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News of the Competition (09/30/2011)

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MADISON, Wis. (10/3/11)
* Banks are saying that the federal rules restricting interchange fees are causing them to close branches (American Banker Sept. 29). The rules have been a force in causing banks to look to cost-cutting to offset expected lost revenue, industry observers told the Banker. Nearly two-thirds of large U.S. banks have stopped offering free checking since the end of 2009, according to research firm Moebs Services Inc. Many branches are too small to justify their costs--a key reason for closures, Christopher Marinac, an analyst at FIG Partners LLC, told the Banker. He expects banks to shutter small, inefficient and ineffective branches. In a related matter, it was widely reported Thursday that Bank of America plans to charge some debit-card users a $5 monthly fee--in an attempt to recoup lost revenues caused by the implementation of a statutory cap on debit interchange fees (News Now Sept. 30). The fee cap, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, set a limit of 21 cents for debit card fees and allows an additional five basis points of the value of the transaction to cover fraud losses ... * Small banks are essentially the only financial institutions left in the Troubled Asset Relief Program (TARP), according to the American Banker (Sept. 29). Of the 400 or so financial institutions that still retain TARP funds, a few have more than $1 billion, and most hold less than $100 million, the Banker said. Many community banks are having a hard time repaying their TARP money because they lack sufficient capital to repay the taxpayer funds, Neil Barofsky, the former inspector general of TARP, told the Banker. Because the Small Business Lending Fund stopped providing money to banks last week, they no longer have that help in exiting TARP, the Banker said … * Some financial companies have introduced products designed to interact with online games and social networks (American Banker Sept. 29). Capital One has introduced interactive games that allow users to build Capital One branches and play with Capital One mascots--such as a sunglass-wearing goat and Visigoths. Taken a step further, Bobber Interactive Corp. of Seattle offers a prepaid card designed around a Facebook app that uses the social-media site as a gaming and goal-sharing platform, the Banker said …

Market News (09/30/2011)

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MADISON, Wis. (10/3/11)
* U.S. consumer confidence increased in September from its lowest level since November 2008 because negativity about the economy has diminished, according to the Thomson Reuters/University of Michigan Index of Consumer Sentiment (Bloomberg.com Sept. 30). The index rose to a higher-than-expected 59.4 from 55.7 in August. Economists had forecast a September reading of 57.8, according to a Bloomberg News survey. The expectations component of the index was responsible for a good portion of the upward revision (Moody’s Economy.com Sept. 30). In a related matter, U.S. consumer sentiment dropped for a second consecutive week, according to the Bloomberg Consumer Confidence Index (Moody’s Economy.com Sept. 29). The index fell 0.9 point--to -54-- for the week ended Sept. 25 ... * Americans’ incomes fell in August for the first time in nearly two years, which slowed consumer spending--a bleak sign, since consumer spending constitutes 70% of the U.S. economy (Bloomberg.com and The Wall Street Journal Sept. 30). Personal income decreased 0.1% in August, after small gains in prior months, the Commerce Department said Friday. The last time personal income declined was October 2009. Consumer spending in August increased 0.2%, following a 0.7% increase in July, the Commerce Department said. Stagnant wages, meager hiring and a nosedive in the stock market have dampened confidence in the economic recovery that started two years ago, and could hurt sales at big-box retailers, Bloomberg said … * The Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--declined to 121.9 for the week ended Sept. 23 from an unrevised 122.2 (Moody’s Economy.com Sept. 30). The smoothed, annualized growth rate dropped to -7.2% from an unrevised -6.7%. For the seventh time in eight weeks, the index dropped. Its current level is eroding hopes that conditions will improve, ECRI said. Risks to an economic recovery still are substantial, ECRI added …

News of the Competition (09/29/2011)

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MADISON, Wis. (9/30/11)
* The U.S. Department of the Treasury Thursday announced the seventh and final wave of funding provided through the Small Business Lending Fund. This includes 51 certified Community Development Financial Institutions (CDFIs) that received a total of $104,279,000. Treasury released the term sheet and other application materials needed by Community Development Loan Funds to access this lower-cost capital on May 26. CDFI Fund Director Donna J. Gambrell issued the following statement: “The Small Business Lending Fund was created to spur investments in small businesses, a priority of CDFIs across the country. I am proud of the strong performance of certified CDFI Loan Funds under this program, which demonstrates that the basics tenets of operation that CDFIs employ everyday--focusing investments in job creation opportunities, encouraging the growth of small businesses, and targeting economic growth where it is most needed--are key to this nation’s economic recovery.” The Credit Union National Association and credit unions are urging Congress to lift the credit union member business lending (MBL) cap to 27.5% of assets from 12.25% so they can help create 140,000 jobs and provide $13 billion in small-business loans … * Paul Smocer, newly name president of BITS, the technology component of the Financial Services Roundtable, is focusing on aiding banks in combating phishing and other criminal activities as he seeks to help banks bolster e-mail security (American Banker Sept. 28). One of his initial actions will be to release a reporting mechanism--available in a month--that Internet service providers can deploy to present authentication and security measures to BITS’ members as a component of reporting … * The Federal Reserve has approved applications from banks in Italy and Japan to establish representative offices in New York (American Banker Sept. 29). They are: Banca Popolare di Vicenza, in Vicenza, Italy, with $50.9 billion in assets, and Bank of Fukuoka Ltd. in Fukuoka, Japan, with $177 billion in assets. The banks intend to use their New York offices as a liaison with their customers, and to conduct research and gather information, the Banker said …

Market News (09/29/2011)

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MADISON, Wis. (9/30/11)
* Initial claims for U.S. unemployment benefits dropped more than expected last week--mainly because of seasonal adjustment volatility, technical issues and atypical calendar alignment, rather than economic factors (The Wall Street Journal and Bloomberg.com Sept. 29). Claims decreased 37,000 in the week ended Sept. 24 to 391,000--the fewest since April--following a revised 428,000--previously 423,000--the prior week, the Labor Department said Thursday. The pace of job cuts has not changed much in 2011 because firms are hesitant to hire when the economy is down and there are worries about a European default increase, Bloomberg said. Meanwhile, continuing claims for unemployment benefits for the week ended Sept. 17 fell to 3.73 million from 3.75 million the prior week (Moody’s Economy.com Sept. 29) … * For a second consecutive month, U.S. pending home sales declined in August, recording a 1.2% decline from July, the National Association of Realtors (NAR) said (Moody’s Economy.com Sept. 29). Hurricane Irene, which disrupted potential homebuying--particularly in the Northeast--is responsible for a portion of that decline, NAR said. Despite the most recent decline, pending home sales across all U.S. regions are higher than year-earlier levels. Also, pending home sales nationally are 7.7% more than August 2010. However, year-earlier comparisons are not an accurate reflection of the housing market’s condition because homebuying activity severely shrank during the summer of 2010 due to the expiration in April 2010 of the second round of homebuyer tax credits, NAR said … * The U.S. economy in the second quarter expanded more than originally estimated in August, aided by consumer spending and exports that were more robust than originally calculated (The New York Times and Bloomberg.com Sept. 29). U.S. gross domestic product (GDP) grew at a 1.3% annualized rate--up from a previously estimated 1%, the Commerce Department said Thursday in its third and final estimate. A pillar of the GDP expansion has been U.S. manufacturing--but it may be dampened by slower global markets that could limit growth in business spending and exports, Bloomberg said … * Foreclosure starts in the U.S. made an 18% jump to 217,955 units in August--the first time since March that the reading was above 200,000 (American Banker Sept. 28). The Hope Now Alliance, a servicing group that compiled the figures, said the surge could indicate a reversal in the foreclosure-start slowdown that took place during the past three quarters. Foreclosure starts hit their zenith during the third quarter of 2010, with 709,000 actions at about the time the robo-signing scandals were reported, the Banker said. After regulatory tightening, foreclosure starts declined to 534,200 units in the second quarter of 2011. Factors in the current upswing include financial issues, medical hardships and unemployment, which have impacted U.S. homeowners, Faith Schwartz, New Hope executive director, told the Banker

News of the Competition (09/28/2011)

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MADISON, Wis. (9/29/11)
* Last week’s security breach of a small segment of websites hosted by GoDaddy.com Inc. did not put customer credit card data at risk, according to a company executive (American Banker Sept. 27). The breach of the 445 GoDaddy.com Web-hosted sites represents a small portion of the more than five million sites the company hosts, said Nick Fuller, a GoDaddy spokesman. Because of the way GoDaddy’s Web-hosting system is set up--it does not integrate its handling of credit cards and Web hosting--it is impossible to obtain credit card data by breaching the hosting system, Todd Redford, GoDaddy chief information security officer, told the Banker … * A lack of trust in the security for mobile payments systems is continuing to cause a roadblock to adoption of the new technology, Rahul Gupta, president of card services for Fiserv, said at a Federal Reserve Bank of Chicago symposium (American Banker Sept. 27). Consumers regard mobile banking and payments as a safety issue, according to Fiserv internal research. Other survey data from Lightspeed Research indicates that consumers believe the ability to make payments with a mobile phone is “very unimportant.” If consumers elect not to use mobile technology, everyone in the mobile banking industry will be in financial trouble, Gupta said ... * The public and federal regulators should be happy that Capital One Financial Corp. has proposed to buy ING Group’s online U.S banking unit, Jon Finnernan, Capital One’s general counsel, told regulators (American Banker Sept. 27). He said the purchase of ING’s unit is significantly safer than other possible alternatives. Countering consumer groups’ assertions that the deal would create another “too big to fail” institution, Finnernan said the alternative to Fiserv’s deal would be to sell ING’s Direct to a larger, more complex financial institution or foreign bank, which would cause more risk to the financial system …

