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News of the Competition (09/28/2012)

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MADISON, Wis. (10/1/12)

  • Freddie Mac did not discourage homeowners from refinancing their mortgages so it could profit from a rare form of interest-rate hedging, according to a report issued Wednesday from the Inspector General for the Federal Housing Finance Agency (American Banker Sept. 27). ProPublica and National Public Radio alleged in a January investigation that Freddie had placed "multi-billion-dollar bets that pay off if homeowners stay trapped in expensive mortgages." However, the 33-page report from the inspector general found no evidence that Freddie used non-public information to direct its investments in its capital markets business, the Banker said …
  • Discover Financial Services indicated Thursday it has plans to push into new areas of mortgage lending and private student lending to augment the company's growth (American Banker Sept. 27). That move is designed to help replace expected lost revenue, while the company still continues to grow its core credit card business, David Nelms, Discover CEO, told the Banker. The company earned $627 million in the quarter ended Aug. 31, the Banker said …
  • Bank of America (BofA) said Friday it will pay $2.43 billion to investors to settle a class action lawsuit related to its acquisition of Merrill Lynch (The New York Times DealBook and The Wall Street Journal Sept. 28). The suit alleges BofA made false and misleading statements about the bank's financial condition and investment bank Merrill Lynch when the two companies merged in 2009, the Journal said. While BofA denied the allegation in the suit, it said it wanted to put the litigation behind it, according to the Times. BofA also agreed--as a component of the proposed settlement--to enhance its corporate governance policies, the Times added ...
  • PayPal's effort to become more widely accepted at grocery stores, restaurants and other retailers could be slowed by a contested national credit card settlement between credit card networks and merchants (American Banker Sept. 27). The reason is that retailers--per the terms of the proposed settlement--may assess a surcharge on consumers who make purchases with plastic, to help the businesses offset the costs of processing noncash transactions. If retailers choose to do so, they must assess a surcharge on all payment types--including PayPal. PayPal currently does not allow merchants to place surcharges on its clients, the Banker said. PayPal is a global e-commerce business allowing payments and money transfers to be made through the Internet …

Market News (09/28/2012)

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MADISON, Wis. (10/1/12)

  • Although U.S. consumer spending recorded its largest gain in August in six months, the increase was more a result of higher prices than a propensity to spend (The Wall Street Journal and Bloomberg.com Sept. 28). Household purchases rose 0.5%--the largest gain since February, the Commerce Department said Friday. That gain--the largest since March 2011--mostly was a reflection of a 0.4% increase in prices. That left so-called real spending up 0.1%. The economic recovery will not be led by the consumer, Ryan Sweet, a senior economist for Moody's Analytics in West Chester, Pa., told Bloomberg. Although gasoline prices appear to have peaked for this year, they still will weigh on consumer spending in the near future and keep it in check, he added …
  • U.S. consumer confidence picked up in September, according to the University of Michigan Consumer Confidence Survey (Moody's Economy.com Sept. 28). The survey index increased four points to 78.3 from 74.3 in August. The increase was driven by significantly improved perceptions of future conditions, which mitigated a decline in consumers' views of present conditions, Moody's said. Inflation expectations were moderate last month, and the one-year and five-year inflation-expectation gauges dipped as well, Moody's added. In a related matter, the Bloomberg Consumer Comfort Index improved for the week ended Sept. 23--marking the fifth consecutive week of improvement (Moody's Economy.com Sept. 27). The index rose to -39.6 from -40.8 the prior week--marking the first time it has been above -40 in eight weeks …
  • Business manufacturing activity in the U.S. shrank in September for the first time in three years, adding evidence that the manufacturing sector will contribute less to the momentum of the economic recovery (Bloomberg.com, The Wall Street Journal and Moody's Economy.com Sept. 28). The Institute for Supply Management (ISM)-Chicago Inc. Friday said its business barometer fell to 49.7 last month from 53 in August. A 50 reading is the dividing line between expansion and contraction. Eroding economies in China and Europe and uncertainties regarding U.S domestic fiscal policy may prevent U.S. firms from adding to their work forces and gearing up production, Bloomberg said. Also, orders for U.S. durable goods--designed to last at least three years--declined in August for a third consecutive month, indicating that export and business- investment slowdowns will further dampen the economic recovery (Bloomberg.com and The Wall Street Journal Sept. 27) … 

News of the Competition (09/27/2012)

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MADISON, Wis. (9/28/12)

  • Geared to increase prosecutions for mortgage-related crimes, three new state laws that are components of the Homeowner Bill of Rights were signed into law Tuesday by California Gov. Jerry Brown (American Banker Sept. 26).  The laws provide the state's attorney general with authority to convene a statewide grand jury to look into financial crimes, including mortgage fraud; extend to three years from one year the statute of limitations to prosecute mortgage-related crimes; and provide renters with a guarantee that they can remain in a foreclosed property bought by new owners ...
  • More websites at some of the largest U.S. banks are experiencing Internet slowdowns since a cyberthreat against U.S. banks emerged last week (American Banker Sept. 26). PNC Financial Services and U.S Bancorp Wednesday said their customers confronted delays when attempting to conduct online banking operations. That brings the number of U.S. financial institutions that have seen online delays since last week's threat to at least five, the Banker said. JPMorgan Chase and Wells Fargo also experienced delays and hang-ups this week when customers attempted electronic transactions. Chase first reported glitches more than a week ago, the Banker said …

Market News (09/27/2012)

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MADISON, Wis. (9/28/12)

  • The U.S. economy grew less than previously estimated in the second quarter because businesses and consumers invested and spent less than originally thought (MarketWatch, The New York Times, Bloomberg.com and Moody's Economy.com Sept. 27). The biggest economy in the world expanded at a 1.3% annual pace--a downward revision from the 1.7% the government reported in August, after 2% growth in the first quarter, the Commerce Department said Thursday. The key reasons for the downward revision were consumer spending--which increased 1.5% instead of the initially estimated 1.7%--and business investment, excluding residential housing, which was revised downward to a 3.6% gain from 4.2%, MarketWatch said. Consumer spending is deficient, Thomas Simons, an economist at Jefferies Group Inc. in New York, told Bloomberg. Consumers are only boosting gross domestic product at a very average pace, he added ...
  • Initial claims for U.S. unemployment benefits dropped last week to the lowest level since late July, indicating some improvement in the slowly healing labor market (Bloomberg.com, MarketWatch and Moody's Economy.com Sept. 27). Claims decreased 26,000--to 359,000--for the week ended Sept. 22 from the prior week, the Labor Department said Thursday. The level of claims--which is a broad measure of whether layoffs are increasing or dropping--is consonant with a labor market that's creating new jobs at a moderate pace, MarketWatch said. Although the labor market is not worsening, unemployment claims explain only one side of the equation, so they don't indicate that hiring is automatically increasing, Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC, told Bloomberg. Meanwhile, continuing claims for U.S. unemployment benefits fell 4,000--to 3.271 million for the week ended Sept. 15 …
  • After reaching a two-year peak, pending home sales fell in August but are at elevated levels compared with a year ago, according to the National Association of Realtors (NAR). The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 2.6% to 99.2 in August from an upwardly revised 101.9 in July. However, it is 10.7% above August 2011, when it was 89.6. The data reflect contracts but not closings. Contract activity in July 2012 was at the highest level since April 2010, when buyers rushed to beat the deadline for the home buyer tax credit. Lawrence Yun, NAR chief economist, said some volatility can be expected in the monthly readings. "The performance in month-to-month contract signings has been uneven with ongoing shortages of lower priced inventory in much of the country, and across most price ranges in the West, but activity has remained at notably higher levels this year," Yun said. "The index shows 16 consecutive months of year-over-year increases, and that has translated into a higher number of closed sales. Year-to-date existing-home sales are 9% above the same period last year, but sales were relatively flat from 2008 through 2011." For the NAR report, use the link … 

