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News of the Competition (07/30/2010)

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MADISON, Wis. (8/2/10)
* Citigroup Inc. is slated to pay $75 million to settle regulators’ claims that it misled investors, according to a complaint filed Thursday in federal court by the Securities and Exchange Commission (SEC) (Bloomberg News via American Banker July 30). The SEC alleges Citi duped investors by its understating its subprime mortgage holdings by billions of dollars as the housing crisis developed in 2007. The SEC complaint added that Citi made misstatements on financial filings about assets and on earnings calls that were tied to subprime loans. Some of the disclosures neglected to mention more than $40 billion in investments, the SEC said … * Bank of America (BofA) pledged $10 million in grant money for nonprofit lenders with the caveat that they would be expected to leverage the money tenfold (American Banker July 30). The grants will be disbursed so that groups such as community development financial institutions can obtain matching funds from the Small Business Administration and the Department of Agriculture, the Banker said. The goal for the nonprofits is to create more than $100 million in low-cost, long-term capital during the next 12 months in small-business microloans, the publication said …

Market News (07/30/2010)

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MADISON, Wis. (8/2/10)
* The U.S. economy grew at a less-than-forecast 2.4% in the second quarter--revealing a slowdown in consumer spending and a larger trade deficit (Bloomberg.com July 30). A median forecast of economists had predicted a 2.6% increase, according to Bloomberg News. The second-quarter gain follows a revised 3.7% advance in the first quarter, the Commerce Department said Friday. “We’re seeing a sort of handover from consumer spending to capital spending,” said John Ryding, chief economist at RDQ Economics. Consumers also look “to have saved more than we thought before, which means they’re perhaps further on road to financial adjustments than we though they were previously” (The New York Times July 30). The economy’s growth in the second half of 2010 will be sluggish because boosts from inventories and the stimulus will fade, before gaining strength next year (Moody’s Economy.com July 30). Robust growth in 2011 and 2012 will eventually lead to substantial improvement in the labor market, Moody’s said … * U.S. consumer confidence plunged in July to the lowest level since November, creating a threat to consumer spending--the largest part of the nation’s economy (Bloomberg.com July 30). The Thomson/Reuters/University of Michigan consumer sentiment index dropped to 67.8 in July from 76 in June. “Consumers have a lot to be concerned about,” said Eric Green, chief market economist at TD Securities Inc. “Private job growth is showing signs of slowing, not accelerating.” Stock market volatility may have been a factor in the drop in the index. Consumers continue to say they are worried about the economy despite the surge in spending early in the year (Moody’s Economy.com July 30). The July decline was led by the current conditions component. Inflation expectations barely changed from June, Moody’s said … * The Securities and Exchange Commission (SEC) Thursday charged two Dallas billionaire brothers with conducting an extensive securities fraud that the SEC said resulted in $550 million in undisclosed gains (The New York Times July 29). Charged were Charles and Samuel Wyly, who are large donors to philanthropies and conservative causes, the Times said. The brothers--founders of Sterling Software, a business software and services company they sold for $4 billion in stock to the software company CA in 2000--also were charged with insider trading violations, which netted them more $31 million, the SEC alleged. The civil charges are a component of a strong effort by the SEC to more sharply concentrate on prominent enforcement cases, the Times said …

News of the Competition (07/29/2010)

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MADISON, Wis. (7/30/10)
* Citigroup Inc. is considering its options to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act, said people familiar with the matter (Bloomberg News via American Banker July 29). The act is anticipated to result in lower levels of government support for U.S. banks. Citi may move a team of proprietary traders into its hedge fund unit. Under that scenario, the bank would set up traders as hedge fund managers, seed their funds, and then get outside investors to put money into the funds to redeem its stakes, the sources said. That scenario is one of at least three options the bank is considering to be in compliance, Bloomberg said … * In the second quarter, U.S. citizens accessed the smallest amount of home equity in a decade, according to a Freddie Mac report (USA Today July 29). Homeowners took out $8.3 billion while refinancing home loans from April through June--the smallest amount in 10 years, even though interest rates declined, the report said. About 22% chose to reduce loan principal, Freddie added. Instead of using home equity to pull out cash for purchases, many homeowners are refinancing to improve their mortgage terms and reduce their payments, the report said …

Market News (07/29/2010)

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MADISON, Wis. (7/30/10)
* Initial U.S. first-time claims for unemployment benefits dropped by 11,000 to 457,000 last week, the Labor Department said Thursday. That number indicates the labor market will improve slowly, even as the economy expands (Bloomberg.com July 29). “The underlying pace of claims has not made any measureable improvement,” said Ellen Zentner, senior U.S. economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Businesses are investing in equipment but other than that, there’s little impetus for them to hire.” A slowing of the pace of economic growth could keep businesses from adding to their payrolls, Bloomberg said. Meanwhile, continuing claims rose 81,000 to nearly 4.57 million for the week ended July 17 (Moody’s Economy.com July 29) … * In the first half of 2010, foreclosure filings rose in 75% of U.S. metropolitan areas, because high unemployment prevented many homeowners from paying their mortgages, mortgage data company RealtyTrac Inc, said Thursday in a report (Bloomberg.com July 29). “Foreclosures are spreading out from areas that had been hardest hit,” said Rick Sharga, senior vice president for marketing at Irving, Calif-based RealtyTrac. “We’re dealing with underlying economic weakness as opposed to unsustainable home prices and bad loans.” The number of properties receiving a filing more than doubled in Albuquerque, N.M., Baltimore and Oklahoma City, the report said. Notices of default, auction or bank seizure increased more than 50% in areas including Atlantic City, N.J., Salt Lake City and Savannah, Ga. …

Fed Beige Book Economy lost momentum in 2Q

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WASHINGTON (7/29/10)--The Federal Reserve Board's 12 district banks described current economic conditions consistent with other recent reports that indicate the economy lost momentum during third quarter in the Fed's Beige Book report released Wednesday. The report is based on information collected on or before July 19 by all district banks. Two districts--Atlanta and Chicago--described stalled or slower growth since the previous report. Cleveland and Kansas City said their districts' economic activity remained steady. Other districts reported modest improvements. Manufacturing expanded in most districts; however, several said it slowed or leveled off. Increased activity was reported by several districts for the services sector, transportation, and tourism; however the Atlanta district reported decreased leisure travel to the Gulf Coast. Retail sales generally rose, with necessities selling strong and big-ticket items moving more slowly. Auto sales declined in those districts reporting on them. Recent rains produced mixed results on crop conditions, and activity related to natural resources increase. Labor conditions overall saw a modest improvement across all districts, with some districts reporting more temporary workers. Consumer prices of services and goods were steady in most districts. A few reported cost increases in input prices. Wage pressures overall were contained, the Fed's report said. Banking conditions were mixed across the districts during the reporting period, said the report. Overall loan demand was soft or weak in Cleveland, Atlanta and Dallas, while total outstanding loan volume decreased in St. Louis and was steady in Philadelphia and San Francisco. Demand for commercial loans was flat to increasing--except for a couple of districts experiencing less movement in this area. Consumer loan demand was weak in Cleveland, eased in Philadelphia, and declined in Atlanta and St. Louis; however, the districts of New York and Kansas City saw increases in consumer loans. Residential mortgage loans were largely sluggish--increasing in New York but easing in Philadelphia, while Cleveland said its activity was below expectations, given rates in the district. St. Louis reported a decrease mortgage lending. Most districts reporting on credit standards said that lending standards remain restrictive. New York reported tighter credit standards for all categories except consumer loans. Kansas City reported tighter commercial lending standards. Cleveland and Kansas City described mixed credit quality in their districts, while San Francisco said it was stable, and Philadelphia, Chicago and Richmond saw an improvement in credit quality. Dallas reported that nonperforming loans have stabilized and aren't expected to worsen. Philadelphia, Cleveland and Richmond continued reporting delinquencies above historic norms, said the report. New York's delinquency rates declined for consumer loans but did not change significantly in other areas.

News of the Competition (07/28/2010)

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MADISON, Wis. (7/29/10)
* Ratings agency Moody’s Tuesday affirmed the long-term and short-term ratings of Bank of America, Citigroup and Wells Fargo (American Banker July 28). However, the recent passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act--which is anticipated to result in lower levels of government support for U.S. banks--prompted Moody’s to change its outlook on the three banks to negative from stable, the publication said. “Since early 2009, Bank of America, Citigroup, and Wells Fargo's ratings have benefited from an unusual amount of support,” Moody’s said. “This support has resulted in debt and deposit ratings that range from three to five notches higher than that indicated by the banks' unsupported, intrinsic financial strength” ... * Bankers looking to acquire failed Nevada banks must act quickly because the bankers’ opportunities are diminishing, reported American Banker (July 28). Nevada has had only 10 bank failures since 2007 despite the implosion of its real estate market and one of the highest unemployment rates in the U.S. California has had 28 bank failures, and Florida has had 34. Only two more Nevada banks will fail this year, according to a forecast by Foresight Analytics, so opportunistic bankers need to proceed quickly, the Banker said. “There is still a lot of pain to be had in that market, but I think it is still going to prove to be a good place to be,” Aaron James Deer, an analyst with Sandler O’Neill & Partners LP, told the publication. “So, it is a good idea for banks to enter now when the entry costs are low, particularly with [Federal Deposit Insurance Corp.] deals” …

Market News (07/28/2010)

