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Mortgage Interest Rates Dipped In May, Says FHFA

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WASHINGTON (6/28/13)--U.S. contract mortgage interest rates fell from April to May--down 0.15%, according to an index of new mortgage contracts.

The National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders index was 3.4% for loans closed in late May, according to the Federal Housing Finance Agency (FHFA). The index is calculated using FHFA's Monthly Interest Rate Survey.

The contract rate on the composite of all mortgage loans was 3.4%, down 15 basis points from 3.55% in April.

Interest rates are typically locked in 30-45 days before a loan is closed. Therefore, May data reflect market rates from mid- to late-April. The effective interest rate was 3.57%, down 12 basis points from 3.69% in April. This rate accounts for the addition of initial fees and charges over the life of the mortgage.

FHFA's interest rate survey shows the average interest rate on conventional, 30-year, fixed-rate mortgages of $417,000 or less was 3.58% in May, a decrease of 19 basis points. The average loan amount was $280,600--up $14,100 from $266,500 in April.

U.S. GDP Growth Slower Than Projected For 1Q

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WASHINGTON (6/27/13)--The U.S. economy grew less than previously estimated in the first quarter, with gross domestic product increasing at a 1.8% annualized rate--down from a prior estimate of 2.4%, the Commerce Department said Wednesday.

The downward adjustment is attributed to fewer purchases on services such as healthcare, take-out food and travel by consumers adjusting their budgets after taxes increased. Other factors are a weaker business investment by firms and declining national exports (MarketWatch, Bloomberg.com, The New York Times and The Wall Street Journal June 26).

Slower spending on consumer services--which increased 1.7% instead of the previously reported 3.1%--are mostly responsible for the GDP revision, MarketWatch said.   

Also, investments in business structures such as plants and office buildings fell 8.3% rather than the previously estimated 3.5%, MarketWatch said.

This year saw the economy start slower than anticipated, but because financial institutions are making it easier to borrow, the second half of 2013 should be better, Maury Harris, New York-based chief economist for UBS Securities LLC, told Bloomberg.

Although the U.S. economy has expanded for 15 consecutive quarters, the roughly 2% pace of those gains is part of one of the slowest economic recoveries since World War II in the 1940s, said the Journal. Economic output grew a scant 0.4% in fourth quarter 2012, the Journal added.

Home Prices Gain Most In Seven Years

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WASHINGTON (6/26/13)--U.S. existing home prices for single-family homes surged in April, resulting in their biggest annual gain in seven years, according to the Standard & Poor's/Case Shiller Home Prices Indexes released Tuesday.

The composite index of 20 metropolitan areas indicates prices rose 12.1% year over year--exceeding forecasts and marking the largest annual gain since March 2006. The prices are a signal of growing momentum in the housing market recovery (The New York Times, The Wall Street Journal and Moody's Economy.com June 25).

Also, the 10-city composite index was 11.6% higher than last year and up from the 10.3% increase originally reported last month.

The housing recovery is absolutely "broad-based," David Blitzer, chairman of the index committee at S&P Dow Jones Indices, said.

In a related matter, new U.S. home sales in May rose more than forecast--an ongoing indication of strength in a sector that is helping to stoke economic growth (Bloomberg.com and Moody's Economy.com June 25).

Sales last month increased 2.1% to an annualized rate of 476,000 homes, the Commerce Department said Tuesday. Economists had forecast 460,000 sales.

Big Banks Planning Large-scale Simulated Cyberattack

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MADISON, Wis. (6/24/13)--Quantum Dawn 2 is not a sequel to a summer blockbuster movie. It's a simulated cyberattack drill being conducted Friday by about 50 of the nation's largest banks to see how they well they can withstand an attack on the nation's financial system.

Planners of the attack--organized by the Securities Industry and Financial Markets Association (SIFMA)--say it will mimic a coordinated, large-scale assault on the financial industry's online sites and information systems (AllthingsD.com June 17 and American Banker June 18). It will run most of the business day Friday, starting with seemingly random bursts of confusing information, followed by a pause for some executive decision making and then it will accelerate.

It will test participants' ability to coordinate internally and with one another, including decision-making with limited information in real time--and the resiliency of their processes.

Both publications said the simulation will involve major banks such as JPMorgan Chase, Wells Fargo, Bank of New York Mellon and U.S. Bancorp, but the exercise is open to any size company, even if they are not members of SIFMA.  Participating companies are paying $1,000, $5,000 or $10,000, depending on their revenue, to cover the cost of the simulation.

