Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive
150x172_CUEffect.jpg
Contacts
LISA MCCUEVICE PRESIDENT OF COMMUNICATIONS
EDITOR-IN-CHIEF
MICHELLE WILLITSManaging Editor
RON JOOSSASSISTANT EDITOR
ALEX MCVEIGHSTAFF NEWSWRITER
TOM SAKASHSTAFF NEWSWRITER

Market Archive

Market

News of the Competition (09/30/2009)

 Permanent link
MADISON, Wis. (10/1/09)
* CIT Group Inc. shares nosedived Wednesday in the midst of reported efforts by the commercial lender to avoid bankruptcy. The efforts include creating an exchange that would reduce its debt and offer its bondholders an equity stake in the firm. CIT is one of the largest U.S. lenders to small and midsize businesses. Its shares dropped 85 cents, or 38.6%, to $1.35 in Wednesday morning trading. The company is preparing an exchange offer that would cut as much as 40% of its more than $30 billion in outstanding debt, said The Wall Street Journal, citing anonymous sources. The exchange reportedly would give CIT’s bondholders control of the company and eliminate common stockholders (The New York Times Sept. 30) … * Bank of America Corp. (BofA) said Wednesday it is selling one of its units to Ameriprise Financial. BofA will sell the long-term asset management business of Columbia Mutual--its mutual fund arm--for roughly $1 billion. Some analysts’ previous estimates of Columbia’s worth were in the $2.5 billion to $3.5 billion range. The sale is expected to close by spring. The unit that Ameriprise will acquire has about $165 billion in assets under management as of June 30, BofA said (DealBook Sept. 30) … * General Motors closed a large truck plant this week, signaling that the appeal of pickup trucks to U.S consumers is quickly diminishing, analysts said. Sales of pickups dropped steeply in 2009--exceeding the decline in overall vehicle sales, which are at their lowest point in the past 25 years. In 2004, auto companies sold nearly 2.5 million pickups in the U.S. This year, truck sales will reach only about one million, analysts said. The sales downturn places new pressure on automakers--which for years made significant profits on truck sales, analysts added. In a separate matter, Toyota said Tuesday it is recalling 3.8 million vehicles because faulty floor mats could cause the accelerator pedal to become stuck and cause accidents. Toyota and federal officials are telling owners to remove the driver’s side mat while the automaker works on a solution (The New York Times Sept. 30) …

Market News (09/30/2009)

 Permanent link
MADISON, Wis. (10/1/09)
* The U.S. gross domestic product (GDP)--which calculates the country’s economic output--shrank 0.7% in the second quarter, with the worst national recession since the 1930s easing more than anticipated, according to Commerce Department figures released Thursday. The report likely indicates the recession ended this summer, which paves the way for the economy to grow throughout the end of 2009, analysts said. The 0.7% second-quarter rate is a revision from earlier estimates of a 1% contraction and the best performance in more than a year. For the first quarter of the year, GDP contracted at a 6.4% annual rate. The federal government’s $787 billion stimulus package--which included a first-time home buyer tax credit and “Cash for Clunkers” vehicle rebates--appear to have boosted the economy, analysts said. However, Federal Reserve policymakers are among those worried that consumer spending gains will not last because of rising unemployment and stagnating incomes (Bloomberg.com and The New York Times Sept. 30) … * Foreclosures on U.S. homes jumped about 17% in the second quarter, despite the federal government’s implementation of a wide-ranging program to help borrowers save their homes, reported the Office of Thrift Supervision (OTS) and the Office of the Comptroller of the Currency (OCC). Second-quarter completed foreclosures tallied 106,007--compared with 90,696 in the first quarter. Under the federal Making Homes Affordable plan, lenders were paid to lower a borrower’s monthly payments. Since its March inception, the program has helped nearly 400,000 borrowers, according to government data. By November, the Obama administration said it hopes to complete another 500,000 loan modifications. However, even as the program gets up to speed, rising unemployment continues to hinder foreclosure prevention efforts, analysts said. More than 50% of homeowners who had their mortgage loans modified in the first half of 2009 had missed at least two months of payments a year later, said OTS and OCC--although results were better for those who saw their monthly payments reduced substantially (The Washington Post and The New York Times Sept. 30) … * For the week ending Sept. 25, the Mortgage Bankers Association’s (MBA) market composites dropped because contract rates barely edged downward. The market index declined 2.8% from the previous week, propelled mainly by a steep drop in the purchase index--reversing the previous week’s gains, analysts said. The refinance index declined 0.8% from the prior week. In a signal that demand for mortgage credit remains weak, the purchase index is still below year-ago levels--despite a steady recovery in the past months, analysts added (Moody’s Economy.com Sept. 30) … * The Institute for Supply Management-Chicago index--a measure of U.S. business activity--unexpectedly shrank in September to 46.1 from 50, as support from the federal “Cash for Clunkers” vehicle rebate program fades. The declining index indicates companies likely will limit production and spending, analysts said. Spending gains and near-record excess capacity sparked almost solely by government stimulus programs will likely keep companies from increasing production on assembly lines. With federal assistance abating, the manufacturing recovery may be uneven, they added. While the September decline is discouraging, the index still averaged 46.5 in the third quarter, compared with 38.3 in the second quarter, analysts said (Bloomberg.com and Moody’s Economy.com Sept. 30) …

Market News (09/29/2009)

 Permanent link
MADISON, Wis. (9/30/09)
* In July, home prices in 20 U.S. metropolitan areas rose the most in nearly four years, signaling that the housing slump that engendered the worst recession since the 1930s could be subsiding, analysts said. The S&P/Case-Shiller home-price index increased 1.2% in July from the previous month--the largest jump since October 2005, the group said Tuesday. Los Angeles was up 1.8%, Minneapolis, 4.6%, New York, 0.8%, San Diego, 2.5%, and San Francisco, 3.3%. Also, home values were down 13.3% from a year earlier--less than economists had forecast. Low borrowing costs, government tax credits for first-time buyers and home-price declines driven by foreclosures have helped slow the drop in prices, analysts said. The recent improvement in the house-price indices portend that the worst house-price drops already have happened, although house-price declines could head downward again in coming months, analysts added (Bloomberg.com, Moody’s Economy.com and The New York Times Sept. 29) … * The Conference Board Index of consumer confidence in September relinquished a small amount of its big August gain, signaling that consumers remain substantially depressed, analysts said. The index fell to 53.1 from an upwardly revised 54.5--previously 54.1. Assessments of current labor market conditions eroded considerably--with the share of respondents saying jobs are plentiful diving to its lowest level since 1983. However, views of future labor market conditions remained mostly unchanged, analysts said. The private research group said this month’s decline is due to worries about the labor market and consumers’ fears of losing their jobs. The downturn of the reading on consumer confidence led to a weakening in the U.S. stock market Tuesday, analysts said (Moody’s Economy.com, The New York Times and The Wall Street Journal Sept. 29) … * The U.S.’s reign as an unchallenged economic superpower might be coming to an end, Robert B. Zoellick, the president of the World Bank, said Monday. Also, the dollar is likely to lose its favored position in the world economy, as the euro and Chinese renminbi take on larger roles, he added. “The U.S. would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency,” Zoellick said in a speech at Johns Hopkins University’s School for Advanced International Studies. “Looking forward, there will increasingly be other options to the dollar.” (The New York Times Sept. 29) …

News of the Competition (09/29/2009)

 Permanent link
MADISON, Wis. (9/30/09)
* Citizens Republic Bancorp Inc. said Monday it will more than triple the number of shares it has outstanding to build its capital ratios. Citizens Republic will issue 268 million shares of common stock in exchange for $209 million in notes and securities. The exchange is set to settle today. The Midwest regional bank said the swap will generate roughly $199 million of additional Tier 1 common equity. Citizens Republic has coped with a struggling Michigan economy, which is experiencing one of the highest unemployment rates in the U.S. The $12.1 billion-asset bank reported it experienced a wider loss because of higher write-downs as the company increased its loan-loss provisions. However, Citizens Republic said its total delinquencies plunged from the first quarter (Dow Jones Newswires via The Wall Street Journal Sept. 28 and American Banker Sept 29) … * U.S. Bancorp subsidiary, Elavon, announced Monday it has acquired Citibank’s Diners Club Card “merchant location” portfolio in Western Europe--which represents more than 75,000 merchants. This constitutes part of Citigroup’s Diners Club credit card processing business, which Citi is shedding as it continues to offload unwanted assets, analyst said. In a separate deal, Elavon also signed an agreement with Diners Club International--a unit of Discover Financial Services. Under conditions of the deal, Elavon said in a statement it will provide funding, processing, and customer services for merchants that accept Diners Club International cards in several foreign countries and areas, including: Benelux, France, Germany, Switzerland and the United Kingdom (TheStreet.com Sept. 28) ... * The average interest rate on conventional 30-year, fixed-rate mortgage loans of $417,000 or less decreased one basis point to 5.30% in August, the Federal Housing Finance Agency (FHFA) said Tuesday in statement. The average interest rate on 15-year fixed-rate loans of $417,000 or less increased three basis points to 4.92% in August. The rates are calculated from FHFA’s Monthly Interest Rate Survey of purchase-money mortgages. Results are for loans closed during Aug. 25-31. Usually, the interest rate is determined 30 to 45 days before the loan is closed, FHFA said …

News of the Competition (09/28/2009)

