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News of the Competition (09/30/2010)

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Madison, Wis. (10/1/10)
* JPMorgan Chase said Wednesday it is suspending court cases against defaulting homeowners, so it has time to review its legal procedures (The New York Times Sept. 29). Chase said it is halting 56,000 foreclosures because some of its employees may not have properly prepared necessary documentation. The suspensions are being implemented in the 23 states--including Connecticut, Florida, Illinois, New Jersey and New York--where foreclosures must be approved by a court. Chase is the second major U.S. mortgage lender to suspend foreclosures, following GMAC Mortgage, which said last week it is suspending an undisclosed number of foreclosures to take a more precise look at its own procedures, the Times said … * American International Group (AIG) said Thursday it has come to an agreement in principle with federal regulators about gradually returning ownership of its government-owned stock to public markets and repaying the Federal Reserve Bank of New York for the company’s 2008 rescue (The New York Times Sept. 30). As a component of the plan, the Treasury Department would convert $49.1 billion of AIG’s preferred shares that it holds into common shares (The Wall Street Journal Sept. 30). AIG also would up the government’s ownership in the company to 92.1% from its current 79.8%. AIG and its government rescuers in recent weeks have pushed to finalize such a plan before the Oct. 3 expiration of the Treasury’s Troubled Asset Relief Program--and before the Fed’s bailout loan was due, the Times said …

Market News (09/30/2010)

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MADISON, Wis. (10/1/10)
* U.S. economic, or gross domestic product (GDP), growth decreased to an annualized rate of 1.7%--upwardly revised from 1.6%--in the second quarter, following 3.7% in first-quarter growth, the Commerce Department said Thursday. A “sharp acceleration” in imports and a “sharp deceleration” in private inventory investment caused the second-quarter GDP decline (MarketWatch Sept. 30). Positives in the second quarter included consumer spending and nonresidential fixed investments. Although the U.S. economy continues to grow, the improvement is too weak to lessen the unemployment rate (Moody’s Economy.com Sept. 30). Economic growth will stay weak into 2011, Moody’s said ... * Initial claims for U.S. unemployment benefits fell last week, indicating that companies are reducing job cuts, even as economic growth moderates (Bloomberg.com Sept. 30). Claims decreased 16,000 to 453,000 for the week ended Sept. 25, the Commerce Department said Thursday. Although job cuts are lessening, employers aren’t adding enough workers to reduce an unemployment rate that’s remaining near a 26-year high. Low job growth portends consumer spending--the largest part of the U.S. economy--will be slow to rebound in the next few months, Bloomberg said. “Employers are still kind of cautious,” said Russell Price, a senior economist at Ameriprise Financial Inc. “We need to regain that broader momentum in the economy, and something like that is just slow to develop.” Meanwhile, continuing claims dropped 83,000 to about 4.46 million for the week ended Sept. 18--although this does not include the roughly five million more people on extended and emergency benefits (Moody’s Economy.com Sept. 30). “Although financial markets are for the most part functioning normally now, a concerted policy effort has so far not produced an economic recovery of sufficient vigor to significantly reduce the high level of unemployment,” Federal Reserve Chairman Ben Bernanke said in a speech last week (The Wall Street Journal Sept. 30) … * For the first time in four weeks, U.S. 30-year fixed-rate mortgages decreased—matching a record low as housing demand remains weak (Bloomberg.com Sept. 30). Rates for 30-year mortgages dropped to 4.32% for the week ended Sept. 30, from 4.37% the previous week, according to Freddie Mac. Also, the average 15-year rate was 3.75%, Freddie said. “There’s a problem with confidence because the unemployment rate remains very high,” said Donald Rissmiller, chief economist at Strategas Research Partners. “We have a housing market struggling to stay flat at very depressed levels.” In a related matter, U.S. homes in the process of foreclosure during the second quarter sold at an average 26% discount--as nearly one-fourth of all transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc. (Bloomberg Businessweek Sept. 30) …

Market News (09/29/2010)

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Madison, Wis. (9/30/10)
* Mortgage applications slipped 0.8% while refinances decreased 1.6% during the week ended Sept. 24, according to the Mortgage Bankers Association's (MBA) Mortgage Applications Survey. MBA's Composite Market Index for the week was 784--down 12.3% from four weeks earlier but up 20.7% from one year ago. The Purchase Index rose 2.4%, to 181.8, from the previous week. That figure is also up 4.7% from four weeks earlier and down 32.8% from a year ago. The Refinance Index dropped 1.6% to 4,288.3--a 15.7% decrease from four weeks earlier and a 50.1% increase from the same period a year earlier, said MBA. Refinances accounted for 80.7% of all applications and 80.7% of prospective loan volume. That is down from 81.1% and 81.3%, respectively, MBA noted. The rate for 30-year, fixed-rate mortgages dropped seven basis points to 4.38% from the previous week. It also declined five basis points from four weeks earlier and was down 56 basis points from a year earlier. One-year, adjustable-rate mortgages were at 7.04%-- an eight basis point increase from the previous week. The figure was also a nine basis point increase from four weeks earlier and was up 64 basis points from a year ago, said MBA (Moody's Economy.com Sept. 29) ...

News of the Competition (09/29/2010)

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Madison, Wis. (9/30/10)
* Boston-based Liberty Mutual Holding Co. Wednesday said it is postponing what was supposed to be the largest U.S. initial public offering (IPO) for 2010. The Liberty Mutual Agency Corp. IPO delay stemmed from the "stalled economic recovery, volatile stock market, and undervalued property-and-casualty insurance stock prices," which created an "unfavorable" environment for receiving appropriate value for the business," the company said (MarketWatch and Bloomberg.com Sept. 29). The company had sought to raise nearly $1.3 billion by selling 64.3 million Class A shares for $18 to $20 each, it said in filings with the Securities and Exchange Commission. At least 45 companies have either withdrawn or postponed IPO sales in the U.S. this year, said Bloomberg ... * The U.S. Treasury Department said Wednesday it has begun selling $2.2 billion of Citigroup securities to lock in profits from the bank's bailout in 2008. The government will sell the trusted preferred shares, called Trups, through a public offering managed by five banks. Citigroup will act as global coordinator, not as a sales agent or underwriter. The government received the shares as payment for $301 billion of asset guarantees set in the bailout agreement. The offering will be managed by a syndicate of investment firms, including Bank of America Merrill Lynch, JPMorgan Chase & Co., Morgan Stanley, UBS AG, and Wells Fargo & Co. Because the Treasury was never required to make any payment under the arrangement and has no further obligation, the sale's proceeds will be a net gain to the taxpayer, the Treasury said (Bloomberg.com and The New York Times Sept. 29) ...

News of the Competition (09/28/2010)

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MADISON, Wis. (9/29/10)
* A Treasury Department plan may be announced this week to return American International Group Inc. (AIG) to independence and recoup taxpayer bailout money, said sources familiar with the matter (Bloomberg News via American Banker Sept. 28). As a major component of the strategy, the Treasury would start to convert its $49 billion of the insurer’s preferred stock into common shares to be sold by the first half of 2011, the sources said. The company’s objective is to “repay the taxpayers and position AIG, over time, as a strong, independent company worthy of investor confidence,” said Mark Herr, AIG spokesman. “We have been in discussion with the U.S. Treasury, the Federal Reserve Bank of New York and trustees of the AIG Trust over the terms of the government’s exit from AIG” … * Morgan Stanley, the sixth-biggest U.S. bank by assets, is freezing its investment-banking hiring for the remainder of 2010 and ruling out layoffs through the end of the year, said a source briefed on the matter (Bloomberg.com Sept. 28). The freeze would include Morgan Stanley’s sales and trading units. However, the company intends to hire brokers for the Morgan Stanley Smith Barney Unit, which is a joint venture with Citigroup Inc., the source said. The freeze was prompted by weak trading and equity volume underwriting, leading to the lowest revenue from investment banking and trading since the fourth quarter 2008 for the five largest Wall Street banks, Bloomberg said …

Market News (09/28/2010)

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MADISON, Wis. (9/29/10)
* The prices of single-family U.S. homes in 20 major cities increased 0.6% on a non-seasonally adjusted basis in July, according to the Case-Shiller home price index released Tuesday by Standard & Poor’s (MarketWatch Sept. 28). Prices rose 3.2% during the past year--down from 4.2% in June. In July, prices increased in 12 of 20 metropolitan areas. However, July prices rose at a slower pace from a year earlier, indicating a sales drop-off following the end of a government tax credit for first-time homebuyers (Bloomberg.com Sept. 28). “The big happening in housing markets right now is the decline in buyer demand and stagnating supply,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC. “A huge portion of potential demand can’t afford a home or get a loan”… * U.S. consumer confidence in September dropped to its lowest level in seven months--pushed down by eroding business conditions and a weak labor market, reported the Conference Board, a private research group (The New York Times Sept. 28). The board’s index of consumer attitudes declined to 48.5 points in September from a revised 53.2 in August. “Consumers are pretty pessimistic and they certainly are worried about their jobs,” David Sloan, a senior economist at 4Cast Inc., told Bloomberg.com (Sept. 28). “Consumer spending is growing at a slow pace. Consumers are facing considerable headwinds” …

News of the Competition (09/27/2010)