News of the Competition (09/26/2012)

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MADISON, Wis.  (9/27/12)

  • Wells Fargo is one of the most recent large U.S. banks to see digital disruptions, with customers experiencing trouble logging on to the bank's website (American Banker Sept. 25). About a week ago, customers at Bank of America (BofA) and JPMorgan Chase confronted similar problems and delays, the Banker said. Since 2011, BofA, Chase and Citigroup have seen multiple denial-of-service attacks from Iran, the Banker previously noted. Wells said its customers still could access their accounts through the bank's phone or ATMs, or by stopping in at branch locations. An industry group--the Financial Services Information Sharing and Analysis Center, has upped its cyber threat level to "high" from "elevated" and told members to scrutinize their networks more closely, the Banker said. Also, the Federal Bureau of Investigation has warned financial firms that scammers may be targeting their websites to steal information that could be used in conducting fraudulent wire transfers, the Banker said …
  • The National Fair Housing Alliance and five of its member organizations filed an administrative discrimination complaint Tuesday with the Department of Housing and Urban Development alleging Bank of America (BofA) violated fair housing laws (American Banker Sept. 25). The complaint claims BofA did not properly maintain and market foreclosed properties in minority neighborhoods, the Banker said. The 78-page complaint further alleges "a systemic and particularized practice of engaging in differential treatment" with foreclosed properties based on race, color and national origin, the Banker said …

Market News (09/26/2012)

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MADISON, Wis. (9/27/12)

  • Purchases of new U.S. single-family homes dipped in August but held close to two-year highs--adding to evidence that the housing market is making progress in its recovery (Bloomberg.com, The New York Times, The Wall Street Journal and Moody's Economy.com Sept. 26). Sales fell 0.3% last month to an annualized pace of 373,000, following a 374,000 rate in July--the strongest since April 2010--the Commerce Department said Wednesday. New-home sales in August were 27.7% higher than in August 2011. Homebuilders are seeing demand for new homes lifted by record-low borrowing costs that continue to entice buyers, while a decline in the number of foreclosed homes alleviates downward pressure on prices, Bloomberg said. Steady home sales and rising prices could prompt homebuilders to accelerate construction, which would boost the overall economy, the Journal said …
  • The U.S. mortgage applications Market Composite Index increased by 2.8% for the week ended Sept. 21 from the prior week, the Mortgage Bankers Association (MBA) said Wednesday (Moody's Economy.com Sept. 26). The composite index was boosted by a third consecutive weekly gain in refinancing activity, while the purchase applications index increased slightly, MBA said.  Potentially foreshadowing consumers' benefits from a third round of quantitative easing, contract rates for 30-year fixed mortgages with conforming loan balances markedly decreased to a new historical low--3.63%, MBA said. The market composite index has risen 11.3% from four weeks ago and is nearly 14% higher than one year ago …
  • The International Council of Shopping Centers (ICSC) Chain Store Sales Index increased 0.6% for the week ended Sept. 22--taking back a portion of the previous week's 2.5% decline (Moody's Economy.com Sept. 25). Customer traffic rose, particularly at discounters and specialty-apparel stores, ICSC said. Year-over-year growth improved to 2.9%. ICSC is forecasting same-store sales--excluding drugstores--to expand 3% to 4% in September, following a 6% rise in August ...

News of the Competition (09/25/2012)

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MADISON, Wis. (9/26/12)

  • The growing mortgage refinancing market is leading some companies to introduce new technology in products designed to broaden the analytics and data sourcing used by mortgage originators and investors to determine borrowers' financial health, economic conditions and collateral, and a lender's underwriting and lending policies (American Banker Sept. 24). Two companies that just introduced competing mortgage-risk products are CoreLogic and Digital Risk, the Banker said. Other vendors joining a bunched field of analytics providers are credit scoring companies such as FICO, business intelligence providers such as SAS, and business information software developers such as Wolter Kluwers, the Banker said  …
  • A rising number of major U.S. cities are requiring banks to provide proof that they are adequately serving low- and moderate-income consumers, which has upset several banks (American Banker Sept. 24). Last week, San Diego joined the growing ranks, as its city council unanimously passed a responsible banking ordinance that requires any bank conducting business with the city to provide detailed data on its lending and community development activities. Banks that are not in compliance can lose the city's business, the Banker said. Several banking groups have objected to the disclosure law who say they already are required to monitor their neighborhood activities through the Community Reinvestment Act, the Banker said. Those groups are worried that local elected officials will attempt to implement scorecards or rating systems that rank banks based on the subjective standards of social responsibility, the Banker added …

Market News (09/25/2012)

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MADISON, Wis. (9/26/12)

  • U.S. consumer confidence increased more than expected in September--to a seven-month high that indicates possible increased spending could help bolster the biggest segment of the economy, according to private research group The Conference Board's index of consumer confidence (Bloomberg.com, The Wall Street Journal and  Moody's Economy.com Sept. 25). The index rose to 70.3 this month from 61.3 in August. Economists had forecast a 63.1 reading for September, according to a Bloomberg survey. Consumer sentiment has improved because of increasing home values and higher stock prices, which could help spark the consumer spending that constitutes 70% of the U.S. economy, Bloomberg said. Impediments to consumer confidence include weak wage gains and a national unemployment rate above 8%, Bloomberg added …
  • Fewer foreclosures and more sales buoyed U.S. home prices in July, according to the Standard & Poor's Case-Shiller Index of property values in 20 U.S. cities (The New York Times, Bloomberg.com and Moody's Economy.com Sept. 25). Home prices rose 1.2% in July, compared with the same month last year--the second consecutive monthly year-over year gain, following two years without one. Also, for the third consecutive month, prices increased in all 20 cities the index tracks. The housing recovery is being driven by record-low mortgage rates and steady home-price increases, the Times said …
  • U.S. house prices rose 0.2% 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 0.7%  increase in June was revised downward to a 0.6% increase. For the 12 months ending in July, U.S. prices rose 3.7%. The U.S. index is 16.4% below its April 2007 peak and is roughly the same as the June 2004 index level. FHFA uses the purchase price of houses with mortgages owned or guaranteed by Fannie Mae or Freddie Mac to calculate the monthly index. For the nine census divisions, seasonally adjusted monthly price changes from June to July ranged from -0.8% in the East South Central division to 1.3% in the Mountain division, while the 12-month changes ranged from -1.4% in the Middle Atlantic division to 11.9% in the Mountain division. For the FHFA report, use the link …

News of the Competition (09/24/2012)

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MADISON, Wis. (9/25/12)