 Permanent link
MADISON, Wis. (9/29/09)
* Federal regulators Friday shut down Georgian Bank in Atlanta--marking the U.S. banking industry’s 95th failure this year. The bank’s failure likely will cost the Federal Deposit Insurance Fund roughly $892 million, analysts estimated. Mostly because of bad loans in the commercial real estate sector, hundreds more banks nationwide are expected to fail in the next few years, analysts said. The Federal Deposit Insurance Corp.’s (FDIC) confidential “problem list” had 416 banks at the end of June--up from 305 in first quarter and the highest number since June 1994, during the savings-and-loan crisis, analysts said. Georgia has had 19 bank failures this year--the most of any state. The FDIC has roughly $50.2 billion in its fund, of which 20% will be depleted by the recent IndyMac failure, analysts said (examiner.com Sept. 28) ... * With U.S. capital markets reopening, many healthy banks were able to raise capital in recent weeks. Most have done so to seize acquisition opportunities or else to repay funds they accepted under the Treasury Department’s Troubled Asset Relief Program, analysts said. Most were considered to be among the most robust banks. However, now some capital seems to be flowing to banks that need to satisfy a regulatory enforcement agreement, analysts said. As an example, Synovus Financial Corp., a $24 billion asset, Columbus, Ga.-based bank, completed a $600 million offering last week--with a memorandum of understanding still pending with the Federal Reserve. The capital market has grown for banks, said Tim O’Brien, managing director at Sandler O’Neill & Partners. This could be because the market is giving more help to healthier banks that are encouraged by regulators to raise capital--or it could be that examiners are more behind the issue “because the market is more supportive in raising capital,” he added (American Banker Sept. 28) …

Market News (09/28/2009)

 Permanent link
MADISON, Wis. (9/29/09)
* The Group of 20 (G-20) leaders and President Barack Obama are trying to put an end to the “financial balance of terror.” At last week’s meeting in Pittsburgh, the group adopted a framework for more sustainable economic growth in efforts to stem the worst economic downturn since the Great Depression. The G-20 also is giving a larger voice in decision-making to China and other emerging economies, analysts said. The U.S. hopes to reduce its dependence on foreign capital to finance consumption and scale back its reliance on China and other creditor nations to purchase their goods, analysts added. “Because our global economy is now fundamentally interconnected, we need to act together to make sure our recovery creates new jobs and industries,” Obama said. To help provide a unified global economic front, G-20 countries are giving the 186-member International Monetary Fund (IMF) a role in assessing the efforts (Bloomberg.com Sept. 28). In a related mater, the IMF, after undertaking a broad self-evaluation, said it acted in an effective manner to mitigate the worldwide recession--especially in Eastern Europe. “Fund-supported programs are helping countries weather the worst of the crisis,” the IMF report said. It is “remarkable” that countries receiving IMF loans so far have circumvented banking crises, the report added (The Wall Street Journal Sept. 28) … * The Federal Reserve Bank of Chicago’s national activity index declined to -0.9 in August from an upwardly revised -0.56 in July. However, the three-month average rose to -1.09 from an upwardly revised -1.61. Although the index has shown significant improvement in recent months, it is still consonant with recession, analysts said. In August, the economic recovery lost some of its momentum because unemployment rose and industrial production increased by a lesser amount, analysts said. While the U.S. industrial cycle is clearly turning for the better, the improvement has been more incremental and slower than anticipated, analysts added (Moody’s Economy.com Sept. 28) … * Global business confidence is parallel with a tentative worldwide economic recovery, according to the most recent Moody’s Economy.com Survey of Business Confidence. Since the spring, most responses to the survey questions have grown more positive--with the strongest confidence in Asia and South America, and the weakest in Europe and North America, analysts said. With many businesses ending inventory drawdowns, inventories are showing the most recent improvement, the survey indicated. Earlier in the year, inventories had been a substantial drag on the economy, Moody’s said. Manufacturers’ responses also are much more upbeat, analysts added. However, sentiment has remained mostly unchanged since August, after improving markedly between mid-April and early August. This indicates that the recovery is not moving rapidly into a self-sustaining economic expansion, analysts said (Moody’s Economy.com Sept. 28) …

News of the Competition (09/25/2009)

 Permanent link
MADISON, Wis. (9/28/09)
* For the eighth consecutive week, the U.S. Federal Reserve’s balance sheet grew because of the central bank’s continuing purchases of mortgage securities and Treasuries, according to data released Thursday. The Fed’s balance sheet liabilities--a wide-ranging measure of its lending to the U.S. financial system--rose to $2.141 trillion Wednesday--a new four-month high from its $2.125 trillion high-water mark the previous week. For the week ended Wednesday, the Fed’s holdings rose to $2.16 trillion from $2.14 trillion the prior week. Total discount window borrowing dipped to $109.98 billion Wednesday from $111.88 billion a weak earlier (Reuters and Dow Jones via American Banker Sept. 25) … * U.S. banks are on course to hit a record $43.6 billion in fees--highlighted by overdraft fees--charged customers this year--right when federal lawmakers are ready to levy new fee restrictions. U.S. banks pulled in $21.8 billion in service charges on deposit accounts through the first half of 2009--a record for the first half of a year--according to Federal Deposit Insurance Corp. Data. In 2008, banks recorded $39.5 billion in fees revenue--which excluded some fees, such as those for using ATMs. Banks have assessed account fees to mitigate growing losses from loans connected to the U.S. housing downturn and economic recession, analysts said (Dow Jones Newswires Sept. 25) …

Market News (09/25/2009)

 Permanent link
MADISON, Wis. (9/28/09)
* New U.S. home sales edged up in August to the highest level in nearly a year because builders slashed prices at a record pace to compete with foreclosures swamping the previously owned home market, analysts said. Sales rose 0.7% above the July figure to an annualized pace of 429,000 units, according to Commerce Department figures released Friday. The median price of a new house dropped 9.5% for the prior month--the largest decrease since 1963 when such records began, analysts said. With first-time home buyers hurrying to take advantage of tax credits before the November deadline, the worst housing slump since the Great Depression could be coming to a close, analysts said. Policymakers at the Federal Reserve promised Wednesday to maintain borrowing costs at a low level to nurture the recovery beyond the time when government stimulus measures fade out. Also, sales are below the year-ago pace, and months of supply stand at 7.3. Year-over year, the median sales price is down 11.6% (Moody’s Economy.com and Bloomberg.com Sept. 25) … * Reaching its highest level since January 2008, the University of Michigan Consumer Sentiment Index continued to rise in the latter half of September with the final index at 73.5--higher than the preliminary data of 70.2, and above the 65.7 for August. The expectations component was the driving force behind the index’s increase from August, although current conditions also show a significant gain, analysts said. Short-term inflation expectations declined. Positive factors boosting consumer sentiment include moderating job losses, a stock market that’s trending upward, and public pronouncements that the recession is ending. Negatives include the failure of gasoline prices to drop in late summer as they typically do, and nonexistent growth in wages, analysts said (Moody’s Economy.com Sept. 25) … * U.S. manufactured durable goods orders fell steeply in August, marking the largest drop in seven months, in part due to lower aircraft demand, the Commerce Department said Thursday. Durable goods are designed to last at least three years. On the heels of July’s biggest gain in two years, new orders unexpectedly declined 2.4% in August to a seasonally adjusted $164.4 billion, offsetting only a portion of the previous month’s revised 4.8% (previously 4.9%) gain. The decline in new orders was led by a 42% drop in non-defense aircraft. Following July’s 2.3% gain, shipments fell 1.4% between July and August (The Wall Street Journal and Moody’s Economy.com Sept. 25) ...

Market News (09/24/2009)

 Permanent link
MADISON, Wis. (9/25/09)
* In a sign that the housing market may be slow to rebound, existing U.S. home sales unexpectedly decreased in August for the first time in four months, according to the National Association of Realtors (NAR). Purchases--which include single-family, town homes, condominiums and co-ops--declined 2.7% to a seasonally adjusted rate of 5.1 million units in August from a pace of 5.24 million in July. However, the August rate is still 3.4% above the 4.93 million-unit level in August 2008. In the past four months, sales have grown 15.2%. Lawrence Yun, NAR chief economist, said the first-time buyer tax credit is working. “Home sales retrenched from a very strong improvement in July but continue to be much higher than before the stimulus,” he said. “The first-time buyer tax credit is having the intended impact of bringing buyers into the market, allowing them to take advantage of very favorable affordability conditions.” Also, the housing inventory situation is improving, with the months of inventory level declining to 8.5--the lowest level since April 2007. The 12.5% year-over-year drop in the median home price remains significant but is stabilizing, analysts said (www.realtor.org, Bloomberg.com and Moody’s Economy.com Sept. 24) … * The number of first-time jobless claims filed in the U.S. for unemployment benefits last week unexpectedly fell to the lowest level in two months, the Labor Department said Thursday. This indicates that as the economy pulls out of the recession, firings are slowing down, the department said. In the week ended Sept. 19, applications declined 21,000 to 530,000 from a revised 551,000 the previous week. The total number of people collecting unemployment benefits dropped the previous week to 6.14 million--less than predicted. Recent gains in manufacturing and homebuilding bolstered forecasts that economic growth will resume this quarter, analysts said. Also, the job market may be beginning to stabilize, but the continuing rise in unemployment indicates a hiring rebound will be gradual and the economic recovery will not be led by consumer spending, they added Bloomberg.com Sept. 24) … * The level of mortgage debt outstanding for the U.S. commercial/multifamily sector dropped in the second quarter to $3.47 trillion--a decrease of $9.9 billion, or 0.3% from the first quarter--according to the Mortgage Bankers Association’s (MBA) analysis of the Federal Reserve Board’s Flow of Funds data. Multifamily mortgage debt outstanding rose to $914 billion--an increase of $6 billion or 0.7% from the first quarter. “Commercial/multifamily mortgage debt outstanding fell by 0.3% in the second quarter, as the amount of loans paid down and paid off exceeded the amount of new mortgages taken out,” said Jamie Woodwell, MBA’s vice president of commercial real estate research. “Most major investor groups, including the commercial mortgage-backed securities market, life insurance companies and banks and thrifts, saw reductions in their holdings of commercial/multifamily mortgages, while Fannie Mae and Freddie Mac increased their holdings of multifamily mortgages.” (www/mbaa.org Sept. 24) …

News of the Competition (09/24/2009)

