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Market Archive

Market

News of the Competition (06/29/2012)

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MADISON, Wis. (7/2/12)

  • JPMorgan Chase's internal controls have come under increased scrutiny by federal regulators who have asked the bank to show that its risk models are properly designed and operating sufficiently, according to sources familiar with matter (The Wall Street Journal June 28). The bank's primary regulator, the office of the Comptroller of the Currency, has asked for reviews of models that gauge the effects of all elements of operation from interest-rate moves to trading losses, the sources said. The chief investment officer at JPMorgan was responsible for trading losses that exceed $2 billion this year, with total losses at the bank because of problematic positions anticipated to be about $5 billion, the Journal said  …
  • In a move to help funnel money to creditors, Lehman Brothers Holdings Inc. Friday said it has sold its Aurora Bank FSB subsidiary (American Banker June 28). Combined with an earlier sale of a Lehman subsidiary--Woodlands Commercial Bank--Lehman anticipates raising $1.5 billion for its bankruptcy estate, Doug Lambert, manager of Lehman's commercial and thrift-banking operations, told the Banker. The failed investment bank sought Chapter 11 protection in September 2008, and unveiled a $65 billion creditor-payment plan in March  …
  • Citigroup announced Tuesday that it created two programs to assist current and former members of the military with their mortgages (American Banker June 28). For service members who have to permanently relocate and need immediate financial help, CitiMortgage introduced a payment program that reduces eligible borrowers' first mortgage payments for six months, the Banker said. Also, for service members having trouble making their mortgage payments, Citigroup will conduct five events near military bases so they can meet individually with a housing counselor, the Banker added …

Market News (06/29/2012)

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MADISON, Wis. (7/2/12)

  • U.S. consumer confidence fell in June to the lowest level in 2012, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index, because the labor market is providing scant evidence of improvement (Bloomberg.com and Moody's Economy.com June 29). The index declined to 73.2 from 79.3 in May. Wage growth is being limited and consumer spending reined in by an unemployment rate that has stayed above 8% for 40 consecutive months, Bloomberg said. Also, U.S citizens are feeling less wealthy because of Europe's debt crisis, which is causing stock market volatility, Bloomberg added. Inflation expectations are marginally higher this month, Moody's said, with one-year-ahead expectations inching up to 3.1% from 3%, and five-year-ahead expectations rising to 2.8% from 2.7% …
  • For the first time in six months, U.S. consumer spending in May was flat because no wage growth, poor job growth and European fiscal problems are prompting shoppers to lie low (The Wall Street Journal, Bloomberg.com and Moody's Economy.com June 29). For the first time since November 2011, spending last month was unchanged from April, the Commerce Department said Friday. Also, April consumer spending was revised downward to a 0.1% advance from a previously reported 0.3% gain. A high and sustained unemployment rate is holding household income in check, Bloomberg said. And although declining gasoline prices are providing some relief to citizens, a lack of employment gains will be a drag on spending and economic expansion, Bloomberg added ...

News of the Competition (06/28/2012)

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MADISON, Wis. (6/29/12)

  • U.S. banks that are in possession of thousands of delinquent mortgages are attempting to rent them to previous homeowners, then securitize the group of single-family rentals and sell them (American Banker June 27). However, there are obstacles to overcome to make those plans work--namely that no one knows how those rental-based securitizations should be structured, Morningstar Credit Ratings analysts Brain Grow and Lawrence Koh told the Banker. The two voiced worries about whether single-family rentals can be grouped together and securitized, in a report published this week, the Banker said. In addition to the structure issue, there is the question of whether rental income would generate sufficient steady cash flows to make bondholders happy. The cost of vacating, securitizing and repairing rental properties is another issue that is not clear, the Banker said ...
  • JPMorgan Chase's losses from a mismanaged $2 billion bet on credit derivatives may hit $9 billion--far surpassing earlier estimates, according to sources briefed on the matter (The New York Times June 28). Although JPMorgan CEO Jamie Dimon estimated the red ink could double in the next few quarters when he announced the original loss in May, the losses have piled up in recent weeks as the company winds down its exit from such trades, anonymous sources at the bank told the Times …
  • Google has revised its mobile wallet to make it more appealing for the sale of digital goods, the company announced this week (American Banker June 28). Google is updating its fee structure to better accommodate sales of digital goods such as virtual items sold within online games. The company also is adding a recurring billing option, the Banker said. For low-cost items, developers pay 5% per transaction under Google's new digital goods pricing structure. For higher-priced purchases, the company charges 1.9% on top of a 30-cent fixed fee, the Banker said …

Market News (06/28/2012)

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MADISON, Wis. (6/29/12)

  • U.S. consumer confidence rose last week to the highest point in two months because positive views about personal finances helped mitigate increasing concerns about the economy, according to the Bloomberg Consumer Comfort index (Bloomberg.com and Moody's Economy.com June 28). The index jumped to -36.1 for the week ended June 24 from -37.9 the prior week. For the first time since April, the measure of the household finances component of the index was positive.  However, sentiment about the state of the economy fell to the lowest mark since February. Although some relief occurred from  a 57-cent decline in gasoline prices since early April--which is allowing consumers to make their paychecks go further--concerns persist about a weakening job market, Bloomberg said ...
  • Initial U.S. claims for unemployment benefits lingered near their highest level in 2012, indicating scant improvement in the labor market (Bloomberg.com and Moody's Economy.com June 28). Claims dropped 6,000--to 386,000--for the week ended June 23, the Labor Department said Thursday. Concerns about the so-called fiscal cliff that the U.S. will confront at the end of the year and collateral damage from the European debt crisis could cause employers to keep from adding to their work forces, Bloomberg said. Meanwhile, continuing claims for unemployment benefits for the week ended June 16 decreased 15,000--to 3.296 million …
  • Deposit levels at U.S. financial institutions are fairly stable--a big departure from last summer when the debt-ceiling impasse and European economic strain caused cash deposits to roll into transaction accounts at one of the fastest paces in years (American Banker June 27). However, with European financial troubles now at a fever pitch, a rush to shelter money could be coming, as deposits have gradually increased in recent months, the Banker said. Last August, year-over-year growth in checking deposits spiked to 33%--exceeding the prior post-Lehman Brothers collapse peak of 29% in December 2008, the Banker said. Although deposit growth has helped provide cheap funding and buoyed net interest margins since the financial crisis, panic surges of deposits can be problematic. That's because they result in money influxes that leave as quickly as they come in, and force banks to maintain large funds of  liquid assets that can cause negative net returns, the Banker said …

News of the Competition (06/27/2012)

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MADISON, Wis. (6/28/12)

  • JPMorgan Chase--as a component of its settlement efforts in a lawsuit regarding it overdraft practices--will no longer charge its customers overdraft fees for transactions of less than $5 (American Banker June 26).  Also, if customers do not overdraw their accounts by a certain daily amount, the New York-based bank will waive overdraft fees, or drop overdrafts for small transactions, the Banker said. That move is similar to new policies several big competitors already have adopted, the publication said …
  • As part of an overarching plan to pursue small-business customers, Bank of America (BofA) has hired more than 30 workers in Washington state, including 10 in the Seattle area (American Banker June 26).  Charlotte, N.C.-based BofA said Tuesday it intends to add roughly 1,000 small business bankers nationwide. Washington has about 532,000 small businesses--accounting for more than 97% of the state's employers and employing more than half the state's private-sector work force, according to the U.S. Small Business Administration. The bankers will provide more acumen to business owners at their place of business to assess the cash management, credit and deposit needs and help them focus on growth, Roger Forman, BofA small-business bank manager for Washington, said in a press release …

Market News (06/27/2012)

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MADISON, Wis.  (6/28/12)

  • Mortgage application volume in the U.S. decreased 7.1% for the week ended June 22 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 also declined 7.1% compared with the previous week. The Refinance Index dropped 8%. The seasonally adjusted Purchase Index fell 1%. The unadjusted Purchase Index decreased more than 2% and was almost 3% lower than the same week one year ago. "Refinance volume fell last week due largely to a fall-off in refinance applications for government loans, which had more than doubled the prior week," said Michael Fratantoni, MBA vice president of research and economics. "The large swings in activity were due to the implementation of the Federal Housing Administration's new premiums on streamline refinances, and borrowers timing their applications to lower their premiums."  For the MBA report, use the link …
  • Pending U.S. home sales bounced back in May, matching the highest level in the past two years, and are well above year-ago levels, according to the National Association of Realtors (NAR). Both monthly and annual gains were seen in every region. The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 5.9% to 101.1 in May from 95.5 in April and is 13.3% above May 2011 when it was 89.2. The data reflect contracts but not closings. The index also reached 101.1 in March, the highest level since April 2010 when buyers rushed to beat the deadline for the home buyer tax credit. Lawrence Yun, NAR chief economist, said longer term comparisons are more relevant. "The housing market is clearly superior this year compared with the past four years," he said. "The latest increase in home contract signings marks 13 consecutive months of year-over-year gains. Actual closings for existing-home sales have been notably higher since the beginning of the year, and we're on track to see a 9% to 10% improvement in total sales for 2012." For the NAR report, use the link …
  • Orders for U.S. durable goods--those meant to last more than three years--increased more than expected in May, allaying fears that manufacturing is stumbling and suggesting that it is solidifying after a tepid early spring  (The Wall Street Journal, Bloomberg.com and Moody's Economy.com June 27). Orders rose 1.1%--the first increase in three months, the Commerce Department said Wednesday. Economists had forecast a 0.5% gain, according to a Bloomberg News survey. More robust demand for cars, defense equipment and machinery spearheaded May's gain, the Journal said. The fact that businesses are not completely cutting back is a relief, Jennifer Lee, a senior economist at BMO Capital Markets in Toronto, told Bloomberg. However, because of widespread uncertainty and moderate growth, caution is needed, she added …