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MADISON, Wis. (7/29/10)
* New orders for durable, manufactured goods in the U.S. unexpectedly dropped in June as a weak economic recovery continued to slow down (The New York Times July 28). Demand for durable goods declined 1%--the second consecutive monthly decline and largest drop since August--the Commerce Department said Wednesday. During the early stages of the economic recovery, manufacturing has driven growth, so a slowdown in orders could signal that the recovery is losing momentum, the Times said. June’s orders were 16.5% higher than the $176 billion in orders from a year ago. June’s decline impacted most major industries, including transportation, electronics, machinery and primary metals. Among the few positive areas were appliances, electrical equipment and motor vehicles, the Times said. June’s decline follows May’s downwardly revised -0.8% (Moody’s Economy.com July 28). However, capital core orders--for non-military capital goods excluding aircraft--rose 0.6% in June after jumping 4.6% in May, the department said (Bloomberg.com July 28) ... * Mortgage loan application volume for the week ended July 23 decreased 4.4%, seasonally adjusted from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index declined 4.2%. The Refinance Index dropped 5.9%. Refinances accounted for 78% of applications, down from 79.4% the previous week. The seasonally adjusted Purchase Index increased 2% and is the highest Purchase Index observed in the survey since the end of June. The unadjusted Purchase Index rose 2.4% and was 34.3% lower than the same week one year ago. The four-week moving average for the seasonally adjusted Market Index is up 1.6%. The four-week moving average is flat for the seasonally adjusted Purchase Index and up 2% for the Refinance Index. For the MBA report, use the link … * The U.S. government’s response to the financial crisis saved about 8.5 million jobs, slowed a decline in gross domestic product, and likely prevented a depression, economists Alan Blinder, a former Fed vice chairman and economics professor at Princeton University, and Mark Zandi, chief economist at Moody’s Analytics Inc, said in a report dated Tuesday (Bloomberg.com July 28). “Eighteen months ago, the global financial system was on the brink of collapse, and the U.S. was suffering its worst economic downturn since the 1930s,” Blinder and Zandi said in their report. “The Great Recession gave way to recovery as quickly as it did largely because of the unprecedented responses by monetary and fiscal policy makers.” Policies that included bailout of financial companies, the government fiscal stimulus, bank stress tests and the Federal Reserve’s purchase of mortgage-backed securities to lower interest rates “probably averted what could have be called the Great Depression 2.0,” the report said …

News of the Competition (07/27/2010)

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MADISON, Wis. (7/28/10)
* The Federal Housing Finance Agency (FHFA) Tuesday 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 4.91%, based on loans closed in June. This is a decrease of 0.08% from the previous month. For the FHFA report, use the link … * Federal bankruptcy officials appointed Joshua R. Hochberg to investigate Washington Mutual Bank’s (WaMu) proposed settlement of billions of dollars in legal claims from its September 2008 seizure and sale (American Banker July 27). He’s been asked to submit a preliminary report by Sept. 7. Last week, a bankruptcy judge authorized the investigation of Washington Mutual Inc.--the former bank’s parent company, after it agreed that an outside viewpoint was necessary to help resolve the matter, the publication said. After losing WaMu, Washington Mutual filed for Chapter 11 bankruptcy protection. It said it wants to settle claims against regulators and JPMorgan Chase, which bought the bank for $1.9 billion … * Citigroup Inc. said it is fixing a security flaw in its free U.S. mobile-banking application for Apple’s iPhone (The Wall Street Journal July 27). Citi is advising its customers to correct the problem by upgrading to a newer version of the iPhone. Citi said its iPhone application accidentally saved information--including security access codes, bill payments information and account numbers--on a hidden file on user’s iPhones. Also, if a users’ iPhone had been synchronized with a computer, the information would have been saved there. Citi said it doesn’t believe any personal data was made vulnerable by the flaw. The issue affected roughly 117,600 customers, said a source familiar with the matter …

Market News (07/27/2010)

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MADISON, Wis. (7/28/10)
* Concerns about business conditions and jobs caused consumer confidence to decline in July, following a steep drop in June, the Conference Board, a private New York-based research firm, said Tuesday (MarketWatch July 27). The consumer confidence index dropped to 50.4--the lowest level since February--from an upwardly revised 54.3 in June. “The concern is that the unemployment rate will start to push up again,” David Semmens, an economist at Standard Chartered Bank in New York. “Consumers need to start seeing more hiring to lift their moods. We’re expecting a feeble recovery.” Consumer views of current and future job prospects eroded in July, the board said (Moody’s Economy.com July 27). Auto- and appliance-buying plans went up, while home-buying plans dropped, the board said … * Due to some residual lift from the homebuyer tax credit, U.S. existing home prices increased at a faster rate during the three months ended in May, than they did in the three months ending in May 2009, according to the Case/Shiller 20-city home price index (Moody’s Economy.com July 27). The index rose 4.6% from the 2009 period to the 2010 period--the largest year-over-year gain since August 2006, the board said (Bloomberg.com July 27). A backslide in demand since the April 30 contract-signing deadline for a federal homebuyer credit of up to $8,000 portends that home prices will drop in coming months, Bloomberg said. “We just are going to muddle through for awhile,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. “I’m not looking for a big movement from here either up or down” …

News of the Competition (07/26/2010)

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MADISON, Wis. (7/27/10)
* Seven failed banks were taken over Friday by regulators and have entered into purchase-and-assumption agreements with other banks, according to the Federal Deposit Insurance Corp. (FDIC). The failures bring the 2010 total for bank failures to 103, compared with 140 failures for all of 2009. Friday's failed banks include Sterling Bank, Lantana, Fla., assumed by IBERIABANK, Lafayette, La.; Crescent Bank and Trust Company, Jasper, Ga., assumed by Renasant Bank, Tupelo, Miss.; Williamsburg First National Bank, Kingstree, S.C., assumed by First Citizens Bank and Trust Company Inc., Columbia, S.C.; Thunder Bank, Sylvan, Kan, assumed by The Bennington State Bank, Salina, Kan.; Community Security Bank, New Prague, Minn., assumed by Roundbank, Waseca, Minn.; SouthwestUSA Bank, Las Vegas, assumed by Plaza Bank, Irvine, Calif., and Home Valley Bank, Cave Junction, Ore., assumed by South Valley Bank & Trust, Klamath Falls, Ore. The seven closed institutions held roughly $2.16 billion assets as of March 31. The FDIC estimated that the banks’ failures will cost the Deposit Insurance Fund about $431 million ... * The first batch of second-quarter financial reports (for U.S. community banks) was encouraging, as profits grew faster than credit problems--a tentative sign that the sector is in recovery, reported American Banker (July 26). Median net income increased by 4% to 9.6% from the previous quarter, depending on the region, according to a report from Sandler O’ Neill & Partners LP and SNL Financial LC. Also regional decreases in nonperforming loans ranged from 2.3% to 9.5%. Gains in credit quality, higher net-interest income, and lower expenses sparked earnings growth, the Banker said. “It feels to me like the industry is healing, albeit slowly,” Mark Fitzgibbon, director of research at Sandler O'Neill, told the publication. But overall, bankers and analysts continue to have a guarded outlook, the Banker said …

Market News (07/26/2010)

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MADISON, Wis. (7/27/10)
* Although new-home sales rose in June, it was the second-weakest sales month on record, indicating the tame economy has made potential buyers wary of purchasing new homes (The New York Times July 26). New-home purchases increased nearly 24% in June from May to a seasonally adjusted annual pace of 330,000, the Commerce Department said Monday. May’s sales number was revised downward to a rate of 267,000--the slowest pace on record dating back to 1963. Rising foreclosures are increasing the number of unsold existing homes, placing downward pressure on prices and preventing buyers from purchasing homes as the unemployment rate lingers around 10% and the economy loses momentum (Bloomberg.com July 26). “[Sales are] bouncing along the bottom,” said Eric Green, chief market economist at TD Securities Inc. “The future is going to be dependent on job growth. There’s no demand because confidence is weak and employment is weak.” The months of home supply improved, decreasing to 7.6 months from 9.6 in May (Moody’s Economy.com July 26) … * The U.S., European and Chinese economies are decelerating at the same time, which could create a new equilibrium for the world economy (Bloomberg.com July 26). Following 5% growth--which was engendered by policy stimulus and inventory rebuilding--for the major economies in the first quarter, the world’s major economies are moving toward a weaker expansion, Bloomberg said. Factors behind the slowing of the growth rate are: weaker bank lending and unemployment in the U.S. and Europe, consumer retrenchment in the U.S., and fiscal consolidation in Europe. Also, Chinese growth may slow as the world’s most populous country redirects its economy away from exports and manufacturing, Bloomberg said. “Post-crisis headwinds will restrain growth in world domestic product by 1 to 1.5 percentage points,” said Stephen Roach, non-executive chairman of Morgan Stanley Asia. In a related matter, the global economy is expanding, but at a rate below its potential, according to Moody’s Economy.com Survey of Business Confidence (July 26). In July, survey responses slid back to March’s level, with responses weakening to all questions in the survey, except for equipment and software investment--which stayed level …

News of the Competition (07/23/2010)