  • Some U.S. banks are experimenting with social media while customers are transacting on the banks' ATMs (American Banker Sept. 21). Banks such as Regions Financial and Wells Fargo are using Twitter and other social media together with mobile phones to engage customers and keep them informed and well-served, the Banker said. As an example, Regions said it will use Facebook and Twitter promotions in its ATM messaging in 2013. With more than 2,100 ATMs in 16 states, Regions intends to promote more of its social properties out at its branches, because social media help to extend "the experience out of the branch," Liliana Grip, Regions vice president of social media, told the Banker
  • In efforts to make it simpler for developers on its system to accept payments from mobile phones, Facebook has added mobile-pay software tools (American Banker Sept. 21). Facebook took its most recent step to turn its payment system into a more advanced and viable option for software developers, the Banker said. Earlier, Facebook started to phase out its virtual credits currency in lieu of developers being permitted to establish prices in local currencies, the Banker said …

Market News (09/24/2012)

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MADISON, Wis. (9/25/12)

  • For the first time since 2010, U.S. investors are purchasing Treasuries at a quicker pace than foreign investors, helping the federal government's borrowing efforts while the national debt passed the $16 trillion mark (Bloomberg.com Sept. 24). Record-low yields on Treasuries are not deterring U.S. buyers, because they are worried that unprecedented Fed stimulus will neither boost the economy nor reduce the unemployment rate that has been above 8% since February 2009, Bloomberg said. Government debt securities held by U.S. buyers, excluding the Federal Reserve, jumped 10.7%  in the first seven months of 2012 to $3.61 trillion, compared with a 6.9% rise for countries ranging from China to Germany, according to the most recent Treasury Department data, compiled by Bloomberg
  • The Chicago Fed National Activity Index--a monthly index designed to gauge overall economic activity and related inflationary pressure fell--to -0.87 in August from -0.12 in July--marking the sixth consecutive month that the index was in negative territory, according to the Chicago Federal Reserve (Moody's Economy.com Sept. 24). The decline was led by the production and income component, which dropped to a -0.58 reading from 0.08. However, all four major categories--including the other three of consumption and housing, industrial production, and employment indicators--eroded in August, the Chicago Fed said …
  • Business confidence worldwide has faltered in recent weeks, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Sept. 24). Sentiment is as down as it was during the debt ceiling imbroglio in the summer of 2011, Moody's said. Businesses have a poor perception of current overall business conditions and their own individual sales strength, Moody's said. The rapidly approaching U.S. fiscal cliff and ongoing financial trouble in Europe still are significant areas of worry, Moody's added. Positive indicators are steady investment spending, and more optimism by workers in business and financial services, Moody's said …

News of the Competition (09/21/2012)

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MADISON, Wis. (9/24/12)

  • Regions Financial is implementing measures to provide less expensive loans to consumers, after encountering consumer groups' criticism about its payday-loan fees (American Banker Sept. 20). The company intends to reduce its fees and create a longer repayment period on its Ready Advance loan, Regions spokeswoman Evelyn Mitchell told the Banker. That loan was launched last year as a service for the bank's customers who had been going to payday lenders. The intended changes are the result of customer feedback, not consumer groups' criticisms, Mitchell said …
  • The boards of  U.S. community banks are well-informed on issues, but lack the requisite aptitude or experience to put key information to use, according to a community bank study commissioned by Baker Tilly and conducted by Integrated Governance Solutions. The study found that 74% of its respondents ranked their bank's board as "strong" or "moderately strong" in regard to being informed of organization health and monitoring of organization practices. The study also indicated there is a distinct correlation between the objective monitoring by boards and management of bank practices and the bank's financial returns …

Market News (09/21/2012)

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MADISON, Wis. (9/24/12)

  • U.S. employers reported instituting 1,267 mass layoffs--the number of layoffs involving at least 50 workers from a single establishment--in August, which is 53 fewer than in July, according to the U.S. Bureau of Labor Statistics (Moody's Economy.com Sept. 21). The number of workers affected also declined by 9,966--to 127,454 last month from 137,420 in July. Manufacturing constituted a smaller portion of the layoff events--partly due to seasonal issues--as auto plants normally retool in July, Moody's said. Layoffs are near pre-recession levels and provide credence to the idea that weakness in the labor markets comes from a dearth of hiring rather than job losses, Moody's said …
  • Fannie Mae is placing a cap on the volume of loans the government-sponsored enterprise (GSE) will purchase from smaller lenders and mortgage servicers. The cap will be based on their net worth and other considerations, National Mortgage News reported (American Banker Sept. 20). Many small lenders and servicers that were recently OK'd to sell loans to Fannie are not familiar to the GSE and have no history that can be used as a gauge to predict future performance, a GSE spokesman told the Banker. There has been an upswing in the number of lenders wanting to conduct business directly with Fannie Mae because of a substantial reduction in correspondent buyers in the secondary market, a Fannie spokesman told the Banker
  • The Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--increased to 125.4 for the week ended Sept.14--marking its seventh consecutive weekly gain and up from 124.7 the prior week (Moody's Economy.com Sept. 21). The smoothed, annualized growth rate quickened to 2.7%, pushing further into growth-projection territory. Economic momentum appears to be building and should obtain a foothold in the coming months, ECRI said …

News of the Competition (09/20/2012)

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MADISON, Wis. (9/21/12)

  • Bank of America (BofA) has set a target of 16,000 job cuts by year's end, as the bank speeds up a wide-ranging cost-cutting plan that could make it relinquish its perch as the top U.S. banking employer (The Wall Street Journal Sept. 19). Outlined in a document given to top management, the cuts are a component of a broader effort to remake BofA into a leaner and more efficient institution, the Journal said. The realigned company will have fewer branches and a reduced mortgage operation, the document indicates. The proposed year-end count of 260,000 employees would be the lowest since 2008 and would leave BofA with a smaller work force than CitiGroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. the Journal said …
  • The Small Business Administration's Section 504 loan program, which allows small-business owners to refinance commercial mortgages, is slated to expire Thursday (American Banker Sept. 19). However, program supporters hope Congress will take another look at the program, following November's elections, the Banker said. The program allows eligible small businesses with mortgages at least two years old to refinance their obligations, regardless of the maturity date of the loan. Since its inception in spring 2011, nearly 2,300 small businesses have borrowed about $2.1 billion though the 504 refinance program, the Banker said …

Market News (09/20/2012)

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MADISON, Wis. (9/21/12)

