking customers and other clients. While the biggest banks have indicated they will accept RSA’s offer to continue using SecurID after the vendor provides them with replacement tokens, about 30% of smaller banks said they will switch or are considering switching to alternative forms of protection, according to a cbanc network survey of 100 community banks ... * The Federal Bureau of Investigation (FBI) has said it will focus more intensely on combatting computer crime, such as the recent breach that exposed personal information and payment details at Sony Corp., Robert Mueller, FBI director, said Wednesday at a Senate Judiciary Committee hearing to extend his term of service two years, per President Barack Obama’s request (Bloomberg News via American Banker June 9). The FBI and other law enforcement agencies are facing a surge of computer crime from hackers in the U.S. and elsewhere who are more focused on publicity than profit, Chinese industrial spies and organized crime groups based in Eastern Europe and Russia …

Market News (06/09/2011)

 Permanent link
MADISON, Wis. (6/10/11)
* Initial U.S. claims for unemployment benefits unexpectedly increased last week, indicating the labor market still is having a difficult time gaining momentum (Bloomberg.com June 9). Claims rose by 1,000--to 427,000--for the week ended June 4--the ninth consecutive week claims were above 400,000--the Labor Department said Thursday. Elevated energy prices, declining home prices and tight credit are causing some employers to cut staff because of diminished demand, Bloomberg said. Although the labor market is experiencing turmoil, claim levels should eventually decrease, Michael Feroli, chief U.S. economist at JP Morgan Chase & Co., told Bloomberg. Meanwhile, continuing claims for unemployment benefits fell 71,000--to roughly 3.68 million for the week ended May 28, from about 3.75 million the prior week. That number excludes millions more on extended and emergency benefits (Moody’s Economy.com June 9) … * A record level of exports--$175.6 billion in goods and services sold overseas--in April unexpectedly shrank the U.S. trade deficit (The New York Times June 9). Exports of goods were $126.4 billion and exports of services were $49.1 billion. Total imports tallied $219.2 billion--resulting in a trade deficit of $43.7 billion--the lowest since December, the Commerce Department said Thursday. Some economists had projected the April trade gap would widen to $48.8 billion from $46.8 billion in March, the Times said. In addition to the record level of exports, the lowering of the trade deficit also was due to a steep reduction in purchase of foreign oil because of a surge in prices (The Wall Street Journal June 9) … * For the third consecutive week, U.S. consumer confidence increased because lower gasoline prices buoyed consumers perceptions of their finances, according to the Bloomberg Consumer Comfort Index (Bloomberg.com June 9). The index gained 1.2 points to rise to minus 45.9 for the week ended June 5 from minus 47.1 the prior week. The average cost of a gallon of gasoline dropped 26 cents from the nearly three-year high of $3.99 per gallon reached May 4 and is providing consumers some extra cash to spend on other goods and services, Bloomberg said. However, a 9.1% unemployment rate and sluggish job growth could keep sentiment from rising any further, Bloomberg said …

Fed Beige Book Four districts see slowing growth

 Permanent link
WASHINGTON (6/9/11)--While economic activity generally continued to expand in the 12 Federal Reserve Districts--thanks largely to manufacturing--four of the districts reported the pace of economic growth in their districts is slowing, according to the Fed's Beige Book released Wednesday. The four districts are Philadelphia, New York, Atlanta and Chicago. One district--Dallas--reported that the growth pace is strengthening. The Beige Book surveys the economic conditions in each of the districts, based on information collected by May 27. The report reflects a weak pace of growth in the first quarter that has continued into April and May, according to an analysis by MarketWatch (June 8). Manufacturing activity continued to expand in most parts of the country, with several districts noting the pace of growth had slowed, said the Beige Book summary. Widespread supply disruptions related to the March 11 earthquake in Japan hit the auto manufacturing industry and high-tech firms in several regions, with dealer inventories reduced and a widespread shortage of used cars reportedly driving up prices. Consumer spending was mixed, with most districts indicating steady to modestly increasing activity. However, elevated food and energy prices and unfavorable weather in some districts weighed on consumers' propensity to spend, said the report. Residential construction and real estate continued to show widespread weakness, except in the rental segment. Agricultural conditions were unfavorable across much of the nation, largely reflecting unseasonably cool and wet weather, widespread flooding along the Mississippi River, and drought conditions in the Dallas district. Labor market conditions improved, with most districts noting a short supply of workers with specialized technical skills. Loan demand in most districts was mixed or slightly improved since last month's report. Consumer loan demand improved in the Cleveland, Richmond and St. Louis districts but held steady or weakened in the New York, Atlanta, Dallas and San Francisco districts. Demand for residential mortgages, including new purchases and refinances, rose in Cleveland and stayed steady in New York, Richmond, St. Louis and Kansas City. Business loans modestly rose in seven districts, with Cleveland noting a broad-based increase in business loan demand including construction loan requests for multi-family dwellings. Credit standards were mixed but a bit easier in recent weeks, said the Fed's report. New York, Cleveland and Atlanta saw increased credit availability for auto loans; Atlanta, Minneapolis and San Francisco indicated easier credit for some types of business loans. Boston said some commercial real estate lending eased. New York, however, reported tighter credit standards in commercial real estate lending, and St. Louis said credit standards for home mortgage loans had tightened. Overall credit quality improved in six districts--Philadelphia, Cleveland, Richmond, Kansas City, Dallas and San Francisco. New York indicated rising delinquency rates on consumer loans but declining rages on commercial loans and mortgages. For the full report, use the resource link.