Also participating will be the Department of Homeland Security, Treasury, the Federal Reserve, and the Securities and Exchange Commission.

Quantum Dawn 1 in 2011 featured a scenario in which a group of "armed men ran around Manhattan trying to gain access to exchanges and attempting to blow up things." Participants in that exercise were in a single conference room comparing notes and making decisions. This time they will be working from theirr offices, said AllThingsD.com.

From September through May the nation's biggest banks--as well as several credit unions--were hit by cyberattacks in the forms of distributed denial of service that stalled their online sites so legitimate members and customers could not access their online banking accounts.

Mass Layoffs, Jobless Claims Increase

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WASHINGTON (6/24/13)--U.S. mass layoffs rose in May and initial claims for unemployment benefits increased last week, with job growth still occurring--albeit at an uneven, diminished pace (The New York Times, The Wall Street Journal and Moody's Economy.com June 20).

Mass layoffs involve 50 or more workers from the same company laid off around the same time, according to the Labor Department.

Last month, U.S. employers implemented 1,301 mass-layoff actions affecting 127,821 workers--up from 1,199 mass layoffs of 116, 849 workers in April.

Initial unemployment claims for the week ended June 15 increased 18,000--to a seasonally adjusted 354,000, the Labor Department said.

The four-week moving average of claims--which smooths out weekly volatility, went up 2,500 to 348,250.

In May, the unemployment rate inched up to 7.6%, from 7.5% in April, with more people trying to enter the work force, the Journal said.

That is noteworthy because the Federal Reserve uses a 6.5% unemployment rate as one of its benchmarks for changes in interest rates and its bond-buying monetary policy.

Fed Could Start Tapering QE3 By End Of Year

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MADISON, Wis., and WASHINGTON (6/20/13)--The Federal Reserve could begin tapering off its bond-purchasing program later this year, said Fed Chairman Ben Bernanke Wednesday after the Federal Open Market Committee (FOMC) meeting. That set off a flurry of bond buying after the meeting. But for now, the Fed's monetary policymakers are holding steady on any action and keeping their near-zero targeted federal funds interest rate.

"In a much anticipated FOMC statement and Bernanke press conference, the bond market sold off due to expectation that the Fed will begin tapering its asset purchase program later this year and end the program in the middle of 2014 when the unemployment rate falls to 7%," said Credit Union National Association Senior Economist Steve Rick.

"This will increase Treasury yields and reduce bond prices," he told News Now Wednesday. "In anticipation of this policy change, investors' demand for longer-term bonds has been declining, pushing up interest rates. After reaching a low of 1.66% on May 1, the 10-year Treasury interest rate rose over 0.5 percentage points in little over a month to reach 2.22% on June 10.  The 10-year Treasury interest rate rose 12 basis points in the hour and a half after the announcement, rising from 2.21% to 2.33%."

So where are long-term interest rates headed?  "We expect the 10-year Treasury interest rate to continue to rise to 2.4% by the end of 2013 and 2.7% by the end of 2014 as real interest rates rise faster than expected inflation falls," Rick said. "This will steepen the yield curve and therefore reduce the margin compression financial institutions have been experiencing over the last several years."

However, "on the downside, the mortgage refinance boom credit unions have experienced over the last two years will come to an end," Rick said.  "This will reduce earnings as credit unions see less mortgage origination fees and less 'gains of sale of mortgage' income," he concluded.

The FOMC met Tuesday and today. Saying that "economic activity has been expanding at a moderate pace," the committee in its statement after the meeting indicated that the holding pattern on its quantitative easing policy--its $85 billion-a-month bond asset purchase plan and the targeted interest rate of 0% to 0.25%--would continue. In Bernanke's press conference, he indicated the Fed could begin to taper its bond purchases later this year, if its forecasts for inflation and unemployment are correct (MarketWatch June. 19).

Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated," said the committee's statement. "Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Partly reflecting transitory influences, inflation has been running below the committee's longer-run objective, but longer-term inflation expectations have remained stable."

The committee noted it "expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the committee judges consistent with its dual mandate" of fostering maximum employment and price stability. It  also "sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall. The committee also anticipates that inflation over the medium term likely will run at or below its 2% objective," said the statement.