  • Initial claims for U.S. unemployment benefits dropped less than expected last week, fueling worries that the labor market is softening and struggling to sustain improvements (Bloomberg.com, The New York Times, and The Wall Street Journal Sept. 20). Claims dipped 3,000--to 382,000--for the week ended Sept. 15 from one week earlier, the Labor Department said Wednesday. Economists had forecast 375,000 claims in a Bloomberg Survey. Pending government spending cuts and tax increases--the rapidly approaching fiscal cliff, if lawmakers take no action--could thwart any upswing in hiring, Bloomberg said. Meanwhile, continuing claims for unemployment benefits fell by 332,000 for the week ended Sept. 8 to 3.27 million. The overall U.S. unemployment rate dropped to 8.1% in August from 8.3% the prior month, but that was the result of more people leaving the work force entirely, the Times said  …
  • U.S. mortgage application volume decreased 2% for the week ended Sept. 14 from one week earlier, according to the Market Composite index, part of the Weekly Mortgage Applications Survey  released this week by the Mortgage Bankers Association (MBA). On an unadjusted basis, the Index increased 24%. The Refinance Index rose 1%. The Home Affordable Refinance Program (HARP) 2.0 share of refinance applications was 22%. The seasonally adjusted Purchase Index declined 4%. The unadjusted Purchase Index gained 18% and was 8% higher than the same week one year ago. The refinance share of mortgage activity went up to 81% of total applications from 80%. The adjustable-rate mortgage share of activity increased to 5% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.72%,  the lowest rate in the history of the survey, from 3.75%  with points increasing to 0.45 from 0.44 (including the origination fee) for 80% loan-to-value ratio loans. The effective rate dropped from last week. For the MBA report, use the link …
  • With U.S. stock prices rallying to a five-year high, consumer views of the economic outlook improved in September, according to the Bloomberg Consumer Comfort Index (Bloomberg.com Sept. 20). The weekly gauge increased to a seven-week high of -40.8 for the week ended Sept. 6 from -42.2 the prior week. The percentage of respondents saying the country was going in the wrong direction fell by the most in three years. The stock market gains may be leading to households becoming more secure about their finances during a time when gasoline prices are escalating, wages have stagnated and unemployment remains above 8%, Bloomberg said …

News of the Competition (09/19/2012)

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MADISON, Wis. (9/20/12)

  • More U.S. banks are seeking customer feedback to improve service and increase sales (American Banker Sept. 18). Although the drive to improve service is not something new, it has perhaps never been more important to a bank's bottom line than now, the Banker said. That's because continually low interest rates are placing more downward pressure on margins than ever before, heaping huge pressure on banks to compensate for lost income by selling more fee-based products and services, the Banker said. However, opportunities to develop relationships also are dwindling, with an increasing number of customers eschewing branches in favor of online or other delivery channels, the publication said …

Market News (09/19/2012)

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MADISON, Wis. (9/20/12)

  • Weak demand and tighter lending standards in 2011 resulted in U.S. mortgage lending dropping to its lowest level in 16 years, according to a report by the Federal Reserve released Tuesday (The Wall Street Journal Sept. 18). Last year, banks funded roughly 7.1 million mortgages, down 16% from the prior year--and the lowest total since 1995 when banks issued 6.2 million mortgages. In compiling its report, the Fed analyzed data submitted by more than 7,600 lenders under the Home Mortgage Disclosure Act, the Journal said. Home-purchase lending activity declined more significantly in areas that have sustained the most foreclosures and home-price declines, indicating how hard it will be for some markets to rebound, the report said …
  • Existing-home sales in the U.S. continued to improve in August, and the national median price rose on a year-over-year basis for the sixth consecutive month, said the National Association of Realtors (NAR). Total existing-home sales--which are completed transactions that include single-family homes, townhomes, condominiums and co-ops--rose 7.8% to a seasonally adjusted annual rate of 4.82 million in August from 4.47 million in July. They are 9.3% higher than the 4.41 million-unit level in August 2011. Lawrence Yun, NAR chief economist, said favorable buying conditions are the reason. "The housing market is steadily recovering with consistent increases in both home sales and median prices," he said. "More buyers are taking advantage of excellent housing affordability conditions. Inventories in many parts of the country are broadly balanced, favoring neither sellers nor buyers. However, the West and Florida markets are experiencing inventory shortages, which are placing pressure on prices." For the NAR report, use the link …
  • Indicating evidence of improvement in the U.S. real estate market, new housing construction increased in August, sparked by the most robust pace of single-family home starts in more than two years (Bloomberg.com and The New York Times Sept. 19). Housing starts rose 2.3% in August to a 750,000 annual rate, the Commerce Department said Wednesday. Residential construction was forecast to climb to a 765,000-unit pace, according to economists in a Reuters poll. Residential construction was up 29.1% last month compared with August 2011. Cheaper properties and mortgage rates that are near all-time record lows are driving sales and construction, constituting one of the economy's few fonts of strength, Bloomberg said …
  • More U.S. consumers say the economy and their personal finances have improved from a year ago, according to the 2012 Chase Pulse of the Consumer Survey released by a unit of JPMorgan Chase (American Banker Sept. 18). About 64% of survey respondents believe the economy has either stabilized or already hit its bottom, and now is improving. That is compared with 33% last year, the Banker said.  Also, 65% of respondents said their personal finances already have bottomed out and are either stabilizing or about to improve--up  from 56% a year ago …

News of the Competition (09/18/2012)

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MADISON, Wis. (9/19/12)

  • The manner in which major U.S. banks process and sell delinquent credit card accounts has come under investigation by a group of state attorneys general (American Banker Sept. 17). The alleged practices being investigated are akin to mortgage documentation gaffs in bank foreclosure proceedings before a national settlement with state attorneys general was reached, the Banker said.  Mississippi Attorney General Jim Hood's office has contacted former JP Morgan Chase employees concerning possible shortfalls in procedures or errors in defaulted credit card account records that Chase sold to third-party debt collectors, the Banker said. That probe also involves other states' attorneys general, who also are closely looking into practices at other banks, according to another former Chase employee contacted by investigators, the Banker said …
  • The inspector general of the Federal Housing Finance Agency (FHFA)--which is Fannie Mae's conservator--issued a report Tuesday that said Fannie's payment of $512 million to purchase the right to administer 384,000 of Bank of America's loans last year was justified (American Banker Sept. 18). Some congressional members had questioned the size of the payment at the time. The FHFA said Fannie believed transferring troubled loans from the struggling BofA to a "high-touch" servicer would avoid more losses and prevent borrowers' homes from going under. However, Fannie thought it had to pay a high price for BofA to quickly release the loans, the report said …
  • Anticipating the possibility of a stronger housing market, U.S. home builders are re-establishing revolving lines of credit with banks--in many instances for the first time in several years--as builders purchase more land and take on increased debt (American Banker Sept. 17). Although the largest builders are getting most of their financing from the public debt and equity markets, banks also are in play, the Banker said. Builders, particularly if they step up their spending on land and development, will need the financial flexibility, the Banker said …

Market News (09/18/2012)

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MADISON, Wis. (9/19/12)

  • The U.S. current-account trade deficit narrowed more than expected during second quarter, propelled lower by a rise in exports, a large income surplus and cheaper oil imports (Bloomberg.com, The New York Times and The Wall Street Journal Sept. 18). The gap--which is the widest gauge of international trade because it includes payment and government transfers--declined 12% to $117.4 billion from $133.6 billion in the first quarter--the largest trade deficit in three years. However, the current account deficit will widen, Ryan Sweet, a senior economist at Moody's Analytics Inc. in West Chester, Pa., told Bloomberg. Because of an economic slowdown in emerging markets worldwide and European fiscal problems, exports will weaken, he said ...
  • As global investors looked for shelter from the European debt crisis, international demand for U.S. financial assets increased more than predicted in July (Bloomberg.com Sept. 18). Net purchasing of long-term equities, bonds and notes totaled $67 billion during the month, compared with the purchase of $9.3 billion in June, the Treasury Department said Tuesday. Economists had forecast net buying of $27.5 billion of long-term assets, according to a Bloomberg News survey. Private investors in Europe protected against erosion in euro financial markets in July by using treasuries and agencies, Guy LeBas, chief-fixed income strategist at Janney Montgomery Scott LLC in Philadelphia, told Bloomberg