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MADISON, Wis. (7/26/10)
* Goldman Sachs Group Inc. gave federal investigators a list of counterparties it used to hedge the risk that insurer American International Group Inc. (AIG) would fail, said sources familiar with the matter (Bloomberg.com July 23). Congressional panels reviewing the beneficiaries of AIG’s $182.3 billion government bailout sought the list, the sources said. After the 2008 rescue, Goldman Sachs received $12.9 billion connected to contracts with AIG. Goldman said it didn’t require AIG to be rescued because it had hedged against the insurer’s failure, the sources said. “We want to know the identity of those parties, partly just to know where American taxpayers dollars went, but partly to assess Goldman’s claims,” said Elizabeth Warren, chairman of the Congressional Oversight Panel, in a Senate hearing this week. “We cannot evaluate the credibility of their claim that they had nothing at stake one way or the other in the AIG bailout” ... * Posting its most profitable first half in more than a decade, Ford Motor Co. reported second-quarter net income of $2.6 billion (Bloomberg.com July 23). In the year’s first six months, Ford earned $4.7 billion--the biggest first-half profit since 1998 and its fifth consecutive profitable quarter. “Ford’s on an amazing roll right now,” said Rebecca Lindland, an analyst at IHS Automotive. Ford CEO Alan Mulally revamped Ford’s arsenal, redesigning cars and adding extras like voice-activated electronics and heated leather seats. Also, he bolstered quality, resulting in $1.1 billion of price gains on cars and trucks in the quarter and helping all of the automaker’s units worldwide achieve profitability, Bloomberg said … * American Express Co. and Capital One Financial Corp. Thursday reported substantial improvements in delinquencies and chargeoffs, signaling a continual improvement in the credit card industry, reported American Banker (July 23). AmEx said its net income increased more than 200% from a year earlier to $1.02 billion, and its net charge-off rate for U.S. cards dropped to 6.2% from 10% a year earlier. Capital One reported similar second-quarter trends in its domestic card business, the Banker said. The banking company’s net income for domestic cards increased 189% year-over-year to $483 million. Its net charge-off rate was 9.5%--up from 9.2% in the same quarter a year earlier, but down from 10.5% in the previous quarter …

Market News (07/23/2010)

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MADISON, Wis. (7/26/10)
* The number of U.S. mass layoffs--layoffs involving at least 50 workers from a single establishment--rose to 1,647 in June from 1,412 in May, according to the Bureau of Labor Statistics (Moody’s Economy.com July 23). The mass layoffs mirror trends in initial claims for unemployment benefits, Moody’s said. The layoffs involved 145,538 workers, compared with 135,789 in May. The June report indicates that primary and secondary schools are laying off workers in masses just as colleges and universities did in May. This is consonant with Moody’s projection that state and local government employment will decrease roughly 1% by year-end---the worst decline since the early 1980s, Moody’s added. Private sector firms are substantially outperforming the public sector--with layoffs down across most industries, compared with last year, Moody’s said … * The Economic Cycle Research Institute (ECRI) weekly index stayed flat at 120.7 for the week ended July 16. The smoothed, annualized growth rate fell to -10.5% from an unrevised -9.8%. During the past several weeks, the index has leveled off--a positive development compared with mostly steady declines in prior weeks, ECRI said. However, the economy still is fragile as growth is moderating and risks are greater than they were just a few months ago, ECRI said. The early stages of the economic recovery were mostly generated by the shifting inventory cycle, with inventories responsible for most of the gross domestic product growth in fourth-quarter 2009 and first-quarter 2010, ECRI said (Moody’s Economy.com July 23) …

News of the Competition (07/22/2010)

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MADISON, Wis. (7/23/10)
* General Motors Co. (GM) reached an agreement to buy subprime lender AmeriCredit Corp. for $3.5 billion, which has been approved by both companies’ boards (Bloomberg.com July 22). The deal--expected to close in the fourth quarter--will help GM reach more customers with leases and loans to borrowers with faulty credit records, Bloomberg said. “This helps GM finance less-than-perfect-credit buyers and God knows there’s plenty of them today with economic conditions as they are,” said Joe Phillippi, principal of Auto Trends, a consulting firm. “A lot of people in the vast heartland of this country don’t have particularly great credit histories and that region has been the core of GM’s strength” … * Federal regulatory reform legislation signed into law Wednesday by President Barack Obama will now face a difficult task of implementation, reported American Banker (July 22). The Banker said the top five challenges of implementation--based on interviews with former academics, analysts, banking lawyers and regulators--are: crafting capital and liquidity standards, building a consumer financial protection bureau, creating a council to detect systemic risks, enforcing a ban on proprietary trading, and setting standards for derivatives. “The amount of work that the regulators are going to have to undertake under this legislation is nothing short of breathtaking,” Charles Horn, a partner at Mayer Brown specializing in financial services regulation, told the Banker. “It isn’t just a question of the sheer number of studies, regulatory implementation requirements and things like that they have to comply with, but it is also the fact that the legislation in so many areas is, frankly, deliberately vague and does not really create a lot of substantive, quantitative support,” he said, adding, “This is going to be close to an unprecedented challenge for the regulatory bodies in general” …

Market News (07/22/2010)

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MADISON, Wis. (7/23/10)
* The index of U.S. leading economic indicators dropped 0.2% in June, marking the second decline in the past 15 months, according to New York-based private research firm The Conference Board. Lower stock prices and a shorter manufacturing work week were the most salient drags (Moody’s Economy.com July 22). Despite the setback in the leading index, the recovery should continue through the rest of the year, Moody’s said. “Economic data softened notably in June, suggesting the recovery has lost some momentum,” said Yelena Shulyatyeva, an economist at BNP Paribas in New York. “As we move into the second half of the year, residential investment is likely to weigh again in economic growth” (Bloomberg.com July 22) … * With the scheduled closing deadline for the home buyer tax credits, existing-home sales slowed in June but remained at relatively elevated levels, according to the National Association of Realtors (NAR). Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, fell 5.1% to a seasonally adjusted annual rate of 5.37 million units in June from 5.66 million in May. June sales are 9.8% more than the 4.89 million-unit pace in June 2009. Lawrence Yun, NAR chief economist, said the market shows uncharacteristic yet understandable swings as buyers responded to the tax credits. “June home sales still reflect a tax credit impact with some sales not closed due to delays, which will show up in the next two months,” he said. “Broadly speaking, sales closed after the home buyer tax credit will be significantly lower compared to the credit-induced spring surge. Only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels.” For the NAR report, use the link. In a related matter, the Federal Housing Finance Agency’s purchase-only price index rose 0.5% from April to May (Moody’s Economy.com July 22) ... * Initial U.S. claims for unemployment benefits rose 37,000 to 464,000 for the week ended July 17. Although the jump was big, it was not unexpected given the continued volatility in the job market because of factories retooling-shutdowns that are typical for this time of the year (Moody’s Economy.com July 22). Meanwhile, continuing claims declined by 223,000 to nearly 4.49 million for the week ended July 10 …

News of the Competition (07/21/2010)

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MADISON, Wis. (7/22/10)
* Morgan Stanley, which owns the largest brokerage in the world, and Wells Fargo & Co., the No. 1 U.S. home lender, reported second-quarter earnings that beat expectations (Bloomberg.com July 21). “The larger banks continue to do well,” said Malcolm Polley, who oversees $1 billion as chief investment officer at Stewart Capital Advisors, Indiana, Pa. “The economy is doing modestly better, and the credit issues aren’t getting worse.” In a key move, James Gorman, Morgan Stanley CEO, added employees to its sales and trading unit to close a gap that existed with competitors, the Times said … * Delinquencies on permanent Home Affordable Modification Program (HAMP) loan modifications that are six months old are significantly lower than servicers’ proprietary loan modifications programs, according to a new government report issued Tuesday by the Office of the Comptroller of the Currency and the Office of Thrift Supervision (American Banker July 21). The most recent HAMP figures indicate the redefault rate--loans 90 days or more past due--on 4,150 HAMP modifications in third quarter 2009 was 2.3% after six months. All loan modifications made during the third quarter 2009 had a redefault rate of 20% …

Market News (07/21/2010)

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MADISON, Wis. (7/22/10)
* Mortgage loan application volume for the week ended July 16 rose 7.6% on a seasonally adjusted basis from the prior week, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the Index increased 19.5% from the previous week, which included the Independence Day holiday. Refinance applications increased 8.6% and were the highest Refinance Index observed in the survey since the week ending May 15, 2009. These were driven by a 10.7% increase in conventional refinance applications, while government refinance applications decreased 4.2%. The seasonally adjusted Purchase Index rose 3.4%, driven by an 8% increase in government purchase applications. Conventional purchase applications were essentially flat, up just 0.3%. The unadjusted Purchase Index rose 15.3%, but was 35.7% lower than the same week one year ago. “As rates on 30- and 15-year fixed-rate mortgages declined to the lowest levels recorded in the survey, refinance activity increased last week. The refinance index is up almost 30% during the past four weeks but is still well below the peak seen last spring,” said Michael Fratantoni, MBA vice president of research and economics. “Refinance borrowers, aiming for the lowest possible rate, are getting conventional loans. The strength in purchase applications comes from government loans, likely indicating that prospective buyers are drawn by the lower down payment requirements.” For the MBA report, use the link … * California is adopting a federal law aimed at mitigating the fraud and abuse that led to the implosion of the housing market. As a result, mortgage brokers in the state will undergo closer scrutiny (Bloomberg.com July 21). Brokers in the most populous U.S. state will be required to pass credit and criminal background checks and licensing exams by July 31. California and roughly one-third of the states did not previously mandate that mortgage sellers have individual licenses. By Jan. 1, all states are required to implement the national rules, which Congress developed in the wake of record mortgage defaults and foreclosures, Bloomberg said. Brokers will be assigned identification numbers to allow regulators and borrowers to track their lending histories, Bloomberg said … * When regulators release the results this week of their stress tests on European banks, they will follow the example of U.S. regulators who conducted similar tests of U.S. banks last year (The New York Times July 21). In June, European leaders agreed to the round of testing--initially for 25 major banks--with the results to be publicly announced. The list was expanded to 91 banks to include smaller banks where problems were thought to be prevalent, the Times said. Europe is trying to engender confidence the way U.S. regulators did in February 2009 when they announced the testing of U.S financial institutions with two-thirds of the U.S. banking system’s assets …