Market News (09/28/2011)

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MADISON, Wis. (9/29/11)
* Mortgage application volume increased 19.3% for the week ended Sept. 23 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 9.2%. The Refinance Index jumped 11.2%. The seasonally adjusted Purchase Index climbed 2.6% from the previous week. The unadjusted Purchase Index went up 2.2%, compared with the previous week and was 0.1% higher than the same week one year ago. Mortgage rates declined last week, at least partially in response to the Fed’s announcement that it would shift its portfolio toward longer-term Treasury securities, and that it would resume buying mortgage-backed securities, said Mike Fratantoni, MBA vice president of research and economics. “With lower rates, refinance application volume increased to its highest level since Aug. 19,” he added. “Purchase application volume also increased. However, the increase was in conventional purchase applications, which were up by 4.9%. Purchase applications for government loans fell by 0.6% over the week, likely influenced by the pending decline in Federal Housing Administration loan limits.” For the MBA report, use the link … * Manufacturers continue to struggle with a troubled economy. U.S. durable goods orders unexpectedly decreased in August--the second decline in three months (The Wall Street Journal Sept. 28). Orders decreased 0.1% from July to $201.76 billion, the Commerce Department said Wednesday. Economists had forecast an August rise of 0.2%, according to a Dow Jones Newswires survey. The August decline came after a 4.1% gain in July and a 1.1% decline in June. Despite recent market volatility, U.S. companies still continue with their investment plans, Neil Dutta, an economist at Bank of America Corp in New York, told Bloomberg. Currently there is no indication whether market volatility will cause businesses to pull back on investments--an ongoing risk, he added … * Health insurance companies have raised premiums sharply in 2011, outpacing any increases in workers’ wages (The New York Times Sept. 27). That situation is engendering more uncertainty for employers who are attempting to keep ever-escalating medical costs in check and for the Obama administration, the Times said. The average annual premium for family coverage through an employer hit $15,073 in 2011--a 9% increase from 2010, according to a study released Tuesday by a research group--the Kaiser Family Foundation …

News of the Competition (09/27/2011)

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MADISON, Wis. (9/28/11)
* Banks should work together more closely with telecom network providers in the emerging mobile payment sector, according to the most recent mobile-payment report, Ernst & Young’s “Mobile Money 2011” (American Banker Sept. 26). Banks and telecom providers are pursuing the same goal--a new revenue stream through mobile payments to augment eroding debit-card fees and increasing regulatory costs, along with stagnant phones and data plan sales, the report said. Mobile payment services are projected to reach $245 billion globally by 2014, the report said … * Consumers say they will accept non-security video surveillance that recognizes them so staff at bank branches greet them by name when the video is deployed to create more efficient service and make interacting with bank staff more personal, according to Zogby research (American Banker Sept. 26). Customer loyalty is enhanced when bank tellers instantly recognize them by name as customers enter a bank, according to 69% of the 2,153 U.S. adults Zogby polled in August. The research firm also found that 78% of those surveyed support the use of advanced technology to deliver customer service via using cameras in branches … * International regulators that constitute the Basel Committee on Banking Supervision began gathering Tuesday in Basel, Switzerland, to consider new capital rules requiring large banks to maintain higher capital buffers than other financial institutions (The Wall Street Journal Sept. 27). The proposal--introduced in July--is designed to reduce risk-taking and make certain that banks can absorb sudden losses without hurting the financial system or necessitating taxpayer bailouts, the Journal said. The July proposal would require 28 large banks to hold 1% to 2.5% of extra capital as a percentage of their “risk-weighted assets” …

Market News (09/27/2011)

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MADISON, Wis. (9/28/11)
* Consumer confidence in the U.S. increased less than expected in September, with the gauge of the difficulty in finding new jobs climbing to the highest level in nearly 30 years (Bloomberg.com Sept. 27). The Conference Board’s Index of Consumer Confidence rose to 45.4 from a revised 45.2 in August, according to data released Tuesday by the New York-based research group. Economists had forecast a September reading of 46 in a Bloomberg News survey. Worries about employment, income and the condition of the economy continue to afflict consumers. As the end of the year approaches, all those factors indicate an even weaker labor market, John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston, told Bloomberg … * U.S. home prices fell less than expected in July from a year earlier, indicating that bank delays in processing foreclosures may have for the time being slowed the descent of real estate values (Bloomberg.com Sept. 27). The S&P/Case-Shiller index of property values in 20 cities dropped 4.1% from July 2010, following a revised 4.4 % decline in the 12 months leading to June. Economists had forecast a 4.4% decline, said a Bloomberg News survey. Foreclosure processing has been delayed by investigations into bank foreclosure practices, and that may have stabilized prices. However, as the holdups dissolve, home values could soon resume the downward trend, placing more homes on the market and delaying any recovery in the industry, Bloomberg said … * Average credit card charge-off rates in the U.S. dropped in August, according to a Moody’s Investors Service report released Sept. 23 (American Banker Sept. 26). The seven basis- point decline to 6.02% from 6.09% in August resumed a general trend downward of the past two years, after a slight rise in July, Moody’s said. A trend of improving delinquencies indicates that charge-offs have sufficient momentum to continue declining in future months, said Moody’s analysts in the report. In October 2009, credit card delinquencies hit their peak, Moody’s reported ...

News of the Competition (09/26/2011)

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MADISON, Wis. (9/27/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday it closed two banks, bringing total bank failures so far this year to 73, compared with 157 for the entire year in 2010. The failed banks are: Citizens Bank of Northern California, Nevada City, Calif., assumed by Tri Counties Bank, Chico, Calif.; and Bank of the Commonwealth, Norfolk, Va., assumed by Southern Bank and Trust Co., Mount Olive, N.C. The closed banks held roughly $1.27 billion in assets. The FDIC estimated the newest failures will cost the Deposit Insurance Fund about $306 million ... * Many U.S. banks, particularly the biggest ones, are making large investments in their mobile and online banking platforms because they are beginning to realize those sites are not meeting customer expectations (American Banker Sept. 26). Online banking revitalization projects at eight big U.S. banks are in progress and will cost more than $100 million apiece, the Banker said. Also, Fiserv polled 1,000 clients to ask whether they intended to make incremental investments in their mobile banking, and 80% said yes … * Vikram Pandit, CEO of CitiGroup Inc., Friday said U.S. firms should no longer rely on credit scores to determine consumer lending decisions, but should use databases and regulations--similar to systems used in Asia--to include sharing on “both sides of the borrowers’ balance sheet” (American Banker Sept. 23). Lenders then use the data to help them decide the creditworthiness and affordability of debt, Pandit said at a conference Friday. Pandit’s point was made in the context of regulators needing to have more focus on consumer issues to keep the financial system safe and sound, the Banker said ...

Market News (09/26/2011)

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MADISON, Wis. (9/27/11)
* For the fourth consecutive month, sales of new U.S. homes in August fell, with housing market woes continuing to afflict the U.S. economy (The Wall Street Journal Sept. 26). Sales declined by 2.3 % to an annualized rate of 295,000--the weakest pace in six months--the Commerce Department said Monday. July sales were upwardly revised to a rate of 302,000 from a previously reported 298,000. A weakening economy and high unemployment are increasing consumers’ doubts about future economic prospects, causing many to save money and pay down debts instead of taking out loans, the Journal said. Inventories of new homes edged up to 6.6 months from 6.5, but declined to 162,000 units. The median new home price decreased 8% year over year (Moody’s Economy.com Sept. 26) ... * Business confidence worldwide still is fragile, but is consonant with a global economy that is not in recession, according to Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com Sept. 26). Encouraging signs include sales that still are reasonably strong, as is investment in equipment and software (Moody’s Economy.com Sept. 26). Trouble spots include depressed hiring by businesses and decreased demand for office space. Expectations about the economic outlook heading into 2012 also are dim. Pricing power remains solid despite the weaker economic conditions, Moody’s said …

News of the Competition (09/23/2011)