Market News (06/26/2012)

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MADISON, Wis.  (6/27/12)

  • U.S. consumer confidence fell in June to a five-month low because people became less certain about the prospects for personal incomes and the labor market (Bloomberg.com and Moody's Economy.com June 26). For a fourth consecutive month, the Conference Board's Index of Consumer Confidence declined--to 62  from a revised 64.4 in May--the New York private research group said Tuesday. The downward confidence trend elevates worries that consumers will not spend as much in the next few months, Moody's said. The index indicates that declining gasoline prices are having a limited effect in bolstering confidence at a time when income growth and hiring have leveled off, Bloomberg said …
  • The Federal Housing Finance Agency (FHFA) today reported that the national average contract mortgage rate for the purchase of previously occupied homes by combined lenders, used as an index in some adjustable-rate mortgage contracts, was 3.78% based on loans closed in May. In March, FHFA began calculating interest rates using unweighted survey data. There was a decrease of 0.15% from the previous month. The average interest rate on conventional, 30-year, fixed-rate mortgage loans of $417,000 or less decreased 17 basis points to 4.04 in May. The rates are calculated from the FHFA's Monthly Interest Rate Survey of purchase-money mortgages. For the FHFA report, use the link …
  • Adding to evidence the U.S. housing market is solidifying, home prices declined in April at the slowest pace in more than a year, according to the S&P/Case-Shiller Home Price indexes (The Wall Street Journal, Bloomberg. com and Moody's Economy.com June 26).  A key measure of U.S. home prices--the composite 20-city home price index--increased 1.3% in April from the prior month and dropped only 1.9% from a year earlier. Since the middle of 2011, housing has gained momentum, Ryan Wang, an economist at HSBC Securities USA Inc. in New York, told Bloomberg. The market is more balanced and prices have stabilized because sales have been improving and the inventory of homes for sale has been declining, he added …
  • The International Council of Shopping Centers (ICSC) chain-store sales index jumped 2% last week--the biggest gain since late March, but not as much as the larger gain in the same week a year ago (Moody's Economy.com June 26). Customer traffic improved for the week ended June 23 at specialty stores and wholesale clubs compared with the same time last year, but diminished at discounters and dollar stores, ICSC reported. Year-over-year growth slackened  to 2.7%, the weakest performance since the week ending March  24 and under the year-to-date average of 3.2% …

News of the Competition (06/26/2012)

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MADISON, Wis. (6/27/12)

  • Bankers should think of return on investment (ROI) for social media in a different way, said Frank Eliason, senior vice president of social media at Citigroup (American Banker June 25). In terms of cash ROI, there is none, but viewed in the context of what can be learned from social media to improve banking operations, the return is bountiful, Eliason told the Banker. Rather than looking at sales or customer engagement, banks should consider their social media ROI to be the information obtained that results in change and process improvement, he added. More about the bank itself and its competitors can be gleaned from information shared over social media sites, Eliason told the publication …

News of the Competition (06/25/2012)

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MADISON, Wis. (6/26/12)

  • Online banking sites in the U.S. are evolving into marketplaces where banks can sell additional financial services beyond just the basic transactions, according to a Forrester Research study finished last week (American Banker June 22). Last year, 37% of U.S. consumers who purchased financial services products applied for them online, compared with 32% in 2010, Forrester's findings indicated. Banks are increasing their investments in the online channel as they become more aware of its importance, Forrester said. The average percentage of digital/e-business budget earmarked for online sales upgrades is 14% among the top 19 heads at retail banking of U.S. and Canadian banks surveyed …
  • Moody's Investors Service's downgrades of some of the biggest U.S. banks is expected to cause less lending and more divestitures (American Banker June 22). Thursday's downgrade should result in minimal short-term damage at Bank of America, Citigroup and JPMorgan Chase because all three have a surfeit of liquidity, and their investors and counterparties have priced the rating changes into their cost of funds, industry experts told the Banker. However, banks will feel increased pressure to stockpile more reserves because of higher borrowing costs and the need--over time--to post more collateral with lenders, the Banker said …
  • A U.S. bankruptcy judge for the Southern District of New York, Robert Drain, agrees with the U.S. Supreme Court's recent decision on a credit bidding case that allows some room to maneuver for courts in denying lenders the ability to use their debt as currency in auctions (American Banker June 22). Supreme Court Justice Antonin Scalia, who delivered the opinion, did not rule on the merits of credit bidding, stating the matter is a question "for the consideration of Congress, not the courts." An auction is only fair if a secured creditor is allowed to bid its credit, but flexibility should be allowed in unusual situations--such as when the structure of the auction could result in widely different sale prices for the same goods or services, Drain said at a seminar last week … 

Market News (06/25/2012)

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MADISON, Wis.  (6/26/12)

  • Sales of new U.S. homes in May rose to the highest level in more than two years, indicating a slow recovery is underway in a sector of the economy that has been troubled for a long time (The Wall Street Journal and Bloomberg.com June 25). Purchases increased to a seasonally adjusted rate of 369,000--a 7.6% gain from April and the most since April 2010, the Commerce Department said Monday. Last month's sales were nearly 20% higher than the same month one year ago. More affordable properties and declining borrowing costs may continue to attract buyers and mitigate the effects of a weak job market and constrained access to credit that are a drag on the economic recovery, Bloomberg said. Both the average and median home sales prices declined in May from April, which may be related to the increase in sales volume, Moody's said …
  • If implemented for too long, stimulus measures that central banks worldwide introduced to allay financial turmoil could engender other problems, the Bank for International Settlements (BIS) general manager said Sunday (The Wall Street Journal June 24). Central banks are stuck in the middle and that may force their hand in becoming the last-resort policymakers, Jaime Caruana said, speaking at the BIS general meeting in Basel, Switzerland. If the stimulus measures are employed too long, there is a concern that monetary policy would be forced to do even more because not enough has been done in other areas, he added …
  • The Economic Cycle Research Institute (ECRI) Weekly Leading Indicator--which measures economic growth--dropped to 121.3 for the week ended June 15, its lowest level since the end of 2011. The indicator was 121.8 the prior week (Moody's Economy.com June 22). For the fourth consecutive week, the rate of decline in the smoothed, annualized growth rate increased to 3.5%. An unpredictable worldwide economy and anemic economic data are causing both growth rates to worsen, ECRI said …

Market News (06/22/2012)

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MADISON, Wis. (6/25/12)

  • Moody's Investors Service downgraded more than a dozen global banks last week, including  five of the six biggest U.S. banks, adding worries to an already jittery marketplace beset by concerned investors, stricter regulations and tepid economic growth (The Wall Street Journal June 22). One of the banks, Morgan Stanley, waged a campaign to convince Moody's not to downgrade its ratings by three levels, the Journal said. Moody's lowered it by two. The lower ratings likely will increase the banks' borrowing costs, impact how they raise capital and could eliminate trading revenue for some banks, the Journal said. Banks' rising costs could be borne by customers such as corporations, municipalities and others who obtain bank loans, the Journal said …
  • Limited supplies of housing inventory held back existing-home sales in May, but sales maintained a strong lead over year-ago levels and home prices are on a sustained uptrend in all regions, according to the National Asscociation of Realtors (NAR). Total existing-home sales--which are completed transactions that include single-family homes, townhomes, condominiums and co-ops--declined 1.5% to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April, but are 9.6% above the 4.15 million-unit pace in May 2011. Lawrence Yun, NAR chief economist, said inventory shortages in certain areas have been building all year. "The slight pullback in monthly home sales is more likely due to supply constraints rather than softening demand," he said. "The normal seasonal upturn in inventory did not occur this spring. Even with the monthly decline, home sales have moved markedly higher with 11 consecutive months of gains over the same month a year earlier" …

News of the Competition (06/22/2012)

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MADISON, Wis. (6/25/12)

