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Market News (07/29/2011)

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MADISON, Wis. (8/1/11)
*The U.S. economy grew less than anticipated in the second quarter because consumers reduced their spending, while revised analysis of the economic slowdown since the beginning of the year indicates it was more severe than originally thought (The Wall Street Journal July 29). Gross domestic product rose at a 1.3% annualized rate, following a 0.4% increase in the first quarter, the Commerce Department said Friday. Economists in polls conducted by Bloomberg News and Dow Jones Newswires each forecast a 1.8% increase. Household purchases--which constitute roughly 70% of the U.S. economy--rose 0.1%. Because consumers have to pay more for gasoline, they are reducing purchases for other items, the Journal said. Consumers are still extremely cautious and vulnerable because the economy is mired in a slow-growth scenario, said Julia Coronado, chief economist for North America at BNP Paribas in New York (Bloomberg.com July 29) … * The University of Michigan Consumer Sentiment Index drastically fell in July because the impasse surrounding deficit-ceiling negotiations in the federal government appears to be dampening consumer sentiment (Moody’s Economy.com July 29). The index dropped 7.8 points, to 63.7, from 71.5 in June. Although sentiment was down across all categories, the biggest decline was with consumer expectations, Moody’s said. However, inflation expectations abated--which usually bolsters confidence, Moody’s said … * The Economic Cycle Research Institute’s (ECRI) Weekly Leading Index--which measures economic growth--rose to 127.6 for the week ended July 22 from a revised 127.4--previously 127.5 (Moody’s Economy.com July 29). The smoothed, annualized growth rate increased to 2% from a revised 1.6%--previously 1.7%. Although its performance in recent weeks has been mixed, the index is no longer steadily pointing downward, suggesting that some of the risks of a recurring recession could be lessening, ECRI said …

News of the Competition (07/29/2011)

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MADISON, Wis. (8/1/11)
* A bankruptcy trustee attempting to recoup billions of dollars for investors who lost money in Bernard Madoff’s huge Ponzi scheme did not have the right to sue banks and other third parties on behalf of the victims, according to a federal judge’s ruling Thursday (The New York Times July 28). The ruling by U.S. District Judge Jed S. Rakoff in Manhattan could trim billions of dollars off how much the trustee can recoup for Madoff’s victims, the Times said. At the time of Madoff’s arrest in December 2008, victims of the scheme said they had a total of $65 billion invested with Madoff … * Green Dot Corp.’s reloadable prepaid cards will be exempt from new rules implemented by the Federal Reserve Board limiting debit-card interchange, said Steve Streit, the company’s chairman, CEO and president (American Banker July 28). Green Dot determined it will meet requirements that would allow its cards to avoid the fee cap after the Monrovia, Calif., company conducted a review of the Fed’s new rules--which limits fees that merchants pay card issuers when customers make a purchase with a debit card, the Banker said …

News of the Competition (07/28/2011)

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MADISON, Wis. (7/29/11)
* The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, filed a lawsuit Wednesday against UBS AG, looking to recover at least $900 million in damages related to the sale of more than $4.5 billion in bad mortgage-backed securities (The Wall Street Journal July 28).The suit, filed in U.S. District Court in New York, is expected to be the first of several lawsuits filed by the agency as it looks to recoup billions of dollars arising from securities purchased from Wall Street firms firm and banks, the Journal said ... * North American financial institution spinoffs dropped 21%, to 145 deals, as of June 30, compared with a year earlier, while their values increased 28%, to $21.7 billion, according to Dealogic ( American Banker July 27). Meanwhile, regular mergers involving commercial and savings banks declined 21%, to 55, with total deal values rising 138%, to $14 billion. Spinoffs provide a middle ground between would-be buyers and potential takeover targets not ready to sell the entire franchise, the Banker said. The few banks looking for acquisitions now are reluctant to overpay for hidden problems, and prefer smaller-scale deals, the Banker said ...

Market News (07/28/2011)

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MADISON, Wis. (7/29/11)
* U.S. pending home sales increased in June following a wide swing down in April and then up in May, according to the National Association of Realtors (NAR). Activity increased in the West and South but declined in the Midwest and Northeast; all regions show strong double-digit gains from a year ago. The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 2.4% to 90.9 in June from 88.8 in May and is 19.8% above the 75.9 reading in June 2010, which was the low point immediately following expiration of the home buyer tax credit. The data reflects contracts but not closings. Lawrence Yun, NAR chief economist, said there may be some increase in closed existing-home sales. “For the majority of transactions, the lag time between pending contacts to actual closings is one to two months,” he said. “Therefore, the two consecutive months of rising activity should lead to overall improvement in closed sales in upcoming months. Though a higher than normal cancellation rate can hold back final closing figures, it could well be that some past cancellations are nothing more than delayed buying decisions rather than outright cancellations.” For the NAR report, use the link … * Initial applications for U.S. unemployment benefits last week dropped to the lowest level in nearly four months--below the important 400,000 mark--indicating the weakness in the labor market is dissipating (The New York Times and Bloomberg.com July 28). Claims decreased 24,000--to a seasonally adjusted 398,000--the Labor Department said Thursday. The decline below the 400,000 level usually is associated with stable job growth and will be a good change for the economy, which has seen poor employment growth in May and June--with only a 43,000 rise in nonfarm payrolls, the Times said. Before employers are more willing to add workers, a necessary step will be a reduction in job cuts, Bloomberg said ... * U.S. consumer confidence fell last week because consumers’ outlook on the economy nosedived to the lowest level since the recession, according to the Bloomberg Consumer Comfort Index (Bloomberg.com July 28). The index dropped to -46.8 for the week ended July 24--the lowest level since May--from -43.3 the prior week. Of those surveyed, 6% said the economy was in good shape--the lowest percentage since April 2009. The most negative readings came from seniors and the unemployed. Declining home prices, high unemployment and a bounce-back in gasoline prices may dampen overall sentiment and hurt consumer spending, Bloomberg said …

News of the Competition (07/27/2011)

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MADISON, Wis. (7/28/11)
* The Financial Industry Regulatory Authority (FINRA) said Tuesday that because of violations related to the sale of auctions-rate securities, it fined Sun Trust Banks Inc. in Atlanta $5 million (Dow Jones via American Banker July 26). Most of the fine was assessed against a SunTrust unit for alleged auction rate security (ARS) violations. The unit underwrote ARS and allegedly neglected to adequately disclose the increased risk that auctions could fail, Dow said. FINRA also alleged that SunTrust distributed advertising and marketing materials that “were not fair and balanced” … * A bankruptcy trustee is suing Toronto Dominion (TD) Bank in the bankruptcy case of Rothstein Rosendfeldt Alder PA (Dow Jones via American Banker July 26). Chapter 11 trustee Herbert Stetting, which is liquidating Ponzi-scheme operator Scott Rothstein’s law firm, filed the suit Monday against TD Bank for allegedly ignoring several red flags arising from Rothstein’s banking practice and for also allowing the incarcerated lawyer’s more than $1.2 billion fraud to grow for as long and as big as it did, Dow said ...

Market News (07/27/2011)

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MADSION, Wis. (7/28/11)
* Mortgage application volume decreased 5% for the week ended July 22 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the Index declined 4.9%. The Refinance Index dropped 5.5%. The seasonally adjusted Purchase Index fell 3.8%. The unadjusted Purchase Index went down 3.4% and was 2.2% higher than the same week one year ago. The four-week moving average for the seasonally adjusted Market Index is down 0.3%. The four-week moving average declined 0.5% for the seasonally adjusted Purchase Index, while this average fell 0.3% for the Refinance Index. The refinance share of mortgage activity decreased to 69.6% of total applications from 70.1% the previous week. The adjustable-rate mortgage share of activity increased to 6.1% from 5.8% of total applications from the previous week. For the MBA report, use the link … * Orders for U.S. durable goods--goods meant to last at least three years--unexpectedly declined in June--the second decline in three months--indicating the listless economy is hampering the nation’s manufacturing sector and could hamper the world’s biggest economy in the second half of 2011 (Bloomberg.com and The Wall Street Journal July 27). Durable goods orders dropped 2.1% after a 1.9% rise in May, the Commerce Department said Wednesday. Economists had forecast a 0.4% rise in June, according to a Dow Jones Newswires survey. Manufacturers are confronting a slowdown in consumer spending, and companies are reducing hiring, which may further hold back household demand, Bloomberg said …

News of the Competition (07/26/2011)

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MADISON, Wis. (7/27/11)
*The attorney general (AG) of Massachusetts has begun an investigation into the Mortgage Electronic System, or MERS, which acts as the middleman in millions of foreclosure filings (Dow Jones via American Banker July 25). AG Martha Coakley said in a Monday letter she intends to send civil investigative demands to the Massachusetts registers of deeds as part of her office’s investigation of MERS. MERS is an electronic-lien registry created a by the mortgage industry to process documentation on loans bundled into pools and sold as securities. Some county officials in the state have alleged that MERS has filed fraudulent documents in Massachusetts and neglected to pay for and file proper mortgage assignments, mandated by state laws, Dow Jones said … * Ford Motor Co. said Tuesday its second-quarter profit dropped nearly 8% because the automaker had to pay higher prices for commodities such as plastics and steel, and it increased spending on its new-model development (The Wall Street Journal July 26). Net income decreased to $2.4 billion from $2.6 billion a year earlier, the Dearborn, Mich.-based automaker said in a Tuesday statement. Excluding some items, Ford’s profit was 65 cents per share--beating the 61 cents per share average estimate of 14 analysts surveyed by Bloomberg (Bloomberg.com July 26). Ford is attempting to reconcile spending more money to upgrade vehicles while keeping the rising prices of commodities from becoming a drain, the Journal said ...