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MADISON, Wis. (9/28/10)
* Two banks were taken over Friday by regulators and have entered into purchase-and-assumption agreements with other banks, according to the Federal Deposit Insurance Corp. (FDIC). The failures bring the 2010 total for bank failures to 127, compared with 140 failures for all of 2009. Friday’s failed banks include Haven Trust Bank Florida, Ponte Verde Beach, Fla., assumed by First Southern Bank, Boca Raton, Fla.; and North County Bank, Arlington, Wash., assumed by Whidbey Island Bank, Coupeville, Wash. The two closed institutions held roughly $437 million in assets as of June 30. The FDIC estimated that the banks' failures will cost the Deposit Insurance Fund about $105 million ... * Central banks worldwide and the International Monetary Fund sold roughly 94.5 metric tons of gold in the year that ended Sunday--the lowest amount since an agreement was struck in 1999, according to World Gold Council data (Bloomberg.com Sept. 27). Gold is headed for a 10th consecutive annual advance--the longest such streak since at least 1920--prompting central banks worldwide to add the precious metal to reserves, Bloomberg said. Combined central bank gold holdings rose in every quarter since the second quarter 2009, the council said. Concern that uncoordinated selling was destabilizing the gold markets and driving down prices led to the 1999 Central Bank Gold Agreement. Gold fell to $253.83 per ounce in February 2001. It reached a record price of $1,300.07 per ounce on Sept. 24 … * Ford Motor Co. said it expects to achieve a “sold profit” this year and intends to invest $2.37 billion in the United Kingdom during the next five years, Allan Mulally, Ford president/CEO said Monday at a British industry lecture in London (The Wall Street Journal Sept. 27). Ford was the only automaker among Detroit’s big three--including General Motors and Chrysler Group LLC--not to ask for government assistance or file for bankruptcy during the financial crisis. The economy is slowing, but that is normal after a period of recovery, Mulally said. Ford plans to cut back the number of models it produces to roughly 25 to 30 from the 97 models it used to build, Mulally said …

Market News (09/27/2010)

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MADISON, Wis. (9/28/10)
* Worldwide business confidence has hardly changed since slumping in late spring, according to the most recent Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com Sept. 27). Business sentiment is broadly consonant with global growth that is barely consistent with worldwide economic growth potential, Moody’s said. Confidence is fairly similar worldwide. Sentiment in South America has recently weakened, and European confidence also has slumped in recent weeks, Moody’s said. The survey’s most promising component is that hiring and investment intentions are holding up well, Moody’s said ... * The Federal Reserve Bank of Chicago’s national activity index dropped in August to -0.53 from a downwardly revised -0.11 in July--which was previously 0. The three-month moving average of the index decreased to -0.42 in August from July’s -0.27. The index’s decline is consonant with a struggling U.S. economic recovery, Moody’s said. Although rising production and the bolstering of depleted inventories have sparked gross domestic product growth for the past three quarters, it will not be a lasting source of growth, Moody’s said ...

News of the Competition (09/24/2010)

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MADISON, Wis. (9/27/10)
* In attempts to clear housing inventory, Fannie Mae Thursday announced it is offering enhanced incentives for buyers of its repossessed homes (American Banker Sept. 24). Fannie’s HomePath program--which allowed buyers to finance purchases with 3% down without mortgage insurance--now allows buyers up to 3.5% of the final home sales price to be put toward closing, including a home warranty--if available. Also, real estate agents representing buyers will receive a $1,500 bonus for a home sale. The most recent incentives are available only on eligible purchase offers submitted on or after Thursday. Sales must close by Dec. 31 … * Several of the largest U.S. banks have initiated “second look” programs to review rejected loan applications (The Wall Street Journal Sept. 24). The move comes in response to criticism that the financial crisis has caused banks to issue fewer loans and to toughen borrowing standards. Most commonly reviewed under the programs are rejected small-business loans denied by loan officers and other bank employees, the Journal said. Also, some bank employees look for credit-report errors that hurt prospective borrowers the first time their applications were reviewed, or the banks search for unreported sources of income that would make a consumer loan appear to be less of a risk, the Journal said … * General Motors’ (GM) initial public stock offering will be smaller than previously indicated, and the U.S. government likely will sell a relatively smaller amount of its 61% stake in the automaker, said sources familiar with the matter (The New York Times Sept. 23). GM is planning an overall offering of stock valued in the $8 billion to $10 billion range--lower than previous internal targets--to obtain the highest possible price for the government, the sources said ...

Market News (09/24/2010)

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MADISON, Wis. (9/27/10)
* Orders for U.S. capital equipment bounced back in August in a sign that a business investment slowdown may be less drastic than some economists had forecast (Bloomberg.com Sept. 24). Orders for goods such as communications gear and computers rose 4.1% following a 5.3% decline in July, the Commerce Department said Friday. Total orders for durable goods in August fell 1.3%, depressed by volatile demand for aircraft, Bloombergsaid. “This is reassuring news,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. “Capital goods spending still seems to be on a very solid underlying trend.” However, overall transportation equipment orders decreased 10.3% in August--pulled down by a 40.3% decline for nondefense aircraft and parts (The Wall Street Journal Sept. 24). Orders for motor vehicles and parts also were down 4.4%. Details of the manufacturing report were positive, with core capital orders increasing 4.1%, and shipments rising 1.6% (Moody’s Economy.com Sept. 24) ... * New U.S. home sales were flat in August, indicating the housing market still is depressed, even in the midst of falling mortgage rates (Bloomberg.com Sept. 24). Purchases remained unchanged at a 288,000 unit annualized pace--matching July as the second-lowest on record since 1963, the Commerce Department said Friday. “There is no upside momentum in housing, period,” said Eric Green, chief market economist at TD Securities Inc. “Unemployment is so high, consumer confidence is so low, household wealth is eroded and the psychology remains negative.” In August, the median sales price for new homes dropped 0.6% from July to $204,700--the lowest level since December 2003. Compared with August 2009, the median price declined 1.2% (The New York Times Sept. 24). Also, the months of housing supply is flat at 8.6, and the median sales price is 1% lower than a year ago (Moody’s Economy.com Sept. 24) ...… * The Economic Cycle Research Institute (ECRI) weekly leading index--which monitors economic growth--fell to 122.2 for the week ended Sept. 17 from an unrevised 122.6. The smoothed annualized growth rate increased to -8.7% from a revised -9.35 (previously -9.3%). Despite the index’s decline, it has recently been on a more positive trend, although it is not yet consistent with a stable economic recovery, ECRI said (Moody’s Economy.com Sept. 24) ...

Market News (09/23/2010)

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MADISON, Wis. (9/24/10)
* In a sign companies still are cautious about hiring as economic growth slows, initial U.S. claims for unemployment benefits unexpectedly increased last week (Bloomberg.com Sept. 23). Claims rose 12,000 to 465,000 for the week ended Sept. 18, the Labor Department said Thursday. Although employers have reduced job cuts since the recession ended in June 2009, they haven’t boosted the pace of hiring enough to cut back on an unemployment rate remaining near a 26-year high, Bloomberg said. Without job growth, consumer spending could be down in the second half of the year, economists said. “The labor market is in a pretty soft position,” said Paul Dales, a U.S. economist at Capital Economics Ltd. in Toronto. “Private-sector employment is still growing but not anywhere near fast enough to bring down the unemployment rate.” Meanwhile, continuing claims for unemployment benefits decreased 48,000 to roughly 4.49 million for the week ended Sept. 11 (Moody’s Economy.com Sept. 23). In a related matter, the number of mass layoffs--those involving at least 50 workers from a single establishment--dropped to 1,546 in August from 1,609 in July, according to the Bureau of Labor Statistics (Moody’s Economy.com Sept. 23) … * Existing-home sales rose in August following a big correction in July, according to the National Association of Realtors (NAR). Existing-home sales--which are completed transactions that include single-family, townhomes, condominiums and co-ops-- increased 7.6% to a seasonally adjusted annual rate of 4.13 million in August from an upwardly revised 3.84 million in July. However, it remained 19% below the 5.10 million-unit pace in August 2009. Lawrence Yun, NAR chief economist, said home sales still remain subpar. “The housing market is trying to recover on its own power without the home buyer tax credit,” he said. “Despite very attractive affordability conditions, a housing market recovery will likely be slow and gradual because of lingering economic uncertainty.” For the NAR report, use the link … * The index of U.S. leading indicators increased in August more than anticipated, meaning that the economy likely will continue growing through early 2011 (Bloomberg.com Sept. 23). The 0.3% increase in the New York-based private research firm Conference Board’s measure of the prospects for the economy in the next three to six months followed a 0.1% increase in July. A gain in building permits, a longer factory workweek, and higher stock prices were among the impetuses for the index’s increase Bloomberg said. “Leading indicators are showing that growth will continue, at about a 2% pace,” said Ellen Zentner, a senior economist at Bank of Tokyo Mitsubishi UFJ Ltd. in New York. Beginning in April 2009, the index had steeply grown because of record-low interest rates, a rebound in manufacturing and a comeback in the stock market, said The New York Times (Sept. 23). However, as U.S. economic growth slowed, the rate of increase leveled off this past summer, the Times added …

News of the Competition (09/23/2010)

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MADISON, Wis. (9/24/10)
* Remaining slightly above the lowest levels in decades, 30-year mortgage rates this week were unchanged from the prior week (The New York Times Sept. 23). The average rate for a 30-year fixed loan this week was 4.37%, said mortgage buyer Freddie Mac. The rate slid to 4.32% earlier this month--the lowest level on records dating back to 1971. The average rate on 15-year fixed loans also was unchanged at 3.82%--the lowest since 1991 … * General Motors (GM) says it intends to make most of its shares in its initial public offering available to U.S. investors, Reuters reported (Blogs.nytimes.com Sept. 23). And a stock split--that could put prices at $20 to $25 per share--likely will make shares accessible to individual investors, Reuters said, citing unnamed sources. GM has not made a decision on the exact per-share price range or the overall valuation of the automaker, the sources added ...