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MADISON, Wis. (9/26/11)
* So-called contingent payments--pay for performance--are becoming more prevalent among bankers in the merger and acquisition market (American Banker Sept. 22). As an example, a couple of community bank takeovers this summer would pay shareholders of the selling bank more money if its loans performed well over several years. Although common in other industries as post-purchase awards when a selling company reaches a revenue target or specific profit level, contingent payments are rare in the banking industry because of stringent regulatory oversight, the Banker said … * Discover Financial Services is moving away from its merger-and-acquisition frenzy and is refocusing on internal new business development rather than buying new businesses (American Banker Sept. 22). Discover intends to launch a new online checking account at the end of 2012 and is working to support some new features by installing a computer system. In the past year, the credit card company frequently went beyond its card lending and transaction processing milieu to purchase online deposits, stray loan portfolios and other assets from Citigroup Inc, Tree.com Inc. and others, the Banker said … * Responding to legislation that will cap what banks can charge merchants for debit card transactions, International Bancshares Corp.in Laredo, Texas, announced Thursday it will close 55 grocery store branches. The company is closing branches to help it continue offering free checking to its customers to compensate for new interchange legislation that goes into effect Saturday, which will deplete revenue, CEO Dennis Nixon said in a news release …

Market News (09/23/2011)

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MADISON, Wis. (9/26/11)
* The U.S. housing slump led to declining mortgage lending last year amid stringent credit standards and weak demand, according to the Federal Reserve (The Wall Street Journal Sept. 23). Especially deep credit contractions occurred in neighborhoods with high numbers of foreclosures, the Fed said. Lenders originated 7.9 million mortgages in 2010--down 12% from 2009, the Fed said in its annual analysis of mortgage data provided by more than 7,900 mortgage lenders that are reported to regulators under the Home Mortgage Disclosure Act. The only year in the past decade that mortgage originations were lower was in 2008 when they were at 7.2 million. (Also see News Now's 2010 HMDA data now available from FFIEC) … * The Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--dropped to 122.2 for the week ended Sept. 16 from a revised 122.8--previously 122.4 (Moody’s Economy.com Sept. 23). The smoothed annualized growth rate decreased to -6.7% from a revised -6.1%--previously -7.1%. The ECRI has fallen six of the past seven weeks. The current ECRI level is keeping optimism down that conditions are favorable for economic improvement. That indicates risks to an economic recovery still are substantial, Moody’s said ...

News of the Competition (09/22/2011)

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MADISON, Wis. (9/23/11)
* American Express Co., CitiGroup Inc. and JPMorgan Chase & Co. have invested $133 million in Rearden Commerce, an e-commerce software company that created the Deem e-commerce platform (American Banker Sept. 22). Citigroup is a new investor. Rearden has previously raised money from American Express and JPMorgan Chase & Co. Rearden will use the capital for “various high-growth initiatives, including acquisitions, working capital and debt repayment,” the company said in a statement. Rearden, based in Foster City, Calif., provides customers online services to manage situations such as business trips, conference calls and restaurant reservations … * Yields on Fannie Mae and Freddie Mac mortgage securities plunged following a Federal Reserve announcement yesterday (American Banker Sept. 22). The Fed said it will reinvest proceeds from past purchases of housing debt into the bonds. That announcement caused Fannie Mae’s current-coupon 30-year fixed rate mortgage securities to decrease about 0.15 percentage point--to 1.07 percentage point more than 10-year U.S. government debt yesterday afternoon--the biggest drop since March 2009, according to Bloomberg data …

Market News (09/22/2011)

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MADISON, Wis. (9/23/11)
* Although initial claims for U.S unemployment benefits last week dropped for the first time in three weeks, the overall claims level still is too elevated to indicate an improvement in a persistently weak U.S. job market (The Wall Street Journal Sept. 22). Claims declined by 9,000--to a seasonally adjusted 423,000 for the week ended Sept. 17--down from a revised 432,000, originally 428,000--filed the prior week, the Labor Department said Thursday. The numbers are consonant with a stagnant labor market, Brian Jones, an economist at Societe Generale in New York, told Bloomberg.com (Sept. 22). Any actions the Fed takes to aid the economy should bolster the labor market, but improvement will take time because job growth is needed before there will be more consumer demand, he added. Meanwhile continuing claims for unemployment benefits declined to 423,000 for the week ended Sept. 17 from 432,000 the prior week (Moody’s economy.com Sept. 22) ... * U.S. house prices rose 0.8% on a seasonally adjusted basis from June to July, according to the Federal Housing Finance Agency’s (FHFA) monthly House Price Index. The previously reported 0.9% increase in June was revised to a 0.7% increase. For the 12 months ending in July, U.S. prices fell 3.3%. The U.S. index is 18.4% below its April 2007 peak and roughly the same as the March 2004 index level. The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the FHFA report, use the link …

Fed to purchase 400B of Treasuries leaves fed funds rate alone

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WASHINGTON (9/22/11)--The Federal Open Market Committee (FOMC) decided at its meeting Tuesday and Wednesday to purchase billions in Treasury securities and leave the target range for the federal funds rate at 0% to 0.25%. Information received since the FOMC met in August indicates that economic growth remains slow. Recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has been increasing at only a modest pace in recent months despite some recovery in sales of motor vehicles as supply-chain disruptions eased. Investment in nonresidential structures is still weak, and the housing sector remains depressed. However, business investment in equipment and software continues to expand. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable. Consistent with its statutory mandate, the committee said it seeks to foster maximum employment and price stability. The FOMC continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the FOMC’s dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the committee will continue to pay close attention to the evolution of inflation and inflation expectations. To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the committee decided Wednesday to extend the average maturity of its holdings of securities. The committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of six years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of three years or less. “Despite political resistance to additional monetary policy, the Federal Reserve chose to go bold with a $400 billion ‘operation twist’ whereby they will sell $400 billion of short-term Treasury notes--less than a three-year maturity--and buy $400 billion of six-to-30 year notes and bonds through June 2012,” Steve Rick, CUNA senior economist, told News Now. "This is an attempt to ‘twist’ the yield curve by lowering long-term market interest rates,” he added. “This will extend the average maturity of the Fed’s security holdings and expose them to greater interest rate risk. The Fed hopes the lower interest rates will increase investment and consumer spending to jump start a stagnant recovery.” This program should put downward pressure on longer-term interest rates and help make broader financial conditions more accommodative, the committee said. The committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate. To help support conditions in mortgage markets, the committee will now reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. Also, the committee will maintain its existing policy of rolling over maturing Treasury securities at auction. “The Fed also decided to reinvest their maturing agency debt to reduce mortgage interest rates further in an attempt to stimulate a weakening housing sector,’ Rick said. “Over the past couple of months, mortgages rates have not come down as fast as the 10-year Treasury interest rate. However, the housing market faces significant headwinds in the form of falling home price expectations among households, weak job growth and falling consumer confidence.” The FOMC also decided to keep the target range for the federal funds rate at 0% to 0.25% and currently anticipates that economic conditions--including low rates of resource use and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. The committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate. Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; Elizabeth A. Duke; Charles L. Evans; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action were Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser, who did not support additional policy accommodation at this time.

News of the Competition (09/21/2011)

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MADISON, Wis. (9/22/11)
* The holiday retail season could be a disappointment for U.S. retailers, according to ShopperTrak, a firm that monitors foot traffic at malls and combines it with economic data to predict trends (The Wall Street Journal Sept. 21). National retail sales will increase by just 3% during November and December--less than last year’s 4.1% gain, ShopperTrak said in a new forecast. That amount will just keep up with inflation, the company said. Shoppers are expected to take fewer trips to stores and when they do shop, to do so mostly for bargains that they’ve scoped out ahead of time, the Journal said. The International Council of Shopping Centers also is predicting a slower holiday sales season during November and December--a 3% increase … * Consumers don’t want to share their personal information with lenders, even though they are sharing more of their personal information than ever online (American Banker Sept. 20). Some companies are trying to accommodate consumers by helping them connect with lenders without revealing even basic contact information until it is absolutely needed, the Banker said. As an example, Google Inc.’s Advisor connects prospective borrowers with card and mortgage lenders by employing a temporary e-mail address. If a consumer ignores a lender’s entreaties three times, the e-mail is automatically turned off forever, said Dan Shapiro, Google Advisor product manager. If consumers choose to contact lenders by phone, the lender does not see the applicant’s phone number unless the applicant calls first, Shapiro added ...