Market News (07/26/2011)

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MADISON, Wis. (7/27/11)
* For a second consecutive month, sales of new U.S. homes deceased in June, a sign the housing market remains weak and still is struggling two years into the economic recovery (Bloomberg.com and The New York Times July 26). Purchases fell 1% to a 312,000 annualized pace--a three-month low--the Commerce Department said Tuesday. That pace is less than half the 700,000 new-home sales that is typical of a healthy market, economists say, according to the Times. In the Northwest and West regions, sales fell to record lows. With records dating back a half century, 2010 was the worst year for new home sales. However, through the first half of 2011, sales are trailing last year’s totals, the Times said … * U.S. home prices in 20 cities decreased in the year ended May by the most in 18 months, adding to indications the housing market is struggling, according to the S&P/Case-Shiller Home Price Index (Bloomberg.com July 26). The index dropped 4.5% from May 2010, with the decline matching the median forecast of 32 economists in a Bloomberg News survey. Uneven consumer demand and a glut of foreclosures will keep prices depressed this year, discouraging construction of new homes and delaying a housing rebound, Bloomberg said. Also, consumer spending--which constitutes 70% of the U.S. economy--is being dampened by diminishing home equity and a 9.2% national unemployment rate … * Rising from an eight-month low, U.S. consumer confidence unexpectedly climbed in July spearheaded by a bounce-back in the outlook for jobs in the next six months, despite turmoil in the labor and housing markets (Bloomberg.com and The Wall Street Journal July 26). The Conference Board, a New York-based private research firm, said its July index climbed to 59.5 from 57.6 in June. Economists had forecast a 55.4 reading in July, according to a Dow Jones Newswires survey. Moderating fuel prices may make consumers more comfortable spending in the second half of the year, Bloomberg said. Consumers have been bombarded by a plethora of bad news, including persistently high unemployment, weak growth, troubled housing markets, rising food and energy prices, and uncertainty over U.S. government borrowing the Journal said …

News of the Competition (07/25/2011)

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MADISON, Wis. (7/26/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday the closing of three banks, bringing total bank failures so far this year to 58, compared with 157 for the entire year in 2010. The failed banks are: Southshore Community Bank, Apollo Beach, Fla., and Landmark Bank of Florida, Sarasota, Fla., assumed by American Momentum Bank, Tampa, Fla.; and Bank of Choice, Greely, Colo., assumed by Bank Midwest, N.A., Kansas City. The three closed banks held roughly $1.39 billion in assets as of March 31. The FDIC estimated the newest failures will cost the Deposit Insurance Fund about $256 million ... * TD Ameritrade Holding Corp. will soon consider acquiring rival online brokerage firm E*Trade Financial Corp., according to sources familiar with the matter (Dow Jones via American Banker July 25).TD Ameritrade’s directors plan to discuss the potential acquisition at a meeting today, the sources said. The talks won’t necessarily result in TD Ameritrade making an offer for E*Trade. However, Ameritrade is a likely buyer because of the appeal of E-trade’s brokerage clients and the potential overlap of E*Trades’ banking assets with Toronto-Dominion Bank--a Canadian bank that owns a minority stake in Ameritrade, some analysts told Dow Jones

Market News (07/25/2011)

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MADISON, Wis. (7/26/11)
* Because exports from developed economies increased, world trade volume rebounded in May from the previous month (The Wall Street Journal July 25). Trade volumes climbed 2.3% in May after falling 2.2% in April, according to figures released Monday by the Netherlands Bureau for Economic Policy analysis, known as the CPB. The rebound indicates that worldwide economic activity may not be slowing as quickly as previously thought, the Journal said. The CPB’s numbers indicate that while developed countries’ exports bounced back from April’s decline, a fall in developing economies’ exports continued for a second consecutive month. Policymakers--including several central banks--closely monitor the CPB’s figures because they provide the earliest available gauge of global trade, the Journal said … * Moody’s Investors Service Monday downgraded the Greek government’s debt ratings three levels because Moody’s concluded that the euro-zone bailout plan announced last week will neccesitate private sector holders of Greek debt to take credit losses (The New York Times and The Wall Street Journal July 25). Although European leaders agreed to another $156.5 billion in official financing for Greece, Moody’s said the program portends the likelihood of a distressed debt exchange, and a default on Greek government bonds was essentially a 100% certainty …

News of the Competition (07/22/2011)

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MADISON, Wis. (7/25/11)
* To be allowed to access government benefits in 2010, U.S. consumers paid nearly $10 per prepaid card, according to a new Federal Reserve Board report (American Banker July 22). On average, cardholders paid total fees of $9.69 per card for services that included ATM withdrawals, balance inquiries--and in some instances--purchase transactions--according to a survey of banks, state treasurers and federal officials, concerning the use of prepaid cards for state local and federal benefits programs. The National Consumer Law Center, in a May report, urged the Consumer Financial Protection Bureau and the Labor Department to review each state’s prepaid card program for unemployment benefits, ban penalties and fees for obtaining information and post their fee schedules online … * Google Inc. is launching a limited-use co-branded MasterCard for small-business owners to help them purchase the online search giant’s search-based advertising (American Banker July 22). The no-annual-fee card carries a fixed annual percentage interest rate of 8.99%. World Financial Capital Bank is issuing the card, which has no rewards associated with it. Google wants to locate new audiences for its well-known, search-based advertising services, analysts told the Banker. However, the card may not be the best way to do that because it creates too many steps for Google and for prospective small-business advertisers, Brian Riley, a senior research director with TowerGroup, told the Banker … * The U.S. government Thursday sold off its last stake in auto manufacturer Chrysler to Italian carmaker Fiat, giving it majority control of Chrysler (The New York Times July 21). However, the federal government’s action leaves U.S. taxpayers $1.3 billion short of recovering their entire investment made two years ago to bail out the U.S. automaker and keep it from going out of business, the Times said. The government said in June it anticipated taking that level of loss, adding the bailout was necessary to save Chrysler and mitigate damage to the fragile U.S. economy ... * Alternative lending companies such as ZestCash Inc. and its rival BillFloat rely on nontraditional streams of consumer data--such as rental information, or information from car payments, cell phone bills or mortgages--to underwrite loans for risky borrowers who comprise their client list (American Banker July 22). Because of the long, stubborn recession, there are sufficient numbers of consumers who have become underbanked and are creating a legitimate market for alternative lending companies. Technology will push these lenders forward, just as it did decades before when Fair Isaac Corp. created its FICO score to rank prime and super-prime borrowers, the Banker said ...

Market News (07/22/2011)

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MADISON, Wis. (7/25/11)
* In a sign the labor market is floundering throughout much of the largest global economy, U.S. payrolls declined in 24 U.S. states and climbed in 26 (Bloomberg.com July 22). Tennessee led the country in payroll decreases with 16,900, and Missouri was second with a 15,700 drop, the Labor Department said Friday. The biggest payroll gains were experienced by Texas (32,000) and California (28,880), while Michigan and Minnesota also were among the largest job gainers. The unemployment rate increased in 28 states. The U.S. job market still is quite a ways from being healthy or normal, and has not yet seen broad-based gains nationwide, Jennifer Lee, a senior economist at BMO Capital Markets in Toronto, told Bloomberg. In a related matter, U.S. mass layoffs--involving at least 50 workers from a single establishment--declined to 1,532 in June from 1,599 in May (Moody’s Economy.com July 22). June’s layoffs involved 143,444 employees … * The Economic Cycle Research Institute (ECRI) weekly leading index--which measures economic growth--fell to 127.5 for the week ended July 15 from an unrevised 128.4 the prior week, ECRI said (Moody’s Economy.com July 22). The smoothed, annualized growth rate remained at 1.7%. The most recent week’s decline ends two consecutive weekly gains, and indicates that the economic recovery will have to endure some setbacks, ECRI said. Confidence in the recovery is an obstacle, and businesses and consumers still are afraid of what the economic outlook may hold, Moody’s said …