News of the Competition (09/22/2010)

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MADISON, Wis. (9/23/10)
* New rules mandating how much rainy-day capital banks must maintain in reserve are “extremely demanding” and “radically transform the regulatory capital framework,” said the chair of the Basel Committee on Banking Supervision (The New York Times Sept. 22). The rules will create “a road to a much safer banking system,” said Nout Wellink, committee chair and president of the Bank of Netherlands, responding to criticism that the proposals are too lax. “If, prior to the crisis, banks had the levels of capital we are asking for, we likely would not have experienced such a deep crisis,” Wellink said in a speech to regulatory officials at a Singapore meeting … * A Student Loan Corp. shareholder is suing the company and Citigroup Inc. to stop the sale of the bank’s 80% stake in the student lender to Discover Financial Services (Reuters via Dow Jones Newswires Sept. 22). The planned sale benefits Citigroup at the expense of minority investors, said Alan Kahn in a lawsuit filed Monday in Delaware Chancery Court. The proposed deal has Discover acquiring Student Loan for $600 million, or $30 per share. The offer is too low, Kahn said, pointing to Student Loan’s book value of $65.74 per share. Citigroup’s majority stake is worth roughly $480 million, Reuters said …

Market News (09/22/2010)

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MADISON, Wis. (9/23/10)
* For the eighth consecutive month, U.S. home prices declined in July as foreclosed properties inundated the housing market (Bloomberg.com Sept. 22). Prices fell 3.3% from a year earlier and 0.5% from June, the Federal Housing Finance Agency (FHFA) said Wednesday. “We have a lot of homes for sale, and a lot of them are distressed properties,” said Thomas Lawler, founder and president of Lawler Housing and Economic Consulting. “That is putting downward pressure on home prices.” In a related matter, the FHFA purchase-only house price index dropped 0.5% in July from the prior month (Moody’s Economy.com Sept. 22). Given the sharp decline in home sales for the month, the result was not surprising, FHFA said. However the index is 3.3% below its July 2009 level--a sharper fall than previously expected--confirming the weakness of the U.S. housing market, FHFA said … * Mortgage loan application volume for the week ended Sept. 17 decreased 1.4% on a seasonally adjusted basis from the prior week, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey, released by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index increased 22.9%. The Refinance Index declined 0.9%, which is the third straight weekly decrease. The seasonally adjusted Purchase Index dropped 3.3%. The unadjusted Purchase Index rose 18.9% and was 38% lower than the same week one year ago. For the MBA report, use the link … * Indicating a quick about-face for the fate of most troubled U.S. companies, corporate debt-default rates are anticipated to drop to the same level that preceded the financial crisis of September 2008 (The Wall Street Journal Sept. 22). By year-end, the U.S. default rate should fall below 3%, according to Moody’s Investors Service. That would mark a startling drop from the 14.6% zenith of November 2009, and below the default rate of 3.1% from August 2008, the Journal said. Federal Reserve efforts to bolster the economy have helped lower the default rate to the lowest level in two years (Bloomberg.com Sept. 22). “In the near term, we seem to have overcome the last wave of restructurings faster than anticipated,” Michael Henkin, co-head of restructuring at Jefferies & Co., told the Journal. “Things came back pretty quickly, and the capital markets have solved a lot of the concerns that were out there on corporate defaults,” he added …

Rates the same Fed readies to ease policy

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MADISON, Wis., and WASHINGTON (9/22/10)--Federal Reserve policymakers said Tuesday that they would keep the target range for the federal funds rate at 0% to 0.25% "for an extended period," and maintain its policy of reinvesting principal payments from securities holdings. But if the economy drops lower, the Federal Open Market Committee's attempts to ease policy could have negative implications for credit unions' net margins, according to a Credit Union National Association (CUNA) economist. "The Federal Reserve's [policymakers'] statement indicated their concern about the slow pace of the economic recovery and its sustainability," said Steve Rick, CUNA senior economist. "Recent economic indicators point to second-half growth below the long-term potential, which will not be enough to absorb new entrants into the labor force. This could result in a rise in the unemployment rate for the rest of the year," he told News Now. "Fed officials raised concerns regarding the slow pace of household spending, which makes up 70% of the economy. One of the major factors reducing debt-laden households' cash flows is their unwillingness or inability to borrow. Household deleveraging could continue for the next few years as they try to reduce their debt service burdens to more sustainable levels," Rick said. "To keep the economic recovery on track, the Fed reiterated its policy of reinvesting principal payments from its securities holdings to keep long-term Treasury interest rates low. If economic growth drops any lower, we could see the Fed boost its quantitative easing (buying bonds with newly printed money) to further flatten the yield curve. "This would have negative consequences for credit union net interest margins. The flatter yield curve will push credit union yield on assets down faster than funding costs," Rick said. "With inflation continuing to trend down and worries about the possibility of a pernicious deflationary downward spiral, the Fed will not raise the fed funds interest rate for an 'extended period.' Translation, don't expect a rate increase until spring 2012 at the earliest," Rick concluded. In a press release after the FOMC meeting Tuesday, the committee noted the pace of recovery in output and employment has slowed in recent months but said it anticipates "a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be modest in the near term." Household spending "remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak," said the committee. The committee also outlined worries about deflation. "Measures of underlying inflation are currently at levels somewhat below those the committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the committee considers consistent with its mandate," the committee said in its press release. In addition to keeping the fed funds rate steady, the committee said it "continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period." The FOMC "will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate. Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy was Thomas M. Hoenig, who said the economy continues to recover at a moderate pace and that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted. Use the link for the full FOMC statement.

News of the Competition (09/21/2010)

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MADISON, Wis. (9/22/10)
* U.S. banks from the Southwest and Midwest regions have the strongest brands, according to the 2010 Bancography Brand Value Index (BBVI). Fifteen banks in Texas rank in the top 10 across BBVI’s four-asset tiers in the ranking of brand strength (PR Newswire via Forbes.com Sept. 21). Banks from the Southwest, Midwest and West regions placed strongly with banks from those regions taking 32 slots in the four top-10 rankings. So, only eight banks representing the South, Northeast and MidAtlantic made the rankings. NOTE: For Bancography’s BBVI rankings for credit unions, see the News Now story, “Bancography names ‘Best CU Brands,’” in CU System News … * Bank of America (BofA) intends to cut several hundred jobs in its investment banking unit this week, according to BofA employees (The New York Times Sept. 20). The cuts emanate from the weak trading environment and the desire to cull underperforming workers as the year draws to a close, said employees who insisted on anonymity. “You want to trim your least productive, weakest players to preserve the bonus pool for everyone else,” one banker told the Times. “We know things haven’t been great in the spring or summer” …

Market News (09/21/2010)

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Madison, Wis. (9/22/10)
* U.S. housing starts rose more than forecast in August--to the highest level in four months--and residential construction permits also increased, indicating the troubled housing market was beginning to stabilize following the end of the government tax credit in spring (Reuters via The New York Times Sept. 21). Housing starts increased 10.5%--the largest climb since November--to a seasonally adjusted rate of 598,000 units, the Commerce Department said Tuesday. “The housing market has found a bottom, and we’re bouncing along here,” said Thomas Simons, an economist at Jefferies Group Inc. “The market is challenged by supply, and until that is cleared out, it will be tough for the homebuilders. We also need additional job creation” (Bloomberg.com Sept. 21). Housing starts are up 25% from their nadir in April 2009, but are still down 74% from their zenith in January 2006, the Times said ... * Led by Michigan, payrolls declined in 36 states in August, a sign the labor market will need more time to rebound from the worst recession since the 1930s (Bloomberg.com Sept. 21). Michigan employers shed 50,300 jobs last month--the largest decrease since January 2009, according to Commerce Department figures released Tuesday. Texas (34,200) and California (33,600) were the other states with the biggest job losses. Unemployment rose in 27 states. Nevada’s unemployment rate hit a record 14.4%--the highest in the U.S. “Employment is still pretty depressed, and the unemployment rate is unacceptably high,” said Omair Sharif, an economist at RBS Securities. “We need consumer demand to grow in order to see more investing and hiring.” Since the recovery began more than a year ago, the U.S. economy has lost more jobs than it has added, said The New York Times Sept. 20 …

News of the Competition (09/20/2010)