Market News (09/21/2011)

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MADISON, Wis. (9/22/11)
* U.S. mortgage loan application volume increased 0.6% for the week ended Sept. 16 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 25.2%, compared with the previous week, which included the Labor Day holiday. The Refinance Index climbed 2.2%. The seasonally adjusted Purchase Index decreased 4.7%. The unadjusted Purchase Index went up 17.1%, compared with the previous week. The four-week moving average for the seasonally adjusted Market Index is down 3.15%. The four-week moving average is down 0.54% for the seasonally adjusted Purchase Index, while this average is down 3.91% for the Refinance Index. For the MBA report, use the link … * Sales of previously owned (existing) homes increased in August to the highest level in five months, but remained down when viewed in a historical context, with the floundering housing market unable to boost the economy (The Wall Street Journal Sept. 21). Sales rose 7.7% in August from July to a seasonally adjusted rate of 5.03 million, the National Association of Realtors said Wednesday. July’s pace remained unrevised at 4.67 million per year. Sales increased 18.6% from year-ago levels. The median home sales price was $168,300--down 5.1% from $177,300 a year earlier. Despite the uptick in sales in August, the U.S. still is struggling in the wake of the worst housing downturn in several decades, the Journal said …

News of the Competition (09/20/2011)

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MADISON, Wis. (9/21/11)
* Former directors of failed U.S. banks are confronting lawsuits filed against them by the Federal Deposit Insurance Corp. (FDIC) by claiming the blame belongs to the FDIC and other regulators because they repeatedly approved the business plans of banks that ultimately failed (American Banker Sept. 19). If the FDIC, which is staffed by banking experts, could not foresee the real estate collapse, how could directors and officers of community banks be expected to do so, the defendants ask. Although some in the industry say the strategy of blaming the regulators doesn’t work, others said they think the defense has some merit because outside bank board members cannot be expected to know about situations that some claim blindsided regulators … * Banking industry costs of implementing Basel III capital rules--including a capital surcharge on systemically important institutions, could have a negative impact on U.S. banks and could hamper an economic recovery, said executives taking part in American Banker’s regulatory symposium Monday (American Banker Sept. 19). Outlined by international regulators following the financial crisis, the new capital rules call for big banks to hold common equity of 7%. The extra surcharge for the largest financial institutions would be between 1% and 2.5%. Basel III is part of a growing uncertainty about future regulation, prompting banks to cut back on their lending at a time when the economy needs more stimulus to recover, said bankers at the symposium ...

Market News (09/20/2011)

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MADISON, Wis. (9/ 21/11)
*The International Monetary Fund (IMF) slashed its 2011 and 2012 global growth forecast, which included a steep downgrade for the U.S. economic outlook through next year because of weak growth and worries about Europe’s inability to rein in its debt crisis (The New York Times and Bloomberg.com Sept. 20). The IMF cut its global growth forecast to 4% this year and next from June forecasts of 4.3% in 2011 and 4.5% in 2012, and warned of “severe repercussions” to the world economy unless the U.S. and euro zone governments take quick policy actions (The Wall Street Journal Sept. 20). The IMF said the U.S. economy is expected to grow only 1.5% this year and 1.8% in 2012--down from its June forecast of 2.5% this year and 2.7% next year. The IMF also lowered its outlook for the 17 European Union countries that use the euro as currency. It forecast 1.6% growth in 2011 and 1.1% in 2012--down from June projections of 2% and 1.7%, respectively … * U.S. housing starts declined more than expected in August--to their lowest level in three months--indicating the housing industry remains stagnant, even though mortgage rates have dipped to record lows (Bloomberg.com and The Wall Street Journal Sept. 20). Housing starts fell 5% to a three-month-low 571,000 annual rate, the Commerce Department said Tuesday. High unemployment, declining home prices and a glut of foreclosures are limiting residential construction, which has usually aided economic rebounds from past recessions, Bloomberg said ... * The Federal Reserve conducted an auction Monday of $5 billion in 28-day term deposits through its Term Deposit Facility. Bids at the stop-out rate were pro-rated at 17.5%. Resulting awards were rounded to the nearest $10,000 except that all awards below $10,000 were rounded up to $10,000. The awarded deposits will settle on Sept. 22, and will mature on Oct. 20. The stop-out rate shown above will apply to all awarded deposits. For the Fed auction, use the link …

News of the Competition (09/19/2011)

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MADISON, Wis. (9/20/11)
* Citigroup Inc. is raising basic checking account fees it charges customers (American Banker Sept. 19). The New York bank also no longer gives customers rewards for using its debit cards. Citigroup will start charging customers in December $10 per month for a basic checking account from the current $8 per month. Customers can sidestep monthly checking fees if they receive at least one direct deposit and make at least one online bill payment per month through the account. The article said the fees come “in the wake of new regulations capping debit interchange fees” … * Mike Perry, former CEO of IndyMac Bancorp until its 2008 implosion, is trying to rebuild his reputation on a new website dubbed “Not Too Big to Fail,” according to American Banker (Sept. 16). After remaining silent for three years, Perry wrote on the website that he decided to clear the air because none of lawsuits against him have any merit, and that IndyMac should not be penalized for failing to make the list of favored financial institutions considered by the federal government to be “too big to fail.” Perry goes on to question the motives of agencies suing him, such as the Federal Deposit Insurance Corp and the Securities and Exchange commission. For Not Too Big to Fail, use the link … * MasterCard Inc. and Google have been working with Citigroup Inc., First Data Corp. and Sprint Nextel Corp. to produce a mobile wallet--and to establish a presence in the growing mobile payments industry (American Banker Sept. 19). Although MasterCard Inc. is preparing to launch Google Inc.’s mobile wallet within the next few weeks, executives do not anticipate consumers regularly paying with their phones anytime soon. In May, Google and its partners introduced a mobile payment system that lets consumers pay for goods by tapping their phones at the checkout counter rather than swiping their cards. The Google consortium is competing with rival efforts from some big financial, technology and telecom companies, including Visa Inc.’s mobile payments projects with top U.S. banks, and the Isis joint venture backed by leading wireless carriers, the Banker said …

Market News (09/19/2011)

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MADISON, Wis. (9/20/11)
* The probability of the U.S. falling into recession in six months jumped to 41% in August from 31% in July because the economy’s troubles became more visible in August, according to Moody’s Analytics risk of recession gauge (Moody’s Economy.com Sept. 19). For four consecutive months, the probability of recession has increased, and the measure is at its highest level since April 2009. The increase in the probability of recession is due to a nosedive in consumer confidence, a deteriorating labor market and more stringent labor market conditions, Moody’s said … * The National Association of Home Builders (NAHB) Housing Market Index declined one point to 14 in September from 15 in August (Moody’s Economy.com Sept. 19). From a regional perspective, a slight rise in the Midwest was more than offset by decreases in the three other U.S. Census regions--the West, Northeast and South. Major U.S. banks are starting to accelerate foreclosure filings, which is leading to increasing downward pressure on home prices. That is causing homebuilder confidence to continue to show weakness, NAHB said ...

Fed to look at steps this week to boost economy

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WASHINGTON (9/20/11)--Federal Reserve officials are likely to look at short-term steps to bolster a weak economy when the Federal Open Market Committee (FOMC) holds its monthly meeting today and Wednesday. The Fed may consider altering the composition of its portfolio of securities to allow it to hold more long-term debt (The Wall Street Journal Sept. 19). The rationale for that move is to stimulate more spending and investment by pushing down long-term interest rates, the Journal said. Also, the Fed could attempt to encourage more lending by reducing the 0.25% interest rate now paid to private banks when they park their money at the central bank, the Journal said. The persistent weakness of the U.S. economy, which has resulted in more than 25 million Americans unable to obtain full-time work, is an overarching argument for Fed action (The New York Times Sept. 18). The Fed has to confront the risk of doing less than expected because of the anticipatory behavior of investors, the Times said. The Fed has no option but to act, Krishna Memani, director of fixed income at Oppenheimer Funds told the Times, adding that if the Fed does nothing--that would make the market react negatively because the Fed has created fairly high market expectations for action. News Now will post a live story Wednesday on the actions taken by the FOMC at the conclusion of its two-day meeting.

News of the Competition (09/16/2011)

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MADISON, Wis. (9/19/11)
* The five biggest U.S. home lenders have paid at least $65.7 billion to cover costs of faulty mortgages and foreclosure abuses, according to a Bloomberg News compilation (Bloomberg.com Sept. 16). New claims could drive the industrywide tally to twice that amount. Bloomberg said its figures were compiled from company statements, regulatory filings and financial presentations by the five largest U.S. mortgage lenders. Bank of America--the biggest U.S. lender--had the highest costs, totaling $39.1 billion since the beginning of 2007. JPMorgan Chase & Co.--ranked as the No. 2 U.S. lender by assets--followed with $16.3 billion. Wells Fargo & Co.--the largest U.S. home lender--had $5.09 billion in costs … * The banking industry is in better shape than is widely believed, said some top U.S. bankers last week (American Banker Sept. 15). Despite mortgage woes and broader economic problems, banks are actually doing well, with losses diminishing and liquidity at an all-time time high. That was the argument made by the heads of PNC Financial Services Group Inc., U.S. Bancorp, and other big financial institutions at a conference in New York, the Banker said. What the banks need to reverse a seven-month-long slide in bank stocks is for dividends to bounce back and for legal troubles involving bad home loans to disappear, some market-watchers told the Banker … * Citigroup Wednesday announced it launched a new iPhone app--the Citi On Campus App--that connects students at specific universities to Citi’s campus recruitment activities (American Banker Sept. 15). The app allows students to view a list of nearby schools hosting Citi recruitment events, follow Citi’s Twitter account for current information about the company, and add Citi recruiting events to their favorites and calendars. Also, the app allows students to watch videos that show what it is like to work at Citi, to get directions to Citi events, and to share Citi events with colleagues and friends through LinkedIn networking services and e-mail …

Market News (09/16/2011)