News of the Competition (07/21/2011)

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MADISON, Wis. (7/22/11)
* The U.S. Department of the Treasury announced Wednesday that 17 community banks nationwide received $214 million as part of the next wave of funding provided through the Small Business Lending Fund (SBLF). The SBLF, established as part of the Small Business Jobs Act that President Obama signed into law, encourages community banks to increase their lending to small businesses, helping those companies expand their operations and create new jobs. Including today’s announcement, 23 community banks have received a combined $337 million in SBLF funding. Additional SBLF funding announcements will be made in the weeks ahead. The government funding for banks contrasts with credit unions’ situation. Credit unions are seeking the means to help more small businesses through increased member business lending (MBL) authority at no cost to taxpayers. The Credit Union National Association (CUNA) and credit unions are asking Congress to increase credit unions’ MBL cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said ... * The Federal Reserve announced Wednesday that Wells Fargo & Co. will pay the Fed an additional $85 million civil as a penalty for misleading borrowers into taking out costly subprime loans, and then approving loans that borrowers were not eligible to receive (American Banker July 21). The penalty is the largest ever issued by the Fed against a bank holding company for violating consumer protection laws, the Banker said … * American Express Co.’s second-quarter earnings are up 31%--with net income rising to $1.3 billion, or $1.10 per share, from $1.02 billion, or 84 cents per share--from a year ago (American Banker July 21). Total revenue increased 12% to $7.62 billion. Second-quarter cardholder spending hit an all-time high of $207.6 billion--an increase of 18% over the same quarter a year ago. In recent months, Amex tried to move beyond its traditional customer base by attracting a younger, more technology-savvy consumer through growing its online capabilities with applications on Facebook and Foursquare, the Banker said ... * Morgan Stanley Thursday reported a second-quarter loss of $558 million--or 38 cents per share --because of the aftereffects of the financial crisis, despite showing improvement in its major divisions (The New York Times DealBook July 21). The loss is a result of a deal made earlier in 2011 with the Mitsubishi UFJ Financial Group, which provided Morgan Stanley a cash infusion during the nadir of the crisis, the Times said. The deal lifted a costly continuing burden off Morgan Stanley, but caused the firm to absorb a $1.7 billion one-time charge in the second quarter, the Times said …

Market News (07/21/2011)

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MADISON, Wis. (7/22/11)
* U.S. consumer confidence idled last week while consumers’ positive feelings about their personal finances battled with increasing negativity about the economy (Bloomberg.com July 21). The Bloomberg Consumer Comfort Index was -43.3 for the week ended July 17--the highest since April--compared with -43.9 the prior week. The index’s monthly measure of the U.S. economic outlook rose from a two-year low. The outlook on growth was bogged down by a 9.2% unemployment rate in June, a foreclosure-plagued housing market, and the smallest payroll gain in nine months, Bloomberg said. Also, after falling in May and June, gasoline prices are again rising and could further constrain consumer spending--the largest component of the U.S. economy, Bloomberg said. In a related matter, U.S. consumers are relying more and more on credit cards to pay for their basic necessities--such as gas and food--because income gains are not keeping pace with the increasing costs of food and fuel (Bloomberg.com July 21). The dollar amount of credit card purchases rose 10.7% in June from year ago, and the number of transactions increased 6.8%, according to First Data Corp.’s SpendTrend report released this month … * Initial U.S. claims for unemployment benefits unexpectedly climbed last week after two weekly declines--a setback for the labor market, which has struggled to pick up steam after faltering in the past two months and which hasn’t created many jobs (The Wall Street Journal and The New York Times July 21). Claims increased 10,000--to a seasonally adjusted 418,000--the Labor Department said Thursday. Economists had forecast a rise to 410,000, according to economists surveyed by Reuters. Roughly 1,750 claims were due to a state government shutdown in Minnesota. The job market still is weak, the Journal said. The economy is adding more jobs than it is shedding when the weekly claims number goes below 400,000, according to economists. Initial claims have been above that mark for 15 consecutive weeks. Meanwhile, continuing claims for unemployment benefits decreased to about 3.70 million for the week ended July 9 from roughly 3.75 million the prior week (Moody’s Economy.com July 21) ... * The Conference Board’s index of U.S. leading economic indicators increased at slower pace in June, compared with May, indicating the economic recovery will be subdued in the second half of 2011 (Bloomberg.com July 21). The New York-based private research firm’s gauge of the economic outlook in the next three to six months rose 0.3%, following a 0.8% gain in May. Economists had forecast a 0.2% increase in June, according to a survey by Bloomberg News. Better weather, cheaper fuel costs and an unclogging of supply bottlenecks from the Japan earthquake and tsunami could come together to boost the economic recovery. However, a reluctance of employers to escalate hiring and limited income growth could dampen consumer purchases--the largest part of the U.S. economy, Bloomberg said ...

News of the Competition (07/20/2011)

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MADISON, Wis. (7/21/11)
* More than 450,000 people--1% of all mortgage borrowers in the U.S.--will receive distributions from a $108 million settlement by the Countrywide Home Loans, which overcharged them when they fell behind on payments, and the Federal Trade Commission (FTC), said FTC Chairman Jon Leibowitz in an interview with The New York Times Wednesday. The settlement, reached in June 2010, is the largest settlement in the FTC's history and double what it had estimated. Nearly 350,000 of the borrowers were overcharged routinely for default-related services by subsidiaries Countrywide set up to maximize profits during bad economic times, said FTC. Another 102,331 received incorrect information about how much they owed on their mortgages or saw fees and escrow charges added without notice. Because they filed Chapter 13 bankruptcies to try to keep their homes, the incorrect amounts were filed with the courts. Of these borrowers, roughly 43,000 were levied improper fees after their bankruptcies had been concluded and they were no longer under court supervision. Borrowers overcharged were serviced by Countrywide between Jan. 1, 2005, and July 1, 2008. The company's subprime loans caused a near-collapse of the firm before it was acquired by Bank of America in 2008. Most of the borrowers will receive $500 or less; however, 5% will receive $5,000 or more. The company admitted no wrongdoing in the settlement but was barred from further such conduct and must use a program to verify that its data in servicing loans is accurate …

Market News (07/20/2011)

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MADISON, Wis. (7/21/11)
* Mortgage applications in the U.S. dropped 5.1% for the week ending July 8 from the previous week, according to the Mortgage Bankers Association Bloomberg News (July 20). Purchases of homes decreased 2.6%, and refinances dropped 6.2%. For the week ending July 15, the overall index rose 15.5%, powered by an increase in refinances (Moody’s Economy July 20). The refinance measure rose 23.1% from the previous week as homeowners sought to take advantage of low mortgage rates. It was the fourth consecutive week that mortgage applications dropped, said Bloomberg ... * Existing-home sales unexpectedly declined in June to a seven-month low as the mortgage industry battled rising unemployment and foreclosures. Purchases of homes fell 0.8% to a 4.77 million pace, according to the National Association of Realtors (NAR) (Bloomberg News (July 20). The median projected in a Bloomberg News survey predicted a gain of 4.9 million. The drop is the third consecutive monthly decline and brings sales to their slowest pace since last fall, according to Moody’s Economy (July 20). Sales gains in the Midwest and South were offset by declines in the Northeast and West. Single-family home sales were stable, while condo sales fell, said NAR … * The probability that the U.S. will be in recession in six months rose to 26% in June from 23% in May. The rise marks the third increase in the past four months and puts the probability of a recession at its highest since November (Moody’s Economy July 20). While the rise is concerning, the risk of recession approached 60% before previous downturns. Reasons cited for the higher probability in June were a tightening of financial markets, a deteriorating labor market and a drop in consumer confidence. While the economy appears to off to a sluggish start this quarter, the recovery is expected to remain on track, said Moody’s …

News of the Competition (07/19/2011)

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MADISON, Wis. (7/20/11)
* Bank of America (BofA) recorded the largest quarterly loss in its history because more of its costs tied to defective mortgages and revenue--which were posted by CEO Brian Moynihan--continued to fall (Bloomberg.com July 19). The second-quarter loss was $8.83 billion--or 90 cents per share--compared with a profit of $3.12 billion--or 27 cents per share--a year earlier, BofA said Tuesday. Moynihan is attempting to push BofA past the consequences of lax home lending procedures by arranging settlements with mortgage bond insurers and investors and earmarking funds for future claims, Bloomberg said ... * With its net revenue falling 18%, Goldman Sachs Group Inc. reported a second-quarter profit well below expectations--$1.05 billion--because difficult markets caused the bank to pare back its risk-taking to the lowest levels in five years (The Wall Street Journal July 19). Earnings per share of $1.85 were 42 cents below analysts’ consensus expectations. It was just Goldman’s fifth profit miss in 12 years as a publicly traded company. Goldman was expected to specify cost-cutting measures on a conference call Tuesday … * Wells Fargo--the largest U.S. consumer bank--posted record second-quarter earnings of $3.9 billion--or 70 cents per share--just beating analysts’ consensus estimate of 69 cents per share (The New York Times Deal Book July 19). That compares with a profit of $3.1 billion--or 55 cents per share--in the same period a year earlier. A reversal of roughly $1 billion that the bank previously had set aside to cover loan losses helped Wells Fargo’s earnings, the Times said. That move offset a 5% decline in revenue--which slid to $20.4 billion--because new regulations tempered overdraft charges, and Wells Fargo’s substantial home-lending business decreased. Also, the bank’s new-mortgage originations fell nearly 25% to $64 billion from $84 billion in the first quarter …