 Permanent link
MADISON, Wis. (9/25/09)
* Citigroup Inc.--the third largest U.S. lender by assets--is considering selling or closing some of its 1,001 branches in the U.S. and Canada, and serving only six metropolitan areas. It is downsizing following last year’s $45 billion federal bailout, said a person familiar with the plans. The bank would tighten its North American retail presence to areas where it has the highest branch concentration, the source said. The bank may scale back its presence to six areas--New York, Washington, D.C., Miami, Chicago, San Francisco and Los Angeles--the source said. Citigroup’s network currently is clustered in California, Chicago, Miami, New York, Washington, D.C., with a lesser presence in Boston, Philadelphia and Texas. The “smaller-but-smarter” approach is Citi’s most recent effort to fix a business model that has been beset by management turnover, strategic mistakes and underinvestment, analysts said (The Wall Street Journal and Bloomberg.com Sept. 24) … * Wells Fargo Wednesday became the most recent large U.S. bank to announce it will cut overdraft fees. Several other large U.S banks already have announced their intentions to do so amid lawmakers’ criticisms that overdraft charges are too costly and levied too often. Bank of America (BofA) and JPMorgan Chase announced their plans earlier this week to significantly revamp their debit card programs by reducing or eliminating fees. Wells Fargo and Chase will cancel fees for accounts overdrawn by $5 or less, they said in separate statements. BofA no longer will assess fees on accounts that are short $10 or less, it said (The New York Times Sept. 24) … * Fritz Henderson, CEO of General Motors Co., said he anticipates “modest improvement” next year in nationwide sales of cars and light trucks. The auto industry should sell 11.5 million to 12 million cars in 2010, compared with roughly 10 million to 10.5 million this year, Henderson said. Speaking to reporters in Orlando, Fla.--the final stop of a nine-city tour--Henderson said the credit market for auto financing is on the mend, and as the economy emerges from the recession there should be growing demand for vehicles (The New York Times Sept. 24) …

Feds actions increase pressure on CU margins

 Permanent link
MADISON, Wis. (9/24/09)--Federal Reserve policymakers Wednesday kept the target for federal funds rate set at a range of zero to 0.25%, saying that economic activity has picked up since their August meeting. And that means credit unions will see more downward pressure on their margins, says a Credit Union National Association (CUNA) economist. "Today's decision by the Federal Reserve will keep downward pressure on credit union net interest margins," said Steve Rick, CUNA senior economist, Wednesday. "Asset yields have been falling faster than funding costs for most credit unions as maturing investments and adjustable-interest-rate loans reprice down to the current extraordinarily low short-term interest rates," he said. The Federal Open Market Committee (FOMC) said it "continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. In addition to keeping the rates range, the committee also addressed other actions:
* To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Fed will purchase $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt. * It will gradually slow the pace of these purchases to promote a smooth transition in markets. The committee expects the purchases to be executed by the end of the first quarter of 2010. * As previously announced, the Fed's purchases of $300 billion of Treasury securities will be completed by the end of October.
"The large supply of new Treasury bonds being dumped on the market--$30 billion per week--is putting upward pressure on longer-term interest rates. This has created the steepest yield curve since 2004," Rick told News Now. "Historically, steep yield curves are good for credit union net interest margins because it makes the business of buying short-term deposits at low rates and lending them out longer-term at higher interest rates more lucrative. Of course this works only if you're lending the funds longer term," he said. "With credit union loan growth on pace to reach only 4% this year, the slowest pace since 1992, most of the new funds coming in are being placed in short-term low-rate investments," Rick said. "As the Federal Reserve policymakers noted in their statement, household spending remains constrained and faces many headwinds. Until those headwinds become tailwinds, credit union loan portfolios will post small gains and earnings will see continued downward pressure," he concluded. In a statement after its meeting, the committee noted it "will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Fed is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted." FOMC also noted that financial markets have improved and activity in the housing sector has increased. "Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth and tight credit," it said. It also noted that businesses are cutting back on fixed investment and staffing at a slower pace and continue to make progress in inventory/sales ratios. "Although economic activity is likely to remain weak for a time, the committee anticipates that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will support a strengthening of economic growth and a gradual return to higher levels of resource utilization in a context of price stability," said the FOMC. It also said it expected inflation "to remain subdued for some time."

News of the Competition (09/23/2009)

 Permanent link
MADISON, Wis. (9/24/09)
* Two of the biggest U.S. banks--Bank of America (BofA) and JPMorgan Chase--are revising fee policies in response to criticism from lawmakers about the way the lenders charge account holders. The banks announced plans Tuesday to cut overdraft fees, allow customers to opt out of overdraft protection and to lower or eliminate debit card fees. Federal regulators and lawmakers are pushing to reform excessive charges--many of which consumers are unaware, analysts said. Overdraft fees give the banking industry tens of billions of dollars each year, they added. Starting Oct. 19, BofA said it will permit current customers to halt their ability to spend when their account hits zero. In June, BofA also plans to limit the number of times each year that current customers can overdraw their account when using a debit card for purchases at a store. By the first quarter of next year, Chase intends to change how it processes ATM and debit transactions. Instead of compiling a day’s worth of debit card and ATM transactions and then processing the highest amounts first--which causes consumers to overdraw faster and pay more fees--it will credit transactions chronologically (The New York Times and Bloomberg.com Sept. 23) … * To meet higher demand for some vehicles, General Motors Corp. (GM) Tuesday said it will call back 2,400 hourly workers to three factories in Indiana, Kansas and Michigan. However, most of the workers will have to move from other states, GM said. The automaker said it intends to operate the plants around the clock on weekdays to make up for lost production when three other plants close this fall. Many GM dealers have been running out of popular models such as the Chevrolet Malibu and Buick Lacrosse during sales engendered by the government’s “Cash for Clunkers” vehicle rebate program, analysts said (The New York Times Sept. 23) … * Some mid-size U.S. banks have lost their appetite for buying failed financial institutions, reasoning that such acquisitions are time-consuming, costly and not worth the trouble, analysts said. At least one banker said he doubts the Federal Deposit Insurance Corp. can afford to abide by its agreement to share losses with acquirers on failed bank assets (American Banker Sept. 23). However, a substantial number of large and small banks said throughout the recession that they were interested in growing by acquiring failed banks. Many still are committed to that plan, analysts said. In a related matter, the Troubled Asset Relief Program--which pumped $125 billion into the nine largest U.S. financial firms--made it clear the government would not allow any major institutions to fail, analysts said. The “too big to fail” pronouncement about major U.S. financial institutions--once a hot topic of debate--is now an accepted public policy, analysts said.

Market News (09/23/2009)

 Permanent link
MADISON, Wis. (9/24/09)
* Loan application volume for the week ending Sept. 18 increased 12.8% on a seasonally adjusted basis from one week earlier, according to the Market Composite Index. The index is part of Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The Refinance Index rose 17.4% from the previous week, and the 30-year fixed-rate mortgage fell below 5% for the first time since mid-May. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.97% from 5.08%. The seasonally adjusted Purchase Index rose 5.6% from one week earlier, spurred by applications for government-insured loans, MBA said. The Government Purchase Index is at the highest level ever recorded in the survey’s history, and the share of purchase applications that were government-insured was 45.7%--the highest share since November 1990. For Mortgage Refinance Applications Increase as Rates Drop in Latest MBA Weekly Survey, use the link … * The number of mass layoffs--those involving at least 50 workers from a single establishment--in August was 2,690 compared with 2,157 in July, according to the Bureau of Labor Statistics. The total number of laid-off workers was 259,307 in August compared with 206,791 in July. All figures are seasonally adjusted. Nearly half of the increase in layoffs was due to job cuts in the manufacturing sector--which is consonant with the increase in manufacturing payroll losses in August, analysts said (Moody’s Economy.com Sept. 23) … * Economists may need to use new assessment tools to evaluate societal well-being, specifically tools that involve a broader concern for human welfare than just economic growth, according to a new study by Noble prize-winning economists Joseph E. Stiglitz and Amartya Sen. They reason that a good deal of the current economic troubles were engendered by an erroneous assumption by policymakers that--by solely focusing on economic growth-- prosperity for all would optimized. “What you measure effects what you do,” Stiglitz said. “If you don’t measure the right thing, you don’t do the right thing.” Most of the world is too exclusively dialed into gross domestic product, when it also should be factoring in considerations such as social costs of joblessness and the impacts of environmental degradation on public health, he added (The New York Times Sept. 23) …

Census data show recession-driven changes

 Permanent link
NEW YORK (9/23/09)--The recession has disrupted American life in a number of ways, according to an annual American Community Survey of the U.S. Census data released Tuesday. The nation's profile in 2008 included more people delaying marriage, delaying home buying, carpooling, and living in overcrowded housing. Fewer people moved residences, and fewer immigrants made their way to America. Median home values dropped in 2008 and the homeownership rate fell half a point to 66.6%, the lowest since 2002. People who changed residences fell to 15% from a recent peak of 16% in 2006. One in four people in Texas (24.1%) lacked health insurance in 2008, the highest rate in the nation. In Massachusetts, one in 20 residents (4.1%) lacked coverage. The share of people over age 15 who have never married rose to 31% last year from 27% in 2000. Median household income in 2008 declined nationwide, with income ranging from $37,790, the median for Mississippi, to $70,545, the median for Maryland. Five states--Kansas, Louisiana, New Jersey, New York and Texas--saw an increase in real median household income between 2007 and 2008. That compares with 33 states experiencing an increase the year before. The median price of an owner-occupied home declined 2% to $197,600 nationally. The median price dropped in 22 states, with the biggest declines in Nevada and California (16%) and Florida (9%). Home values increased in seven states--Texas, Utah, Wyoming, Oregon, Pennsylvania, Tennessee and North Carolina.