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MADISON, Wis. (9/21/10)
* Six banks were taken over Friday by regulators and have entered into purchase-and-assumption agreements with other banks, according to the Federal Deposit Insurance Corp. (FDIC). The failures bring the 2010 total for bank failures to 125, compared with 140 failures for all of 2009. Friday’s failed banks include The Bank of Ellijay, Ellijay, Ga., First Commerce Community Bank, Douglasville, Ga., and The Peoples Bank, Winder, Ga., all assumed by Community & Southern Bank, Carrollton, Ga.; Bramble Savings Bank, Milford, Ohio, assumed by Foundation Bank, Cincinnati; Maritime Savings Bank, West Allis, Wis., assumed by North Shore Bank, FSB, Brookfield, Wis.; and ISN Bank, Cherry Hill, N.J., assumed by New Century Bank (doing business as Customers Bank), Phoenixville, Pa. The six closed institutions held roughly $1.34 billion assets as of June 30. The FDIC estimated that the banks' failures will cost the Deposit Insurance Fund about $348 million ... * Ally Financial Inc.’s GMAC Mortgage unit is halting home foreclosures in 23 states, including Connecticut, Florida and New York, because it may “need to take corrective actions in connection with some foreclosures,” the mortgage unit said in a Sept. 17 memo (Bloomberg.com Sept. 20). Brokers were instructed to stop cash-for-key transactions, lockouts and evictions--regardless of occupant type, said the memo obtained by Bloomberg. GMAC Mortgage also will suspend sales of properties on which it already has foreclosed …

Market News (09/20/2010)

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MADISON, Wis. (9/21/10)
* The longest-lasting recession the U.S. has experienced since World War II ended in June 2009, according to the National Bureau of Economic Research, a panel of academic economists that dates the beginning and end of recessions (The New York Times Sept. 20). The bureau said the recession lasted 18 months, starting in December 2007. The longest prior post-war recessions occurred from 1973 to 1975 and from 1981 to 1982--each lasting 16 months, the bureau said. Also, the probability the U.S. will be in recession again in six months rose four percentage points to 33% in August from the previous month (Moody’s Economy.com Sept. 20). In a related matter, the U.S. economy will grow 2.6% this year--less than the 3.2% previously forecast--predicted the International Organization for Economic Cooperation and Development (OECD) in its most recent economic survey of the U.S. (The New York Times Sept. 20). The OECD also warned that, in contrast to previous recessions, the 2007-2009 recession may spark long-term damage to the economy, with a higher rate of long-term unemployment … * U.S. homebuilder confidence in September unexpectedly held steady at the lowest level in more than a year, indicating the housing market remains weak following the government tax-credit expiration April 30 (Bloomberg.com and The New York Times Sept. 20). The National Association of Home Builders/Wells Fargo Housing Market Index remained unchanged at 13--matching the August reading as the lowest since March 2009. The measure was predicted to rise to 14, according to a Bloomberg News median forecast of economists. “It’s hard to see where the impetus for growth for housing is going to come from,” said David Semmens, an economist at Standard Chartered Bank. “The employment situation keeps people very much on the back foot and remaining in their existing homes” …

NEW Fed Rates steady but prepared to ease policy

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WASHINGTON (Filed at 2:45 p.m. ET 9/21/10)--The Federal Open Market Committee (FOMC) today announced it would keep the target range for the federal funds rate at 0% to 0.25% and maintain its existing policy of reinvesting principal payments from its securities holdings. It also reiterated its policy of keeping rates low for an "extended period." Since its last meeting in August, the FOMC noted the pace of recovery in output and employment has slowed in recent months. But the Fed's policymakers also said they anticipate "a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be modest in the near term." The FOMC noted household spending "remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak." The committee also outlined worries about deflation. "Measures of underlying inflation are currently at levels somewhat below those the committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the committee considers consistent with its mandate," the FOMC said in a press release after today's meeting. In addition to keeping the fed funds rate steady, the committee said it "continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period." The FOMC "will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate. Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy was Thomas M. Hoenig, who judged that the economy continues to recover at a moderate pace. Accordingly, he believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted and will lead to future imbalances that undermine stable long-run growth. He said he did not believe that continuing to reinvest principal payments from its securities holdings was required to support the committee’s policy objectives.

News of the Competition (09/17/2010)

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MADISON, Wis. (9/20/10)
* Citigroup Inc. said Friday it will sell its student lending business plus about $32 billion in related assets to Discover Financial Services and Sallie Mae. Citigroup, hard hit by the recession and financial crisis, had sought a buyer for its 80% stake in the Student Loan Corp. for some time. Discover will pay $600 million and acquire $4.2 billion in private student loans. Sallie Mae will receive $28 billion and 1.3 million new customers. Citigroup said it will lose $500 million on the agreement (The New York Times Sept. 17) ... * Forty-seven percent of troubled homeowners who received counseling and loan modifications in Rhode Island are still in their homes, according to a speaker at the New England Mortgage Banking Conference in Providence, R.I. Helen Iasimone, director of Homeownership Connection, said 47% had "positive outcomes" and noted this included those undergoing forbearance, loan modifications or reverse mortgages. However, the figure doesn't include short sales. If short sales were included, she said, the success rate would be closer to 50% (American Banker Sept. 17) ...

Market News (09/17/2010)

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MADISON, Wis. (9/20/10)
* U.S. consumers' confidence dropped unexpectedly in September to 66.6 from August's reading of 68.9, according to the Thomson Reuters/University of Michigan Consumer Sentiment index (Bloomberg.com and Moody's Economy.com Sept. 17). September's reading is a one-year low, which means consumers may cut back even more on spending. Economists surveyed by Bloomberg News had forecast the index would rise to 70. According to Moody's the decline was driven by consumers' diminished optimism about expectations, with short-term inflation expectations declining while the five-year outlook for prices remained steady. Factors driving the drop include the August decline in the stock market, an increase in the unemployment rate to 10.1%--a 26-year high--and continued uncertainty about policy ... * The cost of living during August went up for the second month, driven by gasoline/energy and food prices, but the underlying inflation rate--the rate monitored closely by the Federal Reserve--was unchanged (The Wall Street Journal (Sept. 17). The seasonally adjusted consumer price index for August rose by 0.3%, the same as in July, after falling in June by 0.1%, said the Labor Department Friday. Economists polled by Dow Jones Newswires had forecast prices to rise 0.3%, with the core price index increasing 0.1%. Year-over-year, prices rose 1.1% over August 2009, after a 1.2% year-over-year gain in July. The core rate for August rose 0.9% over August last year. The lack of price pressures gives the Federal Reserve policymakers--who will meet tomorrow--leeway to leave the benchmark interest rate in the 0% to 0.25% . That range has been maintained since December 2008, said Bloomberg.com (Sept. 17) ... * The percentage of Americans below the poverty line last year rose to 14.3%--the highest in 15 years, said the Census Bureau Thursday. It also said the increase appears to be continuing this year. Four million additional Americans dropped below the poverty benchmark--for a total of 44 million, or one in seven residents, in poverty. One in five children are living in poverty. The bureau said that number would have been greater if many families had not opened their homes and shared with siblings, parents and even non-relatives. Multifamily households increased 11.6% the past two years, the bureau said. The poverty line is $10,830 in pretax cash income for a single adult and $22,050 for a family of four (The New York Times Sept. 17) ...

News of the Competition (09/16/2010)

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MADISON, Wis. (9/17/10)
* JPMorgan Chase & Co.’s website went down Wednesday for the second time this week (Bloomberg News via American Banker Sept. 16). The bank said it would refund late fees and help fix other outage-related problems encountered by its 16.6 million online customers, who could not access their accounts. The website first went down late Monday night before service was restored around 1 a.m. ET Wednesday. Although the system shut down again hours later, it appeared to be operational by midday, Bloomberg said. A software glitch caused the shutdown, and customer accounts were not at risk, Christine Holevas, a Chase spokeswoman, told Bloomberg … * MasterCard Inc. and Global Payments Inc. are striking deals in China to enter the lucrative Chinese market (American Banker Sept. 16). MasterCard on Tuesday announced a memorandum with China UnionPay--the country’s only payment network--to develop a business plan that “aims to forge a platform for potential cooperation including online and other payment areas.” Global Payments said Tuesday it had obtained permission to process card payments in China ...