  • Within hours after federal regulators released a "remediation schedule" Thursday indicating the amount of money homeowners would be paid because of wrongful foreclosure actions stemming from mortgage servicing failures at financial  institutions, consumer advocates were upset (American Banker June 21). Banks regulated by the Federal Reserve and the Office of the Comptroller Currency might have to pay borrowers between $500 and $125,000 if they make mistakes during the foreclosure process, according to guidelines issued Thursday by those agencies (News Now June 22). The guidance states that remedies may include lump-sum payments, suspension or rescission of a foreclosure, a loan modification or other loss mitigation assistance, correction of credit reports, or correction of deficiency amounts and records. The agencies also gave a two-month extension, until Sept. 30, for eligible borrowers to request a free review of their mortgage foreclosures under the Independent Foreclosure Review, News Now added. The disparity in compensation to borrowers has riled consumer advocates, the Banker said. Advocates observed that servicers who erroneously denied loan modifications to qualified buyers--that subsequently went into foreclosure--would pay just $15,000 to borrowers, the Banker said. At this time, it is not clear if states will be impacted by the federal guidelines, the Banker added  ...
  • The U.S. foreclosure pipeline still remains clogged five months after a national mortgage servicing agreement was officially implemented (American Banker June 21). The settlement was supposed to allow the housing market to advance by allowing banks to provide eligible borrowers with principal writedowns and then assuredly foreclose on the others, the Banker said. However, the deal itself may be contributing to the ongoing backlog, industry observers told the publication. Much of the legal risk arising from foreclosures has been removed by the deal, which was agreed to by the five banks that control 70% of the mortgage servicing market, the Banker said. However, new foreclosure delays have taken the place of that impediment. They include adapting to changing servicing standards, and attempting to qualify the maximum number of borrowers to reduce the banks' actual cash liabilities arising from the settlement, the Banker said  …
  • As a component of a broader cost-saving initiative, Wells Fargo will outsource an undetermined number of its institutional retirement division jobs to the Philippines and India (American Banker June 21). The San Francisco-based bank discovered during the past year that it could save more by growing its foreign presence, the Charlotte Observer noted Thursday. The bank--which has about 265,000 full-time employees--aims to eliminate $1.7 billion in expenses during the remainder of 2012, which would reduce its estimated expenses to $11.25 billion in the fourth quarter, the newspaper said …

News of the Competition (06/21/2012)

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MADISON, Wis. (6/22/12)

  • JPMorgan Chase said it will stop accepting Federal Housing Administration (FHA) "streamline" refinancings outside of its current servicing portfolios, according to National Mortgage News (American Banker June 20). JPMorgan will focus its FHA streamline refinancing efforts on it current customers, company spokeswoman Amy Bonitatibus said. Banks can improve their risk exposure by refinancing their existing customers  because that move would lower the borrower's interest rate, Tom Cronin, managing director at The Collingwood Group, told the Banker
  • Wells Fargo and JPMorgan Chase intend to expand their Spanish-language online banking services by early 2013 to accommodate their increasing number of Latino customers and keep pace with their main rivals (American Banker June 20). Bank of America and Citigroup have been offering their customers means to conduct transactions online in Spanish for a long time, the Banker said. Creating sophisticated transactional online banking can take a long time and be expensive, Wells Fargo executives told the Banker. If not done right, there can be a "horrendous" impact on customers, Teddy De Rivera, senior vice president of portfolio strategy and emerging trends at Wells Fargo's internet services group, told the Banker
  • Facebook is updating its payment system by moving to accommodate real currency as opposed to its Credits virtual currency (American Banker June 20). If Facebook were to offer some type of banking service, nearly 30% of consumers surveyed said they might use it, according to an online survey of North American customers conducted by Cisco in May. Facebook is working hard to alter its payment system so it is more compatible with existing methods of moving money. The company presently does not offer traditional banking products, the Banker said ...

Market News (06/21/2012)

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MADISON, Wis. (6/22/12)

  • Initial U.S. claims for unemployment benefits dipped last week but remained mired at a level that shows no improvement in labor market conditions or hiring, according to figures released Thursday by the Labor Department (MarketWatch and Moody's Economy.com June 21). Claims fell 2,000--to a seasonally adjusted 387,000--for the week ended June 16. Although the slight decline indicates movement is in the right direction, it's small improvement doesn't do much to buoy optimism about the labor market's near-term trajectory, Moody's said. For the past four weeks, claims have been at the 380,000 mark or higher--a level that economists say is consonant with--at best--modest hiring trends, MarketWatch said. Meanwhile, continuing claims for unemployment benefits for the week ended June 9 remained unchanged at 3.299 million …
  • U.S mortgage interest rates for 30-year fixed-rate loans fell to a record low this past week, cutting borrowing costs during a checkered economic recovery in the housing market (Bloomberg.com June 21). For the week ended June 21, the average 30-year fixed-rate mortgage dropped to 3.66% from 3.71% the prior week, Freddie Mac said--marking the lowest rate in the government-sponsored enterprise's records harking back to 1971. Also, the average 15-year rate dipped to 2.95% from 2.98%. With house prices stabilizing, low borrowing costs have helped bolster the real estate market, Bloomberg said. However, home demand remains uneven, with sales of  previously owned homes declining 1.5% in May from the prior month, according to a National Association of Realtors report released Thursday …

Market News (06/21/2012)

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MADISON, Wis. (6/21/12)

  • Tuesday's announcement that the number of jobs available in April dropped 8.7%--or 325,000 jobs to 3.4 million--was the largest single-month drop since a 438,000 plunge taken in September 2008, said preliminary statistics from the Labor Department. The drop compares with a 10.6% decrease in April 2009 and a 12% drop in September 2008. Job openings declined from March in nearly all economic sectors, the report said.  Opening in manufacturing declined 20%--to 246,000 about one fifth of the broader economy's decline. Education and health services openings--considered one of the most durable sectors--fell by 17,000 during April. In June, it is estimated that more than 100,000 have been added. Although the current unemployment rate is 8.2%,  Barclays Capital estimated that  the rate could decline to 7.2% by the end of 2013 (USA Today 6/20/12) …

News of the Competition (06/20/2012)

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MADISON, Wis. (6/21/12)

  • Fannie Mae's most recent forecast for mortgage originations for the rest of this year is more upbeat than prior ones (American Banker  June 19).  Economists at the government-sponsored enterprise predict originations will be $1.34 trillion for 2012, compared with $1.31 trillion one month ago. Mortgage bankers originated $1.452 trillion in home mortgages last year, according to data provided by National Mortgagee News and the Quarterly Data Report. Refinancings will account for 64% of the market this year, Fannie said--which is two percentage points lower than in 2011 …
  • Small U.S. community banks are re-entering the mortgage lending business or growing their existing mortgage operations (American Banker June 19). Other banks, in some cases, have stepped up lending even to borrowers outside of their core market--in some instances, way beyond their core markets, the Banker said. Community banks are taking advantage of the fact that the financial crisis and more stringent financial regulations that followed hurt larger home lenders, the publication said. Also, because some larger lenders now are focusing on commercial loans, smaller banks are having difficulty making money in that filed. Hence mortgage lending is more appealing to them, the Banker said …

Federal Reserve to buy 267 billion in Treasuries

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WASHINGTON (6/21/12)--The Federal Reserve's Open Market Committee Wednesday said it would extend "Operation Twist" by purchasing $267 billion in long-term Treasuries to reduce borrowing costs for American consumers and businesses. A Credit Union National Association (CUNA) economist said the Fed's continued low interest rate policy would keep downward pressure on credit unions' net interest margins.

Operation Twist, established by the Fed last September, is intended to extend the average maturity of its holdings of securities.

"The committee intends to purchase Treasury securities with remaining maturities of six years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately three years or less," the Federal Reserve said in a statement released Wednesday. "This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative."

The committee--the Federal Reserve's monetary policymaking group--also said it would maintain the federal funds rate at 0% to 0.25%.

The Federal Reserve's continuation of its exceptionally low interest-rate policy will keep downward pressure on credit unions' net interest margins, CUNA Senior Economist Steve Rick told News Now

"Margins fell below 3% in the first quarter to 2.96%, a record low," Rick said. "We expect asset yields to continue to fall faster than funding costs due aggressive price competition for good loans and the reprising of old loans into today's record low interest rates.  The Fed will try to keep the 10-year Treasury rate below 2% to keep mortgage rates low and the nascent housing recovery on track."

Business investment has increased, the committee said.  Household spending is rising at a slower pace than last year. The housing sector has shown signs of improvement but remains "depressed," the committee said.

Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.

Economic growth is expected remain moderate and then to pick up very gradually, the committee projected. It also anticipated that the unemployment rate will decline slowly.

Troubles with the European market are expected to pose significant downside risks to the U.S. economic outlook, the committee said.