News of the Competition (09/17/2012)

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MADISON, Wis. (9/18/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced a bank closing Friday, bringing total bank failures this year to 42. That compares with 92 for the entire year in 2011. The failed bank is Truman Bank, St. Louis, Mo., which was assumed by Simmons First National Bank, Pine Bluff, Ark. The closed bank held about $282 million in assets. The FDIC estimated the latest failure will cost its Deposit Insurance Fund roughly $34 million …
  • The U.S. Treasury Department is balking at General Motors Co.'s (GM) plan to sell the federal government's entire stake in the automaker (The Wall Street Journal Sept. 17). A 2009 U.S. $50 billion taxpayer bailout kept GM afloat during the recession, and now taxpayers own 26.5% of the Detroit automaker. GM has become more and more frustrated with the moniker "Government Motors" and the resulting stigma, which has hurt its reputation and ability to recruit talent, due to pay restrictions, the Journal said. GM ran a plan past Treasury earlier this summer in which the government department would repurchase 200 million of the 500 million shares the government holds, with Treasury selling the rest through a public stock offering, sources with knowledge of the situation told the Journal. However, Treasury doesn't want to purchase GM's shares at the current price because the government would absorb a substantial loss on its investment, the sources said …
  • A government report portends more disagreements between government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, and banks (American Banker Sept. 17). The follow-up report released by the Federal Housing Finance Agency's (FHFA) Inspector General Steve Linick indicates how FHFA pushed the FHFA and Freddie Mac to demand that the banks repurchase up to $3.4 billion of government-guaranteed loans. The report is evidence of how FHFA is set on a course to optimize the government's bailout recoveries, even if that creates more disputes between the GSEs and banks, the Banker said ...
  • Bank of America (BofA)--in a lawsuit that alleges it discriminated against some borrowers receiving disability income--has agreed to settle and provide compensation to those mortgage loan applicants--potentially 25,000 (American Banker Sept. 17). BofA--the second-largest U.S. home lender--will pay $1,000, $2,500 and $5,000 to potential borrowers who were asked to provide a doctor's letter to justify the income they received from Social Security Disability Insurance, the U.S. Justice Department said Thursday ...

Market News (09/17/2012)

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MADISON, Wis. (9/18/12)

  • Worldwide business sentiment is down as businesses worry about their sales strength and hold a poor view of the present overall business environment (Moody's Economy.com Sept. 17). Continuing economic problems in Europe and the rapidly approaching U.S. fiscal cliff are fueling the uncertainty, Moody's said. However, there is scant evidence that the economic recovery is in peril, Moody's added. Hiring and investment spending are prevailing, although both are lukewarm, said Moody's. Workers in the business and financial services sectors remain more positive. Sentiment remains at a level consonant with an economy that is expanding at the low end of its potential, Moody's concluded …
  • The Economic Cycle Research Institute (ECRI) Weekly Leading Index--which measures economic growth--advanced for the sixth consecutive week, rising to 124.9 for the week ended Sept. 7 from 124.1 the prior week (Moody's Economy.com Sept. 14). The smoothed, annualized growth rate sped up to 2.1%, moving further into growth-projection territory, ECRI said. Ongoing improvement in the index and growth rate is a positive indication of the strength of the U.S. economic recovery, which continues to modestly improve as it confronts obstacles, ECRI said ... 
  • U.S. industrial production fell 1.2% in August after rising 0.5% in July, according to the Federal Reserve. Hurricane Isaac restrained output in the Gulf Coast region at the end of August, reducing the rate of change in total industrial production by an estimated 0.3 percentage point. Manufacturing output decreased 0.7% in August after rising 0.4% in both June and July. Precautionary shutdowns of oil and gas rigs in the Gulf of Mexico before the hurricane contributed to a 1.8% drop in the output of mines for August. The output of utilities declined 3.6%. At 96.8% of its 2007 average, total industrial production in August was 2.8% above its year-earlier level. Capacity use for total industry moved down one percentage point to 78.2%, a rate 2.1 percentage points below its long-run (1972--2011) average. For the Fed release, use the link …

News of the Competition (09/14/2012)

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MADISON, Wis. (9/17/12)

  • If federal lawmakers decide not to extend the Transaction Account Guarantee (TAG) program, many U.S. community banks will be unprepared (American Banker Sept. 13). Lawmakers are likely to allow the TAG program to expire, which would make it harder for small banks to compete for deposits, said panelists at American Banker's Regulatory Symposium held in Washington, D.C. Because smaller banks have not created backup plans if depositors withdraw large sums, the banks would be disadvantaged, Joshua Siegel, managing principal at StoneCastle Partners, which heavily invests in community banks, said at the symposium. TAG is greatly relied upon to collect deposits by some banks--one of which used it as a marketing tool, Siegel added …
  • Products that mitigate the risks caused by cloud computing are deluging the market while federal agencies begin to learn more about the risks (American Banker Sept. 13). Of particular focus for financial institutions will be data that are traveling vulnerable routes between banks and third parties, the Banker said. As an example, CipherCloud Connect AnyApp is a product introduced last week to encrypt data in use or at rest for private and public cloud applications. CipherCloud is a company whose clients include two of the five biggest U.S. banks, the Banker said …

Market News (09/14/2012)

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MADISON, Wis. (9/17/12)

  • The cost of living in the U.S. increased in August by the most in three years, stoked by a surge in gasoline costs, while underlying inflation remained tame (MarketWatch, The New York Times, Bloomberg.com and Moody's Economy.com Sept. 14). The Consumer Price Index (CPI) rose 0.6% last month--marking the largest upswing since June 2009, the Labor Department said Friday. A 9% surge in the gasoline index, which shot up the fastest in three years, accounted for the bulk of the increase in the CPI, MarketWatch said. That caused energy prices to spike 5.6%--the first increase in five months. The cost of food rose at a slower 0.2% in August.  In a related matter, U.S. retail sales improved 0.9% in August--the most in six months--allaying concerns about a bigger retreat in the largest segment of the economy (Bloomberg.com, The Wall Street Journal and Moody's Economy.com  Sept. 14). August's gain followed a 0.6% advance in July, the Commerce Department said Friday. Excluding autos, August's retail sales increased 0.8%. Although encouraging, last month's sales likely are not as robust as the overall percentage increase suggests, Millan Mulraine, a senior U.S. strategist at TD Securities in New York, told Bloomberg. Gasoline prices probably will erode discretionary spending, Mulraine added …
  • U.S. wholesale (producer) prices in August recorded the biggest one-month advance in more than three years as escalating energy costs caused some inflation pressures (The Wall Street Journal, The New York Times and Bloomberg.com Sept. 13). The seasonally adjusted producer price index climbed 1.7% last month, following a 0.3% gain in July, the Labor Department said Friday. The worldwide economic slowdown is anticipated to put downward pressure on input costs through the rest of the year, Moody's said. The slowdown and the approaching fiscal cliff of government spending cuts and higher income taxes could cause consumers to limit their spending, which would make it harder for companies to pass on their higher energy costs, Bloomberg said …
  • Consumer confidence in the U.S. unexpectedly increased in September, according to the Thomson Reuters/University of Michigan Consumer Confidence Survey index. The confidence level provides a stimulus for household spending, which comprises more than 70% of the U.S. economy (Bloomberg.com and Moody's Economy.com Sept. 14). The index rose to 79.2 this month from 74.3 in August. The gauge was forecast to drop to 74, according to  economists surveyed in Bloomberg News poll. Consumer confidence has been bolstered by rising stock prices and home values that have offset higher gasoline prices, Bloomberg said …
  • U.S. foreclosure activity in August rose 0.8% month over month, mitigating some of the 2.9% decline in July, according to data compiled by RealtyTrac (Moody's Economy.com Sept. 14). Compared with a year earlier, foreclosure filings remain down roughly 15%. States with judicial  foreclosure proceedings led the rise in monthly foreclosure activity, RealtyTrac said. Faulty documentation that has delayed foreclosure processing continues to abate, RealtyTrac said …