The committee "decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month" and it will maintain its existing policy of "reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative," said FOMC.

It will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability, said the FOMC.

"The committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives."

The FOMC also said its "highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens." It keptthe target range for the federal funds rate at 0% to 0.25% "and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the committee's 2% longer-run goal, and longer-term inflation expectations continue to be well anchored."

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

Voting for the  action were: Federal Reserve Chairman Ben S. Bernanke; Vice Chairman William C. Dudley;  Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen.

Voting against the policy action were James Bullard, who said the committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings, and Esther L. George, who was concerned the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.

May Housing Starts Climbed 6.8%

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WASHINGTON (6/19/13)--Construction of new U.S. homes rose in May, with permits to build single-family homes increasing to a five-year high, the Commerce Department said Tuesday.

Housing starts climbed 6.8% last month to a seasonally adjusted annual rate of 914,000, following an 856,000 pace in April. A 24.9 % surge in multifamily-unit construction is helping to continue the expansion in the housing market (Bloomberg.com, The Wall Street Journal and Moody's Economy.com June 18).

Also, building permits for single-family homes rose 1.3% to a 622,000 pace--the fastest since May 2008.

With improving job prospects and historically low mortgage rates enticing buyers, there will be an ongoing increase in building permits that exceed the level of starts--indicating residential construction will continue to rise, Bloomberg said.

The Commerce Department report is the most recent signal of steady gains in the housing market. The gains are helping to underpin the U.S. economy during a time when other segments of the economy--such as manufacturing and government spending--are in the doldrums, the Journal said.

NEW: Fed Action On Monetary Policy Stays Steady

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WASHINGTON (6/19/13, UPDATED 2:45 p.m. ET)--The monetary policymakers for the Federal Reserve today held steady on any action, keeping intact their schedule for bond-buying and their near-zero targeted federal funds interest rate, saying that "economic activity has been expanding at a moderate pace."

The Federal Open Market Committee (FOMC) met Tuesday and today.  Its statement after the meeting indicated that the holding pattern on its quantitative easing policy--its $85 billion-a-month bond asset purchase plan and the targeted interest rate of 0% to 0.25%--would continue. In a live blog of Federal Reserve Chairman Ben Bernanke's press conference, he indicated the Fed could begin to taper its bond purchases later this year, if its forecasts for inflation and unemployment are correct (MarketWatch June. 19).

The Credit Union National Association's economists are analyzing the statement and will provide an analysis on what this means for credit unions for Thursday's News Now.

"Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated," said the committee's statement. "Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth. Partly reflecting transitory influences, inflation has been running below the committee's longer-run objective, but longer-term inflation expectations have remained stable."

The committee noted it "expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the committee judges consistent with its dual mandate" of fostering maximum employment and price stability. It  also "sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall. The committee also anticipates that inflation over the medium term likely will run at or below its 2% objective," said the statement.

The committee "decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month" and said it will maintain its existing policy of "reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."

It will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability, said the FOMC.

"The committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives."

It also said its " highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens." It keptthe target range for the federal funds rate at 0% to 0.25% "and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6.5%, inflation between one and two years ahead is projected to be no more than a half percentage point above the committee's 2% longer-run goal, and longer-term inflation expectations continue to be well anchored."

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

Voting for the  action were: Federal Reserve Chairman Ben S. Bernanke; Vice Chairman William C. Dudley;  Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen.

Voting against the policy action were James Bullard, who said the committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings, and Esther L. George, who was concerned the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.

For the full statement, use the link.

Fed's Monetary Policymakers Meet This Week

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WASHINGTON (6/18/13)--The Federal Reserve will release its most recent forecast of growth, inflation and unemployment at the conclusion of its Federal Open Market Committee (FOMC) monthly policy meeting today and Wednesday.

On average, private-sector economists predict the economy will grow 2.3% in 2013 and 2.8% in 2014, according to The Wall Street Journal's Monthly Survey. However, the Fed is more upbeat, forecasting roughly 2.6% growth this year and 3.2% next year, in its most recent growth projections (The Wall Street Journal June 17).

Although Fed officials are not expected to alter their $85-billion-per-month bond-buying program--launched to boost national growth by keeping long-term interest rates down and boosting asset prices--what they indicate about the economy will transmit key signals about what they likely will do in the future, the Journal said.