Market News (09/16/2010)

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MADISON, Wis. (9/17/10)
* In a sign the labor market is improving, initial U.S. claims for unemployment benefits unexpectedly dropped last week to the lowest level in two months (Bloomberg.com Sept. 16). Claims fell 3,000 to 450,000 for the week ended Sept. 11, the Labor Department said Thursday. The median forecast was for an increase to 459,000, according to a Bloomberg News survey. “We really don’t have any economic trend in place other than stumbling economic growth,” said Brett Gallagher, deputy chief investment officer at Artio Global Investors. “The reality is we’re in for a lengthy slog of below-trend growth.” Meanwhile, continuing claims for unemployment were down, falling 84,000 to roughly 4.49 million for the week ended Sept. 4 (Moody’s Economy.com Sept. 16) … * For the third time in five months, U.S. home seizures in August reached a record level because lenders foreclosed on thousands of delinquent owners, according to RealtyTrac Inc. (Bloomberg.com Sept. 16). Bank repossessions for August rose 25% from a year earlier to 95,364--the most since RealtyTrac started keeping records in 2005. Foreclosures are adding to an expanding housing supply that may add up to 12 million homes to the U.S. market, Bloomberg said. “We’re on track for a record year for homes in foreclosure and repossessions,” said Rick Sharga, RealtyTrac senior vice president. “There is no improvement in the underlying economic conditions.” Mortgage bankers anticipate that foreclosures will increase in coming months as Fannie Mae and Freddie Mac begin fining servicers that do not foreclose sooner, said National Mortgage News (Sept. 16) … * The second-quarter U.S. current-account deficit grew to $123.3 billion, indicating an increase in imports (Bloomberg.com Sept. 16). The gap was the largest since the end of 2008, the Commerce Department said Thursday. The current-account deficit is the broadest measure of international trade because it includes government transfers and income payments, Bloomberg said. The figures indicate the U.S.’s dependence on attracting foreign capital to finance deficits, keep interest rates from rising, and preserve the value of the dollar, Bloomberg said. The gap represented 3.4% of gross domestic product in the second quarter--up from 3% the prior three months, but still lower than the 6.1% peak hit in late 2006 … * A rise in energy costs caused U.S. wholesale (producer) prices to rise in August (The New York Times Sept. 16). The Producer Price Index, which indicates the prices of goods that producers are paid before they are sold to consumers, increased 0.4% in August following a 0.2% rise in July--the first upward movement in the index in three months, the Labor Department said Thursday. “There’s persistent price softness in the economy, but we’re not immediately facing deflation,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “The numbers are consistent with the underlying belief that inflation is likely to remain low. We don’t see the Fed raising interest rates until 2013,” he said (Bloomberg.com Sept. 16) …

News of the Competition (09/15/2010)

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MADISON, Wis. (9/16/10)
* Lehman Brothers Holdings Inc. is seeking to recover more than $3 billion it claims it was deprived of because of its record bankruptcy two years ago (The New York Times Sept. 15). Lehman is suing Canadian Imperial Bank of Commerce and dozens of other defendants to recover the funds, contending that the defendants unfairly were allowed to have their claims placed ahead of Lehman’s claims, the Times said. Lehman sought Chapter 11 bankruptcy protection on Sept. 15, 2008. The company said it filed Tuesday’s lawsuit to beat a two-year deadline to file fraudulent transfer cases … * Chase Bank--part of JPMorgan Chase & Co., the second-largest U.S. bank measured by assets--restored its online banking service early Wednesday afternoon after the service went down all day Tuesday (The New York Times Sept. 15). The service shut down Monday night, affecting 16.5 million online-banking customers--many of whom were outraged by the disruption, the said. The outage stemmed from a technical problem, according to Chase, the Times added. The disrupted service means many customers will incur fees resulting from late bill payments, said Jacob Jegher, senior analyst at Celent, a Boston-based financial research and consulting firm. “This is something the bank will have to address with customers and is clearly a huge inconvenience,” he added … * MasterCard Inc.--the world’s second-largest credit and debit processing network--said Wednesday it anticipates its earnings per share to grow at a compound annual rate of more than 20% for 2011 through 2013 (The New York Times Sept. 15). MasterCard outlined its targets for that two-year period in a regulatory filing, saying it expects its annual operating margin to be a “minimum of 50%.” The company also said Tuesday that its board had authorized a $1 billion share buyback program …

Market News (09/15/2010)

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MADISON, Wis. (9/16/10)
* Mortgage loan application volume for the week ended Sept. 10 decreased 8.9% on a seasonally adjusted basis from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released by the Mortgage Bankers Association (MBA). The week’s results included an adjustment to account for the Labor Day holiday. On an unadjusted basis, the index dropped 27.4% from the previous week. The Refinance Index fell 10.8%. The seasonally adjusted Purchase Index declined 0.4%. The unadjusted Purchase Index decreased 21.9% and was 39.7% lower than the same week one year ago. For the MBA report, use the link. “Housing remains in the doldrums, and recovery there will be slower than for the rest of the economy,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Refinancing has come off a little after an initial spurt” (Bloomberg.com Sept. 15) … * The decline in U.S. home prices may last another three years because home-sellers are expected to add as many as 12 million properties to the housing market (Bloomberg.com Sept. 15). The supply of homes in default or foreclosure that may be offered for sale--known as shadow inventory--is keeping prices from bottoming after a 28% nosedive since 2006, according to analysts at Barclays Plc, Fannie Mae, Moody’s Analytics Inc. and Morgan Stanley. The shadow-inventory properties are in addition to homes that are vacant or that may be placed on the market by owners, Bloomberg said. “Whether it’s the sidelined, shadow or current inventory, the issue is there’s more supply than demand,” said Oliver Chang, a U.S. housing strategist at Morgan Stanley. “Once you reach a bottom, it will take three or four years for prices to begin to rise 1% or 2% a year”… * Industrial production rose 0.2% in August after a downwardly revised increase of 0.6% in July, according to the Federal Reserve. The revision primarily resulted from new data on the output of four manufacturing industries: iron and steel, construction machinery, paper, and pharmaceuticals. The index for manufacturing output rose 0.2% in August after advancing 0.7% in July. The step-down in the rate of increase reflected a fallback in the production of motor vehicles and parts, which had jumped sharply in July. Excluding motor vehicles and parts, manufacturing output increased 0.5% in August after gaining 0.2% in July. Production at mines moved up 1.2% in August, while the output of utilities moved down 1.5%. At 93.2% of its 2007 average, total industrial production in August was 6.2% above its year-earlier level. The capacity utilization rate for total industry rose to 74.7%, or 4.7 percentage points above the rate from a year earlier and 5.9 percentage points below its average from 1972 to 2009. For The Federal Reserve release, use the link …

News of the Competition (09/14/2010)

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MADISON, Wis. (9/15/10)
* Because of claims that Citigroup Inc. misled investors by failing to disclose $40 billion in subprime-related holdings, the bank now faces a Sept. 24 court hearing on a proposed $75 million settlement with the U.S. Securities and Exchange Commission (SEC), said Bloomberg.com (Sept. 14). In its July 29 complaint, the SEC said Citigroup made misstatements on earnings calls and financial filings about assets connected to subprime loans--some omitting as much as $40 billion in investments--while the housing crisis occurred in 2007. Because U.S. District Judge Ellen Huvelle was originally dissatisfied with the written proposal, she said she wanted more information before approving the settlement and set the Sept. 24 second hearing, Bloomberg said … * American International Group Inc. (AIG) wants to hasten its bailout exit plan to repay U.S. taxpayers in full while still gaining its independence, said sources familiar with the matter (The Wall Street Journal Sept. 13). Under the plan, which could begin as early as the first half of 2011, the Treasury Department is likely to convert $49 billion in AIG preferred shares it holds into common shares, a move that could take the government's ownership stake in AIG to above 90%, from its current 79.8%, the sources said. The common shares then would be gradually sold off to private investors, reducing U.S. ownership and potentially earning the government a profit if the shares rise in value, the Journal said. The Treasury’s exit from AIG is far from a sure thing and would take several years, the Journal added ...

Market News (09/14/2010)

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MADISON, Wis. (9/15/10)
* Optimism about personal finances mitigated continuing worries about a weak labor market, causing U.S. consumer confidence to increase 3.9% in September from August, according to the Investor’s Business Daily and TechnoMetrica Market Intelligence IBD/TIPP Economic Optimism Index (The New York Times Sept. 14). The index rose to 45.3 in September from 43.6 in August. Readings above 50 show optimism, while those below 50 indicate pessimism. “Recent rallies in the stock market may be helping some Americans feel better about their own finances,” said Terry Jones, associate editor for Investor’s Business Daily. “But the continued slow-growth recovery and 9.6% unemployment rate have certainly hurt overall.” In a related matter, there was small improvement in small-business confidence in August, according to the National Federation of Independent Business (NFIB) (Moody’s Economy.com Sept. 14). The NFIB index rose to 88.8 in August from 88.1 in July ... * For a second consecutive month, U.S. retail sales increased in August, allaying fears the economy will falter in the second half of the year (Bloomberg.com Sept. 14). Purchases rose 0.4%, following a 0.3% uptick in July, the Commerce Department said Tuesday. “It’s reassuring,” said Michael Feroli, chief economist at JP Morgan Chase & Co. “It takes out some of the fears we had about a month ago about the economy maybe slipping into recession. If the labor market picks up, it’s sustainable.” Also, U.S. chain store sales increased 0.8% last week, offsetting the prior week’s 0.4% decrease, according to the International Council of Shopping Centers (ICSC). The most recent gain suggests that consumer spending is holding up (Moody’s Economy.com Sept. 14) … * Total U.S. business inventories increased at the fastest pace in two years because companies stocked up in advance of a back-to-school sales season that was better than forecast (Bloomberg.com Sept. 14). The 1% increase was the largest since July 2008 and followed a 0.5% increase in June, the Commerce Department said Tuesday. “Businesses remain cautious, but they are not retrenching,” said Aaron Smith, a senior economist at Moody’s Economy.com. “The inventory contribution may be fading more slowly, a positive for near-term growth.” July’s rebound is a positive sign that consumer demand is increasing after two weak months (The New York Times Sept. 14). Businesses will need to see more consumer demand to continue bolstering their stockpiles, the Times said. Many businesses reduced their stockpiles during the recession. Inventory growth helped spark the early stages of the economic recovery, the Times added …

News of the Competition (09/13/2010)

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MADISON, Wis. (9/14/10)
* One bank was taken over Friday by regulators and has entered into a purchase-and-assumption agreement with another bank, according to the Federal Deposit Insurance Corp. (FDIC). The failure brings the 2010 total for bank failures to 119, compared with 140 failures for all of 2009. Friday’s failed bank was Horizon Bank, Bradenton, Fla., assumed by Bank of the Ozarks, Little Rock, Ark. Horizon held roughly $187.8 million in assets as of June 30. The FDIC estimated that its failure will cost the Deposit Insurance Fund about $58.9 million … * The way U.S. banks decide to manage the large number of foreclosed homes they own or will take from delinquent borrowers in the future will weigh heavier than mortgage rates or consumers’ desires to buy homes in determining how fast house prices decline during the next few months (The Wall Street Journal Sept. 13). The more that homes are sold by lenders, the faster prices decline, the Journal said. Although mortgage defaults kept escalating, the housing market started to stabilize early last year because of low home prices and government intervention that broke the downward spiral, the Journal said. Federal policymakers spurred home demand by offering tax credits for buyers, keeping mortgage rates low and extending low-down-payment loans through the Federal Housing Administration, the Journal said ..