Market News (06/20/2012)

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MADISON (6/20/12)

  • New home construction in the U.S. fell 4.8% in May to 708,000 (at an annual rate), according to the U.S. Commerce Department (MarketWatch 6/19). The department also reported Tuesday that permits rose 7.9% to the highest level in nearly four years. May's construction was less than the 720,000 annualized starts forecast by economists surveyed by MarketWatch. The department upwardly revised construction starts for April to 723,000, the largest increase since October 2008. Permits for construction of single-family homes rose 4% to 494,000 at an annual rate in May, the highest rate since September. Single family homes make up 75% of the housing market …

News of the Competition (06/19/2012)

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MADISON, Wis. (6/20/12)

  • Claiming new regulations violate state laws, two payday lenders have filed a lawsuit against Austin, Texas (American Banker June 18). The lenders say the rules restrict how much they can lend to an individual borrower and where they can operate. The law went into effect in May after being passed last summer. Lenders' efforts to stop the law from being implemented failed, the Banker said. In denying the lenders' claims, the city of Austin Law Department said it is confident the ordinance is legally sound and it will launch a full-scale defense against the claims, according to the Austin Statesman. The Austin law, which is similar to laws passed in a few states and the District of Columbia, restricts the number of times a borrower can refinance, places limits on how much money a car-title loan company or payday lender can advance to a borrower and limits where they can conduct business …
  • Bank of America (BofA) is seriously considering selling its non-U.S. wealth management unit for $1.5 billion to $2 billion to Julius Baer, but anticipates retaining its Japanese division, CNBC reported Monday (American Banker June 18). In efforts to make its operations more efficient and strengthen its capital levels, BofA has sold several business units and stakes in other companies during the past year, the Banker said.  BofA was seeking bids and aiming to get $3 billion for its non-domestic wealth management divisions, according to reports in April. If the deal closes, it would bolster Julius Baer's Asian and Latin American operations. The company--the biggest private bank in Switzerland--manages about $187 billion of assets, CNBC said …

News of the Competition (06/19/2012)

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MADISON, Wis. (6/19/12)

  • The Federal Deposit Insurance Corp. (FDIC) closed three banks Friday for a total of 31 closures so far in 2012. There were 92 bank closures in 2011. Putnam State Bank, Palatka, Fla. was assumed by Community Bank, Indiantown, Fla.; Security Exchange Bank, Marietta. Ga., was assumed by Fidelity Bank, Atlanta; and The Farmers Bank of Lynchburg (Tenn.) was assumed by Clayton Bank and Trust, Knoxville, Tenn. The banks had roughly $484 million in assets as of March 31. The FDIC estimates the most recent failures will cost its Deposit Insurance Fund roughly $100 million …


  • Poor marketing and high fees have made prepaid cards unappealing to many potential customers, a Western Union executive said in a speech Wednesday (American Banker June 15). Having a product with 30% to 40% attrition rate is not sustainable, said Stewart Stockdale, Western Union head of global services. The remittance company sells a general–purpose reloadable card that MetaBank issues. After the speech, Stockdale told the Banker that good returns are fine and acceptable. However, excessively high fees that some prepaid providers are charging have hurt the industry because potential customers will no longer use the cards when they see how expensive it is to use them.  For active prepaid customers, Western Union does not charge a monthly maintenance fee or a fee to have funds loaded on cards through direct deposit, the Banker said.  The company charges $4.95 to have funds loaded onto a prepaid card by a remittance agent. It also assesses a $2.95 charge after four inactive months, and a $1 fee to transfer funds from a bank account onto its cards, the Banker said …

Market News (06/18/2012)

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Market News

MADISON, Wis. (6/19/12)

  • The rebuilding of foreign-exchange reserves by central banks is at the fastest pace since 2004, and that means there are fewer U.S. dollars for private investors, said Morgan Stanley, which tracks investment flow data. The private sector says it has $2 trillion less than it needs.  The dollar's share of global reserves rose  to 62.1% during December, the latest data from the International Monetary Fund. That's a 1.6 percentage point increase, after dropping to an all-time low of 60.5% during second quarter 2011.  Morgan Stanley expects the dollar to gain 8.2% this year, which would be the most in seven years (Bloomberg.com June 18) …
  • Home equity loans during first quarter rose to their highest level—accounting for 41% of U.S. residential property value share since 2008, according to a Bloomberg analysis of data from the Federal Reserve.  These include homeowners who don't have mortgages, said a Fed study released last week. The last time the share was that high was in third quarter of 2008. Homeowners taking advantage of record low  interest rates to refinance loans  paid down their principal with cash. The percentage gain was the highest in 60 years, said Bloomberg.com (June 14) …

News of the Competition (06/15/2012)

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MADISON, Wis. (6/18/12)

  • A Consumer Financial Protection Bureau (CFPB) senior official lauded nonbank executives and bankers for "groundbreaking work" by providing poor consumers with financial services, in a speech Thursday in San Francisco (American Banker June 14).  A key to solving financial challenges confronted by low-income and economically vulnerable people is to listen to organizations on the front line and to learn from their experiences, said David Silverman, CFPB acting associate director for research, markets and regulations, in speaking before the Underbanked Financial Services Forum. CFPB is more than just a regulatory and enforcement agency, because the Dodd- Frank Act stipulates that one of CFPB's functions is making sure that "markets facilitate access and innovation," Silverman told the forum  …
  • The U.S. Department of the Treasury Friday released Treasury International Capital (TIC) data for April 2012. The total in April of all net foreign acquisitions of long-term securities, short-term U.S. securities and banking flows was a monthly net TIC outflow of $20.5 billion. Of that, net foreign private outflows were $23.7 billion and net foreign official inflows were $3.2 billion. Foreign residents increased their holdings of long-term U.S. securities in March--net purchases were $26.1 billion. Net purchases by private foreign investors were $15.4 billion, and net purchases by foreign official institutions were $10.7 billion. At the same time, U.S. residents increased their holdings of long-term foreign securities, with net purchases of $0.6 billion. The next release, which will report on data for May, is scheduled for July 17. For the Treasury report, use the link …

Market News (06/15/2012)

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MADISON, Wis. (6/18/12)

  • Although U.S. housing debt--in the form of outstanding home mortgages--has fallen to its lowest level in five years, foreclosures again are on the rise (American Banker June 14). At the end of March, consumers owed $8.995 trillion on their residential loans--the lowest amount in nearly five years--after hitting a high of $10.1 trillion in 2009--according to data compiled by National Mortgage News and Quarterly Data Report. Because foreclosed mortgages have been taken out of the debt tally, mortgage servicers overall are processing a lower dollar amount of loans, the Banker said. Also, some consumers have been lowering their overall housing debt. Those who have the financial means to refinance at extremely low rates are entering into "cash-in" refinancings, the Banker said. However, for the first time in three months, U.S. foreclosure filings in May exceeded the 200,000 level because more servicers attempted to take over real estate collateralized by delinquent home mortgages, according to the most recent figures that RealtyTrac compiled, the Banker said. May foreclosures nationwide totaled 205,990--a 9% rise from April, but 4% less than a year ago ...
  • With the labor market showing scant signs of improvement, U.S. consumer confidence fell in June to its lowest level in 2012, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index (Bloomberg.com and Moody's Economy.com June 15). The index declined to 74.1 from 79.3 the previous month--the highest mark since October 2007. Cheaper gasoline prices are being trumped by job growth that has eroded for four consecutive months and wage gains that are not keeping up with the rate of inflation, Bloomberg said. Also, ongoing European debt problems are causing volatility in stock prices, heightening the possibility that consumer spending will idle, Bloomberg added …
  • U.S. business inventories increased 0.4% in April, surpassing the consensus forecast of a 0.3% rise, according to the U.S. Census Bureau (Moody's Economy.com June 13). Retail inventories jumped 0.6%--their largest gain since January. In a sign that businesses are successfully managing their inventories, the inventory-to-sales ratio remained unchanged at 1.26, Moody's said. Also, wholesale inventories previously had been reported going up 0.6% in April, while manufacturing inventories remained unchanged, Moody's said …

News of the Competition (06/14/2012)

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MADISON, Wis. (6/15/12)

  • Fannie Mae and Freddie Mac's recruitment of their last several CEOs may provide some foresight into their possible merger, according to industry observers. Fannie recruited three of its last four leaders internally, sending a message that it can find more suitable talent inside the organization, and reflecting a possible strategy to improve employee morale, according to Robert Wagner, a senior client partner at the executive search firm Korn/Ferry International (American Banker June 13). Freddie chose three of its last four CEOs from outside the company, an indication the company may be cleaning house and looking for "fresh perspectives," said Barry Shulman, a principal at Shulman Associates, an executive recruiting firm. If the two government-sponsored enterprises (GSEs) eventually merge, it is believed Fannie will be the dominant partner, according to employees of the two companies, the Banker said. Fannie is the larger GSE, with nearly double Freddie's guarantee volume ...
  • Discontented investors tired of low returns, who are longtime shareholders or family who have an ownership stake  in U.S. community banks, may constitute the next large threat to the small financial institutions  (American Banker June 13). Many legacy shareholder groups who have proceeded through an intergenerational ownership transfer--along with investors who have no role in running the bank--have become impatient with tepid financial results, Rod Taylor, a bank consultant and executive recruiter with Taylor & Co., told the Banker. He expects that impatience to become more prevalent--particularly with smaller community and regional banks--because there is not going to be an opportunity to sell the banks for a decent return in the near future, he added …
  • Fast-food chain Burger King said Wednesday it is piloting a smartphone app that allows users to pay for their food by using QR codes displayed on their phone screens (American Banker June 13). Burger King is partnering with payments technology company Firethorn Mobile to test its BK Mobile Crown Card at roughly 50 Salt Lake City-area restaurants, the Banker said. QR is short for Quick Response (the codes can be read quickly by a cell phone). They are used to take a piece of information from transitory media and put it in to a cell phone. The reason why they are more useful than a standard barcode is that they can store (and digitally present) much more data, including url links, geo coordinates and text. The other key feature of QR codes is that instead of requiring a hand-held scanner to scan them, many modern cell phones can scan them (searchengineland.com) ...