News of the Competition (06/08/2011)

 Permanent link
MADISON, Wis. (6/9/11)
* HSBC Holdings PLC Tuesday said it agreed to pay investors $62.5 million for a fund it serviced that lost money because of the huge Ponzi scheme fraud perpetrated by Bernard Madoff (Dow Jones via American Banker June 8). The bank, in a regulatory filing, said it finalized a settlement with Thema International Fund PLC investors, who had brought a class-action lawsuit, pending in the U.S District Court for the Southern District of New York. HSBC said the settlement--which requires court approval--shouldn’t be interpreted as an admission of liability or wrongdoing … * In a possible glimpse into Wall Street’s future, Morgan Stanley is placing an intense focus on cost control--even to the point of closely monitoring Blackberry use among employees (The Wall Street Journal June 8). Ruth Porat, Morgan Stanley chief financial officer, discussed new cost-cutting moves at a Deutsche Bank conference and showed how the securities firm intends to bolster profits during the next few years, the Journal said. The company’s ramped-up austerity is an indication of the struggle inside many banks and securities firms dealing with weak revenue growth and pending costs of new capital and regulatory requirements, the Journal said. Other banks, such as Bank of America (BofA) and Wells Fargo & Co., have initiated cost-cutting measures, with BofA saying it intends to reduce its number of branches by 10%, the Journal said … * Swiss bank UBS moved its North American headquarters 15 years ago from New York City to suburban Connecticut, where it built the world’s largest trading floor (The New York Times June 8). However, UBS is contemplating a reverse migration back to the city because its suburban location has become a liability in recruiting the top young bankers. They want to live in Manhattan or Brooklyn, not Stamford, Conn. A return to New York would bring up to 2,000 bankers and traders back to Wall Street …

Market News (06/08/2011)

 Permanent link
MADISON, Wis. (6/9/11)
* U.S. mortgage application volume decreased 0.4% for the week ended June 3 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications survey, released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index declined 11%. The seasonally adjusted Purchase Index dropped 4.4% from one week earlier. The unadjusted Purchase Index fell 15.2% and was 9% higher than the same week one year ago. The adjusted Refinance Index increased 1.3%. The Refinance Index is not seasonally adjusted but is adjusted for the Memorial Day holiday. The four-week moving average for the seasonally adjusted Market Index is up 1%. The four-week moving average is down 1.6% for the seasonally adjusted Purchase Index, while this average is up 2.1% for the Refinance Index. For the MBA report, use the link … * The U.S. Department of the Treasury Wednesday announced the sale of six Small Business Administration (SBA) 7(a) securities executed through a Bid Wanted in Competition (BWIC) for roughly $75.3 million. The amount represents overall gains and income of about $2.9 million for those securities. The closing date for the six securities is expected near June 20, at which time the Treasury will determine the final gains and income. SBA 7(a) securities comprise the portion of loans guaranteed by the SBA that finance a wide-range of small business needs, including working capital, machinery, equipment, furniture and fixtures. Treasury originally invested in 31 SBA 7(a) securities with a value of roughly $368 million. The securities comprised 1,001 loans from 17 different industries, including retail, food services, manufacturing, scientific and technical services, healthcare, educational services, and others. After the closing, Treasury will continue to hold 25 SBA 7(a) securities. For the Treasury announcement, use the link … * Echoing remarks made last week by Moody’s Investors Service, Fitch Ratings Wednesday said it will place U.S. debt on watch for downgrade in August if Congress doesn’t lift the federal debt limit before other temporary measures are expended (The Wall Street Journal June 8). Moody’s has said it might conduct a review as early as July. Moody’s and Fitch said they expect the government to lift the debt limit before it triggers a default. The U.S. government hit its statutory debt limit of $14.3 trillion in May when a bill in the House of Representatives that would have lifted it was defeated by Republican opposition …