News of the Competition (09/22/2009)

 Permanent link
MADISON, Wis. (9/23/09)
* The General Accounting Office (GAO)--the research arm of Congress--said Monday that the financial condition of American International Group (AIG) has stabilized. However, it is uncertain whether the insurance behemoth would ever be able to repay the federal government, the GAO said. AIG’s $192 billion bailout package has stopped the company’s rapid nosedive and has led to improvements in its insurance business. AIG’s ability to retool and survive over the long run depends on “market conditions and continued government support,” the GAO concluded (The New York Times Sept. 22) … * Bank of America Corp. (BofA)--the largest U.S. bank by asset size--said it will pay $425 million to the federal government to nullify an unused guarantee of Merrill Lynch & Co.’s assets and cut BofA’s dependence on federal support after two bailouts. “We are a stronger company than we were even two months ago,” said BofA CEO Kenneth Lewis. BofA’s payment would end a conflict about what the bank owes the U.S. for the bank’s promise to help take on losses on $118 billion of holdings--mainly at Merrill Lynch, analysts said. The government’s guarantee helped clinch BofA’s takeover of Merrill Lynch after after fourth-quarter losses exceeded $15 billion. The agreement was announced in January, but it was never signed. BofA resisted paying, and is trying to convince federal regulators that it is financially fit enough to repay billions in federal aid, said people familiar with the bank’s plans (Bloomberg.com, The Wall Street Journal, and The New York Times, Sept. 22). In a separate matter, BofA--with two million of its customers using its mobile banking application--has become the No. 1 provider of mobile banking services, capturing 35% of the market for U.S. consumers, according to data gathered by ComScore Inc.--a market research company (CardLine via American Banker Sept. 22) … * Under the gun to fill a $9 billion hole in their balance sheets, many insurers have scaled back their sales and raised prices of life insurance. This is similar to banks’ cut backs on lending and higher service fees to bolster their cash reserves, analysts said. Bad real estate investments have led to the depletion of insurers’ capital, analysts said. Insurers also are placing increased emphasis on risk factors such as obesity and high blood pressure--which is another way to increase insurance prices, said industry executives and advisors. These moves, combined with consumer reticence to spend on “nonessential purchases," have led to a 23% decline in life-insurance sales during the first half of 2009--the worst six-month decline in almost 70 years, according to a trade group’s figures (The Wall Street Journal Sept. 22) …

Market News (09/22/2009)

 Permanent link
MADISON, Wis. (9/23/09)
* The recession is causing consumers across all income levels to re-evaluate their spending and take on cost-saving strategies, according to a new survey commissioned by IBM. Those surveyed said the new habits will endure, even after the economy has recovered. Because of the down economy, 72% of respondents said they made “significant spending cuts.” The most-impacted consumers are those making $45,000 per year or less. However, 59% of respondents earning $100,000 or more said they also cut back. The most common steps taken to save money include shopping at more stores to obtain the best deal (49%) and switching grocery stores (39%), the survey said. While 83% of respondents said price is a major factor, 72% said quality also is a prime consideration (The New York Times Sept. 22) … * Marking the third consecutive monthly gain, U.S. home prices rose 0.3% in July from June. The increase is due to the tax credit for first-time home buyers, which sparked demand and helped stabilize the housing market, analysts said. For the 12 months ended in July, the U.S. house price index dropped 4.2%, the Federal Housing Finance Agency said Tuesday. July’s increase was short of the 0.5% gain predicted by 12 analysts in a Bloomberg survey. Even with the July gain, the index remains 4.2% below last year’s levels and down 10.5% from its peak in April 2007. The index is derived from loans owned or guaranteed by government-sponsored mortgage finance companies Fannie Mae and Freddie Mac. Because it excludes the most expensive homes and some subprime loans that have gone into foreclosure, the index dropped less than other housing market measurements, analysts said (Bloomberg.com and The New York Times Sept. 22) … * An accounting procedure known as “deferred tax assets” could harm banks’ bottom lines and force them to raise capital, analysts said (American Banker Sept. 22). When banks are operating profitably, deferred tax assets accrued in the past will offset current income and act as a tax deduction. As long as banks have pretax profits--and therefore taxes--to reduce, banks can use deferred tax assets to mitigate their taxes in future quarters. As banks’ reserves and write-downs ballooned, so have their deferred assets, analysts said. In the future, if banks do not start minting money, accounting for deferred assets could delay or reduce profits and erode already shaky capital levels, they added … * Fannie Mae is concerned that loans provided to homeowners for energy-efficiency improvement programs in roughly 10 states could cause problems. Fannie fears that if homeowners fall behind on loan payments for energy-savers such as solar panels, the debt could become more important to the homeowner than their mortgage lien. Last week, the government-sponsored enterprise said it is developing underwriting requirements for homeowners who have taken out these loans. Fannie also told loan servicers to prepare to advance the overdue amount on energy loans to municipalities--just as they would normally do with unpaid property taxes. Servicers that maintain borrowers’ escrow accounts to pay for property taxes and insurance premiums should do the same for energy-loan payments, Fannie added (American Banker Sept. 22) …

Fed likely to avoid upsetting the apple cart

 Permanent link
WASHINGTON (9/23/09)--Economists widely believe the Federal Reserve Board's policymakers will keep interest rates steady between 0% and 0.25% at the conclusion of today's meeting of the Federal Open Market Committee (FOMC). While investors look for indications of possible tightening in the Fed's policy, the consensus is that no move is imminent in light of the lingering effects on the economy of the recession that began nearly two years ago, according to The Wall Street Journal and MarketWatch (Sept. 22). The Fed also is expected to say little about how it plans to wind down more than $1 trillion in lending and bailout programs, and likely will refrain from any overly enthusiastic language about the economy's outlook, said CNNMoney.com. The FOMC aims to balance unemployment and inflation. It typically lowers rates during a recession to boost private sector borrowing and encourage economic activity. It raises rates coming out of a recession to shore up the economy against inflation. However, the unusual nature of the recession recovery--and the fact that it is not led by consumers--is tenuous. The Fed likely will "keep its finger off the rate-hike button for now," said CNNMoney.com The FOMC also met Tuesday. Check News Now for an update this afternoon on the Fed's action.

Market News (09/21/2009)

 Permanent link
MADISON, Wis. (9/22/09)
* The Group of 20 nations (G-20) is working to finish a plan before this week’s Pittsburgh summit to push the U.S., Europe and China to make substantial changes in national economic policies. The changes are designed to create sustained economic growth to pull the world out of the worst recession in decades. The summit could be a test to see if industrialized and developing nations can work as a board of directors for the worldwide economy, analysts said. The focus of the G-20 will be on a U.S. proposal--“Framework for Sustainable and Balanced Growth”--which, if implemented, would consist of actions such as the U.S. trimming its budget deficit and saving more; Europe making structural changes to enhance its business environment; and China relying less on exports to buoy its economy, analysts said (The Wall Street Journal Sept. 21) … * A global economic recovery--albeit a tentative one--has started, according to the most recent results of Moody’s Economy.com Survey of Business Confidence. Business expectations are strong that conditions will continue to improve throughout the rest of 2009 and into early 2010. Asia and South America show the strongest sentiment among business service firms. The sectors that are the least optimistic are those that work in government and European businesses. The survey notes that while investment in software and equipment is strong, inventory investment and hiring are weaker, although they also are improving. Pricing power is consonant with low rates of inflation (Moody’s Economy.com Sept. 21) … * For the fifth consecutive month, the index of U.S. leading economic indicators rose in August, resulting in the longest stretch of gains since 2004--which analysts said is a sign that a recovery is under way. In August, the Conference Board’s gauge of the economic outlook for the next three to six months increased 0.6%. The number was consistent with forecasts, on the heels of a 0.9% July jump that was bigger than forecast, according to the board’s data released Monday. Advances in homebuilding, stock prices and consumer confidence, which are sustaining the leading index, support Federal Reserve Chairman Ben Bernanke’s view that the worst recession since the 1930s has likely ended, analysts said. However, tighter credit and rising unemployment indicate that a rebound will be slow and gradual, they added (Bloomberg.com Sept. 21) …

News of the Competition (09/21/2009)

 Permanent link
MADISON, Wis. (9/22/09)
* How much slack---the unused portion of the economy’s productive capacity--there is in the U.S. economy, how quickly it can be taken up and to what extent it matters will be the main focus when the Federal Reserve’s Federal Open Market Committee meets today and tomorrow. Although the Fed is not on the verge of raising interest rates or withdrawing the massive amounts of money it has injected into the economy, it is debating the signals it will send about how quickly it will do so, analysts said. At issue is the interplay between slack and inflation because within the Fed there is disagreement about slack, they added. Some believe it will take years for the economy to get up to speed to the extent it would exert upward pressure on wages and prices--which is needed before inflation would become a factor. Until that happens, inflation should remain in check, allowing Fed policymakers to keep interest rates low and work to restore economic growth. However, some within the Fed believe the central bank is putting too much stock into this argument and could end up behind the curve in fighting inflation, analysts said (The Wall Street Journal Sept. 21) … * Several recent reports afford differing consumer views about interchange fees. A Visa Inc. survey released last week indicates that consumers are content with the status quo, despite merchant efforts to get them to rally to their side and against payment companies, analysts said. A July survey by Fabrizio, McLaughlin & Associates of 1,000 adult consumers said 83% of respondents believe that if interchange fees were reduced, savings would not be shared with them by merchants. Also, 78% of respondents said retailers received enough benefits from card acceptance to justify the costs. And a report released last week by a trade group--the Merchants Payments Coalition--put forth arguments against interchange--which it describes as a “cash cow” for banks and a burden on merchants. The Credit Union National Association opposes attempts to regulate credit card interchange fees and believes the free market, not the government, should set the user fees (American Banker Sept. 21) …

News of the Competition (09/18/2009)

 Permanent link
MADISON, Wis. (9/21/09)
* The 30-year, fixed-rate U.S. home mortgage loan dropped to a three-and-a-half-month low for the week ended Thursday coming close to the 5% level, according to Freddie Mac’s weekly survey. Average 30-year mortgages, which are the most commonly issued loan product, fell 0.03 of a percentage point to 5.04%--the lowest since 4.91% was registered in the week ended May 28 and roughly 7/8 percentage point below the 5.78% a year ago, Freddie said. “Interest rates for 30-year fixed-rate mortgages have averaged just above 5% through mid-September, which is roughly a percentage point below last year’s average and suggests that 2009 may reach a record annual low since the survey began in 1971,” said Freddie Mac Chief Economist Frank Nothaft in a statement. Government intervention--such as the Federal Reserve buying up to $1.45 trillion of mortgage-related securities--has pushed borrowing costs down this year, analysts said (Reuters Sept. 17 and Dow Jones Sept. 18) … * A flood of disclosures by bank customers has resulted from a U.S. tax program that encouraged UBS AG clients to avoid criminal prosecution by declaring offshore bank accounts before Sept. 23, analysts said. UBS entered into a $780 million settlement with U.S. authorities that will allow the firm to avoid prosecution for helping Americans cheat on their taxes. Many customers of Bank Leumi Le-Israel Ltd., LGT Group in Lichtenstein, London-based HSBC Holdings Plc, and Zurich, Switzerland-based Credit Suisse Group and Julius Baer Holding AG have come forward with offshore-account information, analysts said. This information could allow the Internal Revenue Service to focus on other overseas wealth managers as it attempts to stem tax evasion, they added (Bloomberg.com Sept. 18) …