If the economy continues to show signs of improvement, the Fed could begin to cut the amount of monthly bond purchases in the next few months, Fed Chairman Ben Bernanke said in recent congressional testimony, the Journal noted.

News Now will provide coverage of the FOMC statement at the conclusion of its meeting Wednesday.

U.S. Consumer Sentiment Slips In May From 6-Year High

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NEW YORK (6/17/13)--After reaching a six-year high in May, U.S. consumer confidence dipped in June to 82.7 from 84.5 in May, according to the Thomson/Reuters University of Michigan preliminary index of consumer sentiment.

The dip was a result of slipping household optimism regarding employment and housing, although the overall view of the U.S. economy by consumers remains positive (The New York Times and Bloomberg.com June 14).  

June's reading still was the second highest in the past eight months, indicating U.S. citizens remain upbeat about long-term prospect for the economy, the Times said.

Even though the index's gauge of current economic expectations dropped to 92.1 from 98, an index component's measure of consumer expectations inched up to its highest level since November, to 76.7 from 75.8, the Times said.

U.S. Initial Unemployment Claims Fell Last Week

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WASHINGTON (6/14/13)--Initial claims for unemployment benefits in the U.S. declined last week, moving close to the lowest level in five years, the Labor Department announced Thursday.

Claims fell 12,000--to a seasonally adjusted 334,000--an indication of the U.S. labor market's resilience and steady progress in the market as well (The New York Times, The Wall Street Journal and Moody's Economy.com June 13).

The four-week moving average, which evens out the data's weekly volatility, declined 7,250--to 342,250.

Rising confidence in the recovery of the U.S. economy has induced American employers to depart from an extended cycle of elevated layoffs, the Times said.

Although the federal government's more stringent austerity measures this year do not appear to have increased layoffs, companies have been reluctant to accelerate hiring, and the U.S. unemployment rate is anticipated to finish the year above 7%, the Times added.

The weekly unemployment data suggest the U.S. economy will progress at a slow, steady pace in adding jobs, the Journal said.

U.S. Mortgage Apps Increased 5% Last Week

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WASHINGTON (6/13/13)--U.S. mortgage applications increased 5% from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending June 7.

The Market Composite Index, a measure of mortgage loan application volume, gained 5% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index rose 16%, compared with the previous week.

The Refinance Index went up 5% from the prior week. Despite the increase in the refinance index last week, the level is still 11% lower than two weeks prior and 36% below the recent peak at the beginning of May. The seasonally adjusted Purchase Index rose 5% from one week earlier. The unadjusted Purchase Index increased 14%, compared with the previous week and was 6% higher than the same week one year ago.

The refinance share of mortgage activity rose to 69% of total applications from 68% the previous week. The adjustable-rate mortgage share of activity increased to 7% of total applications. The Home Affordable Refinance Program share of refinance applications fell from 32% the prior week to 29%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) increased to 4.15%--the highest rate since March 2012, from 4.07%, with points rising to 0.48 from 0.35--including the origination fee--for 80% loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) rose to 4.25%, the highest rate since May 2012, from 4.2%, with points increasing to 0.32 from 0.28--including the origination fee--for 80% LTV loans.

JOLTS Survey: Job Openings Dipped In April

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WASHINGTON (6/12/13)--The number of U.S. job openings dipped to 3.76 million in April from 3.88 million in March, according to the Job Openings and Labor Turnover Survey (JOLTS) released Tuesday by the Bureau of Labor Statistics.

Although hiring picked up in April, the dip in job openings indicates a likely weaker near-term outlook for jobs, JOLTS said (Moody's Economy.com June 1).

Also the job-openings rate decreased to 2.7% from 2.8%.

Meanwhile, hiring rose to 4.43 million from 4.22 million, while separations increased to 4.28 million from 4.12 million. That resulted in the economy still garnering a net jobs gain, JOLTS said.

More workers are quitting their jobs (separations), apparently because better positions are available, and layoffs are steadily falling, said Moody's in its analysis of JOLTS. Workers have more confidence to leave unsatisfying jobs, and they likely are earning more in new positions. As increasing number of workers leave their jobs voluntarily, new workers are filling the openings, Moody's explained.

However, the labor market still is relatively soft, and job creation remains too low to employ an adequate number of job seekers, Moody's said.