Consumers members borrowed more in April

 Permanent link
WASHINGTON (6/8/11)--America's consumers--including credit union members--borrowed $6.25 billion more in April than in March, the seventh consecutive month of increased borrowing overall. For credit unions, members increased debt the most since fourth quarter 2010, according to the Federal Reserve's Consumer Credit report. Consumers' debt rose at an annual rate of 3% to $2.428 trillion from $2.422 trillion in March. Economists had forecast that April credit would increase by $5.33 billion, reported Reuters Tuesday after the Fed released its report. Economists surveyed by Bloomberg News had forecast a $5 billion increase (Bloomberg June 7). The increase in borrowing from commercial banks and credit unions likely reflected a growing demand for autos before gasoline prices began climbing, said Bloomberg. Analysts interviewed by Reuters indicated the turnaround in the credit cycle could be student loan debt as consumers return to school to beef up their job skills in an uncertain job market and as states' budget crises impact the costs of tuition. Nonrevolving credit--which includes auto loans and student loans but not mortgages--rose 5.25% or $7.19 billion in April--to $1.638 trillion from March's $1.630 trillion. Revolving credit--which includes credit card debt--decreased 1.5% or $945.5 million in April to $790.1 billion from March's $791.1 billion. Credit unions loaned out $222.5 billion in April, an increase of $2.8 billion over $219.7 billion loaned in March. That compares with $226.5 billion at the end of 2010, said the Fed's report. Members' credit card debt saw no change in April, which maintained March's $35 billion revolving-debt level. Members increased nonrevolving debt, borrowing $187.4 billion in April, or $2.7 billion more than the $184.7 billion they borrowed in March. That compares with $190.1 billion borrowed at the end of 2010. For the Fed's full report, use the link.

News of the Competition (06/07/2011)

 Permanent link
MADISON, Wis. (6/8/11)
* Bank of America Corp. (BofA) and Wells Fargo & Co. said they have decided to end a three-year-old joint venture to develop a system to process automated clearing house payments (ACH) (American Banker June 7). In May 2008, BofA and Wells Fargo formed Pariter Solutions LLC with the goal of forming a single platform for processing their “on-us” ACH transactions--those in which the payer and payee are customers of the banks, the publication said. Pariter’s service precludes the need to route the transactions through the Federal Reserve’s FedACH or The Clearing House Payments Co.’s Electronic Payments Network--the two main providers of ACH processing service for banks. One of the drivers behind ending the joint venture was Wells Fargo’s acquisitions, which changed its business model and its technology needs, Gabriel Boehmer, a Wells Fargo spokesman, told the Banker … * Bank stocks steeply declined Monday amid worries that the economic recovery has stalled and that new international capital standards may require the biggest U.S. banks to hold more capital (American Banker June 7). At Midday Monday, five bank stocks were among the 10 most actively traded and all ended down, the Banker said. Hardest hit stocks were: Regions Financial Corp., falling nearly 5% to $6.05; Citigroup Inc., down 4.5% to $38.07; and Bank of America, which briefly recorded a 52-week low before closing at $10.83--down 4% from Friday’s close. Wells Fargo shares dropped 2.2% to $26.26, while JPMorgan Chase’s shares fell 2.5% to $40.53 …

Market News (06/07/2011)