Market News (07/20/2010)

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MADISON, Wis. (7/21/10)
* U.S. housing starts in June dropped to the lowest level since October because of a sales drop-off spawned by the expiration of a government tax credit for first-time buyers. The sales slump caused U.S. builders to cut back on housing construction (Bloomberg.com July 20). Housing starts fell 5% from May to June, at an annualized rate of 549,000 units for the month, the Commerce Department said Tuesday. “Given the excess of existing homes for sale, there is no rush to boost starts significantly,” said Jim O’Sullivan, chief economist at MF Global Ltd. “There has been volatility in the data because of the tax credit. The best you can say is the big drag on growth from housing ended a year ago.” Housing starts are down 5.8% from a year ago (Moody’s economy.com July 20). A more positive development is that housing permits and completions increased in June--and the volatile multi-family segment sparked much of the decline in starts, Moody’s said … * U.S. chain store sales increased 1.4% for last week--reversing the prior week’s decrease, according to the International Council of Shopping Centers (ICSC) sales index (Moody’s Economy.com July 20). The year-ago change went up 4.2%--the most robust growth in 10 weeks. Hot weather reportedly boosted sales--which remain consonant with modest growth in consumer spending, Moody’s said. Last week’s jump in sales should help mitigate concerns that spending growth has ended because of the waning economic recovery waned and weakened consumer confidence. Rather, spending growth has slowed to a level more consistent with consumer fundamentals that remain weak--including employment due to the end of temporary Census Bureau jobs and a volatile stock market--Moody’s said …

News of the Competition (07/20/2010)

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MADISON, Wis. (7/21/10)
* Goldman Sachs Group Inc’s second-quarter earnings plunged 83% to 78 cents per share because of a steep reduction in trading gains and damage from volatile markets--making it the worst quarter for the huge investment bank since the nadir of the financial crisis in late 2008 (The New York Times July 20). Revenue dropped 36% to $8.84 billion from $13.76 billion in the quarter a year ago. Net income was $613 million--down from $3.43 billion, or $4.93 per share, in the quarter a year ago. “It was a pretty slow quarter,” said Benjamin Wallace, an analyst at Grimes & Co. “In the first quarter, they made a lot of money on the trading side of things, and this quarter they did not” (Bloomberg.com July 20) … * Several communities nationwide are experimenting with the concept of a local currency, reported American Banker (July 20). The currencies are completely legal and have gone in and out and of fashion for decades. During the Great Depression in the 1930s, when mistrust of mainstream financial institutions reached a high level, local currencies became popular, the Banker said. Each local currency program is set up in its own way. Some employ community banks as funnels to exchange dollars for the local currencies and the reverse. In other programs, banks and credit unions let customers and members pay a portion of loans and fees with the local money. And others don’t involve banks at all. “I think the obvious problems with the global financial system have shaken people's confidence,” Susan Witt, a co-founder of a local currency program in the Berkshires region in Massachusetts and executive director of the New Economics Institute, a think tank, told the publication. “And so they're asking more questions about how money is issued, for what purposes, what keeps it sound. And that has brought up questions about the value of more regionally based currencies” … * Mortgage repurchase requests have not peaked and they will stay at their high levels for at least three years, according to lawyers who represent mortgage servicers and banks (American Banker July 20). The reason is that mortgage buyers are coming up with new reasons to make originators buy back home loans, making repurchases a burden for lenders during the next several years, the Banker said. “Repurchase requests are becoming more and more onerous,” Michael Pfeifer, a managing partner at the law firm Pfeifer & DeLaMora LLP, which represents mortgage lenders and banks, told the publication. “Investors are building more reps and warrants into their guidelines, and most of these contracts are in favor of the investor [buying the loan]” …

CUNA to iThe Streeti Housing market data will be weak

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NEW YORK (7/20/10)--Earnings reports and a deluge of housing data will be available in the next week, and the housing reports are expected to be weak, a Credit Union National Association economist told The Street.com. "Virtually all the housing market indictors come out next week, and these will all be quite weak now that the homebuyer tax credit has expired," Bill Hampel, CUNA chief economist, told The Street.com (July 17). "Since everyone is expecting them to be weak, they're unlikely to move markets unless the number comes in much weaker or stronger than estimates, Hampel added. The National Association of Home Builders issues its July housing market index on Monday, which Hampel expects to remain stable with June's level of 17, the publication said. Today, the Department of Commerce reports on June building permits and housing starts. The market expects building permits to rise to 575,000, after coming in at 574,000 in May, according toBriefing.com. Housing starts, meanwhile, are projected to fall on the month, to 570,000 from 593,000 previously. Wednesday and Thursday bring the usual weekly oil inventory and initial unemployment claims releases, in addition to testimony from Federal Reserve Chairman Ben Bernanke on monetary policy. Also on Thursday, the market gets the latest data on existing-home sales from the National Association of Realtors. Economists are forecasting 5.04 million sales of already-constructed homes and condos in June, representing a decline from May's level of 5.66 million. Hampel said that because existing sales are counted after the loan closes, there could be some leftovers from the tax credit push. He anticipates sales of roughly 5.4 million, the told the publication. "Home prices have been leveling off lately and are likely close to bottoming out. I think we're sort of in the middle of a long bottoming of home prices. They could start to strengthen a little by the end of the year and into the next year, but won't be much better than inflation for a while," Hampel said. "We still have a very weak housing market. There may be some buildup of 'tailbreezes' because it's very cheap to get a mortgage right now, and improvements in the labor market will help housing, but we still have a fairly large supply of housing, which will keep prices low. Plus, people are still nervous. They're not completely sure that housing prices have bottomed," Hampel said, adding, "We're not going to see a strong turnaround in the housing market for years to come."

News of the Competition (07/19/2010)

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MADSION, Wis. (7/20/10)
* Six failed banks were taken over Friday by regulators and have entered into purchase-and-assumption agreements with other banks, according to the Federal Deposit Insurance Corp. (FDIC). The failures bring the 2010 total for banks to 96, compared with 140 failures for all of 2009. Friday’s failed banks include Woodland Bank, Bluffton, S.C, assumed by Bank of the Ozarks, Little Rock, Ark.; Olde Cypress Community Bank, Clewiston Fla., assumed by CenterState Bank of Florida, National Association, Winter Haven Fla.; Mainstreet Savings Bank FSB Hastings, Minn., assumed by Commercial Bank, Alma, Mich. Also, Metro Bank of Dade County, Miami; Turnberry Bank, Adventura, Fla.; and First National Bank of the South Spartanburg, S.C., all were assumed by NAFH National Bank, Miami. The six closed institutions held roughly $2.03 billion assets as of March 31. The FDIC estimated that the banks' failures will cost the Deposit Insurance Fund about $335 million ... * In second quarter 2010, Citigroup Inc. saw 70% of its income generated by continuing operations in Asia and South America (American Banker July 19). “Our belief is born out of what we think are some rather specific long-term trends,” Chief Financial Officer John Gerspach said at a press conference Friday. “Gross Domestic Product (GDP) in emerging markets is certainly going to grow at a faster pace than GDP in the developed world; right there, that offers you a little bit more of a growth advantage.” For the quarter, Citigroup was able to increase revenue year-over-year in its consumer banking transaction-services businesses--where it saw the biggest improvements in net credit losses and loan-loss reserve levels, the publication said … * Bank of America (BofA)--similar to CitiGroup and JPMorgan Chase--managed a second-quarter profit, albeit on lower revenues and stagnant lending, while its credit quality improved, reported American Banker (July 19). BofA’s loan portfolio shrank 2.5% from the first quarter and was at $967.1 billion--mostly unchanged from a year earlier, the Banker said. “The results from the larger banks are confirming our view that the U.S. economy is continuing to deflate,” said Christopher Whalen, managing director at Lord, Whalen LLC's Institutional Risk Analytics. “The U.S. economy is finding a new run rate without the availability of excessive credit. Get used to it. For those of you who still believe in 'normalized earnings,’ this is it,” he said …

Market News (07/19/2010)

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MADISON, Wis. (7/20/10)
* In a sign the expiration of a government tax credit will slow home construction, U.S. homebuilders became more pessimistic in July (Bloomberg.com July 19). The National Association of Home Builders/Wells Fargo confidence index fell to 14 this month--the lowest level since April 2009--from 16 in June. Readings below 50 mean the majority of respondents said conditions were poor. The sales fall-off follows the April 30 expiration of a deadline to sign purchase agreements and qualify for a tax credit worth up to $8,000. The report said the slump is lasting longer than expected. “The housing sector is going to be in a hangover for a few months and it looks like it will be quite a nasty one,” said David Sloan, a senior economist at 4Cast Ltd. “This will weigh on growth in the third quarter and well into the fourth quarter” … * Business confidence worldwide has significantly weakened in the past few weeks--falling to its lowest level in more than three months, according to Moody’s Economy.com Survey of Business Confidence (July 19). Confidence is consonant with an economy that still is growing, but at a lower rate that is below its potential, Moody’s said. With the exception of equipment and software investment--which have remained steady--responses turned softer across all questions asked, Moody’s said. Most notable were poor responses to a broad question regarding current business conditions--which is a survey proxy for real gross domestic product growth, Moody’s said. There was a substantial decrease in European and Asian--especially Japanese--sentiment last week … * The probability that the U.S. will be in recession six months from now increased--for the first time since February--by four percentage points to 27% in June (Moody’s Economy.com July 19). The economy has distinctly weakened--with the most prominent signs in the housing, manufacturing and retail sectors. Job market improvements have leveled off, and conditions in the financial market are less suited for growth, Moody’s said. Also, second-quarter growth was less than expected with real gross domestic product tracking closer to 2% at an annualized rate than the 3% Moody’s had forecast. With the economy still vulnerable during the next few months, and growth anticipated to be below the economy’s potential, this could move the unemployment rate back toward 10%, Moody’s said …