The near-term outlook suggests weak job gains through the end of 2013 because federal cutbacks will dampen the labor market through job cuts and through lower spending by furloughed workers. Also, weak worldwide demand will keep expansions in internationally connected industries in check. Hiring will improve by mid-2014, when net monthly job gains will begin to surpass 200,000, Moody's forecasts.

Tennessee Bank Failure Is 16th Of 2013

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WASHINGTON (6/11/13)--One bank closed Friday, which brings this year's total of failed U.S. banks to 16, the Federal Deposit Insurance Corp. announced Friday.

The National Credit Union Administration has closed nine banks so far this year.

Mountain National Bank, Sevierville, Tenn., was closed and assumed by First Tennessee Bank, N.A., Memphis, Tenn.

As of March 31, Mountain National Bank had roughly $437.3 million in total assets and $373.4 million in total deposits.    

The cost to the Deposit Insurance Fund will be $33.5 million, the FDIC estimated.

Fed: CU Members And Consumers Borrow More In April

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WASHINGTON (6/10/13)--Borrowing by U.S. consumers and credit unions marginally increased in April, continuing a trend that has been ongoing the past several months, according to the Federal Reserve's Consumer Credit Report released Friday afternoon.

Overall, borrowing rose $11.1 billion, or 4.7%, to reach $2.82 trillion.

The $2.82 trillion total for April compares with roughly $2.81 trillion borrowed in March and $2.69 trillion borrowed in second quarter 2012, seasonally adjusted.

At credit unions, members borrowed $251.2 billion, up from March's $247.6 billion and from $231.2 billion in second quarter 2012, not seasonally adjusted.

Revolving credit data indicate that consumers overall charged $807.5 billion in April--up from $804.9 billion in March and just a notch ahead of the $807.4 billion in second quarter 2012. Credit unions' charge card debt barely rose to $39.5 billion from $39.4 billion in March. That compares with $37.4 billion borrowed in second quarter last year.

Total nonrevolving debt--which comprises student and auto loans but not real estate loans--rose $10 billion in April to $1.97 trillion from $1.96 trillion in March. In the second quarter 2012, nonrevolving debt totaled $1.839 trillion.

At credit unions, April nonrevolving debt totaled $211.8 billion, an increase from $208.2 billion in March. During second quarter 2012, members borrowed $193.8 billion.

Las Vegas Bank Closing Is 15th This Year

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WASHINGTON (6/10/13)--The Federal Deposit Insurance Corp. announced one bank closing Thursday, which brings this year's total of failed U.S. banks to 15.   

That compares with nine credit union closings so far this year by the National Credit Union Administration.

1st Commerce Bank, North Las Vegas, Nev., was closed and will be assumed by Plaza Bank, Irvine, Calif., the FDIC said.

1st Commerce Bank, as of March 31, had roughly $20.2 million in total assets and $19.6 million in total deposits.  The FDIC estimates the cost of the closure to its deposit insurance fund to be $9.4 million.

U.S. Jobless Claims Fell By 11,000 Last Week

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WASHINGTON (6/7/13)--The number of new U.S. claims for initial unemployment benefits dropped by 11,000 last week--to 346,000, the Labor Department said Thursday.

The decline indicates job growth is moderate despite slackening economic activity and that firms are confident consumer demand will continue amid federal budget cuts and tax increases (The New York Times and Bloomberg.com June 6).

However, a broader gauge of job cuts rose last week, with the four-week moving average--which smoothes out weekly data volatility--increasing by 4,500, to 352,000 (The Wall Street Journal June 6).

Labor market progress has been uneven, these figures show, with the U.S. economy continues to expand sluggishly, the Journal said.

Employers may be adding to their work forces less aggressively than earlier this year when hiring was strong. For example, unemployment claims increased from five-year lows set a month ago, the Journal added.

Fewer job cuts set up employers to add to their work forces if sales rise in the second half of the year, Bloomberg said.

In a related matter, U.S. private businesses created 135,000 new jobs in May, according to payroll processor Automatic Data Processing Inc. and forecasting company Moody's Analytics (The Wall Street Journal June 5). That was less than the 170,000 jobs expected by economists surveyed by Dow Jones Newswire.

Fed Beige Book: Economy Shows Modest To Moderate Growth

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WASHINGTON (6/6/13)--The 12 district banks that comprise the U.S. Federal Reserve System reported, with one exception, that "overall economic activity increased at a modest to moderate pace" from early April to late May. The exception was the Dallas District, which reported strong economic growth for the period. The information is in the Fed's Beige Book released Wednesday.