News of the Competition (09/13/2012)

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MADISON, Wis. (9/14/12)

  • Most U.S. banks say they cannot assess their intra-day liquidity risk institution-wide, according to a survey released Wednesday by MORs software, a Finland-based provider of systems that helps financial institutions manage their risk (American Banker Sept. 12). Although two-thirds of survey respondents indicate they monitor their risk, only one-third does it institution-wide. Bankers said key reasons to examine liquidity risk include cutting cost and maximizing return on capital--although more and more point to compliance with regulatory requirements as a reason for being capable of assessing liquidity, the Banker said. The survey conducted interviews with 61 bankers in 26 countries throughout Asia, Europe, the United Kingdom, the Middle East and the U.S. …
  • MasterCard this week set a deadline of 2016 for all ATMs that accept MasterCard cards to be EMV compliant--meeting the Europay, MasterCard and Visa (EMV) chip and PIN standard (American Banker Sept. 12). Starting in October 2016, ATM owners will be more liable for fraud over their ATMs if they fail to upgrade their machines to accept EMV cards by that time. All the major card networks have established guidelines in the U.S. for EMV card migration, with different rolling deadlines for fraud liability shifts, the Banker said …
  • The unveiling of Apple's iPhone 5 Wednesday indicated the phone does not contain a Near Field Communication (NFC) chip, which is used in many mobile wallets (American Banker Sept. 12). However, a Passbook application will store cards, coupons and tickets on the iPhone 5. Passbook, which so far is concentrating on boarding passes and loyalty cards rather than payments, displays two-dimensional bar codes connected to cards linked to the account, the Banker said. Experts say it is not necessary for Apple to use NFC to build its eventual payments system, according to the Banker

Market News (09/13/2012)

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MADISON, Wis. (9/14/12)

  • The incomes of working-age and middle-income U.S citizens--a key indicator of the economic health of the U.S. and its middle class--dropped steeply in 2011, while increasing for seniors and top-earners,  according to a report from the U.S. Census Bureau released Wednesday (USA Today Sept. 13). U.S. median income decreased 1.5% to $50,054 last year--marking the fourth consecutive inflation-adjusted annual decline. In seven of the past 10 years, the typical household has lost income and now brings in less cash--when accounting for inflation--than it did in 1996, the bureau said. For the top 5% of households--those making $186,000 per year or more--incomes increased 5.3% last year. For seniors, those 65 years old and older, household incomes rose 2% above inflation in 2011 and 12.8% during the past decade--bolstered by the reliability of Social Security checks, the bureau said …
  • Initial claims for U.S. unemployment benefits increased more than expected last week, indicating little advancement in the labor market (Bloomberg.com and Moody's Economy.com Sept. 13). Claims rose 15,000--to 382,000--in the week ended Sept. 8, the largest gain in nearly two months, the Labor Department said Thursday. Economists had forecast 370,000 claims for last week, according to Bloomberg survey. Roughly 9,000 applications for benefits were the result of Tropical Storm Isaac, the department said. Pending U.S. tax policy changes and a worldwide economic slowdown are making businesses reluctant to hire and causing the job market to cool down, Bloomberg said. Meanwhile, continuing claims for unemployment benefits dropped 49,000 for the week ended Sept. 1, to 3.283 million. The four-week moving average--which smoothes out volatility--rose 3,250 last week to 3.317 million …
  • U.S. consumers were more positive about the economy last week, according to the Bloomberg Consumer Comfort Index (Moody's Economy.com Sept. 13). The index's overall gauge improved to -42.2 from -46.5 the prior week, with all three subcomponents--state of the economy, personal finances and buying climate--rising. Last week's gain marked the index's biggest week-over-week climb since December--some of which was caused by a robust stock market performance, Moody's said. However, that gain still leaves the index far below pre-recession levels, Moody's added ...

Feds QE3 longer low-rate period will impact CUs

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WASHINGTON (9/14/12)--The Federal Reserve's monetary policymaking body Thursday announced it will launch a third program of open-ended bond purchases (quantitative easing or QE3) beginning today at a pace of $40 billion a month. It also extended its Operation Twist policy, and said it would likely if warranted extend its targeted fed funds rate at 0% to 0.25% until mid-2015.  These decisions will continue to affect credit unions, said Bill Hampel, Credit Union National Association's (CUNA) chief economist.

The Federal Open Market Committee (FOMC) made the announcements at the conclusion of two days of meetings. The committee said it expected that a "highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens." It kept the target range for the federal funds rate at 0% to 0.25%--the level the rate has been at since December 2008--and said it "currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015."

"Thursday's announcement by the Fed likely has less to do with the current state of the U.S. economy than it does with the risks the economy faces from a possible collapse of the Eurozone, or falling off the Fiscal Cliff at the end of the year," Hampel told News Now. "That refers to the fact that Congress could plunge the U.S. economy into another recession if it doesn't act to stop a huge fiscal "de-stimulus" of dramatic tax increases and spending cuts set to take place next January.

"By its action, the Fed appears to be saying it will bring whatever tools it has left to try to offset either of these shocks to the economy.  The emphasis the Fed placed on weakness in the employment picture rather than simply the economy as a whole also makes this a stronger statement," Hampel said.

Hampel noted that "the FOMC's announcement further complicates the already vexing task of interest-rate-risk management for credit unions. Long-term interest rates will stay lower, for longer, based on the Fed's actions. This will further compress interest rates, reducing the opportunity for net interest income, the difference between the interest yield on assets and the interest cost of funds. The fact that it may be a while longer before interest rates finally rise doesn't change the fact that once they do, they will have even further to rise.

"In other words, the pressures on credit unions to take on even longer term loans and investments in order to protect current interest income will be coupled with an even greater threat of rising interest rates, which will be very harmful to institutions with long average asset maturities," he said.  

"Of course, the important issue is when will interest rates begin to rise. Caution should be taken in interpreting the Fed's mid-2015 statement," Hampel added, noting that committee members "did not pledge to keep interest rates at their current very low levels until then, as is frequently reported.  Instead, they said they believe very low interest rates 'are likely to be warranted' at least until then.

"What that means is they believe the labor market will not get back toward full employment for three more years.  But, rest assured, if the unemployment rate improves more rapidly than they expect, they will raise rates sooner than mid-2015," he said.   