Market News (07/19/2011)

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MADISON, Wis. (7/20/11)
* U.S. housing starts rose more than expected in June because improved weather allowed homebuilders to begin delayed projects (Bloomberg.com July 19). Starts climbed 15% from May to a 629,000 annual pace--the highest level in five months, the Commerce Department said Tuesday. June housing starts were forecast to increase to a 575,000 annualized rate, according to a Bloomberg News survey of 71 economists. Also, building permits, which indicate future construction, increased 2.5% in June. Although the increase in starts portends stabilization in construction, delays in the processing of foreclosures and falling home values indicate it could take years to clear the housing market of distressed properties, Bloomberg said. Some catching up in activity that didn’t occur in April and May was responsible for the June jump, Paul Dales, a senior economist at Capital Economics Ltd. in Toronto, told Bloomberg. Although housing starts should inch up gradually, the overall housing scenario is still at a very depressed level, he added ... * Business sentiment worldwide has geared down this summer, according to the most recent Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com July 18). Confidence now is consonant with a global economy that is growing at the low end of its potential, Moody’s said. In recent weeks, hiring intentions have experienced the most substantial pullback--and, related to that, demand for office space also has significantly weakened. Sentiment fell the most in the U.S., Japan and recently South America. Most of the decline in sentiment is because conditions are not getting better, rather than because they are eroding, Moody’s said ...

News of the Competition (07/18/2011)

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MADISON, Wis. (7/19/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday the closing of four banks, bringing total bank failures so far this year to 55, compared with 157 for the entire year in 2010. The failed banks are: High Trust Bank, Stockbridge, Ga., and One Georgia Bank, Atlanta, both assumed by Ameris Bank, Moultrie, Ga.; First Peoples Bank, Port Saint Lucie, Fla., assumed by Premier American Bank, N.A., Miami; and Summit Bank, Prescott, Ariz., assumed by The Foothills Bank, Yuma, Ariz. The four closed banks held roughly $679 million in assets as of March 31. The FDIC estimated the newest failures will cost the Deposit Insurance Fund about $129 million ... * Some state regulators are actively attempting to get banks to switch to state charters from federal charters (American Banker July 18). Tom Considine, head of the New Jersey Department of Banking and Insurance, has lobbied federally chartered thrifts to switch, claiming his agency is less expensive than federal regulators, closer in proximity and, in contrast to the Office of Thrift Supervision, won’t dissolve, he told the Banker. In Pennsylvania, Glenn Moyer, the state’s secretary of banking, is making the same pitch and has seen the state recruit four national banks. In general, most states have the advantage of less costly assessments than federal charters, said the article. The average state charter is more than 30% less than a federal charter, Considine told the Banker. Other state regulators are talking more with thrifts, portraying themselves as a lower-cost, local option, consultants told the publication …

Market News (07/18/2011)

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MADISON, Wis. (7/19/11)
* Insufficient demand--rather than uncertainty about government policies--is the main driver behind the reluctance of U.S. companies to increase hiring, according to a consensus of economists in a Wall Street Journal survey (The Wall Street Journal July 18). In the survey, 53 economists were asked why they thought employers were not hiring more. Of the 51 who responded, 31 (65%) pointed to lack of demand for goods and services, while 14 (27%) said it was because of uncertainty about government policy. Although his company is hiring a little bit, the volume of demand is not where it had been or should be, said Daniel Cunningham, CEO of Long Stanton Manufacturing in Hamilton, Ohio, which makes metal parts for Aerospace, medical and other industries. He told the Journal his hesitancy is due in part to the extreme volatility in demand he sees from month to month, with businesses up one month and then down another … * U.S. homebuilder confidence increased in July from a nine-month low because executives became less negative about the sales outlook, according to the National Association of Homebuilders (NAHB)/Wells Fargo Housing Market Index (Bloomberg.com July 18). The index rose two points to 15 this month from 13 in June. However, the index still remains at a low level, and a stronger economy is needed to create a good future for housing, Michelle Meyer, a senior economist at Bank of America Merrill Lynch, told Bloomberg. Readings below 50 indicate more respondents said conditions were poor. Builders are dealing with a surfeit of discounted, distressed properties on the market and a reluctance to begin new construction projects Bloomberg said. Regionally, the South and West showed substantial improvements, which more than mitigated a slight decline in the West (Moody’s Economy.com July 18) …

News of the Competition (07/15/2011)

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MADISON, Wis. (7/18/11)
* Citigroup Inc.’s second-quarter profit leapt 24% because of lower consumer loan losses and solid investment banking results; however, the bank struggled to boost profits in many of its businesses worldwide (The New York Times DealBook and The Wall Street Journal July 15). Citi announced a profit of $3.3 billion--or $1.09 per share--beating analysts’ estimates of 96 cents per share. The second-quarter results compare with a $2.7 billion profit one year ago ... * Credit Suisse Group--a Zurich, Switzerland-based bank--Friday said the U.S. Justice Department is targeting the bank in an investigation into hidden Swiss offshore accounts for wealthy U.S. citizens (The Wall Street Journal July 15). Credit Suisse is the most recent bank to be included in a U.S. government crackdown on foreign banks suspected of aiding tax evasion and tax fraud, the Journal said. U.S. justice officials Thursday informed Credit Suisse that it is now part of the investigation, the bank said in a statement. The bank had been receiving and cooperating with subpoenas sent by the U.S. government, the Journal said. Without mentioning specifics, Credit Suisse said it will continue working toward a resolution of the matter …

Market News (07/15/2011)

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MADISON, Wis. (7/18/11)
* A sharp decline in gasoline costs caused overall U.S. consumer prices to drop in June, although Americans paid higher prices for autos and clothes (The New York Times July 15). The Consumer Price Index (CPI) decreased 0.2% last month, the Labor Department said Friday. The so-called core prices, which exclude volatile food and energy costs, rose 0.3 %--the second consecutive monthly gain and the biggest back-to-back increase since the summer of 2008. Several of the trends pushing the rise in the core index are anticipated to dissipate later this year, the Times said. The surprisingly strong core CPI indicates the impact of the Japanese supply-chain disruptions is not fading as quickly as expected (Moody’s Economy.com July 15). However, relief will come soon because listless economic growth in the first half of the year will catch up with consumer prices, Moody’s said … * U.S. industrial production increased less than predicted in June because production of autos and business equipment declined (Bloomberg.com July 15). Industrial production increased 0.2% in June after dipping 0.1% in May, according to the Industrial Production and Capacity Utilization report released Friday by the Federal Reserve. For the second quarter, total industrial production increased at an annual rate of 0.8%. Manufacturing output was unchanged in June. In the second quarter, supply-chain disruptions following the earthquake in Japan curtailed the production of motor vehicles and parts and restrained output in related industries; the production index for overall manufacturing was little changed for the quarter. The output of mines rose 0.5% in June, while the output of utilities climbed 0.9%. At 93.1% of its 2007 average, total industrial production in June was 3.4% above its year-earlier level. The capacity use rate for total industry remained unchanged at 76.7% in June, 2.2 percentage points above the rate from a year earlier but 3.7 percentage points below its average from 1972 to 2010. For the Fed report, use the link … * Confidence of U.S. consumers in the economy unexpectedly nosedived in July to the lowest level in more than two years, likely due to worries about the government’s ability to meet its financial obligations without a deal in place to reduce the deficit and raise the debt ceiling (Moody’s Economy.com and Bloomberg.com July 15). The lowered confidence--as measured by the Thomson Reuters/University of Michigan consumer sentiment index--is adding to worries that falling home prices and weak employment gains could keep households from spending, Bloomberg said. The index fell to 63.8--the weakest reading since March 2009--from 71.5 in June…

Jobs headed in the right direction CUNA tells ICNBCI

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MADISON, Wis. (7/15/11)--Weekly jobless claims dropped 22,000 last week to the lowest level in almost three months, and that's in the right direction, a Credit Union National Association (CUNA) senior economist told CNBC Thursday in its analysis of the economy. Jobless claims were a seasonally adjusted 405,000. Economists had expected the jobless claims to fall to 415,000, said the article, "Stocks Decline as Fed's Stimulus Hope Fades." "We're getting close to the 400,000 mark--if we can get down to the 35,000 to 37,000 area again, that sets the idea that we have a better job environment," Steve Rick, CUNA senior economist, said in CNBC's article. "We're heading in that direction, but [are] not there yet." The article focused on the stock market's reaction to statements by Federal Reserve Board Chairman Ben Bernanke that the Fed won't take further action on the economy or engage in another round of bond buying.