Market News (07/16/2010)

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MADISON, Wis. (7/19/10)
* U.S. consumer confidence fell nearly 10 points in July to the lowest level in nearly a year, a sign that the largest component of the U.S. economy is losing steam, according to the Thomson Reuters/University of Michigan preliminary sentiment index (Bloomberg.com July 16). The index dropped to 66.5 from June’s 76--the lowest level since August 2009. Economists in a Bloomberg survey had projected a median forecast of 74. “It feels like a wipeout all of a sudden,” said Jonathan Basile, an economist at Credit Suisse in New York. “We basically wipe out all the gains we’ve had for some time. It builds the case for moderate growth in consumer spending in the second half.” Stock market volatility may have contributed to the June decline because consumers say their mood is down despite the surge in spending early in the year (Moody’s Economy.com July 16). Other contributing factors to the confidence decline could have been large cooling bills that consumers received because of unusually hot weather in recent weeks, and also governmental policy uncertainty, Moody’s said … * Because of another big slide in the energy index, the consumer price index (CPI) dropped 0.1% in June, according to the Bureau of Labor Statistics (Moody’s Economy.com July 16). However, the core CPI increased 0.2%--the healthiest reading of the year--following a 0.1% gain in May. Broad strength in prices of consumer items--including used cars and shelter--bolstered the core CPI, Moody’s said. The year-ago change in core CPI, however, still remains at a historic low of 1%, indicating that the economy’s inflationary pressures are being held well in check, Moody’s said ... * The Economic Research Cycle (ECRI) leading index barely decreased to 120.6 for the week ended July 9--basically unchanged from the prior week’s revised figure of 120.6--previously 121.5. The smoothed, annualized growth rate fell to -9.8% from a revised -9.1%--previously -8.3%. The week’s performance in the ECRI leading index was not as bad as has been evident in recent weeks, ECRI said. Although the economy is fragile and risks are significant, the baseline forecast still projects that the economic recovery will prevail, ECRI said (Moody's Economy.com July 16) …

News of the Competition (07/16/2010)

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MADISON, Wis. (7/19/10)
* Goldman Sachs Group Inc. admitted it failed to provide key information to investors in a 2007 deal involving a contract it sold called Abacus 2007-AC1, and agreed to pay a $550 million fine to the Securities and Exchange Commission (SEC) to settle the fraud complaint (USA Today July 16). The Abacus contract was a bet on whether the value of securities based on subprime mortgages would rise or fall--an investment dubbed a collateralized debt obligation, the newspaper said. “This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing,” Robert Khuzami, director of the SEC’s division of enforcement, said in a statement ... * In attempts to raise capital to satisfy regulators, Bank of America (BofA) intends to sell the insurance unit it acquired when it purchased Countrywide Financial Corp. (Bloomberg.com July 16). “We’re selling Balboa Insurance, consistent with this strategy,” said Brian T. Moynihan, BofA CEO. “We just today put it on the market.” Balboa is one of the biggest providers of insurance coverage for foreclosed homes and properties occupied by distressed borrowers, Bloomberg said. BofA is selling assets because regulators are urging the biggest U.S. lender to raise a net $3 billion this year, Bloomberg said …

Market News (07/15/2010)

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MADISON, Wis. (7/16/10)
* Initial U.S. claims for unemployment benefits declined by 29,000 to 429,000 for the week ended July 10--the fewest since August 2008, the Labor Department said Thursday. The government had expected a rise in temporary factory layoffs in early July that did not occur, which led to a drop in applications, a Labor Department spokesman said (Bloomberg.com July 15). “The key story here is the extreme uncertainty over the near-term path of claims as a result of the annual retooling shutdowns, which throw the seasonal adjustments into chaos,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics LLC. Meanwhile, continuing claims for the week ended July 3 rose 247,000 to roughly 4.68 million (Moody’s Economy.com July 15) … * U.S. industrial production rose 0.1% in June--a small increase but better than expected, the Federal Reserve said Thursday (Moody’s Economy.com July 15). Mining and utility output increased--the latter because of higher temperatures nationwide for the month--but manufacturing output dropped for the second time in the past 12 months. As impetus from the inventory cycle fades, the previously red-hot factory sector is starting to cool off, Moody’s said. “The manufacturing recovery is looking a bit more mixed than it was a few months ago when it was hard to find any signs of weakness in the data,” said Zach Pandl, an economist with Nomura Securities International in New York. “Ultimately, businesses aren’t going to be investing at a rapid pace if consumers are going to be more moderate" (Bloomberg.com July 15). Economists surveyed by Bloomberg had forecast a 0.1% drop in June industrial production … * U.S. homes seized from delinquent owners in the second quarter increased to a record number of 269,962 as lenders attempted to claim more than one million properties by the end of 2010, according to RealtyTrac Inc. (Bloomberg.com July 15). Second-quarter home seizures rose 38% from a year earlier and 5% from the first quarter, the California-based data company said. Foreclosure filings--including notices of default, auction and bank repossession--were given to more than 1.65 million properties in the first half of the year--up 8% from the fist six months of 2009. “Foreclosures haven’t peaked yet,” said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies. Unemployment indicates that bank repossessions may rise for another six to nine months, he added …

News of the Competition (07/15/2010)

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MADISON, Wis. (7/16/10)
* In a sign the economy is recovering without inflation, U.S. wholesale (producer) prices dropped more than expected--0.5%--in June because of lower food and energy costs (Bloomberg.com July 15). Economists surveyed by Bloomberg had predicted a 0.1% drop in the prices paid to factories, farmers and other producers. The June decline followed a 0.3% decline in May, the Labor Department said Thursday. Core prices for intermediate and crude goods decreased in June as worldwide growth concerns deepened and the U.S. dollar strengthened (Moody’s Economy.com July 15). “Commodity prices have been slipping amid concerns about slower growth and a stronger dollar,” said Aaron Smith, senior economist at Moody’s. “High unemployment will likely keep wage pressure at bay and continue to restrain pricing power in the second half of the year” … * American International Group (AIG) Wednesday named Steve Miller, 68, as its new chairman. Miller is a restructuring specialist who has overseen the bankruptcy of Delphi Corp.--the biggest U.S. auto parts dealer at one time--and helped return Chrysler Corp. to profitability after it took government loans in 1980 (Bloomberg.com July 15). Miller has been CEO at Bethlehem Steel Corp., Federal-Mogul Corp. and Waste Management Inc. “He’s not just an auto guy,” said Maryann Keller, president of Maryann Keller & Associates. “He’s a finance guy who has had his share of troubled situations. He’s a pragmatic businessman who knows how to operate in these situations” …

News of the Competition (07/14/2010)

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MADISON, Wis. (7/15/10)
* For the second consecutive month, U.S. retail sales declined in June, fueling worries about how much of a slowdown the economy will go through (Bloomberg.com July 14). Retail spending fell 0.5% in June, the Commerce Department said Wednesday. That came on the heels of an even bigger 1.1% drop in May. Spending, excluding autos, was down a smaller 0.1% in June (The New York Times July 14). “The consumer soft patch is not as pronounced as we thought a month or two ago,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, told Bloomberg. “Consumers are still a bit concerned. A lot of the angst is because stocks went into negative territory” … * In the second quarter, the biggest securities dealers on Wall Street loosened the terms for private-equity firms and hedge funds that borrow against securities and over-the-counter derivatives, said a Federal Reserve Board survey released Tuesday (American Banker July 14). “Easing terms is not the same as easy terms,” said Jaret Seiberg, an analyst with Washington Research Group, a division of Concept Capital. “During the crisis, banks tightened considerably. So it is natural for banks to ease these standards as the market recovers” …

Market News (07/14/2010)

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MADISON, Wis. (7/15/10)
* Mortgage loan application volume decreased 2.9% for the week ended July 9 on a seasonally adjusted basis from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey, released Wednesday by the Mortgage Bankers Association (MBA). The week’s results include an adjustment to account for the Independence Day holiday. On an unadjusted basis, the Index declined 12.6% compared with the previous week. The Refinance Index dropped 2.9% from the previous week and the seasonally adjusted Purchase Index fell 3.1%. This was the lowest Purchase Index observed in the survey since December 1996. The unadjusted Purchase Index decreased 12.7% and was 43% lower than Independence Day week one year ago. The four-week moving average for the seasonally adjusted Market Index is up 1.5%. The four-week moving average is down 2.4% for the seasonally adjusted Purchase Index, while this average is up 2.6% for the Refinance Index. For The MBA report, use the link … * In a sign companies are preparing for weaker sales in the coming months, total U.S. business inventories grew 0.1% in May--the smallest gain this year (Bloomberg.com July 14). The increase followed a 0.4% rise the prior month, the Commerce Department said Wednesday. Also, sales dropped 0.9%--the largest decline since March 2009. “Inventory restocking is showing signs of fatigue,” said Ryan Sweet, a senior economist at Moody’s Economy.com. “The recovery has lost some steam over the past month, and the reluctance of small businesses to invest and hire will contribute to a weak second half of this year.” The May gain was caused by increases in inventories by retailers and wholesalers, while manufacturer inventories decreased in the month (Moody’s Economy.com July 14). However, inventories are still lean and have room for further increases, Moody’s said … * For the second consecutive month, U.S. import prices declined in June. The 1.3% drop is the largest since December 2008, according to the Bureau of Labor Statistics (Moody’s Economy.com July 14). The decrease was much bigger than expected, and prices across the board were down, which portends that disinflation continues to permeate the economy, Moody’s said. Import prices--excluding petroleum--dropped for the first time since March, falling 0.5%. Nonfuel import prices in June dropped 0.6%, following a 0.5% gain in May. Previous appreciation in the U.S. dollar and slack in the worldwide economy are putting downward pressure on import prices, Moody’s said … * Federal Reserve leaders toned down their expectations for growth and inflation last month, concluding that the economic recovery is progressing more slowly than they had anticipated in the spring, but that the slowdown did not necessitate new policy actions (The Washington Post July 14). However, Fed leaders did agree to look into options for supporting the economy further in the event that conditions worsen. In forecasts made before the meeting and released Wednesday, the officials said they expected that gross domestic product will grow 3% to 3.5% this year, compared with a forecast of 3.2% to 3.7% at their April meeting. They also slightly downgraded their projection for 2011. That lower growth could result in unemployment reamining higher for a longer period, as the Fed anticipates the jobless rate to be 9.2% to 9.5% in the fourth quarter of 2010, and to be 8.3% to 8.7% at the end of 2011, both a little higher than in April forecasts, the Post said. However, the Fed sees few inflationary pressures, predicting that prices will rise 1% to 1.1% this year, compared with the 1.2% to 1.5% rate they forecast in April. The new outlook is significantly below the 1.7% to 2% inflation rate that the Fed aims for over the longer term, the Post said. …