Market News (09/18/2009)

 Permanent link
MADISON, Wis. (9/21/09)
* In the second quarter, U.S. household wealth grew for the first time in nearly two years. However, households still have a lengthy road to travel to recover losses sustained during the economic downturn. Rising home prices and stock prices drove the gains, according to a Federal Reserve report issued Thursday. Another factor was that families saved more and borrowed less during the recession--which resulted in the paying down of debt owed on credit cards and their homes. Household net worth rose 3.9% to $53.1 trillion in the April-June period from the first quarter, according to the Fed’s quarterly flow of funds report. However, this level was still down nearly 19% from the $65.3 trillion peak reached in the third quarter of 2007, just before the stock market hit its peak, analysts said (The Wall Street Journal Sept. 18) … * Most states saw employment fall between July and August, and roughly half the country saw a rise in unemployment, according to the Bureau of Labor Statistics. Led by Georgia, Michigan and Texas, 42 states and the District of Columbia reported a net decline in payroll employment for August. Also, 27 states and the District of Columbia reported higher unemployment rates--slightly higher than the number that reported increases in July. North Dakota posted the lowest unemployment rate, while Michigan posted the highest rate. Despite the broad-based employment drops in August, job losses in most U.S. regions were moderate compared with fast rates of decline reported earlier in 2009. In a related matter, unemployment in New York City hit 10.3% in August--a 16-year high (Moody’s Economy.com and The New York Times Sept. 18) … * In August, the probability that the U.S. will be in recession six months from now fell to 29% from 35% a month earlier. Based on improving economic data, a recovery appears to have begun, analysts said. A combination of factors--including increases in vehicle production, the success of “Cash for Clunkers” vehicle rebates, a slower pace of inventory liquidation and the federal government’s fiscal stimulus--will cause third-quarter gross domestic product to be positive for the first time since the second quarter of 2008, analysts predict. However, even with economic growth resuming, policymakers need to be on guard because the economy and financial markets still are frail, they added (Moody’s Economy.com Sept. 18) …

News of the Competition (09/17/2009)

 Permanent link
MADISON, Wis. (9/18/09)
* As a result of reining in bad loans, Discover Financial Services’ third-quarter profit more than tripled, the company said Thursday. Write-offs for bad loans were 8.39% in the quarter, close to its previous forecast of 8.5% to 9%. The credit card lender had received $1.2 billion from the Treasury’s rescue fund. For the quarter ended Aug. 31, net income increased to $577.5 million--or $1.07 per share--from $180.1 million--or 37 cents per share--in the same period last year. Discover’s profit was aided by a $287 million gain from an antitrust settlement with MasterCard Inc and Visa Inc., the statement said. Also, Discover’s pretax card income rose to $913 million from $245 million (Bloomberg.com Sept. 17) … * Citigroup Inc.--the third-largest U.S. bank--intends to exit the federal government’s bank rescue program, said people familiar with the matter. Citigroup was the largest user of U.S. government debt guarantees under last year’s rescue program. The bank and the Federal Deposit Insurance Corp. (FDIC) have discussed leaving the program when it expires Oct. 31. The bank doesn’t intend to seek an emergency extension, one source said. Citigroup had $72.4 billion of FDIC-guaranteed debt outstanding as of June 30. A departure from the program would test the bank’s ability to fund itself, analysts said (Bloomberg.com Sept. 16) … * New York Attorney General Andrew Cuomo issued subpoenas to five current and former directors of Bank of America (BofA) as part of his continuing investigation into BofA’s takeover of Merrill Lynch. At issue is which of BofA’s executives knew about large losses and bonus payments at Merrill before the two banks merged last year. Cuomo’s move could indicate a more intense investigation of corporate boards, said one person briefed on the investigation. Members of BofA’s audit committee--which reviews important legal matters--were the directors served with subpoenas (The New York Times Sept. 17) …

Market News (09/17/2009)

 Permanent link
MADISON, Wis. (9/18/09)
* U.S. housing construction in August rose to its highest level in months due to an uptick in apartment construction offsetting a drop in single-family construction, according to the Commerce Department. Construction of new homes and apartments increased 1.5% to an annual rate of 598,000 units in August--just short of the 600,000-unit pace forecast by economists. The August numbers indicate the U.S. housing industry is in the beginning stages of recovery from the worst downturn in decades, analysts said. The August gains moved building activity to it highest level since November and pushed home construction 24.8% above the record-low in April (The New York Times Sept. 18) … * U.S. initial jobless claims unexpectedly dropped last week, signaling that the labor market is receding at a slower pace while the economy begins to recover from a recession, analysts said. First-time claims applications for the week ended Sept. 12 dropped 12,000 to 545,000 from a revised 557,000 claims the previous week, according to Labor Department data. However, the number of people collecting unemployment benefits rose to 6.23 million the prior week. Although the job market may be starting to stabilize as the economy grows, economists surveyed by Bloomberg forecast the unemployment rate would reach 10% this year. This indicates hiring likely will not increase for several months, and the broader economic recovery will not be spearheaded by consumers, analysts said (Bloomberg.com Sept. 17) … * For each loan they originated in the first quarter, mortgage bankers made an average profit of $1,088, said the Mortgage Bankers Association (MBA). This is a distinct improvement over fourth quarter results in which profits averaged $148 per loan, according to MBA’s Quarterly Mortgage Performance Report. The report gauges the performance of independent mortgage bankers and subsidiaries of banks, thrifts and hedge funds. "It is clear the refinance boom in the first quarter of 2009 contributed greatly to an increase in overall production volumes, allowing production operating expenses per loan to finally drop,” said Marina Walsh, MBA’s associate vice president of industry analysis. “The average share of refinancings to total originations for these companies jumped to 66% in the first quarter, from 42% in the previous quarter. As a result, the average production volume for each firm was $213.9 million in the first quarter of 2009 compared to $125.6 million in the fourth quarter of 2008.” For MBA Study Shows Increased Profits in the First Quarter of 2009, Spurred by Heavy Refinancings, use the link …

News of the Competition (09/16/2009)

 Permanent link
MADISON, Wis. (9/17/09)
* Monthly reports released Tuesday by the largest U.S. credit card issuers suggest that credit-loss rates increased in August. The figures indicate a month-over-month decline in the rate at which lenders had to write off debt as uncollectible in July. This means continuing problems in the card industry due to record levels of bad loans, analysts said. A decline in the industry-wide charge-off rate in July was the first monthly drop since September 2008, according to an index updated by Moody’s Investors Service Inc. Credit card issuers with increased charge-off rates or higher balances past-due last month included: Bank of America, Citigroup Inc., JPMorgan Chase, American Express Co., and Capital One Financial Corp. (American Banker Sept. 16) … * It is unlikely that the U.S. commercial real estate market will recover before 2012, according to a survey of property investors released Tuesday. Downtown office rents likely will fall roughly 10%, and suburban office rents will drop about 20% through next year, according to the quarterly PricewaterhouseCoopers Korpacz Real Estate Investor Survey. U.S commercial property values nosedived 36% since hitting their zenith in 2007. The drop was due to mortgage losses causing banks to restrict lending, analysts said. The biggest hindrance to a recovery is that companies are trying to cut costs, with many laying off workers and continuing to reduce their office space needs, said Susan Smith, director of PricewaterhouseCoopers Korpacz real estate advisory service. And because commercial real estate lags events in the economy, this means a recovery will take time, she added. In a related matter, the Treasury Department--in a move that aims to curtail a rise in defaults--has implemented rules that permit lenders to revise commercial real estate loans without triggering tax penalties (Bloomberg.com via American Banker Sept. 16) …

Market News (09/16/2009)

 Permanent link
MADISON, Wis. (9/17/09)
* Fueled by rising energy costs, overall consumer prices rose in August, even though prices for most other goods and services remained stable, according to a Labor Department report issued Wednesday. The department’s consumer price index rose 0.4% last month after remaining unchanged in July. Analysts say this is a signal that inflation is seeping back into the U.S. economy, although not as quickly as some investors had forecast. Food, housing and recreation prices increased slightly. However, clothing and new-car prices declined from a month earlier. The core inflation rate--prices for all items excluding food and energy--rose 0.1% in August, suggesting that most costs of living are not in step with the upward trend of oil and gasoline prices, analysts said (The New York Times Sept. 17) … * U.S. industrial production rose 0.8% in August after increasing 1% in July--the first consecutive monthly increases since November/December 2007, according to a Federal Reserve report. Sparked by gains in motor vehicle production, manufacturing output increased 0.6%. Manufacturing gains are becoming more widespread and should continue even as gains in the auto industry subside, analysts said. For Industrial Production Capacity Utilization, use the link (Moody’s Economy.com Sept. 16) … * Mortgage loan application volume decreased 8.6% on a seasonally adjusted basis for the week ended Sept. 11 from one week earlier, according to the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association. On an unadjusted basis, the index rose 18.3% compared with the previous week and 18.7% compared with the same week one year earlier. The Refinance Index--with adjustments for the Labor Day holiday--declined 7.4% from the previous week. The seasonally adjusted Purchase Index dropped 10.3% from one week earlier. For Mortgage Applications Decrease in Latest MBA Weekly Survey, use the link ... * The U.S. current account deficit narrowed 5.5% to $98.8 billion in the second quarter, compared with a first-quarter deficit of $104.5 billion, which was revised from a previous $101.5 billion, according to the Bureau of Economic Analysis. Some analysts said they had expected a larger narrowing to $93.1 billion. Also, the surplus on income narrowed by $1.9 billion to $16.4 billion. The U.S. trade deficit narrowed to $83 billion from $92.4 billion. The trade deficit is the smallest it’s been in a decade, mostly because of the recession--in which the country reduces all forms of consumption, including imports, analysts said. By holding exports steady, this reduces the trade deficit, they added (Moody’s Economy.com Sept. 16) …