Market News (06/14/2012)

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MADISON, Wis. (6/15/12)

  • Initial claims for U.S. unemployment benefits unexpectedly rose last week, indicating the labor market is having difficulty gaining momentum (Bloomberg.com and Moody's Economy.com June 14). Claims increased 6,000--to 386,000--for the week ended June 9 from 380,000 the previous week, the Labor Department said Thursday. Economists forecast that claims would drop to 375,000, according to a survey by Bloomberg News. Companies may not be able to hire at a pace needed to fuel an economic expansion because of scant clarity in the business environment and weaker economic growth, Bloomberg said. Meanwhile, continuing claims for unemployment benefits declined 33,000--to 3.278 million for the week ended June 2. The labor market is mired in mediocrity now and not picking up much steam, following several disappointing employment reports in May, Bricklin Dwyer, an economist at BNP Paribas in New York, told Bloomberg
  • The Bloomberg Consumer Comfort Index improved 1.2 points to -36.4 from -37.6 for the week ended June 10. The improvement in sentiment was attributed to declining gasoline prices (Moody's Economy.com June 14). Last week's gain marks the fourth consecutive weekly advance, placing the index at more than halfway back to its high in 2012, which was -31.4 in April. The index nosedived to worse than -40 in May after several weeks of losses. Consumers are holding up well in the face of volatile equity prices arising from U.S. economic data that are trending downward and ongoing political and economic problems in Europe, Bloomberg said …
  • U.S. consumer prices dropped in May for the first time in two years and the most in three years because rapidly retreating gasoline prices mitigated rising rents and more costly medical care (The Wall Street Journal, Bloomberg.com and Moody's Economy.com June 14). The consumer price index (CPI) decreased 0.3%--the largest decline since December 2008, the Labor Department said Thursday. For a third consecutive month, the core CPI--which excludes more volatile food and energy costs--rose 0.2%. Lower energy costs could provide help to consumers to compensate for wage and job gains that have leveled off and slowed consumer spending, Bloomberg said ...

News of the Competition (06/13/2012)

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MADISON, Wis. (6/14/12)

  • New York's Gov. Andrew Cuomo and Superintendent of Financial Services Benjamin Lawsky announced Tuesday that force-placed insurers that operate in the state must reduce the premiums they charge (American Banker June 12). A month ago, the state intensely questioned mortgage servicers and insurers about the way they were handling force-placed insurance, the Banker said. Banks purchase force-placed insurance on homes of mortgage borrowers who have allowed their own hazard policies to lapse as a means of protecting mortgage investors and borrowers. However, the product has become an instrument for price-gouging and kickbacks going from insurers to banks, some critics allege, the Banker said …
  • Mobile wallets are providing good opportunities but also obstacles for banks, participants at this week's Mobile Banking and Commerce Summit in San Francisco said (American Banker June 12). At issue is the role banks will play with the new mobile payments paradigm, and banks' knowledge of the capabilities of mobile wallets and the benefits that could come from partnering with developers, the conference revealed. Mobile wallets can allow banks to provide loyalty offers and increased services that are attached to payments, Jim Stapleton, ISIS chief sales officer, told the conference. By placing their brands in their mobile wallets, banks can make consumers aware of their value proposition, he added …

Market News (06/13/2012)

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MADISON, Wis. (6/14/12)

  • U.S. mortgage applications increased 18% for the week ended June 8 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 jumped more than 30%. The Refinance Index rose more than 19% to the highest index level since April 2009. The seasonally adjusted Purchase Index gained roughly 13%. The unadjusted Purchase Index gained more than 23% and was 4% higher than the same week one year ago. "Mortgage application volume increased sharply last week," said Michael Fratantoni, MBA's Vice President of Research and Economics. "The increase was accentuated due to the comparison to the week including Memorial Day, but the level of refinance and total market activity is the highest since the spring of 2009. Refinance volume increased as borrowers were able to lock in at mortgage rates below 4%, and purchase application volume was its highest level in six months.  Home Affordable Refinance Program volume has been steady in recent weeks at about 28% of refinance applications." For the MBA report, use the link …
  • For the second consecutive month, U.S. retail sales dipped in May, because of overall cautious spending--signaling the economy is cooling--and declining gasoline prices (The Wall Street Journal, Bloomberg.com and Moody's Economy.com June 13). Sales slid 0.2%, after a similar decline in April, the Commerce Department said Wednesday. Consumer spending--the biggest part of the U.S. economy--will have a difficult time keeping up with the first-quarter gain that was the largest of the year because of limited advances in payrolls and an unemployment rate that is above 8%. Meanwhile, lower gasoline prices are providing extra cash for consumers, which is helping buoy sales at some retailers such as Target Corp., Bloomberg said …

News of the Competition (06/12/2012)

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MADISON, Wis. (6/13/12)

  • The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) Tuesday announced a $619 million settlement with ING Bank N.V. (ING Bank) to settle potential liability for apparent violations of U.S. sanctions. Tuesday's settlement is the largest OFAC settlement of any kind to date. The settlement resolves OFAC's investigation into ING Bank's allegedly intentional manipulation and deletion of information about U.S.-sanctioned parties in more than 20,000 financial and trade transactions routed through third-party banks in the U.S. between 2002 and 2007. The transactions were primarily in apparent violation of several regulations. ING Bank's alleged violations, which totaled more than $1.6 billion routed through the U.S. despite U.S. sanctions, arose out of policies at multiple offices of ING Bank's Wholesale Banking Division. Neither ING Bank's insurance nor its banking operations in the U.S. were subjects of this investigation. For the Treasury release, use the link …
  • Deficiencies among the 27 member countries in how they are adopting the global economic standards of the Basel III accord have been revealed by the Basel Committee on Banking Supervision in its most recent progress report (American Banker June 11). In September, regulators approved the agreement to help avoid a repeat of the financial crisis of 2008, the Banker said. Although more thorough analysis is required, the report brings to light important areas in which domestic implementation may be less rigorous than the globally agreed-upon standards, Stefan Ingves, chairman of the committee and governor of the Sveriges Riksbank, said in a press release. The U.S., Japan and European Union are some of the regions that could be failing to implement the international banking standards, the report indicated. Although the Basel Committee did not offer specifics about the deficiencies, it said it will publish a complete analysis in September …
  • With a new app known as Passbook, Apple is launching a type of mobile wallet that can store information on a user's iPhone or iPad for airline boarding passes, concert tickets and multiple loyalty cards (American Banker June 11). The app creates a barcode display that, when scanned, redeems rewards at the point of sale or obtains tickets at a gate or door, the Banker said. An Apple Insider report said retailers such as Starbucks could conceivably place their payment barcodes on Passbook …

Market News (06/12/2012)

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MADISON, Wis. (6/13/12)