News of the Competition (07/14/2011)

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MADISON, Wis. (7/15/11)
* JPMorgan Chase & Co.’s second-quarter profit jumped 13% to $5.4 billion from the same period a year ago, buoyed by surging revenue and profit from its investment banking operations, which mitigated lingering mortgage-related charges and troubles, tame trading results and weakness in its retail banking (The Wall Street Journal and The New York Times DealBook July 14). JPMorgan, the first large U.S. bank to report quarterly results, posted a 7% overall increase in revenue growth--which was significantly above expectations and likely to bolster expectations for reports from other lenders due in the next week, the Journal said. JPMorgan’s quarterly report is a solid start to the banking industry’s earnings season, in light of the stagnant U.S. economy, financial problems in Europe and uncertainty about global financial regulations, the Times said …

Market News (07/14/2011)

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MADISON, Wis. (7/15/11)
* U.S. consumer confidence increased last week because households turned more positive about their finances, and wealthier Americans also became more upbeat, according to the Bloomberg Consumer Comfort Index (Bloomberg.com July 14). The index rose to minus 43.9 for the week ended July 10 from minus 45.5 the previous week. However, the index’s component for the state of the economy lost ground and hit a 15-week low (Moody’s economy.com July 14). The poor outlook on the economy likely is due to June’s lackluster employment gains, which were the weakest in nine months, Bloomberg said. That could hamper consumer spending, which constitutes 70% of the U.S. economy. The poor hiring environment has been a constant problem for the two-year-old economic recovery and has curtailed household consumption and overall economic activity, said Joseph Brusuelas, a senior economist at Bloomberg LP in New York … * Initial claims for U.S. unemployment benefits decreased 22,000--to 405,000--for the week ended July 9 from the prior week’s revised 418,000, according to the Employment and Training Administration (Moody’s Economy.com July 14). Although this was a larger decrease than anticipated and usually would be a positive signal, the decrease should be viewed with caution. Claims often are hard to interpret this time of year because of seasonal factory shutdowns and the July 4 holiday. Therefore, claims may not be completely indicative of underlying conditions, Moody’s said …

News of the Competition (07/13/2011)

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MADISON, Wis. (7/14/11)
* Two large U.S. banks--Bank of America (BofA) and JPMorgan Chase--were ranked among the 19 most-hated companies in America, according to the results of a recently published survey on the website of the Atlantic (American Banker July 13). JPMorgan Chase ranked 15 and BofA 19 on the list. At the two banks, customers complained about indifferent customer service and excessive fees for overdrafts. Among the 19 U.S. companies viewed with the most contempt, four are airlines, four are cable companies and four are utilities. Seven of the top-eight most-hated companies are airlines or cable firms. The most disliked company is Potomac Electric Power Co, serving the Washington, D.C., area. For the Atlantic survey, use the link … * Calling the terms of the settlement one-sided, government-sponsored enterprise (GSE) Freddie Mac is seeking to change a recently proposed $1.6 billion settlement involving the bankruptcy estate of Taylor Bean & Whitaker Mortgage Corp. and Bank of America Corp. (Dow Jones via American Banker July 13). The dispute arises from assets that were involved in massive fraud at the disgraced mortgage lender Taylor Bean & Whitaker. Freddie is owed more than $1 billion from the liquidating mortgage lender. The GSE said the “suspect settlement” involving Taylor Bean, its Ocala Funding mortgage conduit and BofA, gives Ocala a $1.6 billion unsecured claim against its estate, Dow Jones said. Freddie said it is concerned that Taylor Bean and Ocala are run by the same firm--restructuring company Navigant Capital Advisors--creating a conflict of interest, according to papers Freddie filed Monday in U.S. bankruptcy court in Jacksonville, Fla. … * Despite potential regulatory risks, an increasing number of acquirers are looking to purchase select assets and deposits rather than entire banks (American Banker July 13). The structure of several recent privately negotiated purchase-and-assumption deals indicates that acquirers are selectively buying most of the sellers’ performing assets and all deposits, the Banker said. These deals could raise red flags with regulators because sellers often are left with nothing except soured assets, industry observers told the Banker. Instead of completely rejecting the deals, regulators likely will scrupulously examine the proposed transactions and put contingencies in place, C.K Lee, a managing partner at Commerce Street Capital LLC and a former regional thrift director, told the Banker

Market News (07/13/2011)

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MADISON, Wis. (7/14/11)
* Mortgage loan application volume decreased 5.1% for the week ended July 8 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index declined 24%. The seasonally adjusted Purchase Index dropped 2.6%. The unadjusted Purchase Index fell 21.9% and was 0.2% lower than the same week one year ago. The Refinance Index slid 6.2 % and was 42.1% lower than a year ago. The Refinance Index has decreased four consecutive weeks, reaching its lowest level since April 29. The Refinance Index is not seasonally adjusted but is adjusted for the holiday. The four-week moving average for the seasonally adjusted Market Index is down 4.7%. The four-week moving average fell 1% for the seasonally adjusted Purchase Index, while this average declined 6.3% for the Refinance Index. For the MBA report, use the link … * For the first time in a year, U.S import prices fell in June while energy and food prices retreated from their peak. The new report provided the Federal Reserve some assurance that it can maintain low interest rates to aid the economic recovery (The Wall Street Journal and Bloomberg.com July 13). The prices of imported goods decreased 0.5% in June from the prior month, the Labor Department said Wednesday. Import prices, year over year are up 13.6%--the largest annual increase since August 2008. June’s import price decline is indicative of what analysts are expecting in the second half of 2011 from weaker energy and food prices, David Semmens, a U.S. economist at Standard Chartered Bank in New York, told Bloomberg. Because import prices portend that more relief from inflation pressures is coming, the Fed will have more flexibility to maintain its policy of monetary stimulus (Moody’s Economy.com July 13) …

FOMC minutes Fed addressed how to exit easing strategy

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WASHINGTON (7/13/11)--The Federal Open Market Committee (FOMC)--the Fed's policymaking group--outlined the Fed's exit strategy principles for normalizing its monetary policy during its June 21-22 meeting, according to the meeting's minutes released Tuesday afternoon. The committee did not provide a timeline and stressed that the discussion was part of "prudent planning and did not imply that a move toward such normalization would necessarily begin sometime soon." FOMC members discussed how they should characterize the monetary policy framework they would adopt after the conduct of policy returned to normal, and whether the principles should encompass the possible timing between normalization steps. All but one participant agreed on the key elements they would expect to follow "when it becomes appropriate to begin normalizing the stance and conduct of monetary policy." The principles:
* Determine the timing and pace of policy normalization to promote the Fed's statutory mandate of maximum employment and price stability. * Cease reinvesting some or all payments of principal on the securities holding in the System Open Market Account ( SOMA). * Modify, either at the same time or afterward, the committee's forward guidance on the path of the federal funds rate and initiate temporary reserve draining operations to support implementing increases in the funds rate when appropriate. * Begin--when conditions warrant--raising the target for the federal funds rate. From then on, changing the level or range of the target would be the "primary means of adjusting the stance of monetary policy." During the normalization process, adjustments to the interest rate on excess reserves and the level of reserves in the banking system will be used to bring the funds rate toward its target. * Commence sales of agency securities from the SOMA after the first increase in the fed funds rate target, while communicating the timing and pace of sales to the public in advance. That pace is anticipated to be relatively gradual and steady, but it could be adjusted in response to "material changes in the economic outlook or financial conditions." * Once sales begin, the sales pace is expected to try to eliminate the SOMA's holdings of agency securities over three to five years to minimize the extent the SOMA portfolio might affect the allocation of credit across sectors of the economy. At this pace, sales would be expected to normalize the size of the portfolio over two to three years. "In particular, the size of the securities portfolio and the associated quantity of bank reserves are expected to be reduced to the smallest levels that would be consistent with the efficient implementation of monetary policy." * The committee is prepared to adjust its exit strategy if necessary in light of economic and financial developments.
To read the entire minutes, use the link.