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MADISON, Wis. (9/19/11)
* There is a one in three chance that the U.S. economy will fall back into recession during the next 12 months, according to economists in a Wall Street Journal survey (The Wall Street Journal Sept. 16). Those odds are the highest for a new recession that economists in the survey have given since the start of the economic recovery. It is doubtful that anything the Federal Reserve might do at its meeting this week will change that, the economists added. A weak job market, concerns about European stability and market turmoil have caused economic strains to intensify, the Journal said. In a related matter, the Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--decreased to 122.4 for the week ended Sept. 9 from a revised 122.5 the prior week (Moody’s Economy.com Sept. 16). The index declined for the fifth time in the past six weeks … * U.S. foreclosure filings in August increased by 7.1% from July, driven by a 32% surge in earlier stages of foreclosure--particularly new foreclosure filings, according to RealtyTrac (Moody’s Economy.com Sept. 16). The rise is a sign that lenders are starting to get through the foreclosure delays caused by faulty documentation, Moody’s said. However, foreclosures remain 33% lower than a year ago, despite the most recent acceleration in the month-over-month pace. Total foreclosure activity will accelerate more as servicers work through a backlog of foreclosures accumulated at several stages of the foreclosure process during the past months, Moody’s said … * With citizens’ views of current economic conditions improving, confidence among U.S. consumers increased in September from the lowest level since November 2008, according to the Thomson/Reuters/University of Michigan Consumer Sentiment Index (Bloomberg.com Sept. 16). The index rose to 57.8 this month from 55.7 in August. However, the group’s gauge of consumer expectations six months from now fell to the lowest level since May 1980. Headwinds for consumer spending include a paucity of jobs and income growth, higher costs and a volatile stock market, Bloomberg said …

News of the Competition (09/15/2011)

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MADISON, Wis. (9/16/11)
* The statutes of limitation are winding down on investors aiming to sue the largest U.S. banks over mortgage securities that soured. The development is causing a recent wave of lawsuits that are proving unsettling to investors in recent months, according to lawyers (American Banker Sept. 15). The statute for federal securities lawsuits can be as short as one year--and in several instances, already has expired, lawyers told the Banker. Claims alleging faulty information in mortgage-backed security documents have time limits of two years after discovery of the fraud or five years after the sale … * Non-cash payments (e-payments) rose 7.8% in 2010, following a 5% growth rate in 2009, according to a global payments report released Thursday by Capgemini and the Royal Bank of Scotland (American Banker Sept. 15). Overall in 2009, there were 260 billion non-cash payments, including card transactions, credit transfers, direct debit, mobile payments and wires, the report said. Cards remain the preferred non-cash payment mechanism worldwide, with global transaction volumes rising nearly 10% in 2010 and having a market share of more than 40% in most markets … * Indicating that lenders are hastening the foreclosure process after nearly a year of delays, default notices sent to delinquent U.S. homebuyers spiked 33% in August from July, according to data from RealtyTrac Inc. (Bloomberg.com Sept. 15.). First-time default notices were filed on 78,880 properties--the largest number in nine months. Foreclosure filings rose 7% to 228,098 from a four-year low in July. In August, one in 570 homes received a notice ...

Market News (09/15/2011)

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MADISON, Wis. (9/16/11)
* U.S. consumer prices jumped in August because of escalating food, gasoline and housing costs, according to the Consumer Price Index (The Wall Street Journal Sept. 15). Prices last month increased a seasonally adjusted 0.4% from July following a 0.5% rise that month, the Labor Department said Thursday. Last month, prices rose 3.8% compared with a year earlier. Price strength was broad-based in August, while core inflation remained the same as in July at 0.2% (Moody’s Economy.com Sept. 15). Inflation is proving more persistent than anticipated, according to the August data, which may concern federal financial officials, Moody’s said ... * Initial claims for U.S. unemployment benefits unexpectedly rose last week to the highest level since the end of June, accentuating the risk of the labor market weakening further (Bloomberg.com Sept. 15). Claims rose by 11,000--to 428,000--for the week ended Sept. 10, the Labor Department said Thursday. Economists had forecast a drop in claims to 411,000, according to a Bloomberg News survey. Job growth is moving sideways, when it needs to move upward to generate the wages necessary to bolster consumer spending, Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pa., told Bloomberg. Meanwhile, continuing claims for unemployment benefits for the week ended Sept. 3 fell to 3.726 million from 3.738 million the prior week (Moody’s Economy.com) … * U.S. industrial production unexpectedly climbed last month, indicating the expansion in manufacturing will support the largest global economy (Bloomberg.com Sept. 15). Industrial production increased 0.2% in August after advancing 0.9% in July, according to the Industrial Capacity and Utilization report released Thursday by the Federal Reserve. Manufacturing rose 0.5% in August, after a similarly sized gain in July, and the rates of change were revised down slightly in April, May and June. At 94% of its 2007 average, total industrial production for August was 3.4% above its year-earlier level. Capacity utilization for total industry edged up to 77.4%, a rate 1.9 percentage points above its level from a year earlier but 3 percentage points below its long-run (1972--2010) average. For the Fed report, use the link …

News of the Competition (09/14/2011)

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MADISON, Wis. (9/15/11)
* Fraudsters are ramping up their use of alternative payment methods--such as eBay’s Inc. PayPal--to make phony transactions, in a move away from checks and debit cards, U.S. merchants say (American Banker Sept. 13). Alternative payment methods are often advertised as being a safer alternative for online payments than cards or checks because they allow consumers to buy goods and services without revealing their bank account personal information to sellers. However, fraudsters are paying more attention to alternative systems, according to merchants that use them. In July, merchants who accepted alternative payments reported to Javelin Strategy & Research that 27% of fraud took place with alternative payment products--up from 20% a year earlier. Meanwhile, check, credit and debit transactions all showed fraud declines among merchants that accept them … * Small community banks are looking to capitalize on the downsizing of giant Bank of America (BofA) as it closes down some of its 5,900 branches (American Banker Sept. 13). Many BofA branches are located on prime real estate and would be desirable locations for community bankers looking to grow, bankers and consultants told the publication. BofA intends to close roughly 750 branches nationwide, CEO Brian Moynihan said in August. The sale of BofA branches will begin soon, John Koelmel, president/CEO of First Niagara Financial Group Inc. of Buffalo, N.Y., predicted to the Banker

Market News (09/14/2011)

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MADISON, Wis. (9/15/11)
* U.S. retail sales unexpectedly stagnated in August because consumers purchased fewer autos, clothes and furniture. That leaves retail sales unchanged from July, and accentuating the possibility that the economy could stall (The New York Times and Bloomberg.com Sept. 14). August’s flat sales followed a 0.3% gain in July, the Labor Department said Wednesday. Last month’s retail sales stagnation was a surprise because major automakers reported robust sales increases mostly because dealers offered cheaper financing and introduced new models, the Times said. Also, major U.S. retailers reported good results because of key back-to-school shopping. August’s tepid sales indicate that the retail sector could struggle to grow in the second half of 2011, the Times said. Economic headwinds are causing consumers to become more cautious. Federal policymakers need to focus on growth because August indicates growth has nearly come to a halt, Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, told Bloomberg ... * Mortgage loan application volume for the week ended Sept. 9 increased 6.3% from a week earlier, according to the Market Composite Index in the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index decreased 15.4%. The seasonally adjusted Purchase Index rose 7%. The unadjusted Purchase Index declined 16.2% and was 7.2% lower than the same week one year ago. The Refinance Index climbed 6%, stopping a run of three consecutive weekly decreases. The Refinance Index is not seasonally adjusted but is adjusted for the Labor Day holiday. On an unadjusted basis, the Refinance Index fell 15.2% and is 23.5% lower than the same week a year ago. The four-week moving average for the seasonally adjusted Market Index is down 2.9%. The four-week moving average is up 0.5% for the seasonally adjusted Purchase Index, while that average is down 3.9% for the Refinance Index. For the MBA report, use the link … * Prices for finished goods (producer prices) remained unchanged in August after increasing 0.2% in July, according to the Bureau of Labor Statistics. The prices belie general expectations of a substantial decrease (Moody’s Economy.com Sept. 14). Inflation for core finished goods prices slowed considerably and inflation for earlier stages of production continued to moderate, Moody’s said ...