 Permanent link
MADISON, Wis. (6/8/11)
* For the first time in three months, U.S. job openings declined in April, indicating that companies were beginning to lose optimism about the durability of the economic expansion, even before hiring began to wane in May (Bloomberg.com June 7). The number of job positions waiting to be filled dropped 151,000 to 2.97 million--the fewest since January, the Labor Department said Tuesday. The number of people hired and the number of workers fired also declined. With employers adding the fewest number of workers in eight months, the May unemployment rate rose to 9.1%. Since economic growth slowed in the beginning of 2011, more job gains are necessary to boost consumer spending, Bloomberg said. Many employers are placing hiring plans in abeyance until they can be certain the economic recovery is continuing and can sustain itself, Jennifer Lee, a senior economist at BMO Capital Markets in Toronto, told Bloomberg … * Nearly 40% of homeowners who took out second mortgages are underwater on their loans or owe more than their homes are worth, according to a report released Tuesday by real estate data firm CoreLogic Inc (The Wall Street Journal June 7). About 38% of borrowers took cash out of their residences to pay for everything from medical bills to vacations through home equity loans that are now underwater, the report said. In comparison, 18% of borrowers who don’t have home equity loans were underwater, CoreLogic said. The report shows the consequences of easy borrowing amid the inflated home prices resulting from the housing boom, the Journal said …

News of the Competition (06/06/2011)

 Permanent link
MADISON, Wis. (6/7/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday the closing of one bank, bringing the total bank failures so far this year to 45, compared with 157 for the entire year in 2010. The failed bank is Atlantic Bank and Trust, Charleston, S.C., which was assumed by First Citizens Bank and Trust Company, Inc., Columbia, S.C. The closed bank held roughly $208 million in assets as of March 31. The FDIC estimated the newest failure will cost the Deposit Insurance Fund about $36 million ... * The Securities and Exchange Commission (SEC) is contemplating issuing a public rebuke of Lehman Brother Holdings Inc. and its former executives in lieu of suing them for actions that culminated in Lehman’s 2008 failure, said sources familiar with the matter (Bloomberg News via American Banker June 6). SEC enforcement lawyers are concerned that a legal challenge to Lehman’s accounting practices would be unsuccessful, the sources said. As an alternative, SEC enforcement staff may opt to take a seldom-used step of publishing a so-called report of investigation, also known as a 21(a) report. The report, which has been issued only six times in the past 10 years, describes allegations of misconduct without levying penalties, Bloomberg said … * The Manhattan District Attorney’s office subpoenaed Goldman Sachs Group Inc. for information about the company’s activities that led into the credit crisis, said sources familiar with the matter (Bloomberg News via American Banker June 6). The subpoena is related to the Senate’s permanent subcommittee on investigations report concerning Wall Street’s role in the financial markets’ collapse. The report accuses Goldman--the fifth-largest U.S. bank by assets--of misleading buyers of mortgage-linked investments, the sources said ...

Market News (06/06/2011)

 Permanent link
MADISON, Wis. (6/7/11)
* Business confidence worldwide improved last week--running contrary to nearly every other economic statistic that was released--according to Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com June 6). The confidence level for the week ended June 3 rose to 40.4 from 31.7 the prior week. A near record one-half of the responses to the nine questions asked in the survey were positive, with only 10% of the responses being negative. The most positive sign in the survey is that U.S. hiring intentions are solid, compared with the recent weakening in employment data, Moody’s said ... * The Economic Cycle Research Institute (ECRI) weekly leading index declined to 128.3 for the week ended May 27 from a revised 128.4 (previously 128.5) for the prior week. The smoothed, annualized growth rate dropped to 4.9% from an unrevised 5%. The ECRI index suggests that the economic recovery has lost some steam this year--which is consistent with a slowdown seen in first-quarter employment, gross domestic product and other survey measures, ECRI said. However, the index does not portend a renewed recession, ECRI added …

Market News (06/03/2011)