News of the Competition (07/12/2011)

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MADISON, Wis. (7/13/11)
* Bank of America’s (BofA) proposed settlement with investors in its troubled mortgage securities could result in tens of thousands of BofA’s most distressed borrowers getting evicted and losing their homes (The New York Times July 11). However, the outcome could be more positive for troubled borrowers who are in better financial shape because the deal would provide incentives for mortgage servicers to help homebuyers who have fallen behind on their payments and whose homes are worth less than the amount borrowed to buy them, the Times said. While strong investors likely will benefit from the $8.5 billion settlement arising from BofA’s bundling of suspect mortgages as securities, the consequences for the nearly 275,000 borrowers who took out those loans mostly hinge on how deep they are in the foreclosure process and whether they have sufficient income to bail themselves out, the Times said … * MBIA Inc., a bond insurer, said it will drop a mortgage lawsuit against Bank of America Corp. (BofA) and Merrill Lynch (The Wall Street Journal July 12). The suit stems from more than $5.7 billion in credit default protection MBIA underwrote for the bank’s mortgage-backed securities. All the parties in the suit are voluntarily dismissing the claims and paying their own legal fees, according to a New York court filing. In April 2009, MBIA had sued Merrill Lynch--after BofA had bought the investment bank--alleging it had perpetrated fraud when convincing the bond insurer to provide credit default protection. MBIA claimed the bank covered up the fact that the supposed AAA-rated mortgage-backed securities were backed by insufficiently underwritten mortgages, the Journal said … * To resolve charges it paid kickbacks to real estate brokers, Fidelity National Financial Inc. has agreed to a $4.5 million settlement with the Department of Housing and Urban Development (HUD) (American Banker July 12). HUD claimed the company, one of the biggest U.S. providers of title insurance, was illegally paying brokers for referring the real estate settlement business, including title insurance and home warranties. HUD said those actions constituted a violation of the Real Estate Settlement and Procedures Act …

Market News (07/12/2011)

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MADISON, Wis. (7/13/11)
* The U.S. trade deficit grew in May to the highest level in nearly three years, in part because of a spike in the cost of imported crude oil (Bloomberg.com July 12). The trade gap widened 15% to $50.2 billion from $43.6 billion in April, the Commerce Department said Tuesday. Two-thirds of the erosion in the trade balance was because of a widening in the petroleum deficit--reflecting an increase in the price and quantity of crude oil imports (Moody’s Economy.com July 12). Growing economies abroad and a weaker U.S. dollar could continue to boost demand for American-made products, which would benefit some U.S. companies, Bloomberg said. With a recent decline in oil costs and a slowing in consumer spending that will curb imports, the trade deficit may narrow--leading to trade bolstering the world's biggest economy, Bloomberg said … * Consumer spending strengthened in early July, according to the International Council of Shopping Centers chain store sales index (Moody’s Economy.com July 12). The index rose 0.5% for the week ended July 9, marking the third consecutive weekly gain. However, sales dropped dramatically in the comparable week a year ago, so year-over year growth spurted to 5.5%. The drag on sales caused by higher gasoline prices was trumped by hot weather that reportedly stimulated sales of seasonal merchandise. If sustained, the strength in chain store sales could be a key positive signal that the lull in the U.S. economic recovery is ending, Moody’s said …

News of the Competition (07/11/2011)

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MADISON, Wis. (7/12/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday the closing of three banks, bringing total bank failures so far this year to 51, compared with 157 for the entire year in 2010. The failed banks are: First Chicago Bank & Trust, assumed by Northbrook Bank & Trust Company, Northbrook, Ill.; Colorado Capital Bank, Castle Rock, Colo., assumed by First Citizens Bank & Trust Company, Raleigh, N.C.; and Signature Bank, Windsor, Colo., assumed by Points West Community Bank, Julesburg, Colo. The three closed banks held roughly $1.74 billion in assets as of March 31. The FDIC estimated the newest failure will cost the Deposit Insurance Fund about $590 million ... * The total value of mobile payments worldwide for digital and physical goods, money transfers and Near Field Communication (NFC) transactions will hit $670 billion by 2015--up from $240 billion in 2011, according to a report from Juniper Research (American Banker July 11). All three segments will expand by a least 200% during the 2011 to 2105 time period--propelled by the rapid adoption of NFC contactless payments, global ticketing, and physical good purchases and money transfers, Juniper said … * The shaky U.S. economy has made consumers wary of purchasing homes, according to a Credit Suisse study of real estate agents (American Banker July 11). The fear of being laid off from their jobs has made homebuyers reluctant to commit to mortgages, and those who do want to buy a home are having a difficult time obtaining financing, the survey indicated. Lack of confidence in employment is a major issue--particularly when linked with worries that a home bought today may lose value in the next three to six months, Daniel Oppenheim, Credit Suisse lead analyst, told the Banker

Market News (07/11/2011)

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MADSION, Wis. (7/12/11)
* Nearly $2 out of every $10 that went into U.S. citizens’ pockets last year came from government benefit payments--which soon will be gone, according to an analysis by Moody’s Analytics (The New York Times July 10). In some states that were significantly impacted by the economic downturn--such as Arizona, Florida, Michigan and Ohio--residents received an even higher percentage of their income from government checks, the Times said. However, by the end of 2011, those payments--jobless benefits, food stamps, Social Security and disability--are going to vanish because of the expiration of extended benefits to help people cope with the ongoing effects of the recession, the study said. Unless hiring improves, that lost income--estimated at $37 billion by Moody’s Analytics--could further dampen consumer spending and become a drag on the economic recovery, some economists said … * Small-business CEOs are reluctant to hire new workers because of the uncertain economic outlook, and that means the U.S. economy could stay lethargic for a while, according to a U.S. Chamber of Commerce report (The Wall Street Journal July 11). Of the small-business CEOs surveyed, 64% said they aren’t expecting to add to their payrolls in the next year and another 12% intend to cut jobs. Only 19% said they intended to expand their work forces. The Small Business Administration defines small businesses--which employ roughly half the workers in the private sector--as firms with fewer than 500 workers … * The U.S. dollar’s slide in value during the past year will come to end because Europe’s worsening debt crisis is discouraging bets against the world’s reserve currency, according to top currency forecasters (Bloomberg.com July 11). The five most accurate forecasters as measured by Bloomberg predict the dollar to be trading at $1.42 per euro on average by the end of 2011, compared with $1.43 per euro on July 8. Forecasters predict the dollar will rise to 83 from 80.64 against the yen …

Consumer credit rises in May CU members borrow more

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WASHINGTON (7/11/11)--Consumers borrowed $5.08 billion more in May than they did in April, according the Federal Reserve's Consumer Credit statistics for May, released Friday. It was the eighth consecutive increase and more than the $3 billion increase forecast by economists. Consumers also borrowed more from credit unions. The total amount borrowed in May reached $2.432 trillion, up from April's $2.427 trillion. The amount borrowed from credit unions totaled $223 billion, up from April's $221.8 billion and March's $219.7 billion. Credit card debt--revolving credit--shot up by $3.36 billion to $793.1 billion after a decline of $867 million in April to $789.8 billion, according to the Fed's statistics. May's figure is the largest monthly increase in credit debit since mid-2008 mid-way through the financial crisis that led to the recession. Although the Fed doesn't release a commentary with the statistics, some analysts said one reason for the increase may be that consumers facing limited job prospects were forced to turn to credit cards more frequently to pay bills (Reuters July 8). At credit unions, revolving debt totaled $35.6 billion, up from $35.2 billion in April and $35 billion in March, according to the Fed's statistics. Nonrevolving debt, which includes student loans and auto loans, grew $1.7 billion overall to $1.639 trillion, up from $1.637 trillion in April. At credit unions, consumers borrowed $187.4 billion in May, up from $186.6 billion in April. While other sectors saw increases in consumer debt, finance companies that saw a decline in both revolving and nonrevolving credit. The report does not include home mortgage loans and home equity lines of credit.