The FOMC also decided to extend the average maturity of its holdings of Treasury securities as announced in June, and to maintain its existing "Operation Twist" policy of reinvesting principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities (MBS)  in agency MBS.

It noted that these actions "together will increase the committee's holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."

In explaining its decisions, the committee said that economic activity has "continued to expand at a moderate pace in recent months." It recognized slow employment and an elevated unemployment rate, and noted that household spending has continued to advance, but growth in business fixed investment appears to have slowed. "The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently," said the committee's press release.

The FOMC also stated it "is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to lose significant downside risks to the economic look." It expects the inflation over the medium term would run at or below its 2% objective.

The committee will "closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the committee will continue its purchases of agency MBS, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the committee will, as always, take appropriate account of the likely efficacy and costs of such purchases."

Voting for the FOMC monetary policy action were: Chairman Ben S. Bernanke, Vice Chairman William C. Dudley; Elizabeth A. Duke, Dennis P. Lockhart, Sandra Pianalto, Jerome H. Powell, Sarah Bloom Raskin, Jeremy C. Stein, Daniel K. Tarullo, John C. Williams, and Janet L. Yellen.

Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit the description of the time period over which exceptionally low levels for the federal funds rate are likely to be warranted.

For more information use the link

NEW Fed launches QE3 will keep interest rate near 0 longer

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WASHINGTON (FILED at 1:15 p.m. ET 9/14/12)--True to economists' expectations, the Federal Open Market Committee (FOMC)--the Federal Reserve's monetary policymaking body--today said it will launch a third program of open-ended bond purchases (dubbed quantitative easing or QE3) beginning Friday at a pace of $40 billion a month.

The FOMC also decided to extend the average maturity of its holdings of Treasury securities as announced in June, and to maintain its existing "Operation Twist" policy of reinvesting principal payments from the Federal Reserve's holdings of agency debt and agency mortgage-backed securities (MBS)  in agency MBS.

It noted that these actions "together will increase the committee's holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."

The committee also expected that a "highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens." It kept the target range for the federal funds rate at 0% to 0.25%--the level the rate has been at since December 2008--and said it "currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015."

In explaining its decisions, the committee said that economic activity has "continued to expand at a moderate pace in recent months." It recognized slow employment and an elevated unemployment rate, and noted that household spending has continued to advance, but growth in business fixed investment appears to have slowed. "The housing sector has shown some further signs of improvement, albeit from a depressed level. Inflation has been subdued, although the prices of some key commodities have increased recently," said the committee's press release.

The FOMC also stated it "is concerned that, without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Furthermore, strains in global financial markets continue to lose significant downside risks to the economic look." It expects the inflation over the medium term would run at or below its 2% objective.

The committee will "closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the committee will continue its purchases of agency MBS, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. In determining the size, pace, and composition of its asset purchases, the committee will, as always, take appropriate account of the likely efficacy and costs of such purchases."

Voting for the FOMC monetary policy action were: Chairman Ben S. Bernanke, Vice Chairman William C. Dudley; Elizabeth A. Duke, Dennis P. Lockhart, Sandra Pianalto, Jerome H. Powell, Sarah Bloom Raskin, Jeremy C. Stein, Daniel K. Tarullo, John C. Williams, and Janet L. Yellen.

Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and preferred to omit the description of the time period over which exceptionally low levels for the federal funds rate are likely to be warranted.

For more information use the link.

News of the Competition (09/12/2012)

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MADISON, Wis. (9/13/12)

  • For revealing the secrets of the Swiss banking system, the U.S. Internal Revenue Service (IRS) awarded $104 million to former UBS AG banker and whistleblower Bradley Birkenfeld (The New York Times and The Wall Street Journal Sept. 11). That is believed to be the biggest reward ever given to an individual U.S. whistleblower. By telling of illicit schemes and practices UBS deployed to encourage U.S. citizens to avoid paying their taxes, Birkenfeld led the IRS to an investigation that has significantly reduced Switzerland's status as a secret shelter for American tax cheaters, and given the U.S. Treasury the means to recover billions in unpaid taxes, the Times said …
  • U.S. banks are putting more time and effort into more thoroughly examining consumer data and using it to help develop promotions to entice consumers to continue switching to a specific credit card or to consider using a different one when they make purchases at a store (American Banker Sept. 11). By using targeted offers, credit card companies can apply lessons learned to a broader arena if the offers are successful, the Banker said …
  • Maryland-based banks held 21% of deposits in the state as of June 30, 2011, a decline owing to takeovers by out-of-state buyers in recent years, according to recently released government data (American Banker Sept. 11). In 2001, banks based in Maryland held nearly three times that amount of deposits--57%. However, some Maryland community bankers want to reverse that trend by merging with each other because large buyers may no longer be interested in bank-merger targets that remain. As a result, many of the community banks are considering or moving ahead with mergers, the Banker said …

Market News (09/12/2012)

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MADISON, Wis. (9/13/12)

  • The Mortgage Bankers Association (MBA) said U.S. mortgage applications increased 11.1% for the week ended Sept. 7 from one week earlier, according to its Market Composite Index. The index is part of MBA's Weekly Mortgage Applications Survey released Wednesday. On an unadjusted basis, the index decreased 12%. The adjusted Refinance Index gained 12%. The seasonally adjusted Purchase Index rose 8%. The unadjusted Purchase Index declined more than 15% and was 7% higher than the same week one year ago. The holiday-adjusted numbers may overstate the level of refinance applications because some lenders who rely primarily on the Internet/consumer direct channel for originations saw little if any decline in applications for Labor Day, compared with the drop at lenders at retail offices. Borrowers had additional time over the Labor Day weekend to complete online refinance applications, MBA said. The refinance share of mortgage activity climbed to 80% of total applications from 79% the previous week. The adjustable-rate mortgage share of activity dropped to 4.5% of total applications. For the MBA report, use the link …
  • U.S. small-business confidence modestly improved in August, but small companies still are cautious, according to the National Federation of Independent Business (NFIB) Small Business Survey (Moody's Economy.com Sept. 11). The NFIB optimism index rose 1.7 points to 92.9 from 91.2 in July. The overall survey results were varied, with sales struggling and profits down. However, during the next three months, more small companies anticipate improved sales, and a net 10% of the firms surveyed intend to hire during that period, NFIB said. That is five percentage points higher than July's survey and the highest net share since February 2008. Also, the net share of companies surveyed that said they will make capital expenditures increased to 24% from 21% in July …
  • U.S. import prices increased 0.7 % in August, rising for the first time since March, with some strength in fuels, while nonfuel import prices widely decreased, according to the Bureau of Labor Statistics (Moody's Economy.com Sept. 12). With export prices rising 0.9%, U.S. terms of trade improved. Tepid prospects for growth abroad will continue to bog down prices of imported goods, Moody's said.  In a related matter, U.S. wholesale inventories also went up 0.7% in July--beating the consensus prediction of a 0.3% inventory climb and better than the 0.2% decline in July, according to the U.S. Census Bureau (Moody's Economy.com Sept. 12). The inventories-to-sales ratio inched up to 1.21 in July from 1.2 in June …

FOMC to announce latest policy moves today

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WASHINGTON (9/13/12)--The Federal Reserve's policy making group, meeting the past two days, will announce its monetary policy action to aid the economy this afternoon, with economists widely expecting some sort of bond-buying announcement or an extension into 2015 of its policy of keeping interest rates at near zero.