  • U.S. small businesses are maintaining their confidence in the face of a troubled financial situation in Europe and a worldwide economy trending downward, according to the National Federation of Independent Business (NFIB) Small Business Survey (Moody's Economy.com June 12). The NFIB index slid to 94.4 in May from 94.5 in April, but still is above its first-quarter average of 93.6. Although hiring intentions increased, small businesses trimmed their capital expenditure plans last month, NFIB said. In a related matter, U.S. employers indicated they intend to boost hiring in the third quarter, according to Manpower Inc.'s employment index for July through September (Bloomberg.com June 12). The index rose 11%--the highest reading in four years--from 10% in the second quarter, said the Milwaukee-based staffing company. U.S. employers maintained upbeat hiring outlooks in consecutive quarters in all regions of the country and in all industries for the first time since 2008, Manpower said …
  • Prices of U.S. imports declined in May by the most in nearly two years, spurred by lower food and fuel costs, according to import-price index figures released Tuesday by the Labor Department (Bloomberg.com and Moody's Economy.com June 12). The 1% decrease in the index is the largest since June 2010, coming on the heels of an unchanged reading in April. A slowdown in foreign economies may cut back demand for raw materials, keeping prices steady while energy costs fall, Bloomberg said. Also, low inflationary pressures are allowing the Federal Reserve to have more leeway in easing monetary policy to spark U.S. economic expansion, Bloomberg added …
  • The International Council of Shopping Centers (ICSC) chain store sales index continued to decline last week for the seventh time in the past nine weeks (Moody's Economy.com June 12). The index fell 0.7% for the week ended June 9 from the prior week. Also, customer traffic picked up slightly last week--especially at wholesale clubs and dollar stores, ICSC said. Those stores reported sales were negatively impacted by cool weather, mitigated by the continuing slide in gasoline prices, ICSC said …

News of the Competition (06/11/2012)

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MADISON, Wis. (6/12/12)

  • The Federal Deposit Insurance Corp. (FDIC) closed four banks Friday for a total of 28 closures so far in 2012. There were 92 bank closures in 2011. First Capital Bank, Kingfisher, Okla., was assumed by F&M Bank, Edmond, Okla.; Carolina Federal Savings Bank, Charleston, S.C., was assumed by Bank of Carolina, Thomasville, N.C.; Farmers and Traders State Bank, Shabbona, Ill., was assumed by First State Bank, Mendota, Ill.: and Waccamaw Bank, Whiteville, N.C., was assumed by First Community Bank, Bluefield, Va. The banks had roughly $677 million in assets as of March 31. The FDIC estimates the most recent failures will cost its Deposit Insurance Fund about $81 million …
  • To continue the process of ending the Troubled Asset Relief Program (TARP), the Treasury Department has started to sell off the stakes it holds in seven banks that received funds when the financial crisis was at its worst (The Wall Street Journal June 11). Auction agents--Merrill Lynch; Pierce, Fenner & Smith Inc.; and Sandler O'Neill--initiated the public offering Monday at 8:30 a.m. ET and it will run through 6:30 p.m. Wednesday. The federal government still owns stakes in 343 banks, more than three years after TARP was initiated, the Journal said …
  • The fifth-largest U.S. bank by assets, Goldman Sachs Group Inc., is negotiating to sell its hedge fund administration unit--which provides accounting, risk management and valuation for hedge funds--to State Street Corp., said a source with knowledge of the situation (Bloomberg.com June 11). A final agreement still is pending, the source said. At the end of March, State Street had $506 billion in hedge-fund assets under administration, the company said in an April 30  presentation …

Market News (06/11/2012)

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MADISON, Wis.  (6/12/12)

  • A combination of record-low mortgage rates and more lenient lending standards is beginning to lift up real estate markets in states where home values have plummeted (Bloomberg.com June 11). The federal government's Home Affordable Refinancing Program (HARP)--which allows owners to refinance their homes when they are worth less than their  mortgage--along with broader refinancing is providing a spark to cash flow for homeowners--especially in hard-hit states such as Florida, Mark Zandi, chief economist at Moody's Analytics Inc. in West Chester, Pa., told Bloomberg. For troubled homeowners in down markets with negative equity, these developments should really help, he added …
  • Business confidence worldwide has mostly remained the same during the past three months and is consonant with the worldwide economy expanding at the low end of its potential, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com June 11). A recent trend that is noteworthy is that U.S. business sentiment is better than many other regions in the world. Also, in the U.S., there is a low level of job layoffs along with some hiring, weaker pricing pressure and steadily improving credit quality. For the week ended June 8, there was a noticeable decrease in businesses' general evaluations of current business conditions and the outlook six months from now. Both bear watching during the next several weeks to see if those assessments are affirmed, Moody's said …

News of the Competition (06/08/2012)

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MADISON, Wis. (6/11/12)

  • SunTrust Banks (STI) is making it harder for some customers to obtain free checking. It will require a minimum daily balance of $1,500--three times the current requirement--beginning in August to avoid a $7 monthly checking fee (American Banker June 7). If customers have $10 directly deposited into their account each month, they can avoid the fee. For its checking customers, STI also is eliminating some benefits such as a fee discount--$25 instead of the usual $36--for first-time overdrafts, the Banker said …
  • About 70% of U.S. home-loan modifications--those that are eligible non-government-sponsored enterprise loans entering the Home Affordable Modification Program (HAMP)--received some form of principal reduction, according to the Treasury's new HAMP report (American Banker June 7). Huge U.S. servicers are ramping up their use of principal reductions to modify loans in trying to meet requirements under the $25 billion robo-signing settlement with federal agencies and state attorneys general, the Banker said ...

Market News (06/08/2012)

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MADISON, Wis. (6/11/12)

  • The U.S. trade deficit contracted in April, with strong reduction in imports and exports to Europe, indicating the Euro zone's economic troubles are increasingly impacting the U.S. economy (The Wall Street Journal and Moody's Economy.com June 8). The U.S. deficit in international trade of goods and services dropped 4.9% to $50.06 billion from an upwardly revised $52.62 billion--originally estimated at $51.83 billion--in March, the Commerce Department said Friday. Sales of U.S. goods and services abroad saw the largest decline in five months, the Journal said. U.S. exports and imports retreated from record highs, as exports fell 0.8% to $182.91 billion, and imports shrank 14.1% to $7.56 billion …
  • The Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--decreased to 121.6 for the week ended June 1--its lowest level since the first week of 2012 (Moody's Economy.com June 1). That level is down from 122.3 the prior week. The smoothed, annualized pace of decline increased to 2%. The downward trend of both indicators is a result of tepid economic news and stock market declines in the past three months, ECRI said. An encouraging sign for the future is that May's nonmanufacturing Institute of Supply Management report indicated service sector employment expanded for the 29th consecutive month, Moody's said …
  • U.S. wholesale inventories increased in April while firms tried to align unsold goods with consumer demand (Bloomberg.com and Moody's Economy.com June 8). The 0.6% rise in inventories comes after a 0.3% increase in March, the Commerce Department said Friday. Sales went up 1.1% in April, following a 0.4% gain in March. The inventory-to-sales ratio stayed the same at 1.17. A worldwide economic slowdown and the leveling off of U.S. economic growth may prompt companies to keep from bolstering their inventories for a sales increase, Bloomberg said. Uncertain economic conditions in Europe are keeping U.S. companies from stockpiling inventory, Jay Bryson, senior global economist at Wells Fargo Securities LLC in Charlotte, N.C., told Bloomberg

Consumers borrowed 3 more in April more at CUs

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WASHINGTON (6/8/12)--U.S. consumers borrowed $2.551 trillion during April, a 3% increase over May's debt, according to the newly constructed Consumer Credit G-19 report from the Federal Reserve Board.  Credit union members borrowed $226 billion, a $3 billion increase from the $223 billion they borrowed in March from credit unions.

The report, released Thursday, was the first report since the Fed announced Monday it had restructured the statistical release to reflect regulatory filing changes for U.S.-chartered depository institutions. In addition to its data normally reported on the level of credit outstanding, April's is the first report to include data on the flow of credit.

Total credit increased $6.5 billion following a $12.4 billion gain the previous month, said the Fed's report. It was the eighth consecutive month that total credit increased, driven by automobile lending and student lending. Economists surveyed  by Dow Jones Newswires had forecast a $10.2 billion increase. The slowdown in jobs created and concerns about Europe's economic woes have raised concerns about consumers' continued spending and willingness to go into debt, said The Wall Street Journal (June 7).

Revolving credit, including credit cards, totaled $862.3 billion, a decrease of $3.44 billion at an annual rate of 4.8%. In credit unions, members borrowed $36.6 billion, compared with $36.4 billion in March and $36.7 billion in February, said the report.

Nonrevolving credit, which encompasses auto loans and student loans but not real estate loans, increased at an annual rate of 7% or $10.6 billion during April to $1,688.6 trillion. Credit union members borrowed $189.4 billion in this category--an increase from the $186.6 billion borrowed last month and from the $187.1 billion borrowed in March.

Savings institutions now file the same regulatory report as U.S. chartered commercial banks, and both sectors, previously reported separately, are now combined into a new sector called depository institutions.

The new flow data represents changes in the level of credit due to economic and financial activity, rather than breaks in the data series due to changes in methodology, source data and other technical aspects of the estimation that impact the credit level.  Access to flow data allows users to calculate a growth rate for consumer credit that excludes such breaks, said the Fed Monday.

The changes are accompanied by revisions to the estimates of outstanding credit back to January 2006 and reflect improvements in methodology and a comprehensive review of the source data, said the Fed.