News of the Competition (09/15/2009)

 Permanent link
MADISON, Wis. (9/16/09)
* Citigroup Inc. is looking to cut down the U.S. government’s 34% stake in the financial firm. Company executives have created plans for a possible multibillion-dollar joint stock sale with the Treasury Department. Under the plan, Citigroup would issue new shares to the public, and the Treasury would sell at least a portion of its Citigroup holdings, said people familiar with the situation. Thus far, Citigroup hasn’t held any substantial talks with the government. Citigroup called a Treasury official last weekend to get the ball rolling in attempts to trim the Treasury’s investment, said people familiar with the matter. Citigroup said during the call that it plans to raise outside capital to repay any outstanding bailout funds. Treasury reportedly did not object to Citigroup paying back the government as long as it could raise offsetting capital (The Wall Street Journal Sept. 15) … * A federal judge has tossed out the Securities and Exchange Commission’s (SEC) proposed settlement with Bank of America concerning BofA’s disclosure of bonuses paid to Merrill Lynch employees. The ruling by U.S. District Judge Jed Rakoff raises questions about how the agency manages probes of major U.S. companies, analysts said. “The proposed consent judgment in this case suggests a rather cynical relationship between the parties … And all this is done at the expense, not only of the shareholders, but also the truth,” Rakoff said in a statement. By rejecting the SEC deal, the judge implicitly postulated wider-ranging questions about the government’s role in taking unprecedented steps to rescue the U.S. financial system, analysts said (The Wall Street Journal Sept. 15) …

Market News (09/15/2009)

 Permanent link
MADISON, Wis. (9/16/09)
* Wholesale or producer prices--those paid to factories, farmers and other producers--increased steeply by 1.7% in August, following a 0.9% decline in July, according to the Labor Department’s Producer Price Index. The rise was the fourth gain in five months. The price increase was twice what was forecast, largely due to rapid inflation among energy products led by gasoline costs, analysts said. Core prices, which exclude food and fuel, rose 0.2%--higher than forecast. Companies will have a difficult time passing higher expenses onto customers until the economic recovery results in sustained gains in business investment and consumer spending, analysts said. Inflation will remain low, economists predict, which will allow the Federal Reserve to keep interest rates close to zero to spark growth, they added (Bloomberg.com and Moody’s Economy.com Sept. 15) … * Consumer auto purchases spurred sales at U.S. retailers in August by the highest amount in three years, with total sales rising 2.7%. The increase was sparked by the government’s “Cash for Clunkers” program, analysts said. August sales rose 1.1%, excluding autos, and 0.6%, excluding gas at stations--which experienced benefits from prices, they added. Department stores, sporting goods and apparel experienced significant gains. Furniture and building supply stores were the sole areas of weakness. Data indicate that back-to-school sales were stronger then originally thought (Moody’s Economy.com and Bloomberg.com Sept. 15) … * Total business inventories declined 1% in July, as expected, according to a report from the Census Bureau. The month’s drop constituted the 11th consecutive monthly inventory decline. July had a slower rate of decline compared with June (-1.4%), which suggests that businesses are making headway in trimming inventories closer to desired levels, analysts said. Retail inventories declined 1%. The I/S (inventory-to-sales) ratio fell to 1.36 from a previous 1.38; the high was 1.48 in January (Moody’s Economy.com Sept. 15) …

News of the Competition (09/14/2009)

 Permanent link
MADISON, Wis. (9/15/09)
* Federal regulators Friday shut down Corus Bank--a $7 billion asset national bank that once was an aggressive lender in the condominium markets. As those markets bottomed out during the recession, the bank sustained heavy losses, analysts said. Appointed receiver after Chicago-based Corus was seized Friday, the Federal Deposit Insurance Corp. (FDIC) entered a purchase and assumption agreement with MB Financial Bank of Chicago. In assuming all Corus deposits, MB will pay a 0.2% premium, the FDIC said. Also, MB agreed to purchase roughly $3 billion of Corus’ assets--mostly cash and marketable securities. The FDIC intends to sell the remaining assets of Corus in the next 30 days in a private placement. Corus’ failure will cost the FDIC’s Deposit Insurance Fund about $1.7 billion, analysts said (Austin Business Journal and American Banker Sept. 14) ... * A year after Bank of America (BofA) purchased Merrill Lynch & Co., there are signs that BofA may be making financial headway on the deal, causing some of the transaction’s critics to say it is starting to make strategic sense, analysts said. In the second quarter, Merrill contributed to investment banking revenue that increased 60% from the previous quarter to $1.6 billion. The rebranded Bank of America Merrill Lynch was at the top of first-half 2009 measures for mortgage-backed securities, leveraged loans and high-yield debt, according to Dealogic (American Banker Sept. 14) …

Market News (09/14/2009)

 Permanent link
MADISON, Wis. (9/15/09)
* The U.S. economy could experience its slowest recovery since World War II as it rallies to make up for what was lost in the recession, analysts said, even if economists’ rosiest forecasts come true. The economic downturn was so steep that the 3.5% average quarterly growth next year forecast by Bruce Kasman, chief economist for JPMorgan Chase, won’t be sufficient to push gross domestic product (GDP) back to its $13.42 trillion peak before the recession, he said. This counters the past 10 U.S. economic recoveries in which GDP bounced back to its previous levels within one year, analysts said (Bloomberg.com Sept. 14) … * Business confidence worldwide is consonant with the beginning stages of a global economic recovery, according to the Moody’s Economy.com Survey of Business Confidence. Conditions should continue to improve this year and early in 2010, per business expectations--which are strong--analysts said. The strongest sentiment is evident among business service firms and in Asia and South America. The government sector and European businesses are the least optimistic. Software and equipment investment is robust, the survey indicated. And although hiring and inventory investment are noticeably weaker, they also show signs of improvement. Pricing power is indicative of a low inflation rate (Moody’s Economy.com Sept. 14) … * U.S. credit scores continue to level off and remain stable for many consumers, according to a report released by Credit Karma Thursday. About 37% of consumer credit scores rose, 29% dropped, and 34% remained the same, the U.S. Credit Score Climate Report indicated. Currently, the average U.S. consumer credit score is 673. Also, consumer credit card debt continues to decline, dropping $43 in August among consumers with a credit card account. The report indicates that in August, the average consumer with an open account had $6,775 in credit card debt. Other August statistics indicate the average consumer with an open account had: $195,386 in home mortgage loans; $54,642 in home equity; $14,439 in auto loans; and $26,080 in student loans …

News of the Competition (09/11/2009)

 Permanent link
MADISON, Wis. (9/14/09)
* Prices of U.S. imports rose a higher-than-anticipated 2% in August, according to a report by the Bureau of Labor Statistics. Import prices have risen in all but two months this year. Excluding fuels, import prices increased 0.4%--the largest amount since 2008--compared with -0.2% in July. Small increases in import prices--excluding fuels--if sustained, are good--as there is still a risk of significant disinflation, analysts said. Due to escalating unemployment and a substantial output gap, inflation is not an immediate concern, they added (Moody’s Economy.com Sept. 11) … * Fannie Mae is speeding up its funding in mortgage-backed transactions to hasten turnaround for lenders amid scant U.S. warehouse lending. Warehouse lending is a line of credit extended by a financial institution to a loan originator to fund a mortgage that a borrower initially used to buy a property. The loan typically lasts from the time it is originated to when the loan is sold into the secondary market, whether directly or through a securitization. Fannie is not intending to get into the warehouse lending business, but is looking at ways to provide support for warehouse lending due to a request from its regulator--the Federal Housing Finance Agency--and the Treasury Department, said Michael Williams, Fannie president/CEO (National Mortgage News via American Banker Sept. 11) …

Market News (09/11/2009)

 Permanent link
MADISON, Wis. (9/14/09)
* The U.S. economy’s movement out of a recession will happen at faster rate than previously expected before it slows due to the end of the government’s auto rebate program acting as a drag on consumer spending, according to a survey of economists. From July through September this year, the economy will increase at a 2.9% annual rate--compared with a forecast of 2.2% the previous month--according to median estimates of 61 economists surveyed in a monthly Bloomberg News survey. For the last quarter of 2009, growth is forecast to slow to a 2.2% pace, the survey indicated. An unemployment rate that soared to a 26-year high last month and a record drop in borrowing by Americans suggests that business and government spending--rather than consumer spending--will shape the strength of the economic recovery, analysts said. (Bloomberg News Sept. 11) … * U.S. consumer confidence increased more than forecast in September due to a reduced pace of job losses and signs of recovery, analysts said. The Reuters/University of Michigan preliminary index of consumer sentiment rose to 70.2 in September--exceeding the 67.5 forecast in the Bloomberg survey of economists-- from 65.7 in August. Consumers are more optimistic after going through a record diminution of wealth and the slump in home and stock prices, analysts said. However, consumers still may be reluctant to increase their spending--which constitutes 70% of the US. economy--as they focus on paying down debt and bolstering their savings, analysts said (Bloomberg.com Sept. 11) …

Market News (09/10/2009)

 Permanent link
MADISON, Wis. (9/11/09)
* Signaling a slower pace of labor market deterioration, first-time claims for U.S. jobless benefits declined last week to the lowest level since July. For the week ended Sept. 5, applications declined by 26,000 to 550,000--lower than economists’ forecasts--from a revised 576,000 the week before, according to Labor Department data released Thursday. Also, the total number of people collecting unemployment fell to the lowest level since April. After 20 consecutive months of job losses, the economy may be beginning to stabilize, economists said. However, a return to job growth is likely many months away, because many companies are delaying the hiring of new workers, analysts said (Bloomberg.com Sept. 10) … * With demand increasing for cars, computers and oil, the U.S trade deficit grew in July, and imports gained by a record percentage, analysts said. The gap between imports and exports rose 16%--the most in 10 years--to $32 billion, which is up from a revised $27.5 billion in June--larger than previously forecast, the Commerce Department said. Imports jumped 4.7%--outpacing a 2.2% rise in exports. Exports are beginning to grow as the worldwide economy comes out of its worst slump since World War II, which is resulting in increased demand for U.S.-made goods, analysts said (Bloomberg.com Sept. 10) …