Market News (07/08/2011)

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MADISON, Wis. (7/11/11)
* The U.S. added a mere 18,000 jobs in June, much less than the 125,000 anticipated and bringing the total number of people out of work to 12.1 million, including 6.3 million who have been jobless for at least six months, reported the Labor Department Friday. That compares with a gain of a revised 25,000 jobs in May and means that the unemployment rate crept up to 9.2% from May's 9.1%. "The June employment report is a big disappointment," said Moody's Economy.com (July 8). The report is "dashing hopes the economic recovery is getting back on track and putting pressure on lawmakers to react," said The Wall Street Journal (July 8). Employers in the private sector added 57,000 jobs--down from 73,000 in May. Government agencies, faced with the need to slash budgets, cut 39,000 jobs in June. The report is considered a measure of how well the nation's job market is restoring the more than eight million jobs lost during the recession, said The New York Times (July 8). Payrolls for the previous two months were revised downward by 44,000 jobs to show increases of 25,000 jobs in May and 217,000 in April. See related report, "Boost sluggish economy with MBL cap lift: CUNA" in today's Washington section of News Now … * Consumer credit conditions improved in June, with account balances declining at a 2.7% pace from June 2010, according to a Moody's Econony.com analysis Friday of data from Equifax and Moody's Analytics. The pace is the smallest decline since August 2009, which is significant given the weak job growth and auto sales reported last week. The decline in accounts slowed to 0.6%--the smallest decrease since late 2008. Auto loan balances were higher than the year-ago level although new-auto sales declined to 11.4 million units from 11.8 million in May and 13.1 million in April. The year-over-year decline for credit card balances slowed to less than 7.5% in June from more than 10% in March. All major segments except student loans saw lower numbers of accounts than in June 2010. However, those declines were less than 1% in total and in the bankcard and retail segments, said Moody's. Mortgages experienced a 3.3% decline from June 2010; bankcard balances dropped 7.4% ; and retail card balances dropped 2.1% …

News of the Competition (07/08/2011)

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MADISON, Wis. (7/11/11)
* Wells Fargo & Co. will pay $125 million to several pension funds in a settlement filed in federal court in San Jose, Calif., Thursday, culminating a two-year battle over the bank's underwriting of billions of dollars in mortgage-backed securities (MBS) that collapsed during got caught in the financial crisis. The settlement, which includes no admission of wrongdoing by the San Francisco-based bank, applies to 28 MBSs from 2006-2007, according to The Wall Street Journal (July 8). The plaintiffs in the consolidated case included the General Retirement System of Detroit, New Orleans Employees' Retirement System and other public pensions (Bloomberg News July 8). Wells Fargo inherited the troubled MBSs from its forced merger with Wachovia Corp. The settlement applies only to Wells Fargo deals … * Firms representing banks are welcoming the Justice Department's softer approach toward charging corporations with crimes. The department issued a directive for "deferred prosecutions," which may explain why few criminal cases have been brought despite all the inquiries into the causes of the financial crisis, said The New York Times (July 8). The guidelines present a possibility of leniency for companies that investigate and report their own wrongdoing. If they promise to change their behavior, the government could delay or cancel prosecution for such companies. The agreements require that corporations pay penalties and restitution, correct criminal conduct and other negative consequences to innocent parties who played no role in the criminal conduct. The Securities and Exchange Commission added deferred prosecution last year, said the article …

News of the Competition (07/07/2011)

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MADISON, Wis. (7/8/11)
* State attorneys general and federal officials are in advanced negotiations with a group of lenders to settle state and federal claims about faulty foreclosures, according to two sources familiar with the matter (Bloomberg.com July 7). Negotiators tentatively slated July 13 as the target date for a settlement--which could rise above $20 billion, the sources told Bloomberg. Bank of America, JPMorgan Chase & Co, and three other mortgage servicers are involved in the talks. CitiGroup Inc. and Wells Fargo & Co. and Ally Financial also are involved in negotiations, the sources added. If a final agreement is reached that sets standards for servicing loans and processing foreclosures, it could become a guide for handling claims against the rest of the mortgage industry, Bloomberg said …

Market News (07/07/2011)

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MADISON, Wis. (7/8/11)
* Initial claims for U.S. unemployment benefits dropped last week, but remained at a level that indicates the labor market will need time to recover (Bloomberg.com July 7). Claims dropped 14,000--to 418,000--for the week ended July 2, the Labor Department said Thursday. Also, private sector U.S. jobs increased by 157,000 in June, according to a national employment report released by payroll company Automatic Data Processing Inc. (ADP) and consultancy Macroeconomic Advisers (The Wall Street Journal July 7). The ADP report said that although the economic recovery dipped in the spring, the June employment numbers suggest the recovery might have moved back on track in early summer. Meanwhile, continuing claims for unemployment benefits decreased by 43,000--to roughly 3.68 million--for the week ended June 25. That figure excludes millions more on extended and emergency unemployment benefits (Moody’s Economy.com July 7) … * U.S. consumer confidence fell to a 10-week low because consumers’ view of their finances and the economy darkened, according to the Bloomberg Consumer Comfort Index (Bloomberg.com July 7). The index declined to minus 45.5 for the week ended July 3 from minus 43.9 the previous week. Declining home prices, stilted wage growth, and unemployment hovering above 9% were the reasons why 54% said the condition of their finances were either not good or poor, according to the survey …

News of the Competition (07/06/2011)

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MADSION, Wis. (7/7/11)
* Although federal regulators are issuing fewer enforcement actions to U.S. banks, that doesn’t necessarily indicate the industry is recovering (American Banker July 6). The drop-off could reflect a declining number of candidates for regulators to reprimand for inappropriate behavior, some industry observers told the Banker. Ten banks entered into consent orders with the Federal Deposit Insurance Corp. in May--half the monthly average for the previous six months and consistent with the number of orders issued in October 2008--when the financial world was going through the depths of a financial crisis, the Banker said … * Nine out of 10 prepaid cardholders said they are “extremely” or “very” satisfied with their prepaid cards, according to an Aite Group LLC report issued June 30 (American Banker July 6). However, card issuers could do more to retain customers in the long term, the report suggests. Eight out of 10 former prepaid card users said they saw the product as something just for short-term use--and six out of 10 existing prepaid card users expressed similar views, the study indicated. The Aite report suggests that issuers need to offer incentive for long-term use by providing loyalty and rewards programs … * Two major card brands have entered into sponsorship deals to promote their brands (American Banker July 6). Visa Inc. promoted its prepaid cards by sponsoring the Essence Music Festival in New Orleans during the July 4 holiday weekend. For marketing efforts related to the festival, Visa used online, outdoor, television and radio ads that accentuated the benefits of prepaid cards--such as access to electronic payments for online and point-of-sale shopping, and direct deposit. American Express Co. announced June 30 it made deals designating its brand as the official card of the United Center in Chicago and Miami’s American Airlines Arena--two entertainment venues that are collectively home to three professional sports teams, the Banker said ...

Market News (07/06/2011)

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MADISON, Wis. (7/7/11)
* U.S. mortgage loan applications decreased 5.2% for the week ended July 1 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 5.1%. The Refinance Index, which dropped 9.2%, has fallen for three consecutive weeks, reaching its lowest level since May 6. The seasonally adjusted Purchase Index increased 4.8%. The unadjusted Purchase Index rose 4.4 % and was 11.7% higher than the same week one year ago. “Stronger economic data towards the end of the week coupled with the end of the Fed’s second round of quantitative easing helped bring mortgage rates to their highest level in over a month,” said Michael Fratantoni, MBA vice president of research and economics. “Refinance activity, already constrained by a smaller pool of eligible borrowers, declined in response to the higher rates, but purchase applications picked up appreciably in the week before the July 4th holiday.” For the MBA report, use the link … * For a second consecutive month, announced U.S. job cuts rose in June, but still remained well beneath the pace prior to the recession, according to the Challenger Report issued by Challenger, Gray and Christmas Inc. (Moody’s Economy.com July 6). Employers announced 41,432 job cuts for the month. For the second quarter, 115,057 cuts were announced--12% fewer than during the first quarter and just below second quarter in 2010. Of the total cuts made in June, about 25% were in government and nonprofits, which led all other sectors in cuts made … * The U.S. nonmanufacturing sector--service industries--expanded at a slower pace in June, an indication the economy lost some momentum at the end of the first half of 2011, according to figures released by the Institute for Supply Management (ISM) (The Wall Street Journal and Bloomberg.com July 6). The ISM index dropped to 53.3 from 54.6 in May. Readings above 50 indicate expansion. High commodity prices and consequences from the natural and nuclear disasters in Japan in March hampered business activity, the Journal said. As gasoline prices moderate and supply disruptions from Japan abate, the service sector should expand, Bloomberg said. Because the more immediate factors that depressed services seem to be reversing, the outlook for the second half of the year is promising, Chris Rupkey, chief financial economist at Bank of Tokyo Mitsubishi UFJ Ltd. in NewYork, told Bloomberg

News of the Competition (07/05/2011)

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MADISON, Wis. (7/6/11)
* JPMorgan Chase & Co. Friday said it is extending its premier checking accounts--usually offered only to elite customers--to active duty members of the U.S. armed forces, and members of the National Guard and reserves (American Banker July 5). The bank’s move is the most recent initiative to better accommodate military customers after Chase admitted earlier in 2011 to foreclosing on servicemembers’ homes while they served abroad, the Banker said. The interest-bearing checking account includes no fees on non-Chase ATM withdrawals, wire transfers, money orders or travelers checks; no monthly fee or balance requirements; a free safe deposit box; and two additional premier checking accounts with no monthly fees. Chase also pledged to provide 1,000 homes to veterans during the next five years, and--with its nonprofit partners--has agreed to jointly hire 100,000 veterans by 2020 …

Market News (07/05/2011)