News of the Competition (06/07/2012)

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MADISON, Wis. (6/8/12)

  • With May becoming the strongest month for sizable bank mergers in more than a year, bank industry merger and acquisition (M&A) experts are nervous about uncertain economic conditions and stock market declines in recent weeks stalling M&A momentum (American Banker June 6). Last month, there were six whole-bank deals transacted that were worth a minimum of $50 million apiece. That is the most in one month since four comparable deals occurred in October 2010, according to Keefe, Bruyette & Woods …
  • Mortgage lenders will need to keep a closer eye on documentation and the functioning of third-party providers for services such as collections, legal assistance and underwriting (American Banker June 6). That's because the Consumer Financial Protection Bureau is focusing on third-party documents and requiring lenders to take more responsibility for information that third parties supply, the Banker said. Also, the Treasury Department is looking at processing shortfalls surrounding foreclosures, which likely will lead to increased inspection regarding how lenders make use of externally provided information to make foreclosures on distressed residential properties, the Banker said ...

Market News (06/07/2012)

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MADISON, Wis. (6/8/12)

  • Initial claims for U.S. unemployment benefits declined for the first time in more than a month, signaling some labor market improvement after a two-month-long hiring slowdown (The Wall Street Journal and Bloomberg.com June 7). Claims dropped 12,000--to 377,000--for the week ended June 2 from 389,000 the prior week, the Labor Department said Thursday. Although consistent demand is prompting companies to maintain current employment levels, more robust sales may be needed to spark an increase in hiring, Bloomberg said. However, continuing claims for unemployment benefits for the week ended May 26 increased 34,000--to 2.293 million from 3.259 million the prior week. Also, the four-week moving average inched up to 3.28 million from 3.27 million (Moody's Economy.com June 7) …
  • For the third consecutive week, U.S. consumer confidence increased, according to the Bloomberg Consumer Comfort Index, because the buying climate and personal finances improved (Bloomberg.com and Moody's Economy.com June 7). The index rose to -37.6 for the week ended June 3 from -39.3 the previous week. Gasoline prices, which have fallen 9% from a one-year high in April, may be mitigating disappointing news in the labor market and a stock mark decline due to worries about the European economic situation, Bloomberg said. If less money is needed to purchase fuel for cars, more can be used to buy other goods and services and provide a foundation for economic growth, Bloomberg added …
  • A recent survey indicates people in the U.S. and Europe are becoming more negative about the strength of their finances to fund retirement (The New York Times June 7). Aegon, a Dutch insurance company, funded the study, which is based on a survey of 9,000 people in the U.S. and Europe. Of those surveyed, 71% said they believe future generations will be in worse financial shape in retirement than their parents. That view comes from the knowledge that people live longer and put more strain on their finances in post-working years, Aegon said …

Fed IBeige BookI Economy continues moderate growth

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WASHINGTON (6/7/12)--Overall economic activity expanded at a moderate pace during the reporting period between early May and May 25, according to the Federal Reserve's Beige Book, a summary of economic activity in each Fed district.

The book, released Wednesday, indicated that economy expanded or improved in all Fed Districts except Philadelphia, which reported its pace of expansion had slowed slightly since the previous Beige Book report in April.

The report was "paints a surprisingly upbeat picture of the U.S. economy continuing to improve," and "suggests that the economy may not be as bad as the recent string of economic data indicate," said The Wall Street Journal (June 6). The Journal also noted that the book's positive tone could give Fed Chairman Ben S. Bernanke "one more reason to wait before pushing for another round of stimulus to spur growth." Bernanke will testify today before the Joint Economic Committee in Congress.

The report noted that manufacturing continued to expand in most districts. "Consumer spending was unchanged or up modestly. New-vehicle sales remained strong and inventories of some popular models were tight. Sales of used automobiles held steady. Travel and tourism expanded, boosted by both the business and leisure segments. Demand for nonfinancial services was generally stable to slightly higher since the last report, and several districts noted strong growth in information technology services," said the report's summary, which was written by the Federal Reserve Bank of Dallas.

"Conditions in residential and commercial real estate improved. Construction picked up in many areas of the country. Lenders in most districts noted an improvement in loan demand and credit conditions. Agricultural conditions generally improved, and spring planting was well ahead of its normal pace in most reporting districts. Energy production and exploration continued to expand, except for coal producers who noted a slight slowing in activity," the Fed said.

It also noted that "wage pressures overall were modest. Hiring was steady or increased slightly, and contacts in a number of districts reported difficulties in finding qualified workers, particularly those with specialized skills." (The latest job reports which caused concern last week came after the Fed's reporting period for the Beige Book.)

Also, the Fed added, price inflation remained modest across most districts, and overall cost pressures eased as the price of energy inputs declined. "Economic outlooks remain positive, but contacts were slightly more guarded in their optimism," it said.

In the banking and finance arena, most districts that commented on lending noted "steady or slightly stronger loan demand."

"Small and medium-sized banks in the New York District reported the most broad-based increase in loan demand since the mid-1990s," said the report. "Several bankers in the Richmond District said the volume of small business loan applications was markedly higher. Drivers of business loan demand included energy, healthcare and commercial real estate. Several districts noted increased demand for capital spending loans."

Mortgage lending also showed "slow improvement." The New York District noted stronger mortgage lending, although growth in refinancing eased, while the Cleveland District indicated strong mortgage demand and a shift from home refinancing to new purchases. Richmond reported continued improvement in mortgage demand; however, refinancing was still dominant.  Atlanta indicated that more applicants had "ample cash for down payments or enough equity in their homes to meet refinancing requirements." Commercial real estate loan demand also was reportedly stronger.

Loan pricing remained "quite competitive" in several districts--Cleveland, Atlanta, Chicago, Dallas and San Francisco. New York reported a decrease in spreads of loan rates over the cost of funds, especially for commercial mortgages.

Lending standards were relatively unchanged to slightly easier across districts and loan types, said the Fed.  "Bankers reporting on deposit growth indicated that deposits were steady or continued to increase. Credit quality remained solid, and there were several reports of improved loan quality. Most district banks said loan delinquencies continued to decline."

News of the Competition (06/06/2012)

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MADISON, Wis. (6/7/12)

  • Several U.S. cities have passed ordinances in 2012 mandating that banks that hold government deposits provide in-depth accounts of their lending practices in low-income areas (American Banker June 5). City councils in Pittsburgh, Los Angeles and New York passed such ordinances this year, in which lending data listed by neighborhood will be available for public inspection, the Banker said. Similar proposals are being considered in Boston, Minneapolis, Milwaukee and San Diego. If city governments ascertain that banks have failed to sufficiently lend in low-income neighborhoods, the banks could lose their government deposits, the Banker said …
  • Nine out of 10 banks in a KPMG survey of more than 100 banks said they are reconsidering their operating models--including who is in their a customer base, how they can be reached and what products they will be offered, according to Brian Stephen, KPMG's national leader of banking  and capital markets practice (American Banker June 6). A troubled economy and new federal regulations appear to be prompting significant changes in an industry that is categorized as often being stuck in the past, the Banker said. During the next few years, asset and wealth management will be crucial to growing revenue, said 40% of survey respondents …

Market News (06/06/2012)

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MADISON, Wis. (6/7/12)

  • The Mortgage Bankers Association (MBA) said U.S. mortgage application volume increased 1.3% for the week ended June 1 from one week earlier, according to the Market Composite Index, part of its Weekly Mortgage Applications Survey released Wednesday. On an unadjusted basis, the index decreased more than 9%. The Refinance Index rose 2% to its highest level since Feb. 10. The seasonally adjusted Purchase Index declined to its lowest level since April 13. The unadjusted Purchase Index dropped 13% and was 3% lower than the same week one year ago. The refinance share of mortgage activity inched up to 78% of total applications from 77%. This is the highest refinance share since Feb. 24. The adjustable-rate mortgage share of activity remained at about 5% of total applications. For the MBA report, use the link …
  • U.S. nonfarm worker productivity in the first quarter declined more than originally estimated because labor costs rose, a sign that firms may delay hiring new workers (Bloomberg.com and Moody's Economy.com June 6). The gauge of employee output per hour fell at a 0.9% annualized rate, following a 1.2% gain in the fourth quarter 2011, according to revised Labor Department figures released Wednesday. Expenses per worker increased at a 1.3% rate, and output rose 2.4%. In the coming stages of the economic recovery, productivity growth will be harder to achieve, which will necessitate that companies add workers to grow their output, Moody's said. Hiring is the weakest it has been since December, Brian Jones, a senior U.S. economist at Societe Generale in New York, told Bloomberg  …
  • Home prices in the U.S. continued to improve in April, according to the CoreLogic Price Index (Moody's Economy.com June 5). The index rose 2.2% in April and also increased 1.1% compared with April 2011. Home prices still are being negatively impacted by distress sales--with the distress sales index rising 2.6% in April, CoreLogic said. Although a housing market recovery has been in evidence the past three months, foreclosure sales will remain a key downward force on home prices through the coming year, CoreLogic said …