Market News (09/13/2010)

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MADISON, Wis. (9/14/10)
* The worldwide economic recovery remains solidly in place, according to the Moody’s Analytics Survey of Business Confidence. Also, the slowdown in economic growth this summer seems to be mostly over and growth has stabilized. However, the global economy is only growing at a rate barely consistent with its potential, the survey said. Economies are expanding above their potential in South America and in Asia, outside of Japan. European economies are growing close to their potential, and economies in the U.S. and Japan are growing below their potential, the survey indicated (Moody's Economy.com Sept. 13) … * Far-reaching new rules to make the global banking industry safer and protect international economies from future financial crises were agreed upon by the world’s top banking regulators Sunday in Basel, Switzerland (The New York Times Sept. 12). New requirements will more than triple the amount of capital that banks must have in reserve as a buffer against potential losses, the Times said. The keynote to the agreement is a rule mandating that banks raise the amount of common equity they hold--considered the least risky form of capital--to 7% of assets from 2%, the Times said. Also, regulators are giving the world’s banks eight years to comply with the new requirements (Bloomberg.com Sept. 13). Germany wanted firms to have a decade to make the transition, while the U.S., United Kingdom and Switzerland had wanted a maximum of five years. “Extending these deadlines--liquidity, buffers and capital definitions--should be a relief to banks,” said Frederick Cannon, an analyst at KBW Inc. in New York. A World Council of Credit Union’s delegation at a Basel Committee on Banking Supervision meeting in Frankfurt, Germany, June 1, stressed the success credit unions have had during the economic crisis and the intrinsic strengths of the cooperative model, and sought to make sure that credit union have a seat at the table (News Now June 11).

Market News (09/10/2010)

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MADISON, Wis. (9/13/10)
* U.S. wholesale inventories increased 1.3% in July--the most in two years--because a bounce-back in consumer demand induced companies to add to their stockpiles (Bloomberg.com Sept. 10). “Companies showed a willingness to extend themselves a bit more, and that’s positive,” said Richard Dekaser, chief economist at Woodley Park Research. “At the same time, inventories are still lean.” The amount of goods available compared with sales portends manufacturing gains will be sustained in the coming months, Bloomberg said. Inventory rebuilding, which has helped the economy pull out of recession, could wane unless consumers increase their spending, Bloomberg said … * Because elevated unemployment will hold back consumer spending and companies’ investment plans, the U.S. economy will slow down more than previously estimated, according to a Bloomberg News survey of economists (Bloomberg.com Sept. 10). The biggest global economy will grow an average of 2.5% in 2011--less than 2.8% projected in August and slower than the estimated 2.7% for this year, according to a Bloomberg survey of economists, conducted Sept. 1 through Sept. 9. Also, household purchases will decrease and the jobless rate will remain above 9%, analysts told Bloomberg. “The economy is stagnating,” said Nariman Behravesh, chief economist at IHS Inc., a consulting firm in Lexington, Mass. “Consumer spending isn’t going anywhere. Unemployment is going to be very slow to come down, so we’ll be stuck in the mid-9% range for awhile” … * The Economic Research Cycle Institute (ECRI) weekly leading index, which measures economic growth, rose to 122 for the week ended Sept. 3, from a revised 120.5, previously 120.6. The smoothed, annualized growth rate increased to -10.1% from a revised -10.2%, previously -10.1%. Despite the gain, the index has remained relatively flat in recent months, not yet indicating a stable economic recovery, ECRI said (Moody’s Economy.com Sept. 10) …

News of the Competition (09/10/2010)

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MADISON, Wis. (9/13/10)
* A former Bank of America (BofA) executive pleaded guilty Thursday to fraud and conspiracy charges. Douglas Lee Campbell admitted to participating in a criminal conspiracy to rig bids on investments sold to state and local governments and then profit at taxpayers’ expense (Bloomberg News Sept. 10). Campbell worked at BofA until 2002. The investigation focused on guaranteed investment contracts--know as GICs--that municipalities purchased with money raised through bond sales … * China’s currency, the yuan, hit a new high against the U.S. dollar Friday. That development may indicate that China has decided to let its tightly controlled currency rise in response to escalating U.S. pressure to do so (The Wall Street Journal Sept. 10). Washington has been frustrated by China’s currency policy because of its huge trade surpluses and the slow gains it has allowed in the yuan, which the U.S. claims helps keep the yuan undervalued to help China’s exporters, the Journal said ...

News of the Competition (09/09/2010)

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MADISON, Wis. (9/10/10)
* The U.S. housing market will require three to four years to assimilate an estimated seven million homes that are vacant or in the process of foreclosure so it can stabilize itself, said Douglas Duncan, chief economist for Fannie Mae (Bloomberg.com Sept. 9). Excess housing inventory has pushed demand for new homes down and will maintain prices at a “flat bottom,” Duncan said. “To get back to a more normal relationship with overall economic growth, we see 2013 or 2014,” he added. * New minimum levels of Tier 1 capital--a key regulatory gauge--and establishing a threshold for a new, stricter form of this measure, based on common equity, is the basis for a meeting of international bank regulators in Basel, Switzerland this weekend (The Wall Street Journal Sept. 9). Also, regulators will mandate that banks create buffers that go beyond the minimum levels, the Journal said. Clarity on capital should give banks clear targets, and also give investors a better picture on whether a bank could soon be permitted to resume paying dividends or buying back stock, the Journal said …

Market News (09/09/2010)

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MADISON, Wis. (9/10/10)
* Initial U.S. claims for unemployment benefits dropped more than anticipated last week, allaying fears that employers would step up job cuts as the economy cools off (Bloomberg.com Sept. 9). Claims decreased 27,000 to 451,000 for the week ended Sept. 4--the lowest level in two months, according to Labor Department figures released Thursday. Meanwhile, continuing claims remained basically unchanged, falling 2,000 to roughly 4.48 million for the week ended Aug. 28 (Moody’s Economy.com Sept. 9). Job creation needs to increase to obviate a drop in consumer spending--which accounts for 70% of the U.S. economy--and mitigate the risk of it falling back into recession, Bloomberg said. “[Job creation is] still consistent with a pretty lackluster labor market,” said Scott Brown, chief economist at Raymond James & Associates Inc. “The good news is [the number of unemployment claims] is coming down; the bad news is it’s still pretty high” .. * The U.S. trade deficit narrowed in July by 14%--to $42.8 billion from $49.8 billion in June--because U.S. exports increased roughly $2.8 billion, according to Commerce Department statistics released Thursday (The New York Times Sept. 9). July exports totaled $153.3 billion up from $150.6 billion in June. Most of the July increase in exports was due to a $2.3 billion rise in capital goods--the bulk of which was civilian aircraft, the Times said. Industrial materials and supplies, and food and beverages also increased. The trade deficit with China--the U.S.’s largest with a single country--totaled $25.9 billion in July, just less than the $26.2 billion in June. Imports were $196.1 billion in July--$4.2 billion less than June. The drop in imports indicated that the U.S. consumer may be more focused on increasing savings rather than on spending, said Steven Ricchiuto, a chief economist for Mizuho Securities USA … * In the annual rankings of the world’s most competitive economies, the U.S. dropped to fourth place from second place as it deals with a record budget deficit, while Switzerland retained the No. 1 spot, according to the World Economic Forum (WEF) (Bloomberg.com Sept. 9). Two years ago, the U.S. held the No. 1 spot, which it held since 2004 when WEF began its current index. A $1 trillion budget shortfall and public distrust of politicians were highlighted as weaknesses for the world’s biggest economy, WEF said. “A number of escalating weaknesses have lowered the U.S. ranking over the past two years,” said the study of 139 counties. “A lack of macroeconomic stability continues to be the U.S.’s greatest area of weakness” …

News of the Competition (09/08/2010)