News of the Competition (09/10/2009)

 Permanent link
MADISON, Wis. (9/11/09)
* The Beige Book--a compilation of information on economic conditions for each of the 12 Federal Reserve Banks in the U.S.--indicates that while residential real estate markets remained weak, there were indications of improvement. Over the past six weeks, Chicago, Richmond, Boston and San Francisco experienced an uptick in sales. Overall U.S. consumer spending, retail sales, loan demand and labor market conditions were flat or weak, the report indicated. For Summary of Commentary on Current Economic Conditions by Federal Reserve District (Beige Book), use the link … * U.S. chain store sales increased 0.6% for the week ended Sept. 5--which continues a see-saw pattern of growth that was recently established, according to the International Council of Shopping Centers (ICSC) Sales Index. Consumer spending remains lethargic, analysts said. Year-ago growth is continuing to trend nearly flat. Also, sales were 0.1% lower than their year-ago level--the eighth year-ago decline in the past nine weeks. However, the decline was smaller than most, analysts said. Customer traffic and sales for the week reportedly got a boost from cooler weather (Moody’s Economy.com Sept. 9) …

News of the Competition (09/09/2009)

 Permanent link
MADISON, Wis. (9/10/09)
* The Market Composite Index--a measure of mortgage loan application volume--increased 17% for the week ending Sept. 4 on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index rose 15.8% compared with the previous week and 64.5% compared with the same week one year earlier. The index is part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association. In the largest jump since mid-March, the Refinance Index rose 22.5% from the previous week. The seasonally adjusted Purchase Index increased 9.5% from one week earlier--the largest gain since early April. For Lower Rates Spur Mortgage Applications in Latest MBA Weekly Survey, use the link … * Lawsuits against creditors and collection firms leapt 46% between Aug. 16 and Aug. 31 with 513 collectors being sued, according to the Web Recon LLC, which tracks lawsuits individual consumer statutes--primarily the Fair Debt Collection Practices Act, the Fair Credit Reporting Act and the Truth-in-Lending Act. To date this year, 6,160 industry-related lawsuits were filed in the U.S.--including 5,111 alleging Fair Debt Collection Practices Act violations and 853 claiming Fair Credit Reporting Act violations (Collections & Credit Risks via American Banker Sept. 9) …

Market News (09/09/2009)

 Permanent link
MADISON, Wis. (9/10/09)
* Gross hiring activity in July remained weak, according to the Job Openings and Labor Turnover Survey conducted by the Bureau of Labor Statistics. Hiring rose slightly to 4 million new hires up from 3.9 million in June. The number of job openings fell in July to about 2.4 million--about half the amount available earlier in the decade during the economic expansion--from roughly 2.5 million in June. The number of people who left their jobs remained steady at 4.3 million. Regionally, the job openings rate was highest in the Northwest (2%) although it also fell the most there--from 2.4%. The job openings rate was lowest in the South and West--1.7% (Moody’s Economy.com Sept. 9) … * The U.S. dollar fell to its lowest level in nearly a year Wednesday against currencies of six major U.S. trading partners because record-low borrowing costs incentivized investors to sell dollars and purchase higher-yielding assets, analysts said. Investors are using dollars--which became the cheapest funding currency in London this week--to fund their risky investments, said Bilal Hafeez, the London-based global head of foreign-exchange strategy for Deutsche Bank AG--the largest currency trader in the world. Many investors are borrowing dollars for the purpose of investing them in other markets, he added (Bloomberg.com Sept. 9) …

News of the Competition (09/08/2009)

 Permanent link
MADISON, Wis. (9/9/09)
* With more U.S. consumers gaining confidence in their personal finances and the economy, the Discover Financial Services Spending Monitor rebounded in August, increasing 3.5 points to 87 on a 100-point scale. Overall, 31% of consumers think economic conditions are on the upswing--a Monitor high and 7-point rise from July. Also, 21% of respondents said their personal finances were improving--the highest number since August 2008. Although an increase in economic and personal financial confidence could signal that consumers think the future will be brighter, it doesn’t necessarily mean they will resume spending, analysts said. Heading into September, consumers intend to continue to maintain a tight hold on discretionary spending, the survey indicated (Reuters Sept. 2) … * Despite a recovery, credit availability is still depressed, according to August’s Credit Management Index, said National Association of Credit Management economist Chris Kuehl. Although August’s index inched up to 48.1 in August from 48 the previous month, other economic indicators weakened, including the amount of credit extended, new credit applications and dollar collections, the survey indicated. Lenders also are troubled about the upcoming G-20 meetings in which a premier topic will be the pulling back of stimulus and financial support programs. “We’re not ready, we’re just getting back on our feet,” Kuehl said (USBanker Sept. 8, 2009) …

Market News (09/08/2009)

 Permanent link
MADISON, Wis. (9/9/09)
* U.S. employers’ hiring plans for the pending fourth quarter this year fell to their lowest level in the history of Manpower’s Employment Outlook Survey, which began in 1962. In the fourth quarter, the Milwaukee-based company’s survey of more than 28,000 employers indicated that a net -3% of employers said they will hire--down from -2% in the third quarter on a seasonally adjusted basis. Before 2009, the survey’s previous low-point was in the third quarter of 1982 with a net 1% hiring outlook, analysts said. In 2008, a seasonally adjusted 9% of firms indicated they would hire in the fourth quarter. The survey measures the percentage of firms planning to hire minus the firms intending layoffs; it doesn’t measure the number of jobs. In a separate issue, the economy lost 216,000 jobs in August--the 20th consecutive monthly decline, according to the U.S. Labor Department (MarketWatch Sept. 8) … * World stock markets and the price of gold rose Tuesday morning with gold prices hitting their highest level in a year and a half ($1,003 per ounce)--an indication that traders think an economic recovery could fuel inflation and ratchet up the demand for raw materials, analysts said. Also, prices of copper, crude oil and other commodities increased. Investors are anticipating that businesses and factories worldwide--especially in China--will start to order more goods to restock depleted inventory stockpiles, analysts said. As production increases and businesses need more supplies, prices of metal and other resources will go up, said Bart Melek, a commodity strategist for BMO Capital Markets (The New York Times Sept. 9) …

News of the Competition (09/07/2009)

 Permanent link
MADISON, Wis. (9/8/09)
* Direct borrowing by U.S. banks from the Federal Reserve’s discount window increased for the week ended Sept. 2, according to Fed data released Thursday. Overall bank borrowings averaged $109.22 billion per day, compared with an average $105.99 billion per day the week before. The Fed’s balance sheet--which is a broad measure of the central bank’s lending activity to the financial system--increased to $2.069 trillion Sept. 2 from $2.052 trillion Aug. 26. Overall primary discount window borrowing in the latest week averaged $32.66 billion per day, compared with $29.98 billion the previous week (Reuters Sept.3) … * The collapse of Capmark Financial Group Inc. may be a sign of a new upwelling of real estate losses for banks that could propel the number of bank failures this year to more than 100, analysts said. The failure of Capmark--one of the biggest U.S. real estate lenders according to rankings by Moody’s Investors Service--was related to business property. On Sept. 2, the Horsham, Pa.-based company posted a quarterly loss of $1.6 billion and said it could go bankrupt. As the default rate more than doubled on commercial mortgages held by U.S. banks, Capmark experienced difficulties, analysts said (Bloomberg.com Sept. 4) … * After their stocks more than tripled in August, mortgage finance companies Fannie Mae and Freddie Mac avoided being delisted from the New York Stock Exchange. Federal regulators seized the two government-sponsored enterprises (GSE) a year ago. Shares of Fannie and Freddie increased last week to above $2--their highest levels since the government placed the GSEs into conservatorship in September 2008 because of escalating mortgage delinquencies. In August, Fannie Mae’s share value was up 232%, while Freddie Mac jumped 269%. However, the rally was deemed unjustified by FBR Capital’s Paul Miller, who said there is no remaining fundamental value in the GSEs. He added that the leap in value was due to short sellers and investor speculation regarding reverse stock splits (Bloomberg.com Sept. 4) …

Market News (09/07/2009)

 Permanent link
MADISON, Wis. (9/8/09)
* The U.S. unemployment rate hit a 26-year high of 9.7% in August, according to a Labor Department report issued Friday. The good news is that the labor market is slowly improving as the pace of job losses dropped to a one-year low last month, analysts said. Employers cut 216,000 jobs--the lowest amount since August 2008. Analysts had forecast nonfarm jobs to decline by 225,000 and the unemployment rate to increase to 9.5%. Average hourly earnings rose by 0.3%--in line with the July increase, analysts said. Revised job losses for June and July indicate there were 49,000 more job losses than previously reported. Many analysts concur that the job market and economy are improving, but their recoveries will be slow (The New York Times and Moody’s Economy.com Sept. 4) … * The Economic Cycle Research Institute’s U.S. Future Inflation Gauge (FIG) rose to 89.6 in August from 84.6 the previous month. The smooth annualized growth rate increased to 6.5% from -8.8%. Although it remains low by historical standards, the U.S. FIG has recorded five consecutive monthly gains, analysts said. The gauge could be beginning to indicate some nascent inflation pressures coming--but well in the future, they added (Moody’s Economy.com Sept. 4) … * The International Monetary Fund (IMF) has upwardly revised its world gross domestic product forecast for 2009 and 2010 for major industrialized economies and worldwide, according to a document obtained Friday by Reuters. In 2009, the world economy will contract 1.3%--slightly less than the IMF’s earlier forecast of a 1.4% dip. It then will expand 2.9% in 2010--an upward revision from the 2.5% the IMF forecast in April. However, the IMF downgraded its 2009 outlook for the U.S. and Great Britain, forecasting a 2.9% U.S. contraction and a 4.5% downturn for Great Britain (The New York Times Sept. 4) …