News of the Competition (07/13/2010)

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MADISON, Wis. (7/14/10)
* U.S. banks are searching for additional data on prospective customers so the banks can make more informed lending decisions (American Banker July 13). Although not a new concept, the focus on “alternative” data to credit scores in underwriting departments has increased after the hard lessons banks learned from the credit crisis, the Banker said. “In the marketplace right now everyone is talking about rethinking underwriting,” said Peter Carroll, a partner in the retail and business banking practice of the management consulting firm Oliver Wyman. “Everyone realizes that credit scores, as clever as they are, have in some respects left out of the credit-assessment equation certain aspects of the borrower” … * U.S. chain store sales dropped 1.5% last week--reversing roughly half the gains of the prior two weeks and leaving a trend of modest sales growth intact, according to the International Council of Shopping Centers (ICSC) sales index. Job losses due to the end of Census Bureau temporary jobs and recent stock mark volatility were part of the still-weak consumer fundamentals that eroded sales (Moody’s Economy.com July 13). The year-ago change dropped to 3.2%, staying above 3% for a third consecutive week, as sales declined in the comparable week last year …

Market News (07/13/2010)

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MADISON, Wis. (7/14/10)
* Because imports outpaced growth in exports, the U.S. trade deficit unexpectedly widened in May to the highest level since November 2008 (Bloomberg.com July 13). With U.S. companies importing more automobiles and consumer goods, the trade gap grew 4.8% to $42.3 billion, the Commerce Department said Tuesday. Also imports and exports increased to the highest level since 2008. The trade gap was forecast to narrow to $39 billion, according to analysts in a Bloomberg News survey. Meanwhile, the real goods deficit tallied $46 billion in May, compared with $44.2 billion in April (Moody’s Economy.com July 13). The real goods deficit widening portends that trade will be a larger drag on growth in the second quarter than was originally expected, Moody’s said … * May’s Job Openings and Labor Turnover Survey (JOLTS) gave an overly optimistic assessment of the U.S. labor market, the Bureau of Labor Statistics said. The number of people hired was more than the number of people who left their jobs in May. For the month, 4.5 million workers were hired--up from 4.3 million in April, while 4.09 million left their jobs--roughly equal to April. May marks the fourth month this year of net gains and the largest net gain so far. However, the May gain was mostly due to Census hiring, as private-sector hiring slid to 3.8 million from 3.9 million the prior month, the bureau said. Also, the number of available jobs declined to 3.2 million from 3.3 million in April. Although many bigger companies are profitable, they lack the confidence in the economy necessary to increase investment and hiring. Meanwhile, smaller companies looking to grow still are having a hard time obtaining the credit needed to hire and expand, the bureau said …

News of the Competition (07/12/2010)

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MADISON, Wis. (7/13/10)
* Four failed banks were taken over Friday by regulators, and three have entered into purchase-and-assumption agreements with other banks, while one had an approved payout of insured deposits and was closed, according to the Federal Deposit Insurance Corp. (FDIC). The failures bring the 2010 total for banks to 90, compared with 140 failures for all of 2009. Friday’s failed banks include Home National Bank, Blackwell, Okla., assumed by RCB Bank, Claremore, Okla.; USA Bank, Port Chester, N.Y., assumed by New Century Bank (doing business as Customer’s 1st Bank), Phoenixville, Pa.; and Bay National Bank, Baltimore, assumed by Bay Bank, FSB, Lutherville, Md. The FDIC approved the payout of the insured deposits of Ideal Federal Savings Bank, Baltimore, which was closed Friday by the Office of Thrift Supervision, and appointed the FDIC as receiver. The four closed institutions held nearly $1.13 billion assets as of March 31. The FDIC estimated that the banks' failures will cost the Deposit Insurance Fund about $160 million ... * General Motors Co. (GM) has decided not to create its own finance unit, opting instead to approach banks about strengthening its lending capacity, said sources familiar with the matter (Bloomberg News via American Banker July 12). GM reportedly is talking with Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., the sources said. To help spark vehicle sales, the banks would write loans and leases on cars, the sources added. “They have to make sure they cover all of the credit tiers,” said Maryann Keller, president of the consultant Maryann Keller & Associates. “They can’t reacquire GMAC because it’s only basis for cheap capital is that they own a bank. GM can’t legally own a bank” ...

Market News (07/12/2010)

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MADISON, Wis. (7/13/10)
* FICO figures show that millions of Americans’ credit scores are dropping to unprecedented lows (USA Today July 12). FICO said 25.5% of consumers--nearly 43.4 million people--have a credit score of 599 or lower, designating them as poor risks for lenders. With the tighter lending standards banks currently use, it’s unlikely consumers below that level will be able to obtain auto loans, credit cards or mortgages, the newspaper said. FICO’s findings indicate an increase of roughly 2.4 million people in the lowest credit score categories during the past two years, the paper added. Consumer credit reports as of April provided the basis for the FICO analysis … * Failure to publish individual banks’ exposure to sovereign debt could hurt investor confidence, the European Commission told it member government officials (Bloomberg.com July 12). “There is considerable opposition to the publication of individual exposures to sovereign debt,” the European Union’s (EU) executive arm said in a confidential letter dated July 9 obtained by Bloomberg News. “Stepping back” [from planned publication of this information] “would give the impression that we have something to hide.” EU finance officials are deciding how much detail of the tests to make public. Results are scheduled for release July 23 …

Consumer credit at CUs down in May

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MADISON, Wis. and WASHINGTON (7/12/10)--Consumer credit outstanding at credit unions continued to drop in May--to $223.7 billion from April's $224.8 billion and March's $228 billion, according to the Federal Reserve's Consumer Credit report, released Thursday. The figures are not a surprise to economists at the Credit Union National Association (CUNA). Credit unions followed the trend for financial institutions overall in consumer credit outstanding and for nonrevolving credit, which decreased over the month. However, they bucked the trend in revolving credit, which continued to increase at credit unions while decreasing among other financial institutions or staying the same. Revolving credit at credit unions grew to $34.6 billion in May--up from $34.5 billion in April and $34.3 billion in March. Nonrevolving credit totaled $189.1 billion in May, a decrease from $190.3 billion in April and $193.7 billion in March. Overall consumer credit in May for all institutions decreased at an annual rate of 4.5% to $2,415.3 billion (or $2.4 trillion), compared with April's $2,424.4 billion, said the report. Revolving credit decreased 10.5% to $830.8 billion in May from the previous month's $838.2 billion. Nonrevolving credit also dropped, by 1.5% to $1,584.5 billion from $1,586.3 billion the month before. "These numbers do not come as a surprise," said Mike Schenk, vice president of economics and statistics, and senior economist at CUNA. "CUNA, in fact, provides the numbers to the Fed and the Fed in turn uses them to produces its estimate of consumer credit trends," he told News Now. "Our source is about 500 credit unions that provide us with a monthly financial snapshot--via participation in our Financial and Statistical Trends (FAST) program. The data in that program are summarized in CUNA's Monthly Credit Union Estimates Report (use the link to download the report). So what do the numbers mean? "Basically what is going on is this: consumers have high levels of debt, and they are paying down that debt to more manageable levels," said Schenk. "This is being magnified by historically low deposit yields and a volatile stock market," he said. "Even among those that have manageable debt loads it seems that, for many, paying down that debt is more palatable than accepting near-zero returns on savings and investments."