News of the Competition (09/13/2011)

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MADISON, Wis. (9/14/11)
* As part of a cost-savings program, Bank of America Corp (BofA) aims to cut $5 billion in annual costs by the end of 2013, according to CEO Brian Moynihan (The Wall Street Journal Sept. 12). To overcome previous financial missteps, BofA will trim $5 billion in annual expenses out of $27 billion in consumer and small-business banking expenses, card costs, global technology and other areas as part of the first phase of a plan dubbed “Project New BAC,” Moynihan said at a financial conference in New York. As Moynihan dismantles and reorganizes BofA, it will likely lose the distinction of being the largest U.S. lender by assets (Bloomberg.com Sept. 12). The bank already has lost its No. 1 spot in credit cards, deposits and mortgage lending because Moynihan is reducing operations added by former BofA CEO Kenneth Lewis, Bloomberg said …

Market News (09/13/2011)

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MADISON, Wis. (9/14/11)
* The U.S. poverty level in 2010 increased to the highest level in 17 years and household income also dropped last year, indicating that there is a lingering effect from the worst economic drop-off in seven decades (Bloomberg.com Sept. 11). There were 46.2 million people in poverty last year--the largest amount in the 52 years that data have been published, according to a report issued Tuesday by the U.S. Census Bureau (MarketWatch Sept. 13). The poverty level rose to 15.1% last year from 14.3 % in 2009. Real median household income last year was $49,445--down 2.3% from the prior year. Families are struggling to make ends meet and don’t have the buying power to help boost an economic recovery, Isabel Sawhill, a senior fellow at the Brookings Institution in Washington, D.C., told Bloomberg … * Commercial/multifamily mortgage delinquency rates among four out of five major investor groups--banks, life insurance companies, Fannie Mae and Freddie Mac--decreased in the second quarter of 2011, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report. Between the first quarter and second quarter of 2011, the 90-plus-day delinquency rate for loans held by Federal Deposit Insurance Corp.-insured banks and thrifts declined 0.25%--to 3.93%. The 60-plus-day delinquency rate for loans held in life company portfolios dropped 0.02 percentage points to 0.12%. The 60-plus-day delinquency rate for multifamily loans held or insured by Fannie Mae fell 0.18 percentage points to 0.46%. The 60-plus-day delinquency rate for multifamily loans held or insured by Freddie Mac decreased 0.05 percentage points to 0.31%. The 30-plus-day delinquency rate for loans held in commercial mortgage-backed securities increased 0.25 percentage points to 9.43%. For the MBA report, use the link … * U.S. small-business owner confidence in the economy in August dropped to the lowest level in more than a year, eroded by a sluggish economic recovery and financial problems in Europe (The Wall Street Journal and Moody’s Economy.com Sept. 13). The National Federation of Independent Business’ (NFIB) small-business optimism index fell to 88.1 in August from 89.9 in July. The decrease constitutes the sixth consecutive monthly decline, placing the index below its second-quarter average of 91--its lowest reading since July 2010. Expectations for business conditions and real-estate sales growth were major factors in the confidence decline, the Journal said …

News of the Competition (09/12/2011)

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MADISON, Wis. (9/13/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday it closed one bank, bringing total bank failures so far this year to 71, compared with 157 for the entire year in 2010. The failed bank is The First National Bank of Florida, Milton, Fla., assumed by CharterBank, West Point, Ga. The closed bank held roughly $207 million in assets as of June 30. The FDIC estimated the newest failure will cost the Deposit Insurance Fund about $47 million ... * First Merchants Corp. Muncie, Ind., said Friday it intends to repay $116 million of Troubled Asset Relief Program (TARP) funds it received in February 2009 (American Banker Sept. 9). The $4.1 billion asset First Merchants plans to exit TARP by using proceeds from a recent common stock offering--$21.2 million--along with a low-interest $90.8 million loan from the Treasury Department’s Small Business Lending Fund. The additional capital aided the company as it went through the recent recession, Mark Hardwick, First Merchants chief financial officer, said in a press release ... * Hamilton State Bancshares Inc, Hochston, Ga., repurchased $1.5 million of its common stock by completing a cash tender offer--about a third of the $4.2 million in stock the company had targeted when it announced the plan in August, the company said Friday (American Banker Sept. 9). At a share price of $6.50, shareholders tendered 230,761 shares. The buyback comes after a $231.6 million of capital was raised in March …

Market News (09/12/2011)

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MADISON, Wis. (9/13/11)
* Worldwide business confidence continues to erode, declining last week to its lowest point since early 2010, according to Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com Sept. 12). Readings of U.S. business sentiment are consonant with an economy on the edge of a recession, Moody’s said. In recent weeks, sales strength has weakened after holding steady for awhile. Hiring intentions have weakened significantly since the summer. Also, recent decreases in credit availability could affect sentiment. Businesses are becoming more worried about their prospects heading into next year, Moody’s said. Japanese and U.S. businesses are the most worried respondents, while Chinese and German businesses are the most positive, Moody’s said … * Some industry analysts are wondering if there are new forces affecting the stock market that cause sharp erratic swings of hundreds of points each day, and if this will make trading permanently more unpredictable (The New York Times Sept. 11). It has become more common for stock prices to make big swings--of 3% to 4%--than at any other time in the history of the stock market, according to a Times analysis of price changes in the Standard & Poor’s 500-stock market index since 1962. Volatility can be problematic since it can steer investors away from the markets, make companies hesitant to go public and reduce confidence in the economy, which can lead to further declines in stock prices, the Times said ...

News of the Competition (09/09/2011)

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MADISON, Wis. (9/12/11)
* During its first phase of restructuring, Bank of America (BofA)--the biggest U.S. lender by assets--may cut roughly 40,000 positions, said sources familiar with the plans, which CEO Brian Moynihan is expected to discuss today (The Wall Street Journal Sept. 9). Although the numbers could change, the restructuring would reduce the bank’s work force for several years as a component of an overhaul plan known as “Project New BAC,” the Journal said. Moynihan is attempting to increase profits amid worries about BofA’s exposure to a surfeit of mortgage-related losses and lawsuits, and a slowing U.S. economy, the Journal said … * U.S. banks have found allies among foreign financial institutions in a fight over a proposed surcharge on the world’s riskiest financial institutions (American Banker Sept. 8). Foreign banks--in comment letters to the Basel Committee on Banking Supervision--brought forth issues that go beyond the usual arguments by U.S. banks that such a surcharge would restrict lending and hurt the economy. Foreign banks also object to how regulators will decide which 28 institutions will be deemed “globally systemically significant financial institutions,”--or G-SIBS--which are subject to the charge. The foreign banks also assert that the total impact of the surcharge is unpredictable, the Banker said … * Mitek Systems, Inc.--which provides mobile-imaging applications using smartphone cameras for check deposits, bill payments and automated clearing house enrollments--Thursday announced an application for the financial services industry that allows consumers to switch bank credit card accounts as simply as “point, shoot and transfer.” Mitek Mobile Balance Transfer is a way for a bank to acquire new credit card customers. The mobile application allows a bank’s customer to use a smartphone camera to take a picture of a competitor’s credit card payment coupon. The customer transmits the information to the bank, which then can offer the customer a better interest rate to incent the customer to open a new credit card account and transfer an existing balance. For banks, Mobile Balance Transfer allows the bank to interact with a customer in real time. By accepting the bank’s offer, the consumer transfers his or her outstanding credit card balance to a new credit card account offering a more attractive rate, saving the customer time and money, Mitek said ...

Market News (09/09/2011)

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MADISON, Wis. (9/12/11)
* U.S. wholesale inventories increased in July, a sign that companies are becoming more cautious about the economic outlook (The Wall Street Journal Sept. 5). Inventories rose 0.8% to a seasonally adjusted $462.4 billion, following a 0.6% gain in June, the Commerce Department said Friday. Most of the 0.4% growth in gross domestic product (GDP) in the first quarter was due to a buildup in inventories early in the year, which helped bolster a troubled economy, the Journal said. However, inventories actually subtracted 0.2 percentage points from second-quarter GDP--rather than adding that amount as originally estimated, according to recently revised data. Leaner inventories can be a sign of higher growth later in the year, some economists say. However, if companies become concerned about demand and draw down stockpiles even more, inventories could remain a drag on the economy, the Journal said … * The U.S. trade deficit in July narrowed to its lowest level in three months because domestic manufacturers sold more airplane, cars and industrial machinery--raising exports to a record high, the Commerce Department said Thursday (The New York Times Sept. 8). The trade deficit narrowed $6.8 billion--to $44.8 billion--down 13.1% from June. That improvement reflected a 3.6% gain in exports to a record level of $178 billion. Imports slid 0.2% to $126.9 billion, with a decline in crude oil prices resulting in the cost for imported oil falling 6% to $35.5 billion. The surge in exports should provide much-needed stimulus for growth at a time when the U.S. economy is on the precipice of a recession, the Times said … * The Economic Cycle Research Institute’s (ECRI) weekly leading index--which measures economic growth--rose to 123 for the week ended Sept. 2 from a revised 122.5 (Moody’s Economy.com Sept. 9). The index increased for the first time in five weeks, but its present level still is curbing optimism that conditions are conducive to improvement, ECRI said. Risks to a U.S. economic recovery remain substantial, ECRI concluded ...