Market News (09/03/2009)

 Permanent link
MADISON, Wis. (9/4/09)
* As U.S. companies continue to trim expenses, more Americans than predicted filed jobless-benefits claims last week. For the week ended Aug. 29, applications dropped 4,000 to 570,000 but exceeded the 564,000 median forecast of economists surveyed by Bloomberg News, according to data provided by the Labor Department Thursday. Because of worker firings, consumer spending--which constitutes 70% of the U.S. economy--will have a difficult time becoming stronger, according to economists. Bloomberg’s survey of analysts indicates they predict a Labor Department report due out today will show that August payrolls dropped 230,000--the smallest decrease in a year (Bloomberg.com Sept. 3) … * The Institute for Supply Management (ISM) Nonmanufacturing Index rose two points to 48.4 in August from 46.4 in July--the highest level recorded since September 2008. Readings below 50 indicate contraction. This is further evidence the U.S. economy is beginning to come out of the recession, analysts said. Business activity and new orders were healthy, but employment remained down, analysts said. Actions such as the “Cash for Clunkers” vehicle incentive program and the Federal Reserve’s attempts to unfreeze credit are bolstering demand and could help the economy grow in the third quarter. However, rising unemployment and a record drop in wealth loom as problems because they dampen consumer spending, which is needed to provide a sustained economic recovery, analysts said (Moody’s Economy.com and Bloomberg.com Sept. 3) … * Small-business owners’ confidence in the U.S. economy in August has leapt to its highest level in 18 months, according to the most recent Discover Small Business Watch index provided by Discover Financial Services. The index increased 7.7 points from July to 89.8--the highest level since a 90.9 reading in February 2008. “For the past few months, small-business owners have shown rising confidence in the overall economy as well as an increasing sense that the conditions for their own businesses are improving,” said Ryan Scully, Discover's business credit card director, in a press release. “This month we have a few more signs that they may be ready to start trying to grow their businesses again and that the worst may be over” (Reuters Aug. 31) …

News of the Competition (09/03/2009)

 Permanent link
MADISON, Wis. (9/4/09)
* The Federal Reserve is attempting to prepare the investor markets for the end of the Fed’s housing-debt purchases, while also maintaining interest rates near zero. This is indicative of an economy coming out of a recession with little momentum, analysts said. Members of the Federal Open Market Committee (FOMC) considered extending the end date of the agency and mortgage-backed bond programs at the FOMC’s Aug. 11-12 meeting, according to the FOMC minutes released Wednesday. The goal of such an action would be to avoid housing-credit disruptions at a time when prospects of recovery are threatened by escalating unemployment and slowing growth in wages, analysts said. For

News of the Competition (09/02/2009)

 Permanent link
MADISON, Wis. (9/3/09)
* August U.S. auto sales received a spark from the “Cash for Clunkers” program and rose to their highest monthly total in more than a year, stoking hopes that in the months ahead the auto industry’s recovery will continue, analysts said. Although the industry anticipates a sales slowdown in September, automakers said they are optimistic that the improving U.S. economy will lead to a broader expansion of vehicle sales. Automakers sold 1,261,977 cars and pickup trucks--about a 1% increase from a year earlier and up from 997,824 in July. The August tally was the first time the industry experienced a year-over-year increase since October 2007 and its highest sales total since May 2008, analysts said (The Wall Street Journal Sept. 2) … * Saying it will save the credit card processor more than $100 million, Visa Inc. announced Monday it would prepay the remainder of a big legal settlement with U.S. merchants-- which will garner the company a discount. Visa said it will prepay $683 million by Sept. 30--which will negate the $800 million it still owes on a $2 billion settlement reached in June 2003 by its subsidiary, Visa USA. The settlement was a culmination of a lawsuit that alleged Visa and MasterCard Inc. conspired to set prices and restrict trade (The New York Times Aug. 31) … * Citigroup Inc. is selling three credit card portfolios to U.S. Bancorp and is shutting down the co-branded cards it issues for retail partner Home Depot Inc. to rid itself of troublesome card assets, analysts said. The Citi Holdings unit that Citigroup formed in January comprises the three card portfolios being sold and the Home Depot accounts. They are among the unwanted assets Citigroup intends to sell or unwind and include cards it issues for affinity groups and retailers, or as an agent for smaller banks (American Banker Sept. 2) …

Market News (09/02/2009)

 Permanent link
MADISON, Wis. (9/3/09)
* U.S. companies cut more jobs than predicted in August, according to data from ADP Employer Services. The month’s data are a sign that employers are not confident about a recovery from the steepest recession since the 1930s, analysts said. The 298,000 jobs cut in August--290,000 was the forecast--followed a revised 360,000 lost in July. Consumer spending, which constitutes roughly 70% of the U.S. economy, may be slow in rebounding in the next few months, analysts said. Also a pending Labor Department release will indicate the U.S. unemployment rate increased to 9.5% in August, they added. The labor market’s return to health will be “slow and painful” due to the scope of the recession and uncertainty surrounding the vigor and sustainability of a recovery, said Ryan Sweet, a senior economist at Moody’s Economy.com (Bloomberg.com Sept. 2) … * U.S. factory orders increased less than forecast in July, hampered by a drop in non-durable goods such as food and oil--which mitigated a rise in demand for new equipment that exceeded predictions, analysts said. Orders rose 1.3% following a revised 0.9% June increase that was bigger than anticipated, the Commerce Department said Wednesday. Factory orders were forecast to rise 2.2 %, according to the median of 63 estimates in a survey by Bloomberg News. Meanwhile, possibly reflecting lower prices, the 1.9% decrease in non-durable goods orders was the largest drop this year, analysts said (Bloomberg.com Sept. 2) … * Mortgage loan application volume--declined 2.2% for the week ending Aug. 28 on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Market Composite Index dropped 3.1% compared with the previous week and increased 22.7% compared with the same week one year earlier. The index is part of the Weekly Mortgage Applications Survey, conducted by the Mortgage Bankers Association (MBA). The Refinance Index decreased 3.1% from the previous week, and the seasonally adjusted Purchase Index dropped 1% from a week ago. For Mortgage Applications Decrease in Latest MBA Weekly Survey, use the link ...

News of the Competition (09/01/2009)

 Permanent link
MADISON, Wis. (9/2/09)
* So far in 2009, only three mutual thrifts have been able to go public. However, the conversions are picking up with two big deals in the pipeline. Northwest Bancorp Inc., a $7 billion asset, Warren, Pa.-based bank, and OmniAmerican Bank, a $1.1 billion asset Fort Worth-based institution have announced their plans to sell stock. The market for mutual conversions and bank and thrift stocks has been rough, analysts said. During the past year, at least four thrifts canceled their conversion deals due to a lack of investor interest. By this time last year, there had been seven conversion offerings, including some first and second steps (American Banker Sept. 1) … * The Council of Better Business Bureau’s national advertising division has reprimanded U.S. Bank for ads its U.S. Bancorp unit ran in competition with American Express Co. The ads hoped to attract credit card customers who found themselves without reward programs after an airline merger. Both card companies offer cards that feature airline-miles rewards programs to customers of Northwest Airlines--which merged with Delta Airlines. U.S Bank’s ads attempted to make its card look better than AmEx’s after presenting comparisons between the two, analysts said. After reviewing the U.S. Bank ads, the council did not find their claims valid, and directed the bank to never again make the claims used in the ads. The ad campaign is old and no longer in use, and U.S. Bank will take “into consideration” the council’s directive, said a bank spokesman (American Banker Sept. 1) …

Market News (09/01/2009)

 Permanent link
MADISON, Wis. (9/2/09)
* For the first time since 2001, contract activity for pending home sales has increased for six consecutive months, according to the National Association of Realtors (NAR). The Pending Home Sales Index--which began in 2001--is a forward-looking indicator. Based on contracts signed in July, the index increased 3.2% to 97.6 from a 94.6 reading in June, and is 12% higher than its 87.1 reading in July 2008. The index is at it highest level since it registered 100.7 in June 2007. The index indicates that housing momentum is on the rise, according to Lawrence Yun, NAR chief economist. “The recovery is broad-based across many parts of the country,” he said. “Housing affordability has been at record highs this year with the added stimulus of a first-time buyer tax credit.” For Pending Home Sales on a Record Roll, use the link … * Spending on U.S. construction dropped slightly in July, the Commerce Department said Tuesday. The best tally for home building in the past 10 months was mitigated by weakness in government projects and nonresidential building, the department said. Following a 0.1% increase in June, July construction spending slipped 0.2%--more than economists anticipated. The drop-off in July happened despite a 2.3% increase in construction for homes and apartments for the month. July experienced the most construction since September 2008 and is a sign that the lengthy U.S. housing slump may be ending, analysts said (The New York Times Sept. 1) … * The Institute for Supply Management’s (ISM) manufacturing index rose four points to 52.9 in August, after decreasing for 18 straight months. The index is consistent with ISM’s forecast of a return of growth in manufacturing and the broader economy in the third quarter. The increase, which is higher than the 50.5 forecast, places the index 10.3 points above its second-quarter average and above the growth threshold of 50 for the first time since January 2008. The August results support future growth as the economy starts to come out of recession, analysts predicted. The index--based on a survey of members of ISM--a trade group of purchasing executives, based in Tempe, Ariz.--included new orders, production, employment, inventories, prices and other factors (Moody’s Economy.com and The New York Times Sept. 1) … * When a new law designed to limit the fees and penalties that credit card companies can levy on consumers begins later this academic year, college students will not be quite as deluged by credit-card marketers, analysts predicted. The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 will place limits on how credit card companies market their products to anyone under the age of 21. The goal is to lessen the credit card debt that many college students have when they graduate, analysts said. Average credit card debt among all U.S. undergraduate college students was $3,173 for 2008--up from $1,879 in 1998, according to a 2009 study conducted by student loan provider Sallie Mae. The study is titled “How Undergraduate Students Use Credit Cards” (SmartMoney.com Sept. 1) …