The newest report compares with "moderate" growth the Beige Book reported for late February to early April. The report, prepared by the Federal Reserve Bank of Minnesota, describes current economic conditions in each district.

Officials at the Fed will consider the report as they continue consider when to begin reducing the pace of bond purchases (Bloomberg.com June 5). Officials meet June 18-19 and are deciding whether gains in employment are significant enough to merit a reduction in stimulus, and how much the world's biggest economy is being constrained by federal budget cuts, said Bloomberg.

Although most analysts think the economic recovery is picking up steam, they anticipate it will temporarily settle down in the next few months because a package of government spending cuts--known as the sequester--will bog down output (The Wall Street Journal June 5).

Gross-domestic-product growth is slowing in the second quarter, some recent data indicate, after expanding by a 2.4% seasonally adjusted annual rate in the first quarter, the Journal added.

Most districts reported slight to moderate pick-ups in consumer spending and a moderate rise in vehicle sales. In all 12 districts, construction and residential real estate activity rose at a moderate to strong pace.

Since the last Beige Book, overall lending at financial institutions modestly increased. Credit quality and deposits rose, while credit standards remained largely unchanged.

"Hiring increased at a measured pace in several districts, with some contacts noting difficulty finding qualified workers," said the Beige Book. "Wage pressures remained contained overall, although several districts reported a modest or moderate rise for selected occupations. Districts reported level prices to mild price increases; some manufacturers raised prices and some increases for input prices were noted."

The Dallas District reported strong growth in auto lending and residential markets, with ongoing weakness in corporate transactions. The New York District saw rising demand for all types of loans except commercial and industrial loans--for which demand was unchanged.

Wisconsin Bank Closing Is 14th This Year

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WASHINGTON (6/4/13)--The Federal Deposit Insurance Corp. announced one bank closing Friday, which brings this year's total of failed U.S. banks to 14.

In comparison, the National Credit Union Administration has closed nine credit unions so far this year.

Banks of Wisconsin, Kenosha, Wis., was closed and will be assumed by North Shore Bank, FSB,  Brookfield, Wis., the FDIC said.

Banks of Wisconsin had $134 million in total assets and $127.6 million in total deposits as of March 31. The FDIC estimates the cost of the closure to its Deposit Insurance Fund will be $26.3 million.

DoS Attacks' Next Target: Cell Phones

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NEW YORK (6/3/13)--Banks and credit unions that were hit earlier this year by a series of distributed denial of service (DDoS) attacks on their online banking sites may have seen nothing yet. The next wave of targets will include using hijacked "botnets" of mobile phones of unsuspecting consumers to unleash attacks on call centers, web servers, financial accounts and even the stock market.

Smartphones are a quieter but more serious threat to financial institutions because mobile malware can be used to conduct telephony denial of service (TDoS) attacks--with high volumes of calls that tie up the target's the system so it cannot receive legitimate calls-- as well as steal mobile banking credentials to withdraw funds from accounts,  said the American Banker (May 30).

Authorities, including the Department of Homeland Security, in April were investigating an extortion scheme that hit public safety communications, hospitals and ambulance services. The scheme started with a phone call to an organization from someone claiming to be a collections company for payday loans. The caller, often with an accent, asked to speak with an employee about outstanding debt. If he didn't get payment, he launched a TDoS attack, with a continual stream of calls for an extended time that prevented legitimate incoming and outgoing calls.

A caller could use the TDoS attack in combination with Zeus or Zitmo malware against a financial institution's contact center, said Frost & Sullivan Principal Consultant Jarad Carleton in the article. The malware would coordinate a botnet of thousands of consumer smartphones--without the phone owners' knowledge-- with TDoS attacks on call centers or Web servers.

Other related frauds include:

  • Hijacking a mobile phone to call an organization's Information Technology department to change passwords. The caller ID would be proof of identification, and the consumer would be blamed.
  • Installing  malware on consumers' phones to intercept SMS messages and reroute them to a hacker, who transfers funds from the consumers' account.
  • Targeting company CEOs and using phones to eavesdrop on conversations or employing the phone's camera to watch. Once they capture the intelligence they want, the hackers can manipulate the stock market with a buying or selling spree, the article concluded.