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MADISON, Wis. (9/9/10)
* The Treasury Department said it will auction warrants of Hartford Financial Services (52.1 million) Inc. and Lincoln National Corp. (13 million) that it obtained as part of the bailout of the two insurers (Dow Jones via American Banker Sept. 8). The warrants will be auctioned during the next several weeks. Once the auction is over, the two insurers will be completely out of the government’s Troubled Asset Relief Program (TARP). Through TARP, the Treasury provided cash to financial firms during the financial crisis in exchange for ownership stakes in the companies … * As China evolves into the world’s largest stock market, the market vale of emerging-market stocks could balloon more than five-fold to $80 trillion in two decades--surpassing developed nations, said Goldman Sachs Group Inc. (Bloomberg.com Sept. 8). Emerging nation’s share of world equity capitalization could rise to 55% by 2030 from 31% today, Goldman strategists said in a research report. “The primary drivers are rapid economic growth and the maturing of equity markets that are at earlier stages of development,” wrote Goldman lead strategist Timothy Moe in the report. “Developed-market institutional asset management pools will need to increase their holdings of emerging-market equities” …

Market News (09/08/2010)

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MADISON, Wis. (9/9/10)
* Mortgage loan application volume for the week ended Sept. 3 decreased 1.5% on a seasonally adjusted basis from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index decreased 1.9%. The Refinance Index fell 3.1%. The seasonally adjusted Purchase Index increased 6.3%. The unadjusted Purchase Index rose 4% and was 38.8% lower than the same week one year ago. “Purchase applications increased last week, reaching the highest level since the end of May,” said Michael Fratantoni, MBA vice president of research and economics. “However, purchase activity remains well below levels seen prior to the expiration of the homebuyer tax credit, and is almost 40% below the level recorded one year ago. On the other hand, refinance volume dropped last week for the first time in six weeks, but the level of applications to refinance remains close to recent highs, as historically low mortgage rates continue to draw borrowers into the market.” For the MBA report, use the link … * Reports from the 12 Federal Reserve Districts suggested continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods, according to the most recent Beige Book (Sept. 8), issued by the Federal Reserve Banks. Economic growth at a modest pace was the most common characterization of overall conditions, as provided by the five western Districts of St. Louis, Minneapolis, Kansas City, Dallas and San Francisco. The reports from Boston and Cleveland also pointed to positive developments or net improvements compared with the previous reporting period. However, the remaining Districts of New York, Philadelphia, Richmond, Atlanta and Chicago all highlighted mixed conditions or deceleration in overall economic activity. Consumer spending appeared to increase on balance despite continued consumer caution that limited nonessential purchases, while activity in the travel and tourism sector picked up relative to seasonal norms. For The Beige Book summary, use the link … * To avoid taking on more debt, U.S. consumers are using their debit cards and putting away their credit cards, according to Javelin Strategy & Research (Bloomberg.com Sept. 8). Debit cards’ total payment volume eclipsed credit card volume for the first time in 2009 and will continue to surpass it into 2010, Javelin said. “Consumers are turning from one form of plastic to another,” said James Van Dyke, president and founder of Javelin. “Credit cards are falling out of favor as cardholders become more cautious and look for more conservative payment methods” …

News of the Competition (09/07/2010)

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MADISON, Wis. (9/8/10)
* There likely will be a slowdown in U.S. hiring in coming months, according to a report released by the Conference Board, a private research firm (The Wall Street Journal Sept. 7). The board’s August employment trends index dropped to 96.7--down from July’s revised figure of 97.4--previously reported as 97. The August index is 9.4% higher than a year ago. “Employment growth has been slow lately, and the employment trends index suggests that it may slow even further this fall,” said Gad Lavanon, associate director. “However, we still expect job growth rather than an outright decline in the next several months” … * London-based Barclays PLC Tuesday named American Robert E. Diamond Jr. to be its new CEO (The Wall Street Journal Sept. 7). Diamond, Barclays’s president and investment-banking chief, will replace John Varley, the bank’s current CEO, who has served in that capacity since September 2004. Diamond will assume the position of deputy group CEO on Oct. 1. The announcement is a surprise because Varley hadn’t announced plans to retire, the Journal said …

Market News (09/07/2010)

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MADISON, Wis. (9/8/10)
* Because the U.S. economy is not likely to grow enough to employ people rejoining the labor force, the unemployment rate probably will approach 10% in the coming months, (Bloomberg.com Sept. 7). U.S. private payrolls increased 67,000 in August, after a 107,000 gain in July, while unemployment climbed to 9.6%, the Labor Department said Friday. “Growth is too sluggish to successfully bring down the unemployment rate,” said Michelle Meyer, a senior economist at BofA Merrill Lynch Global Research in New York. “At this stage, about one year into recovery, this was still quite feeble growth.” In a related matter, companies in most developed countries intend to add to their work forces at a slower pace during the fourth quarter, according to the Manpower Employment Outlooks Survey (Moody’s Economy.com Sept. 7). The Manpower employment outlook dropped in the U.S., Canada and Germany, while remaining flat in most European economies and Japan. The employment outlook has improved for emerging economies in Asia and South America, the survey said … * Although worldwide business sentiment geared down this summer, it remains mostly unchanged during the past two months, according to the Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com Sept. 7). Businesses’s assessments of present conditions have deteriorated the most. Also, expectations for the outlook six months from now have been downgraded. However, investment and hiring intentions remain solid, portending that--although businesses aren’t expanding their operations in an aggressive manner--they are not sliding back either, Moody’s said. Therefore, the global economic recovery remains intact. However, growth is not up to the potential of the global economy, Moody’s said …

Hampel in INY TimesI IAPI Add more jobs to avoid recession

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WASHINGTON (9/7/10)--Friday's report that the private sector had added 67,000 jobs during August brought cautious optimism from Credit Union National Association (CUNA) Chief Economist Bill Hampel, who analyzed the numbers for the Associated Press. The New York Times (Sept. 3) was among those that picked up the report. "We need to get that [jobs] number over 100,000 to feel comfortably that we won't slip back into recession," Hampel told the news service. "We need it over 150,000 to feel confident we have a nice, sustainable recovery," he added. The Labor Department said the 67,000 jobs was more than the 41,000 jobs forecast by economists polled earlier by Thomson Reuters. (See related brief in News Now's "Market News.") While the government's report "added a small dose of optimism, it also shows that the economic recovery is still tenuous," said the article. It reported that stocks extended their rally Friday after the data were announced. More than 500,000 resumed their job hunts last month, driving up the unemployment rate to 9.6% from 9.5%, the article reported. Use the link for the full report.

News of the Competition (09/06/2010)

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MADISON, Wis. (9/7/10)
* The Securities and Exchange Commission (SEC) is pursuing a civil fraud case against three former officials of Countrywide Financial Corp., in which the SEC’s alleges that the defendants hid information about escalating risks from stockholders (The Wall Street Journal Sept. 2). In an unusual twist that could have wider impact on public companies, the defendants said some of the risk information allegedly hidden about Countrywide’s huge mortgage portfolio actually was disclosed in public filings. The filings were made by four of the company’s subsidiaries in connection with the sale of mortgage-backed securities, said the defendants, which include former CEO Angelo Mozilo. However, the SEC said those documents were too obscure and difficult to understand to be considered as adequate disclosure, according to the Journal. The broader issue, said some experts, is that as companies’ assets have been packaged into securities, disclosures about risks associated with those assets have come in SEC filings other than ones stockholders traditionally have looked at--such as annual and quarterly reports … * The Federal Deposit Insurance Corp. (FDIC) will conduct six phone seminars about deposit insurance coverage, Sept. 23 through Nov. 2. The seminars are geared to bank officers and employees (American Banker Sept. 3). Although the agency regularly conducts the training sessions, they now are of more intense interest since the enactment of the Dodd-Frank Act, which made the $250,000 deposit insurance coverage limit permanent, the Banker said … * The largest bank by assets in Latin America is preparing to ramp up its international growth plans and is looking to expand in the U.S. and South America, said Allan Toledo, vice president of international affairs of Banco de Brasil SA ( Dow Jones via American Banker Sept. 3). With roughly 1.4 million Brazilians living in the U.S., Banco De Brasil is focusing on Florida and New York--where most Brazilians live--to find a small bank worth about $50 million to acquire, Toledo told the publication …

Market News (09/06/2010)

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MADISON, Wis. (9/7/10)
* The U.S. private sector added 67,000 jobs in August, allaying concerns that the economy was sliding back into recession (Bloomberg.com Sept. 3). The August gain follows a revised 107,000 increase of private payrolls--which excludes government agencies--in July that was more than initially estimated, according to Labor Department figures released Friday. “The double-dip talk was probably misplaced,” said Maury Harris, chief economist at UBS Securities LLC. “From a historical perspective, things are still soft. The economy ought to be doing better.” The economy still lost 54,000 jobs overall in August--primarily because of the loss of temporary Census Bureau jobs (The New York Times Sept. 3). The August unemployment rate increased to 9.6% from 9.5% in July. August’s private sector employment gains and an increase in construction hiring made the month’s employment report stronger than expected (Moody’s Economy.com Sept. 3) … * Service industries--or the non-manufacturing sector--in the U.S. grew at the slowest pace in seven months, which indicates the economy may be slow to pick up steam in the second half of the year (Bloomberg.com Sept. 3). However, the sector did grow for an eighth consecutive month. The Institute for Supply Management said its index of national services activity dropped to 51.5 in August from 54.3 in July. A reading below 50 indicates contraction, while a number above 50 shows expansion (The New York Times Sept. 3). The survey indicates that service industries’ overall momentum has recently moderated--a negative sign for third-quarter gross domestic product growth (Moody’s Economy.com Sept. 3). “The sluggish recovery keeps slogging along at a pace that makes nobody happy,” Joel Naroff, president of Naroff Economic Advisors Inc., told Bloomberg. “The failure to recognize that the recovery was modest has led to the current panic that the upturn is faltering. It is not,” Naroff said … * The Economic Cycle Research Institute’s (ECRI) weekly leading index, which measures economic growth, dropped to 120.6 for the week ended Aug. 27, from a revised 120.9 the prior week (Moody’s Economy.com Sept. 3). The smoothed, annualized rate fell to -10.1% from an unrevised -9.9%. For the past two months, the ECRI weekly leading index has remained basically flat. However, its trend is not yet consonant with a stable economic recovery, ECRI said …