Consumer credit rises 12B in July up also for CUs

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WASHINGTON (9/9/11)--American consumers increased their borrowing in July by $12 billion--at an annual rate of 6%--to reach $2.455 trillion, said the Federal Reserve Consumer Credit report. Total borrowing at credit unions--for both revolving and nonrevolving loans--also increased during the month. It was the 10th consecutive month that overall consumer debt had increased, the largest increase since April 2008, and more than the $6 billion increase economists on Wall Street had expected (MarketWatch.com Sept. 8). In June, consumer debt rose $11.3 billion. Overall revolving debt--or credit card debt--dropped to $792.5 billion (5.14% at an annual rate) from $795.9 billion in June. Nonrevolving debt--such as auto loans, personal loans and student loans--rose 11.25% at an annual rate to $1.662 trillion from June's $1.647 trillion. It was the most since November 2001 (Bloomberg via sfgate Sept. 8). Members borrowed $222.7 billion from credit unions in July, compared with $220.9 billion in June. Roughly $36 million of that was in revolving credit, up from $35.8 million in June, said the Fed's report. Nonrevolving credit at credit unions totaled $186.7 billion, up from $185.1 billion.

News of the Competition (09/08/2011)

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MADISON, Wis. (9/9/11)
* The Treasury Department this week announced it has denied 40% of Small Business Lending Fund (SBLF) applicants (American Banker Sept. 7). Of the $30 billion allocated to the program, Treasury said it intends to distribute $4.3 billion. A Sept. 6 white paper indicated it awarded money to 382 out of 932 banks that applied to the fund. Treasury on Wednesday began contacting applicants that had not been approved because of their failure to meet minimum program or statutory requirements--including the ability to pay dividends and garnering approval from their primary regulator … * Associated Banc-Corp in Green Bay, Wis., intends to pay off its debt to the Treasury Department’s Troubled Asset Relief Program (TARP) by raising more than $200 million in new capital (American Banker Sept. 7). The company received $525 million in TARP funds in late 2008, and paid back about half the balance in early 2011, following its issuance of a $300 million debt offering … * Some midsize U.S. regional banking companies have maintained significant advantages in deposit pricing over their peer group despite a low-interest-rate milieu that overall has created cheaper funding for everyone, according to American Banker (Sept. 7). Data from SVB Financial Information Systems LLC indicate a variety of business models and deposit costs. Some of the data validates reputations for strong customer service and deep relationships with customers, the Banker said. SVB Financial Group had the lowest cost of second-quarter deposits--for financial institutions of $10 billion to $40 billion in assets as of June 30--at 18 basis points, per SVB data …

Market News (09/08/2011)

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MADISON, Wis. (9/9/11)
* U.S. mortgage rates fell to their lowest level in at least 40 years, indicating that poor job growth and continuing market concerns caused investors to move to government bonds (Bloomberg.com and The Wall Street Journal Sept. 8). The average rate on 30-year fixed-rate mortgages dropped to 4.12% for the week ended Sept. 8, from 4.22% the prior week and 4.35% a year ago, Freddie Mac said Thursday. The previous low was 4.15% for the week ended Aug. 18. Record-low interest rates are not prompting homebuyers to respond, Patrick Newport, an economist at IHS Global Insight in Lexington, Mass., told Bloomberg. As the outlook for the economy weakens, interest rates have been dropping, so people are careful about buying a home unless their jobs are secure, he added ... * Initial claims for U.S. unemployment benefits rose 2,000--to 414,000--for the week ended Sept. 3, according to the Employment and Training Administration (Moody’s Economy.com Sept. 8). The four-week moving average rose to 414,750 from 411,000. Because new filings of claims are on par with the August average, it indicates that the job market is not improving, Moody’s said. Meanwhile, continuing claims for unemployment benefits declined by 30,000 for the week ended Aug. 27 to 3.717 million ... * For the second consecutive week, U.S. consumer confidence declined because of worsening views of the state of the economy, according to the Bloomberg Consumer Comfort Index (Moody’s Economy.com Sept. 8). The index decreased by 0.2 points, to -49.3, for the week ended Sept. 4. Part of the decline in consumer sentiment is because of a stagnant labor market, which added no jobs in August, Moody’s said …

News of the Competition (09/07/2011)

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MADISON, Wis. (9/8/11)
* California banks are leading a mini merger and acquisition (M&A) boom, with 12 banks agreeing to be sold in the first half of 2011 (American Banker Sept. 6). That’s three more than in all of 2010, according to data from SNL Financial LC and Sheshunoff & Co. The 12 deals each were worth $50 million or less, and most were sales of an institution heavily operating in business banking, the Banker said. California is an M&A hot bed for two main reasons: it has heavy concentrations of small businesses and wealthy people; and it is one of the biggest and richest banking markets in the U.S. Texas has the second-highest number of M&A deals so far this year with six ... * Bank of America Corp. (BofA) has made several changes to its management team in efforts to guide the largest U.S. bank through troubled global markets (The Wall Street Journal Sept. 7). BofA made Thomas Montag and David Darnell co-chief operating officers. It also ousted consumer-banking head Joe Price and wealth-management head Sallie Krawcheck. In a related matter, BofA intends to eliminate about 3,500 jobs this quarter--the beginning of an efficiency movement that could reduce the company’s worldwide work force by 10%, according to a report in the Charlotte Observer (American Banker Sept. 6) …

Market News (09/07/2011)

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MADISON, Wis. (9/8/11)
* U.S. mortgage application volume dropped 4.9% for the week ended Sept. 2 in a third consecutive week of declining refinancing applications, according to the Mortgage Bankers Association (MBA) Market Composite Index (Moody’s Economy.com Sept. 7). The refinancing index decreased 6.3%, despite lower mortgage rates, MBA said. The purchase index rose 0.2%, but still is at a historically low level because homebuyers still are hesitant to spend, MBA said. The index is down 12.6% during the past four weeks, and is down 31.7% from a year ago … * Roughly 3.2 million U.S. jobs were available in July--about equal to June, according to the Job Openings and Labor Turnover Survey (JOLTS) (Moody’s Economy.com Sept. 7). That indicates there were 4.3 unemployed workers for every job available, based on the number of unemployed workers in June and July. Meanwhile, 3.98 million workers were hired in July--just below the June number--and 3.92 million workers left their jobs--slightly below the June figure. Net hires remained slightly positive, according to JOLTS …

Fed Beige Book The economys current trends

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WASHINGTON (9/8/11)--Economic activity continued to expand at a modest pace although some districts reported mixed or weakening activity, according to the Fed's Beige Book, a survey of reports from the 12 Federal Reserve Districts on the conditions in their districts. The report, based on anecdotes of conditions occurring from the latter half of July to Aug. 27, was released Wednesday afternoon and was prepared by the Kansas City Fed. Five of the Fed's districts--San Francisco, Dallas, Kansas City, Minneapolis and St. Louis--reported "modest or slight" expansion. The rest said growth was either sluggish, or reported mixed results. Richmond and Philadelphia reported slower economic activity overall, said the report. Contributing to the sluggish economy: areas weakened by a slowdown in manufacturing activity, continued weakness in real estate and Hurricane Irene's impact on the East Coast. Volatility in the stock market and "increased economic uncertainty" also contributed, said the Fed. Consumer spending rose slightly in most districts, largely due to auto sales and fewer problems in the supply chain from Japan. Pressures on prices eased in some industries, the report said. Loan demand remained stable or slightly weaker, with only the St. Louis district reporting a modest increase, said the report. Demand for business loans remained unchanged or weakened in New York, Chicago, Kansas City, and San Francisco districts but were stronger in areas such as Philadelphia, Cleveland and St. Louis. Demand for consumer loans rose in St. Louis but was unchanged or slightly weaker in New York, Kansas City and San Francisco. Most districts reported that loan quality "was generally improving and that the credit standards were largely unchanged." However, New York indicated that delinquency rates increased on most categories of loans and that banks tightened standards for commercial mortgages and commercial and industrial loans. According to The Wall Street Journal, the report will be used at the Sept. 20-21 meeting of the Federal Open Market Committee (FOMC) meeting--the Fed's policymaking group that determines interest rates. Although officials are divided, most appear to favor using an additional monetary stimulus to try and spur growth, the article said. Fed Chairman Ben Bernanke is scheduled to talk about the economy today in Minneapolis--his last speech before the FOMC meeting. For the full report, use the resource link.