News of the Competition (06/05/2012)

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MADISON, Wis. (6/6/12)

  • The biggest U.S. bank--JPMorgan Chase & Co.--may be looking at a $4.2 billion second-quarter trading loss in its chief investment office, according to an International Strategy & Investment Group Inc. (ISI) estimate (Bloomberg.com June 4). If that deficit stands, the pre-tax loss would reduce second-quarter earnings to 65 cents per share--a 30% drop from an earlier estimate of 93 cents per share, said ISI analyst Ed Najarian in a Sunday note. Trading and investment banking revenue that was less than anticipated, combined with mark-to-market private equity losses also will dampen results, he added …
  • With its earnings prospects eroding, Goldman Sachs Group Inc.--the fifth largest U.S. bank by assets--reduced expenses by cutting fewer than 50 jobs last week (Bloomberg.com June 5). Some of the work force reductions involved managing directors--the No. 2 position at the company behind partners, said an anonymous source. The bank had 32,400 employees at the end of March--down from 35,400 one year earlier--per Goldman Sachs' most recent quarterly earnings report. The company is expected to earn $2.29 per share in the second quarter--a 42% decrease from the first quarter,  according to the median forecast of 25 analysts in a Bloomberg survey …

Market News (06/05/2012)

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MADISON, Wis. (6/6/12)

  • The growth of U.S. industries in the service economy held steady in May from April, according to the Institute for Supply Management's  (ISM) Index of Nonmanufacturing  Businesses--an indication that the economy is not gaining traction because employment has slowed and the European economy is slipping further to the brink of recession (Bloomberg.com and Moody's Economy.com June 5). The index inched up to 53.7 in May from 53.5 in April--a four-month low. Readings above 50 are a sign of expansion. Weakness in U.S. service industries and a waning of the manufacturing sector--which was a mainstay of the economic recovery--are resulting in negligible U.S. growth, Bloomberg said …
  • The International Council of Shopping Centers (ICSC) chain store sales index broke a string of consecutive weekly declines by posting a 0.4% gain for the week ended June 2 (Moody's Economy.com June 12). Year-over-year growth held steady at 2.8%--its lowest level in 10 weeks. Customer traffic at apparel stores was higher than last year but stagnant at department stores and significantly down at discount stores, ICSC said. Inclement weather was a drag on sales, mitigated by the ongoing drop in gasoline prices, ICSC said …

News of the Competition (06/04/2012)

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MADISON, Wis. (6/5/12)

  • FlexWage Solutions is offering a payday loan alternative in the form of a payroll card that allows employees to access the wages they've earned--for a flat fee of $3 to $5 per transaction--before their employer's pay period ends (American Banker June 1). Consumers can use FlexWage Cards to obtain a portion of their paycheck in advance, in which they are paying to have early access to earned wages, but are not taking a loan against future earnings, Frank Dombroski, the company founder, told the Banker
  • U.S. automakers saw strong domestic sales gains in May because consumers who purchased cars were not daunted by uncertainty in the economy (The Wall Street Journal June 1). Chrysler Group LLC saw a 30% surge in auto sales last month, with Ford Motor Co. garnering a 13% gain, and General Motors realizing an 11% increase, despite tepid sales for its Cadillac brand, the Journal said. Toyota Motor Corp.'s sales spiked 87% last month as the Japanese company continued to overcome recall and production problems during the past several years, the Journal said ...

Market News (06/04/2012)

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MADISON, Wis.  (6/5/12)

  • For the third consecutive year, the U.S. economy may see another slowdown, but likely will keep from falling into a recession (Bloomberg.com June 4). In the first quarter, indebtedness is down roughly $100 billion, putting household finances in better condition, according to the New York Federal Reserve. With earnings having increased for 11 consecutive quarters--according to Federal Deposit Insurance Corp. data--banks are more profitable, Bloomberg said. Because of those positives, the slowdown should not have any more impact than it did the past two years, John Ryding, chief economist at RDG Economics LLC in New York and former Fed researcher, told Bloomberg. In a related matter, the Economic Cycle Research Institute's (ECRI) Weekly Leading Index--which measures economic growth--declined to 122.4 for the week ended May 25 from 123 the prior week--which was its lowest level since the start of January, ECRI said (Moody's Economy.com June 1) …
  • U.S. factory orders in April declined to their lowest level in six months, a troublesome development for a sector that has been a consistent job creation foundation during the economic recovery and an indication of a worldwide slowdown in manufacturing as the economy decelerates (The Wall Street Journal and Bloomberg.com June 4). Orders dropped 0.6% in April to $465.98 billion, following a 2.1% decline in March, the Commerce Department said Monday. Also, the Institute for Supply Management's  (ISM) factory index decreased to 53.5 in May after hitting a 10-month-high of 54.8 in April, ISM said Friday (Bloomberg.com and Moody's Economy.com June 1). Readings above 50 indicate growth. Advances in auto sales are buoying growth at factories, but European economic troubles, less corporate investment by the U.S., and U.S. fiscal worries could dampen the industry, Bloomberg said …
  • Business confidence worldwide experienced a setback last week with broad-based weaker responses to all questions posed in Moody's Analytics Survey of Business Confidence (Moody's Economy.com June 4). However, hiring intentions remained slightly better, indicating the weak U.S. job numbers in May could be exaggerating the job market's weakness, Moody's said. Economic trouble in Europe and in the emerging nations is hurting confidence worldwide, Moody's said. The worldwide economy is expanding at the low end of its potential, the survey results indicated …

News of the Competition (06/01/2012)

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MADISON, Wis. (6/4/12)

  • Large numbers of U.S. community banks are attempting to lower some regulatory expenses by taking advantage of the Jumpstart Our Business Startups, or JOBS Act, which took effect in April (American Banker May 31). Since its inception, nearly 65 banks have filed to deregister with the Securities and Exchange Commission. That total is more than all the deregistrations in the prior 16 quarters, accord to SNL Financial figures. Deregistering securities could save many banks a minimum of six figures in filing costs every year, even though those banks still must report to a bank regulator, the Banker said ...
  • The Community Mortgage Lenders of America--a trade group of 100 community banks and mortgage banking firms--wants government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to be downsized, but also to maintain their current form and continue to provide small mortgage lenders with secondary market access (American Banker May 31). The group also said it will fight attempts to privatize the GSEs or convert them into public utilities because that action could result in more dominance by a few big banks in the mortgage market …
  • Royal Bank of Canada's (RBC) alleged financial transgressions this spring could have critical implications for American banks, said American Banker (May 31). The Commodity Futures Trading Commission (CFTC) alleged in April that RBC traded with itself to circumvent Canadian tax laws. Although those claims involved just a few foreign entities swapping securities on a small-scale exchange, the case could be a model for larger-scale CFTC trading enforcement nations, the Banker said ...
  • The U.S. Public Interest Research Group (U.S. PIRG) said partnerships that financial institutions enter into with colleges and universities may cost students more money (American Banker May 31). In a report published Wednesday, U.S. PIRG says students are incurring millions of dollars in ATM, merchant interchange and overdraft fees for banks because the students are being channeled into using debit prepaid cards associated with campus ID cards--even for disbursement of student loans.  Financial institutions and colleges have nearly 900 relationships that impact more than nine million students, said U.S. PIRG …

Market News (06/01/2012)

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MADISON, Wis.  (6/4/12)

  • The U.S. economy in May added the fewest workers in the past year and the unemployment rate unexpectedly rose as people sought to re-enter the work force amid growing evidence of a worldwide economic slowdown (The New York Times, Bloomberg.com and Moody's Economy.com June 1). The economy added 69,000 jobs last month and the unemployment rate climbed to 8.2% from 8.1% in April, the Labor Department indicated Friday--mostly because of the new job seekers, the Times said. A high level of uncertainty is causing businesses to be reluctant to hire more workers, and confidence in the economy is falling, Hugh Johnson, chairman and chief investment officer at Hugh Johnson Advisors LLC in Albany, N.Y., told Bloomberg. It is clear that the labor market is eroding, he added. In a related matter, the U.S. Monster Employment Index--a broad monthly gauge of U.S. online job demand compiled by Monster Worldwide Inc.--increased one point in May from April to 147 (Moody's Economy.com June 1) …
  • U.S. consumer spending and personal incomes climbed in April, an indication that households are helping to bolster the economy while the labor market attempts to pick up steam (Bloomberg.com and Moody's Economy.com June 1). Spending increased 0.3% in April after a 0.2% gain in March, the Commerce Department said Friday. Personal incomes climbed 0.2%--the slowest pace since November. Wage income grew 0.2%--the slowest this year. Income growth hasn't been able to support spending, Sean Incremona, a senior economist at 4Cast Inc. in New York, told Bloomberg. That, along with weak payroll numbers, indicate that spending likely will continue to abate in a tepid economy, he added …