 Permanent link
MADISON, Wis. (6/6/11)
* U.S. employer hiring significantly slowed in May--following several months of strong job growth--adding to worries that the job market could take a long time, perhaps years, to recover because the economy remains weak (The Wall Street Journal and The New York Times June 3). The U.S. added 54,000 nonfarm payroll jobs last month after an increase of 232,000 jobs in April, the Labor Department said Friday. The May job increase was roughly a third of what economists had predicted, the Times said. The May unemployment rate inched up to 9.1% from 9% in April. Causes of the employment slowdown include a manufacturing employment decrease for the first time since October 2010, and supply disruptions following Japan’s earthquake and tsunami in March, which is a drag on the manufacturing sector, the Journal said. In a related matter, the U.S. Monster employment index--which measures want ads placed by U.S. employers--fell two points between April and May, to 143 from 145 (Moody’s economy.com June 3) … * Moody’s Investors Service warned Thursday that if the government makes no progress in Washington, D.C., in reaching a deal to raise the $14.294 trillion federal borrowing limit and cut deficits, it might review the U.S. government’s Aaa debt rating for a possible downgrade as early as July (The Wall Street Journal June 3). Without a debt-limit increase, the Treasury Department projects it would begin defaulting on its obligations as soon as Aug. 2. If the government were to miss interest payments, that would spark a downgrade of one to three ratings levels, Stephen Hess, senior credit officer in Moody’s Sovereign Risk Group, told the Journal … * For a second consecutive week, U.S. consumer confidence increased, in part because gasoline prices retreated, according to the Bloomberg Consumer Comfort Index (Bloomberg.com June 2). The index rose to minus 47.1 for the week ended May 29 from minus 48.4 the prior week. However, the 2.3-point gain during the past two weeks hasn’t mitigated the 6.8-point month-long decline that pushed the gauge to a nine-month low two weeks ago, Bloomberg said. Despite the rise in consumer sentiment, there isn’t much that gives analysts confidence that consumers’ situation is improving or that the economy is getting better, Robert Brusca, president of Fact & Opinion Economics in New York, told Bloomberg

News of the Competition (06/03/2011)

 Permanent link
MADISON, Wis. (6/6/11)
* Consumer advocates and mortgage bankers united Thursday in coming out against a proposed down-payment requirement to obtain a “qualified residential mortgage” (QRM), claiming it will move the market too much in favor of the wealthy (American Banker June 3). Borrowers must make a minimum 20% down payment and meet other criteria to receive a QRM--a category of loans that will be exempt from a Dodd-Frank Act requirement that lenders retain a minimum of 5% of the credit risk, federal regulators have said. The QRM is meant to be a limited exemption, federal banking agencies have said. However, four consumer groups and the Mortgage Bankers Association said the proposal could create a new paradigm for home loans in which borrowers who cannot afford higher down payments will be burdened with costlier loans ... * The size of the reward a customer receives in a financial institution’s customer rewards program matters much less than the manner in which it is delivered, according to a study published in the Journal of Marketing Research and conducted at a large regional bank (American Banker June 3). The sequence in which items given to customers increased or decreased in value resulted in drastically different behavior, the study found. Those who received gifts that increased in value kept account balances that were--on average--more than $1,200 higher than those who received gifts of diminishing value. The study illustrates the impact of loss aversion, experts explained. If the value of gifts decreases, it goes against expectations and is a turn-off to customers. Doing so can erase the goodwill generated by a more valuable initial gift, the study found …

News of the Competition (06/02/2011)

 Permanent link
MADISON, Wis. (6/3/11)
* The New York State Senate Banking Committee passed a bill in May that would allow check cashers to make loans for periods ranging from 90 to 180 days, with the maximum interest rate to be set by the New York superintendent of banks (American Banker June 2). The legislation is being called a backdoor maneuver--by consumer advocates--to allow payday lending in the third-most populous U.S. state. New York has a 25% cap on interest rates for short-term loans--one of the most stringent U.S. usury laws, the Banker said. The bill has the potential to subvert the New York state usury law by permitting banks to offer loans under the “most favored lender” doctrine, which states a national bank can charge the highest interest rate a state allows for any other type of lender, consumer advocates say … * Ratings firm Moody’s Investors Service may downgrade Bank of America, Citigroup Inc. and Wells Fargo as Moody’s reviews whether the government will limit its backing of the biggest U.S. financial firms (Bloomberg.com June 2). The banks’ current ratings are based on assumptions it made about systemic support by the government during the financial crisis, Moody’s said in a statement released Thursday. Moody’s said it would review whether the ratings should be adjusted to remove the factor of the unusual government support and include only the pre-crisis level of support …

Market News (06/02/2011)