News of the Competition (09/06/2011)

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MADISON, Wis. (9/7/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday it closed two banks, bringing total bank failures so far this year to 70, compared with 157 for the entire year in 2010. The two failed banks are: Patriot Bank of Georgia, Cumming, Ga., and Creekside Bank, Woodstock, Ga., both assumed by Georgia Commerce Bank, Atlanta. The two closed banks held roughly $253 million in assets as of June 30. The FDIC estimated the newest failures will cost the Deposit Insurance Fund about $72 million ... * For the first time since October 2010, U.S. mortgage brokerage firms added jobs in July, hiring 400 employees (American Banker Sept. 2). Brokerage firms’ total employment tallied 49,000 as of July 31--an 18% decline from a year ago. Overall mortgage industry employment has decreased 9% from a year ago ... * San Diego-based Bofl Holding Inc. intends to raise $10 million in a stock sale and to use the proceeds to bolster growth and regulatory capital at its bank subsidiary, Bank of Internet USA (American Banker Sept. 2). The $2 billion asset Bofl said in a news release that it will sell 10,000 shares for preferred stock at $10 per share. The preferred stock can be converted into common stock at an initial conversion rate of 61.92 shares, and will pay an annual dividend of 6% …

Market News (09/06/2011)

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MADISON, Wis. (9/7/11)
* The U.S. service (nonmanufacturing) sector unexpectedly expanded in August, according to the Institute for Supply Management’s (ISM) nonmanufacturing index (The Wall Street Journal Sept. 6). The ISM’s nonmanufacturing purchaser’s index increased to 53.3 from 52.7 in July. Analysts had forecast a drop to 51, according to a Dow Jones Newswires survey. Readings above 50 reflect increasing activity. However, despite the uptick, comments of respondents remain mixed because there is some uncertainty about business conditions for the rest of 2011, the ISM report said. Overall, last month’s ISM index is consonant with lethargic gross domestic product growth, but not contraction (Moody’s Economy.com Sept. 6) ... * Business confidence worldwide is as weak as it was in early 2010 when the economy was starting to bounce back, according to Moody’s Analytics Survey of Business Confidence for the week ended Sept. 2 (Moody’s Economy.com Sept. 6). Sentiment is mirroring a worldwide economy that is growing below its potential, Moody’s said. U.S. and Japanese businesses are the most tenuous respondents, while Chinese and German businesses are the most positive. Last week’s sentiment reading--if taken at face value--indicates the U.S. economy is on the edge of a recession, Moody’s said. Problem areas include a recent drop-off in the availability of credit, recent declines in expectations about the outlook heading into next year, and hiring expectations … * U.S. shoppers, driven by back-to-school needs, continued to purchase at a fast pace in August, according to a Thomson/Reuters survey of 23 retailers (The New York Times Sept. 1). Sales at stores open a minimum of one year increased 4.4 % on average from August 2010--0.2 percentage points below what analysts anticipated, but still a robust result, the Times said. Companies seeing the biggest gains--such as Costco, BJ’s Wholesale and Limited--were mostly in the retail sector. August’s sales auger well for the rest of 2011 because consumers continue to buy despite Wall Street volatility and negative news from Washington, D.C., Madison Riley, managing director at retail consulting firm Kurt Salmon, told the Times ...

Market News (09/05/2011)

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MADISON, Wis. (9/6/11)
* The labor market deflated during August in what was considered the worst showing since September 2010, according to a report Friday from the Labor Department. Total payrolls were unchanged, and unemployment was unchanged at 9.1%. The figures do not count a "temporary blip"--the 45,000 Verizon workers who were on strike during the month. Even if they were added in, payroll gains were far weaker than expected (The New York Times and Moody's Economy.com Sept. 2). The private sector grew 17,000--down from July's total of 156,000, which was revised from 154,000. However, the loss of 17,000 government jobs offset the gain. The average workweek dropped by 0.1 hour to 34.2 hours per week, and average hourly earnings declined by 0.1% in August to $23.09. Weekly earnings dropped by 0.4%, said Moody's. The report adds pressure to the Obama administration, which was preparing its proposal to bolster job creation this week, and to the Federal Reserve, which is divided over how to get the economy moving again, said the Times … * The Economic Cycle Research Institute (ECRI) weekly index fell for the fourth consecutive week during the week ending Aug. 26. The index for the week was 122.5 from a revised 122.7 while the smooth, annualized growth rate dropped to -4.3% from an unrevised -2.1% --a move in the wrong direction, said Moody's Economy.com (Sept. 2). However, the ECRI index is still above the level for the same period a year ago … * Fannie Mae's loan purchases from seller-servicers during July declined 5% from June, but registered a 26% drop when compared to purchases in July 2010, the government-sponsored enterprise (GSE) said last week (American Banker Sept. 2). Fannie bought $39.4 million of home mortgages. During July, the GSE issued less than $32 billion in mortgage-backed securities, a decline of 11% from June. Delinquencies of 90 days or more remained the same--at 4.08% month over month; it was the first month since January 2010 that serious delinquencies had not declined …

News of the Competition (09/05/2011)

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MADISON, Wis. (9/6/11)
* The Federal Housing Finance Agency (FHFA) Friday filed lawsuits against 17 large banks, seeking billions of dollars in compensation for what FHFA says was misrepresentation of the quality of mortgage securities the banks sold during the housing boom. FHFA regulates mortgage giants Fannie Mae and Freddie Mac, which lost more than $30 billion in deals involving mortgage-backed securities (MBS). The suits are aimed primarily at Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank and allege the banks failed to perform due diligence mandated by securities law. The banks also missed evidence that borrowers' incomes were falsified or inflated on loan documents, the complaints filed Friday said. Fannie and Freddie purchased $6 billion in securities from BofA between September 2005 and November 2007. FHFA's suit reflects a growing effort to force banks to pay for contributing to the housing bubble, whose collapse helped fuel the financial crisis in 2008 (The New York Times Sept. 2) … * For the second consecutive quarter, the Treasury Department withheld foreclosure prevention incentives from Bank of America and JPMorgan Chase & Co. Treasury said the two banks must make “substantial improvement” in their mortgage servicing operations (American Banker Sept. 2). Wells Fargo & Co., which also did not receive incentives in the first quarter and disputed Treasury's findings, did receive incentives in the second quarter. Treasury has been heavily criticized for the Making Home Affordable Program, through which servicers modify the loans of defaulted borrowers. Because it cannot assess financial penalties against servicers, withholding incentive payments is one of the few ways Treasury can motivate services to improve, the agency said … * Goldman Sachs reached an agreement with the Federal Reserve and the New York Banking Department to address alleged mortgage servicing misconduct involving its former subsidiary, Litton Loan Servicing LP. Goldman’s agreement with New York regulators was pending the approved sale of Litton Loan Servicing to Ocwen Loan Servicing, which also was announced yesterday (American Banker Sept. 2). The agreement with the banking department is binding on both Goldman and Ocwen. The Fed’s agreement applied only to Goldman. Ocwen agreed to end robo-signing practices and to withdraw pending foreclosure actions that include robo-signed affidavits. The mortgage servicer also will provide a single point of contact to borrowers who seek a loan modification foreclosure. Goldman will write down about $53 million in unpaid principal to help troubled New York homeowners …

Market News (09/01/2011)

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MADISON, Wis. (9/2/11)
* Initial jobless claims in the U.S. dropped 12,000--to 409,000--for the week ending Aug. 27, compared with 421,000 (revised upward from 417,000) the week before, according to the Employment and Training Administration (Moody's Economy.com Sept. 1). The increase was slightly better than expected, said Moody's. However, the data is not a signal yet that the jobs market is improving. The four-week moving average for claims increased to 410,250 from 408,500. Continuing jobless claims for the week ending Aug. 20 decreased to 3.735 million from 3.753 million, bringing the four-week moving average for continuing claims to 3.726 million, a slight decline from 3.729 million … * U.S. consumers' confidence during the week ending Aug. 27 slipped to -49.1 from -47 during the previous week, according to the Bloomberg Consumer Comfort index. The slump is the second-lowest level in two years and a record low among consumers in the lowest income bracket (Bloomberg.com Sept. 1). Since peaking in February, consumer sentiment has declined steadily, largely due to a "lagged impact of rising gasoline and food prices, as well as flat wages," said Bloomberg LP senior economist Joseph Brusuelas. The decline in consumer confidence will likely curb spending at the levels seen in July, he added. Confidence has slumped in light of unemployment figures above 9%, limited growth in wages, and volatility in the stock market, said Bloomberg. Confidence among homeowners, whose property values remain depressed, was almost at an all-time low … * The Institute for Supply Management's (ISM) manufacturing index reported manufacturing in the U.S. expanded unexpectedly during August. The index dropped to 50.6 from July's reading of 50.9. An index figure greater than 50 indicates expansion, according to the Tempe, Ariz.-based ISM (Bloomberg.com and Moody's Economy.com Sept. 1). Though the index was better than expected, it remains well below its second-quarter average of 56.4, said Moody's. In August's reading, both the employment and production components declined …

News of the Competition (09/01/2011)

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MADISON, Wis. (9/2/11)
* Some large mortgage servicers continue to fabricate documents nearly a year after being cited for dubious foreclosure practices--while the industry negotiates a settlement with state attorneys general investigating the abuses. Mortgage services are backdating paperwork needed to support the foreclosure process (American Banker Sept. 1). Documents obtained by the Banker show signatures by current bank employees claiming to represent lenders no longer in business. Banks argue that the mortgage assignments are standard industry practice. Michael Olenick, CEO of the research firm Legalprise Inc., said that the burden of proof is on the banks to show their legal right to enforce a debt … * Independent mortgage banks and subsidiaries made an average profit of $575 on each loan they originated in the second quarter, up from $346 per loan in the first quarter, according to the Mortgage Bankers Association’s (MBA) Second Quarter 2011 Mortgage Bankers Performance Report. Average production volume was $174 million per company during the quarter, up from $164 million per company in the first quarter. The MBA estimate for overall quarterly industry origination volume was $290 billion in the second quarter, down from $302 billion in the first quarter. Average loan balances remained relatively constant at $197,039, compared with $196,456 in the first quarter …