News of the Competition (07/09/2010)

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MADSION, Wis. (7/12/10)
* Most who default on U.S. mortgages--whether it be their residence, a second home or a house bought as an investment--are rich (The New York Times July 8). More than one in seven homeowners with loans in excess of $1 million are seriously delinquent, according to data compiled for the Times by CoreLogic, a real estate firm. Conversely, about one in 12 mortgages below the million-dollar mark is delinquent. CoreLogic data suggests that many of the wealthier property owners are purposely shedding their financially draining properties--similar to the way they would rid themselves of any other investment that turned south--although this is hard to prove, the Times said … * Some banks are giving business borrowers more time to repay loans that come due. While banks call the move a wise strategy, some skeptics label it “extend and pretend” (The Wall Street Journal July 7). Banks especially are applying the strategy to commercial real estate lending because, during the real estate boom, many over-zealous borrowers collectively went beyond their means by tens of billions of dollars, the Times said. In recent months, a strong effort by banks to modify such loans through implementing below-market interest rates or lengthening maturities has slowed a surge in defaults, the Times said …

Market News (07/09/2010)

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MADISON, Wis. (7/12/10)
* Growth in the U.S. economy will average 2.8% from the current quarter through the second quarter 2011, according to a median forecast of economists surveyed from July 1 through July 8. That is down 0.1 of a percentage point from last month (Bloomberg.com July 9). Although the U.S. economy is seen as more vulnerable than in the past, based on employment and manufacturing figures, the survey indicates the economic recovery will thrive despite the effects of the European debt crisis and China’s efforts to slow growth, Bloomberg said. With inflationary forces slight, the Federal Reserve will wait longer than previously thought before raising interest rates, the publication added. “It’s not a falling-off-the-cliff scenario but a bit more cautious,” said Julia Coronado, a senior economist at BNP Paribas. “There is going to be fallout from the European situation.” In a related matter, the Economic Cycle Research Institute (ECRI) weekly leading index decreased to 121.5 for the week ended July 2 from a revised 122.3--revised from 122.2 for the prior week (Moody’s Economy.com July 9). The smoothed annualized rate fell to -8.3% from -7.6%, revised from -7.7%. Continued decreases in the ECRI index indicate the economic recovery is tenuous and the risks are tangible, ECRI said … * U.S. wholesale inventories rose in May because warehouses were restocked with machinery and other durable goods (The Wall Street Journal July 9). Inventories rose 0.5% after increasing by a downwardly revised 0.2% in April--from 0.4% (Moody’s Economy.com July 9). Meanwhile, sales dropped 0.3% from an upwardly revised 0.9% in April--which previously was 0.7%. The inventory-to-sales ratio increased by one basis point to 1.14 in May … * Canadian job creation in June was nearly five times more than economists had anticipated, replenishing most of the country’s job losses since 2008 (Bloomberg.com July 9). The situation also strengthens the case for the central bank to raise interest rates for the second consecutive month, Bloomberg said. Employment increased 93,200 in June, following gains of 24,700 in May and a record 108,700 in April, Statistics Canada said Friday. The jobless rate dropped to 7.9%--the lowest level since January 2009--from 8.1% …

Market News (07/08/2010)

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MADISON, Wis. (7/9/10)
* Initial U.S. claims for unemployment benefits decreased last week by 21,000 to 454,000, the Labor department said Thursday--the largest decline since mid-April and more than analysts anticipated (The Wall Street Journal July 8). Economists had expected a drop of 12,000 claims, according to a survey conducted by Dow Jones Newswires. The claims figures are consonant with other data that indicate improvement in the job market will take more time to develop (Bloomberg.com July 8). U.S. companies hired fewer workers than predicted, according to a Labor Department report last week. “[Last week’s figures] point toward a labor market that is slowly moving in the right direction,” said Ryan Sweet, a senior economist at Moody’s Economy.com (July 8). “We still have a long ways to go and it will be a bumpy road.” Meanwhile, continuing claims for unemployment benefits declined by 224,000 to roughly 4.41 million for the week ended June 26, he said … * For the second consecutive week, U.S. mortgage rates this week fell to the lowest mark in a half-century. However, the low rates may not be sufficient to spark the housing market (The New York Times July 8). The average 30-year, fixed-rate mortgage dropped to 4.57%--down from the previous record of 4.58% set last week. The rate was the lowest since Freddie Mac began tracking rates in 1971, Freddie said Thursday. Rates fell as investors, worried about the European debt crisis, have shifted their money into the safe haven of Treasury bonds, the Times said ... * The International Monetary Fund’s (IMF) most recent assessment of the global economy, released Thursday, predicts the economy will grow faster than expected this year (The New York Times July 8). However, the economic recovery is threatened by major risks and the growth pace likely will slow next year, the IMF added. “While we predict the recovery will continue, it is clear that downside risks have risen sharply,” said Olivier Blanchard, IMF chief economist. “How Europe deals with fiscal and financial problems, how advanced countries proceed with fiscal consolidations, and how emerging market countries rebalance their economies, will determine the outcome” …

News of the Competition (07/08/2010)

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MADISON, Wis. (7/9/10)
* Wells Fargo & Co. plans to close its consumer-finance branch network and cut 3,800 jobs (Bloomberg.com July 8). Wells Fargo purchased Wachovia Corp. for $12.67 billion in 2008 and is streamlining operations and reducing redundancies as it merges the two operations, Bloomberg said. The lender, the fourth-biggest U.S. bank by assets, will post a restructuring charge of $185 million--with $137 million, or two cents per share--in the second quarter, according to the bank’s statement released Wednesday. Wells Fargo said it will close 638 independent consumer-finance branches and stop issuing nonprime home loans ... * Citigroup Inc. has agreed to sell roughly $900 million of private equity investments, following a plan announced in 2009 to reduce the U.S. bank’s assets, said sources familiar with the matter (Bloomberg Businessweek July 7). Operating under its 10-year-old Citi Private Equity unit--which was put up for sale last year--the bank is selling buyout investments, the sources said. Citi Private Equity is one of more than two dozen businesses marked for sale or eventual closure by CEO Vikram Pandit in early 2009. The divestiture plan was instituted after the bank’s $45 billion taxpayer bailout … * Wal-Mart’s Sam’s Club is joining forces with lender Superior Financial Group to offer loans of up to $25,000 to its small business members (Associated Press via LoneStar Leaguer July 8). The program is among several from the huge retailer offering bank-like services to customers to help them spend more in the community, APsaid. The program will concentrate on minority-, veteran- and women-owned businesses. After a November survey, Sam’s Club said 15% of its business members reported they were denied a loan …

News of the Competition (07/07/2010)

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MADISON, Wis. (7/8/10)
* Second-quarter results for large U.S. banks likely will be impacted by financial reform (American Banker July 7). Also, there are indications that the improvement in credit that allowed banks to put off provisioning or to start accessing their capital buffers may be stalling, the Banker said. The focus of analysts and investors is anticipated to shift to the bill’s effect on banking business, since banks’ credit positions and core businesses aren’t expected to lose ground, the publication said … * The largest banks in the world are offering loans as inducements to garner places on companies’ bond deals (Bloomberg.com July 7). The moves come in the wake of a 39% decline in sales this year--the most since at least 1998--which is shrinking fees. As an example, Citigroup offered a loan with Credit Suisse Group AG and 12 other lenders to join a bond sale by Virgin Media Inc.--the second-largest pay television company in the United Kingdom, said Richard Martin, treasurer at London-based Virgin. “We’ve been very clear with our banking business partners that we’ll take care of those who are good to us,” said Martin, who got a record 14 banks to sell debt in January. “If you want to be in the bond, we need you to give us your balance sheet as well” … * The European Union (EU), acting through the European Parliament, Wednesday approved some of the most austere restraints on exorbitant bank bonuses (The New York Times July 7). Bankers in the 27-nation EU bloc will not be allowed to take more than 30% of their bonuses in cash starting next year. Also, if a bank’s performance deteriorates during the next three years, bankers would risk losing some of the remainder of their bonuses, the Times said. Banks that don’t reign in salaries of their biggest earners would have to put aside more capital to account for the risk. “The exercise here is to make sure that bonuses are not a one-way bet, so that if you take risks and lose in a big way, that will affect what you get,” said Nick Dent, an employment law partner with Barlow Lyde & Gilbert LLP ...

Market News (07/07/2010)

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MADISON, Wis. (7/8/10)
* U.S. mortgage loan application volume for the week ended July 2 rose 6.7% on a seasonally adjusted basis 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 increased 6.5% from the previous week. The Refinance Index went up 9.2% and is the highest Refinance Index observed in the survey since the week ended May 15, 2009. The seasonally adjusted Purchase Index declined 2% from one week earlier for the eight of the past nine weeks. The unadjusted Purchase Index dropped 2.3%, compared with the previous week and was 34.7% lower than the same week one year ago. “Mortgage rates remained near record lows last week, as incoming data on the job and housing markets were weaker than anticipated,” said Michael Fratantoni, MBA vice president of research and economics. “As more homeowners locked in these low rates, the level of refinance applications increased to a new 13-month high. For the month of June, purchase applications declined almost 15% relative to the prior month, and were down more than 30%, compared to April, the last month in which buyers were eligible for the tax credit.” For the MBA report, use the link … * Sales at U.S. retailers are expanding at the fastest pace in four years--a signal that consumers may be overcoming concerns about low home values and unemployment (Bloomberg.com July 7). In the retail fiscal year that began Jan. 31, sales likely expanded at an average monthly rate of 4%--the largest gain since 2006, the International Council of Shopping Centers (ICSC) said Wednesday. Although vacancies and lease rates at U.S. shopping centers continued to get worse in the second quarter, the pace of deterioration is slowing, which suggests a recovery that could begin in the coming quarters (The Wall Street Journal July 7). Large mall vacancies in the top 80 U.S. markets increased to 9% in the second quarter--up from 8.9% during the first quarter, according to Reis Inc, a real estate research company. Mall vacancies have steadily risen for nearly four years because consumers curtailed their spending, while retailers shuttered stores and cut back on expansions, the Journal said …

News of the Competition (07/06/2010)

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MADISON, Wis. (7/7/10)
* Robert Steel will resign from his seat on the board of directors for Wells Fargo & Co., the company said Friday in a filing with the Securities and Exchange Commission (American Banker July 6). Steel was obligated to give up his role on the board after being named deputy mayor of New York City in late June, the publication said. His resignation takes effect at the end of July. His new job begins in August. Steele was a former CEO of Wachovia Corp. and deputy secretary of the Treasury Department ...