 Permanent link
MADISON, Wis. (6/3/11)
* Initial U.S. claims for unemployment benefits declined last week but remain elevated--an indication of the continuing weakness of the economy (The Wall Street Journal June 2). Claims dropped 6,000--to 422,000--for the week ended May 28, following a revised 428,000 (previously 424,000) claims the previous week, the Labor Department said Thursday. Meanwhile, continuing claims for unemployment slightly fell to 3.711 million for the week ended May 21 from 3.712 million the prior week. That figure doesn’t take into account millions more people on extended and emergency unemployment benefits (Moody’s Economy.com June 2) … * U.S. mortgage loan application volume declined 4% for the week ended May 27 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index decreased 4.2%. The Refinance Index dropped 5.7%. The seasonally adjusted Purchase Index was essentially unchanged from one week earlier. The unadjusted Purchase Index fell 1.2% and was 7.6% higher than the same week one year ago. “Interest rates fell last week as incoming economic data was weaker than anticipated,” said Mike Fratantoni, MBA vice president of research and economics. “Despite this drop in rates, the number of refinance applications fell. In fact, the last time mortgage rates were this low, refinance volume was more than 20% higher. It is likely that many borrowers still cannot qualify to refinance, given the lack of equity in their homes.” For the MBA report, use the link … * First-quarter U.S. worker productivity waned and labor costs increased because companies bolstered employment to meet rising consumer demand (Bloomberg.com June 2). The gauge of employee output per hour rose at a 1.8% annual rate, following a 2.9% gain in fourth quarter 2010, the Labor Department said Thursday. Company expenses for employees went up 0.7% after falling 2.8% the previous quarter. Increasing costs of inputs such as components and energy may cause companies to try to contain labor costs, an indication hiring may not accelerate, Bloomberg said. A report due out today is expected to show 170,000 workers were hired in May--down from 244,000 the previous month, according to estimates of economists …

News of the Competition (06/01/2011)

 Permanent link
MADISON, Wis. (6/2/11)
* Bank of America Corp. (BofA)--the largest U.S. bank by assets--has no need to raise capital while it continues to confront problems with mortgage investors and aims to raise its dividend, Brian Moynihan, BofA CEO, told a Sanford Bernstein Strategic Decisions Conference Wednesday (The Wall Street Journal June 1). Moynihan was responding to questions about BofA’s need to bolster its capital to meet new regulations and demand from investors in mortgage-backed securities that it buy back the debt, the Journal said. BofA absorbed a $1.6 billion charge in the first quarter to settle repurchase demands made by bond insurer Assured Guaranty Ltd. The bank also set aside another $1 billion for other repurchase claims, the Journal said … * Citigroup Inc. is edging toward a deal with a China partner that would give the New York bank a coveted foothold in China’s domestic capital markets, said sources familiar with the matter (The Wall Street Journal June 1). Citigroup looks to set up a joint-venture securities business and is expected to sign a memorandum of understanding with Orient Securities Company Ltd., based in Shanghai, as soon as today, the sources said. The deal would require regulatory approval …

Market News (06/01/2011)

 Permanent link
MADISON, Wis. (6/2/11)
* Companies in the U.S. added fewer workers in May than expected, an indication that job growth is still weak, according to a private report released Wednesday by ADP Employer Services (Bloomberg.com June 1). Employment rose by 38,000 workers last month--the smallest gain since September--from a revised 177,000 in April. Analysts had forecast a 175,000 gain in May, according to a Bloomberg News survey. The May numbers signal a weakening in the job market that reflects a general slowdown of the economy and a downturn in sentiment caused by rising energy prices, disruptions caused by natural disasters in Japan and to some extent the aversion to risk caused by Greece’s economic turmoil, said Eric Green, chief market economist at TD Securities in New York. In a related matter, U.S. employers announced total job cuts of 37,135 in May--roughly equal to the 36,490 tally for April and down 4% during the past year, according to the Challenger Report issued by Challenger, Gray and Christmas Inc. (Moody’s Economy.com June 1). Year-to-date job cuts are 21% lower than in the first five months of 2010. The government sector and nonprofits account for the biggest portion of the cuts--16,607 ... * U.S. manufacturing grew in May at the slowest pace in more than a year because of higher commodity costs and a disruption in the supply of parts in the aftermath of March’s earthquake and tsunami in Japan, according to the Institute for Supply Management’s factory index (Bloomberg.com June1). The index fell to 53.5 last month--the lowest level since September 2009--from 60.4 in April. Momentum is being lost because businesses are reluctant to invest heavily after replacing outdated equipment and are now having less reason to spend, Lindsey Piegza, an economist at FTN Financial in New York, told Bloomberg. Orders will be stagnant unless there’s sufficient growth in demand, he added …