Market News (09/02/2010)

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MADISON, Wis. (9/3/10)
* Initial U.S. claims for unemployment benefits decreased for the second consecutive week, portending that the weakening economy has not caused widespread job cuts yet (The New York Times Sept. 2). Claims fell last week by 6,000 to a seasonally adjusted 472,000, the Labor Department said Thursday. Several economic indicators, including data on employment and housing indicate a slowdown in U.S. growth (The Wall Street Journal Sept. 2). Meanwhile, continuing claims also dropped. They fell by 23,000 to roughly 4.46 million for the week ended Aug. 21 (Moody’s Economy.com Sept. 2). In a related matter, online help-wanted ads placed by U.S. employers leveled off after a series of steep increases earlier this year, according to the Monster Employment Index, which tracks help-wanted ads online. The index increased two points from July to August, with recruiting decreasing in most of the 20 industries the index tracks, Moody’s said … * Pending home sales have modestly risen, following a sharp drop in the months immediately after expiration of the home buyer tax credit, according to the National Association of Realtors (NAR). The Pending Home Sales Index, a forward-looking indicator, rose 5.2% to 79.4 based on contracts signed in July from a downwardly revised 75.5 in June, but remains 19.1% below July 2009, when it was 98.1. The data reflect contracts and not closings, which normally occur with a lag time of one or two months. Lawrence Yun, NAR chief economist, said that there would be a long recovery process. “Home sales will remain soft in the months ahead, but improved affordability conditions should help with a recovery,” he said. “But the recovery looks to be a long process. Home buyers over the past year got a great deal, and buyers for the balance of this year have an edge over sellers. For those who bought at or near the peak several years ago, particularly in markets experiencing big bubbles, it may take over a decade to fully recover lost equity.” For the NAR report, use the link … * U.S. worker productivity in the second quarter fell more than previously estimated--driving up labor costs and indicating the growth slowdown will hold back profits (Bloomberg.com Sept. 2). The gauge of employee output per hour dropped at a 1.8% annual rate--twice the 0.9% decrease originally calculated and the largest decline in nearly four years, according to revised Labor Department figures released Thursday. Work force costs increased at the fastest pace in more than a year. “It’ll be harder for companies to increase profits,” said Chris Low, chief economist at FTN Financial, a provider of financial products for the investment and banking sector. “We either need faster economic growth or there’ll be a return to net job losses in coming months, and hopefully we’ll get the former,” Low said … * U.S. retailers used discounted back-to-school merchandise in August to record 3.3% revenue increases at retail stores open at least one year, according to a Thomson Reuters summary of 27 retailers (The New York Times Sept. 2). The August number was above the 2.5% increase that analysts anticipated, the Times said. Tax holidays also helped to get consumers to spend (Bloomberg.com Sept. 2). “The tax-free holidays really gave a boost,” said Ken Perkins, president of Retail Metrics. “Retailers came out of the gates strong on the promotional front in the last week of July and that carried through for basically the entire month of August” …

News of the Competition (09/02/2010)

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MADISON, Wis. (9/3/10)
* Fannie Mae notified mortgage loan servicers Tuesday that it will start to monitor them to ascertain why there are delays in moving delinquent loans into foreclosure (American Banker Sept. 2). If servicers cannot adequately explain the reasons for the delays, Freddie will conduct on-site reviews and assess fees to give servicers “a financial incentive to comply with Fannie Mae policies and improve the overall quality of their performance.” U.S. banks have repossessed or brought into the foreclosure process roughly 2.9 million homes, according to Lender Processing Services. Also, about 4.5 million borrowers are at least 30 days delinquent on their mortgages … * Connecticut Attorney General Richard Blumenthal Wednesday said he is investigating First Niagara Financial Group’s proposed acquisition of NewAlliance Banchares Inc., reported American Banker (Sept. 2). Buffalo, N.Y.-based First Niagara announced a deal Aug. 19 to acquire NewAlliance of New Haven, Conn., for $1.5 billion. Blumenthal sent a letter to the banks, asking them to provide information on the deal and a justification for it, saying it “raises significant and far-reaching legal and public policy issues.” Blumenthal specifically requested information on jobs that may be lost due to the merger, executive and shareholder compensation, credit card and overdraft fee practices, and the bank’s plan to provide credit to consumers, the Banker said …

News of the Competition (09/01/2010)

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MADISON, Wis. (9/2/10)
* In efforts to get customers to use the bank for their primary accounts, Citigroup Inc. said it will reduce fees on its U.S. banking accounts (Bloomberg.com Sept. 1). Customers with Citigold accounts can sidestep monthly fees if they maintain $50,000 in combined balances at Citigroup, beginning Nov. 1. The bank also intends to eliminate fees for some account-holders at the basic level, with more specific information forthcoming, Bloomberg said. Also, Citigroup announced Wednesday that it intends to nearly triple its work force in China to roughly 12,000 employees during the next three years (The Wall Street Journal Sept. 1). The plan is a “reflection of the fact that China is one our priority markets around the world, and we intend to continue to strongly grow our business in China,” said Stephen Thomas, Citigroup spokesman … * Failed investment bank Lehman Brothers might have survived if U.S. financial regulators had made different decisions, Richard Fuld, former Lehman CEO, said Wednesday in prepared testimony for a hearing before the Financial Crisis Inquiry Commission. “Uncontrollable market forces” that led to Lehman’s downfall also threatened other banks, Fuld said. “But Lehman was the only firm that was mandated by government regulators to file for bankruptcy,” he added. “The government then was forced to intervene to protect those other firms and their entire financial system.” Lehman proposed options to regulators that would have provided the bank relief and possibly averted its September 2008 implosion, Fuld said (The New York Times Sept. 1). The options included allowing Lehman to become a bank holding company, Fuld said in testimony. In a related matter, United Kingdom bank Barclays PLC said it had asked the Federal Reserve if the U.S. government would guarantee liabilities Barclays assumed when it bought the brokerage unit of the bankrupt Lehman in September 2008 (Bloomberg News Sept. 1). The U.S. told Barclays no aid would be available, Victor Lekow, who represented Barclays in the Lehman deal, testified Tuesday in U.S. Bankruptcy Court in Manhattan …

Market News (09/01/2010)

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MADISON, Wis. (9/2/10)
* Mortgage loan application volume for the week ended Aug. 27 increased 2.7% on a seasonally adjusted basis from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey, released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the Index rose 2.3%. The Refinance Index went up 2.8% and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 1.8% from one week earlier. The unadjusted Purchase Index decreased 0.4% and was 37% lower than the same week one year ago. “Refinancing activity picked up again last week, reaching new 15-month highs, as borrowers took advantage of even lower mortgage rates,” said Michael Fratantoni, MBA vice president of research and economics. “The drop in mortgage rates was in line with Treasury rates as the latest data continue to show weak economic growth and an exceptionally weak housing market.” For the MBA report, use the link … * U.S. companies unexpectedly cut workers in August, and employment dropped by 10,000--the first decline since January--according to figures released Wednesday by ADP Employer Services (Bloomberg.com Sept. 1). Economists had forecast a gain of 15,000, according to a Bloomberg News survey. Job losses raise the specter that consumer spending--70% of the U.S. economy--will slide and halt the economic recovery, Bloomberg said. “The labor market is really in peril as businesses are just being cautious,” said David Semmens, an economist at Standard Chartered Bank. “[These figures] will drag down expectations for the Friday payroll reports. The stability surrounding the recovery is declining.” In a related matter, announced job cuts dropped to a 10-year low of 34,768 in August---seeming to go against the current of a slowing economic recovery, according to Challenger, Gray and Christmas Inc. (Moody’s Economy.com Sept. 1). The data suggest that firms are operating very lean and have little to cut as the economic recovery weakens, Moody’s said … * Manufacturing has led the economic recovery and likely will keep it from fading, as it expanded at a more rapid pace in August than expected, according to numbers released by the Institute for Supply Management (ISM) (Bloomberg.com Sept. 1). The ISM’s manufacturing (factory) index rose to 56.3 in August from 55.5 in July. Economists had forecast a decline to 52.8, according to a Bloomberg News survey. Readings greater than 50 indicate growth. “The manufacturing sector has maintained its momentum at least through August,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “[The report] makes clear the economy is not slipping into recession any time [soon], but [it’s] still reasonable to be concerned about where we’re heading over the next three to six months.” This most recent ISM survey may help allay fears that the economic recovery was rapidly deteriorating midway through this quarter, ISM said (Moody’s Economy.com Sept. 1) …