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MADISON, Wis. (7/6/11)
* U.S. factory orders increased in May, an indication that manufacturing is expanding, although the increase was short of expectations amid a weak economy (The Wall Street Journal July 5). Orders rose 0.8% from April to $445.29 billion, the Commerce Department said Tuesday. Economists had forecast a 1% increase, according to a Dow Jones Newswires survey. The May increase was broad-based with gains in several industries, the Journal said. Manufacturing is showing signs of recovery, following parts shortages emanating from the earthquake and tsunami in Japan that slowed the sector (Bloomberg.com July 5). Also, receding commodity costs and expanding economies abroad are fueling exports, Bloomberg said. Meanwhile, unfilled orders climbed, while inventories expanded for the 13th consecutive month (Moody’s Economy.com July 5) … * Business sentiment worldwide appreciably weakened last week--likely due in part to a slow response rate because of the U.S. July 4th holiday, according to Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com July 5). However, beyond the measurement considerations, worldwide business confidence has eroded from its zenith early in 2011, mostly because of weaker responses to the most general questions pertaining to current business conditions and expectations about the economy at year’s end. More solid responses were seen to specific questions regarding the strength of sales, equipment investment and hiring. Weaker overall sentiment since the start of 2011 is mostly due to fewer positive responses to survey questions, rather than a rise in negative responses, Moody’s said …

News of the Competition (07/04/2011)

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MADISON, Wis. (7/5/11)
MasterCard Inc. has entered into a new agreement with China UnionPay--China's national bank card association--as the credit card company aims to become a bigger force in the Chinese payments industry (American Banker July 1). The recently signed service agreement will allow MasterCard's Payment Gateway to process UnionPay card transactions made at e-commerce merchants outside of mainland China, the Banker said. The two parties also signed an extension to a memorandum of understanding announced in September to work together to develop services for online and other payment areas ... For the second consecutive month, auto sales in the U.S. remained lethargic because economic concerns and a short supply of small cars from Japan continued to plague the industry, according to a General Motors Co. (GM) executive (The Wall Street Journal July 1). GM's annualized sales rate was estimated to be 12 million vehicles, compared with 11.8 million in May--when auto sales experienced their first substantial decline in 18 months--Don Johnson, GM U.S. sales chief, told the Journal. GM said it expects auto sales to increase in the second half of 2011 ...

Market News (07/04/2011)

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MADISON, Wis. (7/5/11)
U.S. consumer confidence declined more than expected in June, adding to worries that household spending may erode (Bloomberg.com July 1). The Thomson Reuters/University of Michigan final index of consumer sentiment fell to 71.5 from 74.3 in May. The measure was forecast to drop to 72, according to economists surveyed by Bloomberg News. Weaknesses in the labor and stock markets overrode the moderation in gasoline prices, with the decline in sentiment coming entirely from expectations (Moody's Economy.com July 1). Falling property values, an unemployment rate above 9%, and accelerating inflation are contributing to consumers' pessimism, overshadowing the good news about gas prices, Bloomberg said ... Production grew at a brisk pace in June, indicating the U.S. manufacturing sector appears to be in healthy shape, according to the Institute for Supply Management's (ISM) factory index (The Wall Street Journal July 1). The index rose to 55.3 from 53.5 in May. The ISM numbers were in contrast to poor global manufacturing data released last week, the Journal said. The June manufacturing data indicate the industry is bouncing back after shortages of parts and components from Japan slowed production (Bloomberg.com July 1). The manufacturing sector is starting to see positive momentum because the series of negative factors that hurt growth are now fading or reversing, James O'Sullivan, chief economist at MF Global Inc. in New York, told Bloomberg ... The Case-Shiller Home Price Index declined steeply in the first quarter because of persistent weak housing demand and foreclosure activity that remains elevated (Moody's Economy.com July 1). The national index fell by an annualized 8% quarter over quarter--significantly worse than the 4% decline in fourth quarter 2010, Moody's said. The home price declines are evident nationwide, with the Northeast and South-Atlantic regions most negatively impacted, Moody's said. Also, more than half the metro areas covered in the survey posted a quarter-to quarter decrease ...

News of the Competition (07/01/2011)

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MADISON, Wis. (7/5/11)
* MasterCard Inc. has entered into a new agreement with China UnionPay--China’s national bank card association--as the credit card company aims to become a bigger force in the Chinese payments industry (American Banker July 1). The recently signed service agreement will allow MasterCard’s Payment Gateway to process UnionPay card transactions made at e-commerce merchants outside of mainland China, the Banker said. The two parties also signed an extension to a memorandum of understanding announced in September to work together to develop services for online and other payment areas … * For the second consecutive month, auto sales in the U.S. remained lethargic because economic concerns and a short supply of small cars from Japan continued to plague the industry, according to a General Motors Co. (GM) executive (The Wall Street Journal July 1). GM’s annualized sales rate was estimated to be 12 million vehicles, compared with 11.8 million in May--when auto sales experienced their first substantial decline in 18 months--Don Johnson, GM U.S. sales chief, told the Journal. GM said it expects auto sales to increase in the second half of 2011 …

Market News (07/01/2011)

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MADISON, Wis. (7/5/11)
* U.S. consumer confidence declined more than expected in June, adding to worries that household spending may erode (Bloomberg.com July 1). The Thomson Reuters/University of Michigan final index of consumer sentiment fell to 71.5 from 74.3 in May. The measure was forecast to drop to 72, according to economists surveyed by Bloomberg News. Weaknesses in the labor and stock markets overrode the moderation in gasoline prices, with the decline in sentiment coming entirely from expectations (Moody’s Economy.com July 1). Falling property values, an unemployment rate above 9%, and accelerating inflation are contributing to consumers’ pessimism, overshadowing the good news about gas prices, Bloomberg said ... * Production grew at a brisk pace in June, indicating the U.S. manufacturing sector appears to be in healthy shape, according to the Institute for Supply Management’s (ISM) factory index (The Wall Street Journal July 1). The index rose to 55.3 from 53.5 in May. The ISM numbers were in contrast to poor global manufacturing data released last week, the Journal said. The June manufacturing data indicate the industry is bouncing back after shortages of parts and components from Japan slowed production (Bloomberg.com July 1). The manufacturing sector is starting to see positive momentum because the series of negative factors that hurt growth are now fading or reversing, James O’Sullivan, chief economist at MF Global Inc. in New York, told Bloomberg … * The Case-Shiller Home Price Index declined steeply in the first quarter because of persistent weak housing demand and foreclosure activity that remains elevated (Moody’s Economy.com July 1). The national index fell by an annualized 8% quarter over quarter--significantly worse than the 4% decline in fourth quarter 2010, Moody’s said. The home price declines are evident nationwide, with the Northeast and South-Atlantic regions most negatively impacted, Moody’s said. Also, more than half the metro areas covered in the survey posted a quarter-to quarter decrease …

Fed governor calls for financial inclusion

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WASHINGTON (7/5/11)--Citing an economic crisis that has left 13.9 million Americans unemployed and another 10 million people working less than they want to or giving up looking for work, Federal Reserve Governor Sarah Bloom Raskin last week called for policymakers and financial institutions to help more people increase their incomes and net worth through innovative financial services. Raskin spoke Wednesday at "Rebuilding the Road to Financial Stability," which was co-sponsored by the New America Foundation, the Congressional Savings and Ownership Caucus, and the Center for Financial Security at the University of Wisconsin-Madison. She asserted that broad financial inclusion “bolsters American consumption and savings, which drives macroeconomic growth.” In contrast, the recession and its aftermath have hit the poorest families hardest because they lacked the assets to ease the pain of wage cuts, job loss, and declining home values that have dragged the economy down. An 18% decline in net worth among families in the bottom fifth of income distribution between 2007 and 2009 fuels an inequality that “is destabilizing and undermines the ability of the economy to grow sustainably and efficiently," Raskin said. "It is associated with increases in crime, profound strains on households, lower savings rates, poorer health outcomes, and diminished levels of trust in people and institutions.” The solution, she said, is providing low- and moderate-income Americans safe and affordable access to the tools of economic participation. These include affordable methods to cash checks, receive deposits, pay bills, save and borrow for emergencies and goals, and pay without cash. However, between 13% and 25% of families earning less than $30,000 are unbanked. And it’s imperative that more appealing financial tools be created to overcome high levels of distrust of financial institutions, Raskin said. She highlighted some opportunities for financial product and service innovation that would improve financial inclusion:
* New technology to open up access to the unbanked through relatively inexpensive mobile financial services; * Prepaid cards to combine the features of debit cards and checking accounts, perhaps with the incentive of an early bill payment discount automatically deposited in a savings account; and * Partnerships among credit unions, banks, local governments, and non-profits to deliver low-cost financial services such as free checking.
With innovation, an engaged regulatory system would watch over product developments that threaten economic stability, Raskin promised. “It is incumbent upon regulators to ensure that these products and services are safe, affordable, transparent, and easy to understand, regardless of the provider. In some cases, regulators may need to ban products that are inherently unfair or deceptive,” she concluded.