Market News (07/06/2010)

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MADISON, Wis. (7/7/10)
* U.S. service industries grew in June at a slower pace than expected (Bloomberg.com July 6). The slowdown signaled an economy that is cooling off as it heads into the second half of the year. The Institute for Supply Management’s (ISM) index of non-manufacturing businesses--covering roughly 90% of the economy--dropped to a four-month low of 53.8 from 55.44 in May. The June figure was below the median forecast of 55 in a Bloomberg News survey. Readings above 50 indicate expansion. June orders slowed for a third consecutive month and employment declined. Other indicators in June also have weakened--including the ISM manufacturing index, homebuilder sentiment and equity markets (Moody’s Economy.com July 6) … * Business sentiment worldwide significantly weakened last week--although the drop could partly reflect a lower response rate because of the U.S. July 4th holiday, according to Moody’s Economy.com Survey of Business Confidence (July 6). There was a particularly steep drop in businesses’ assessment of present conditions--especially in the U.S. and Europe. Global business confidence has remained unchanged since mostly improving from the spring of 2009 through the spring of 2010. Sentiment remains consonant with a worldwide economy that is growing close to its potential, Moody’s said. That is a significant improvement from conditions a short time ago--but it is becoming more disappointing that--given this rate of growth--little progress is being made in reducing very high worldwide unemployment, Moody’s said …

News of the Competition (07/05/2010)

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MADISON, Wis. (7/6/10)
* The biggest Asian-American financial institutions--Chinese-American and Korean-American banks--located in Southern California are finding success in raising capital (American Banker July 2). The banks are surprising their competitors by garnering last-minute capital infusions even while some are conducting operations under the purview of regulatory orders, the publication said. The banks’ success in attracting capital is due to their proximity to their ethnic markets, Banker said. Because the banks’ loan portfolios were concentrated in commercial real estate, they needed to raise capital to thrive when that market imploded in California. The Asian communities responded well, the publication said ...

Market News (07/05/2010)

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MADISON, Wis. (7/6/10)
* U.S. payrolls declined by 125,000 in June as the government cut 225,000 temporary workers who conducted the 2010 census, the Labor Department said Friday. Private sector payrolls rose by 83,000. However, the unemployment rate decreased to 9.5%--mostly because of a drop in the number of job seekers (Moody’s Economy.com July 2). The current pace of hiring suggests that it will take years for the U.S. economy--the world’s largest--to recover the more than eight million jobs lost during the recession that started in December 2007 (Bloomberg.com July 2). The European debt crisis--which is creating turmoil in financial markets--could cause employment to slow, sapping American households of the income needed to maintain spending, Bloomberg said. “Overall, [the employment situation] is weak with very little breadth in hiring,” said John Herrmann, a senior fixed-income strategist at State Central Markets. “This will lead to second-half consumption well below the first half” … * The U.S. future inflation gauge (FIG) decreased to 97.4 in June from 99.7 in May, according to the Economic Cycle Research Institute (ECRI). The smooth, annualized growth rate diminished to 5.7% from 14%. Over the past several months, the gauge has slowed, indicating inflation pressures are easing with the moderate growth of the economy, Moody’s said. In a related matter, the ECRI weekly leading index (WLI) fell to 122.2 for the week ended June 25 from an unrevised 122.9 the previous week. The smooth, annualized rate declined to -7.7% from an unrevised -6.9%. The weekly trend is appearing more problematic, suggesting that risks to the economy are increasing, ECRI said (Moody’s Economy.com July 2). Meanwhile, financial advisers were more confident in June about the long-term prospects for the U.S. economy and stock market, according to the Advisor Confidence Index issued last week by Rydex/SGI advisor Benchmarking (American Banker July 2). The index registered 104.29 in June--up from 101.19 in May … * In a sign that manufacturing may be starting to cool off, new orders placed with U.S. factories in May decreased more than forecast (Bloomberg.com July 2). Orders fell 1.4%--the biggest decline since March 2009. Excluding transportation, new orders dropped 0.6%. Nondurable good orders declined 2.1%. Inventories increased for the fifth consecutive month (Moody’s Economy.com July 2). Economists had predicted an overall 0.5% decline in May orders, according to a median forecast in a Bloomberg News survey. “Manufacturing has been the star of the economy this year, so any signs the conditions are turning would cause some concern,” said Joel Naroff, president of Naroff Economic Advisers Inc. “The demand for products is slowing” …

Schenk market-performance analysis in ITheStreet.comI

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MADISON, Wis. (7/2/10)--Markets are beginning to grasp the fact that the economy's recovery will be unlike any other and are beginning to focus on negative results, Mike Schenk, senior economist at the Credit Union National Association, told TheStreet.com Thursday. Schenk provided an analysis of market performance while stocks struggled after Thursday's news of a steep drop in May pending home sales and an larger than anticipated increase in initial jobless claims. "We're in a place today where market participants are hanging their hats on disappointing results and ignoring the good results," he told the publication. He noted "it bears mentioning, that by almost any measure, we're better off than we were a year ago." Most of the disappointing news has come from the housing market, he said. "We did have massive stimulus and that stimulus was removed, so in some respects, it shouldn't be all that surprising," he noted, adding that Thursday's jump in initial jobless claims indicated that today's unemployment report would not be above expectations. "But again, I think expectations were for this recovery to look like a normal recovery. We know labor markets will not recover the way they traditionally recover ... it's going to be a long, slow affair, and because of that, we think markets, at least in the near term, will focus on negatives and not focus on positive results." Use the link to read the full article.

News of the Competition (07/01/2010)

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MADISON, Wis. (7/2/10)
* Properties owned by U.S. banks sold for an average 34% discount in the first quarter--an increase from 32%--in the previous quarter and a year earlier, according to a report issued Wednesday by RealtyTrac Inc. (Bloomberg News via American Banker July 1). Bank properties constituted 19% of total U.S. home sales--up from nearly 16% in the fourth quarter and down from 21% in the fourth quarter 2009, RealtyTrac said. Properties scheduled for auction or in default sold for an average discount of about 15%--up from 14% the previous quarter and down from 16% a year earlier. Those homes often are sold in short sales--in which lenders accept less than the outstanding loan amount for the property, RealtyTrac said. “The competing forces will be bank-owned properties and short sales,” said Rick Sharga, RealtyTrac’s senior vice president for marketing. “The more short sales, the lower the average discount is likely to be” …

Market News (07/01/2010)

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MADISON, Wis. (7/2/10)
* Initial claims for unemployment benefits rose by 13,000 to 472,000 for the week ended June 26, the Labor Department said Thursday. In recent weeks, the general trend has been moving higher, portending that the labor market is perhaps starting to weaken (Moody’s Economy.com July 1). The increase in applications indicates that turmoil in financial markets caused by the European debt crisis could result in additional U.S. cutbacks in staff (Bloomberg.com July 1). Also, the decline in temporary federal workers who helped conduct the Census Report this year could be a factor in the June job loss, Bloomberg said. “The labor market is not generating employment for anyone, even for people who have been out a long time,” said Steven Ricchiuto, chief economist at Nizuho Securities USA Inc. “What we’re seeing in the backup of claims is not a particularly healthy story, showing we can’t generate upside momentum in the labor market.” Meanwhile, continuing claims rose by 43,000 to more than 4.61 million for the week ended June 19, Moody's said … * U.S. job cutting has diminished dramatically, according to the June Challenger Report, issued by Challenger, Gray and Christmas Inc. Only 39,358 people will be affected by the June cuts, down from about 38,800 in May. The steep decline in layoffs suggests that the extent of job cutting during the recession likely was excessive and that companies are operating very lean, the report said. Therefore, the environment is conducive to robust hiring as the economy picks up steam, the report said. In a related matter, help-wanted ads placed online in June spiked again--indicating the U.S. job market may not be as weak as it seemed in May, according to the Monster Employment Index. The overall index rose seven points from May to June, reaching a level of 141. The uptick in employment is being experienced across half of all industries, indicating the employment recovery could be relatively broad (Moody’s Economy.com July 1) … * Following a surge driven by the homebuyer tax credit, pending home sales fell with the expiration of the deadline for qualified buyers to sign a purchase contract, according to the National Association of Realtors (NAR). The Pending Home Sales Index, a forward-looking indicator, dropped 30% to 77.6, based on contracts signed in May from a reading of 110.9 in April, and is 15.9% below May 2009 when it was 92.3. The falloff follows three strong monthly gains as home buyers rushed to take advantage of the tax credit. The data reflect contracts and not closings, which normally occur with a lag time of one or two months. NAR chief economist Lawrence Yun said: “Consumers are rational and they rushed to meet the tax credit eligibility deadline in April. The sharp decline in contract signings in May is a natural result with similar low levels of sales activity anticipated in June.” For the NAR report, use the link. Meanwhile, the Case-Shiller home price indexes dipped in the first quarter, reversing a three-quarter trend of price appreciation. The national index fell quarter over quarter by an annualized 5.1% (Moody’s Economy.com July 1) ... * U.S. construction spending in May dropped 0.2% below the revised April total and now is 8% below its May 2009 level, according to the Census Bureau (Moody’s Economy.com July 1). Although the decrease is less than anticipated, it does show that the homebuyer tax credit expiration and the sluggish commercial real estate markets are continuing to be a drag on spending, Moody’s said. In May, private residential construction dipped 0.4%, and nonresidential construction declined 0.6%. Because spending on public construction rose 0.4% from April, total spending did not fall as much as anticipated, Moody’s said …