The Federal Open Market Committee (FOMC) is expected to make its announcement at 12:30 p.m. ET, followed by the Fed's new economic and interest-rate projections at 2 p.m. ET, with Fed Chairman Ben Bernanke scheduling a press conference a few minutes later, said Reuters (foxbusiness.com Sept. 12).

Most economists are expecting an announcement of a third round of the quantitative easing (QE3). Sixty percent of the 59 economists surveyed by Reuters and nearly two-thirds of economists surveyed by Bloomberg, said they expect a third round of bond purchases, which so far have totaled $2.3 trillion but have failed to bolster the labor market, said Bloomberg.com (Sept. 12). However, some believe the Fed will hold off until after the Nov. 6 presidential election before introducing a third round, said Reuters.

The FOMC also is expected to indicate it is extending into 2015 its forward guidance on how long the Fed will keep the federal funds target interest rate between 0% and 0.25%.  Interest rates have been in that range since December 2008.  Throughout 2012, the Fed has maintained it would keep interest rates at this level through 2014. With updated projections for 2015 to be announced today, an extension of the low rates is possible to prevent financial markets from prematurely pricing in higher rates when the economy picks up, said Reuters.

The Fed is struggling with an economy that has seen less than 2% economic growth in second quarter and an unemployment rate that has been stuck at more than 8% for 43 consecutive months, said Bloomberg.

Watch for News Now's live report this afternoon on the policymakers' decision, as well as News Now's LiveWire twitter feed.

NRF to oppose interchange settlement in court

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NEW YORK (9/12/12)--The National Retail Federation (NRF) says it has been given a go-ahead by its board to try to block the $7.25 billion settlement of a federal antitrust lawsuit against Visa and MasterCard over credit card swipe fees they charge merchants for accepting credit cards.

NRF was not a party to the original lawsuit, and said in a press release it was not certain whether outside groups will be allowed to intervene.

NRF "categorically opposes the proposed settlement," said NRF President/CEO Matthew Shay. "It does nothing to curb the anticompetitive behavior of Visa and MasterCard, and instead ensures that swipe fees paid by retailers and their customers will continue to rise while barring any future legal challenges."

The board's resolution authorized NRF to take steps including "intervention in pending actions" to reach a solution "equitable to the broad merchant community." NRF is exploring what form the legal action might take. U.S. District Court Judge John Gleeson has not yet fully outlined how outside groups will be allowed to intervene or if the case qualifies as a class action, said NRF's press release.

The plaintiffs and the defendants in the case announced the settlement in July. The court will consider preliminary approval arguments in October and will likely issue its decision in December or January.

Credit unions were not a party to the litigation, but will be impacted by the injunctive relief settlement terms--temporary reduction in credit card interchange, surcharging and buying groups.

News of the Competition (09/11/2012)

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MADISON, Wis. (9/12/12)

  • Several U.S. banks that have been actively participating in mergers and acquisitions are moving to reduce one of the largest costs--brick and mortar branches (American Banker Sept. 10).  Executives from FirstMerit in Akron, Ohio; KeyCorp in in Cleveland; and PNC in Pittsburgh told the Banker there are too many branches. Keycorp intends to close 5% of its 1,062 locations by the end of this year, while FirstMerit just closed roughly 4% of its branches, which now are down to 198 offices, the Banker said. The move has been driven by technology, which replaces tellers and enhances profits, the bank executives told the publication. In another cost-cutting move, PNC expects to implement 1,500 ATMs this year--up from 900 last month--with check-scanning technology …
  • The Google-branded virtual prepaid card--a component of the Google Wallet--will no longer be supported by Google Inc., effective Oct. 17 (American Banker Sept. 10). The prepaid card option allowed Google Wallet users to select any credit or debit card to fund point-of-sale purchases. That option has been included in Google's mobile wallet since its launch last year, the Banker said. The reason for the move is redundancy. In August, Google added the ability to link most credit and debit cards to Google Wallet through funding of a separate Virtual MasterCard--which caused the Google-branded prepaid card to become redundant, the Banker said …
  • More U.S. community banks aiming to grow their business dealings with peers are filling the void in correspondent lending created by several large and midsize banks cutting back or leaving the business (American Banker Sept. 10). Several community banks in recent months have hired lenders and also contacted smaller banks in need of credit, foreign exchange services or mortgage servicing, the Banker said. Some large and regional lenders have left correspondent lending because of liquidity risks and lender-specific regulatory constraints, the Banker said …
  • The Morgan Stanley Smith Barney brokerage joint venture has been valued at $13.5 billion by an independent appraiser, resolving a month-long dispute and paving the way for Morgan Stanley to take full control of the retail brokerage from Citigroup--its parent in the venture (The New York Times DealBook Sept. 11). Investment bank Perella Weinberg Partners made the valuation, constituting a win for Morgan Stanley, which had previously assessed the value of the venture at $9 billion, while Citigroup said the value was roughly $23 billion, the Times said …

Market News (09/11/2012)

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MADISON, Wis. (9/12/12)

  • For the first time in four months, the U.S. trade deficit widened in July--although less than predicted--with a worldwide economic slowdown hurting demand for American-made goods (Bloomberg.com and Moody's Economy.com Sept. 11). The trade gap increased 0.2% to $42 billion from $41.9 billion in June, the Commerce Department said Tuesday. Economists had forecast a $44 billion deficit in July, according to a Bloomberg survey. Exports declined the most since April--trumping a decrease in imports that was a reflection of less expensive petroleum, Bloomberg said. Demand for U.S. products--a robust source of expansion in the second quarter--may be beginning to be drained by fiscal problems in Europe and weaker economies in emerging markets such as China. Also, a bounce-back in crude oil prices could cause higher import costs in the U.S., Bloomberg said …
  • The U.S. government could lose its triple-A credit rating from Moody's Investors Service unless federal lawmakers during the 2013 congressional legislative session can cut the percentage of debt to gross domestic product (Bloomberg.com and The Wall Street Journal Sept. 11). The rating likely would be cut to Aa1 if negotiations fail to produce that desired result, Moody's--which placed a negative outlook on the U.S.' triple-A rating in August--said Tuesday in a statement. The top rating likely would be affirmed if plans to create stabilization and a downward trend in the ratio during the medium term occur, Bloomberg said …
  • The Job Openings and Labor Turnover Survey (JOLTS) for July shows a continuation of a U.S. labor market lull during the summer, according to a release from the U.S. Bureau of Labor Statistics (Moody's Economy.com Sept. 11). Job openings declined to 3.66 million from 3.72 million from June. However, the rate of 2.7% was unchanged in July from June. Hiring dipped in July to 4.23 million from 4.28 million, with the rate unchanged at 3.2%. Job separations dropped to 4.06 million from 4.25 million …

News of the Competition (09/10/2012)

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MADISON, Wis. (9/11/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced a bank closing Friday, bringing total bank failures this year to 41. That compares with 92 for the entire year in 2011. The failed bank is First Commercial Bank, Bloomington, Minn., assumed by Republic Bank & Trust Co., Louisville, Ky. The closed bank held about $216 million in assets. The FDIC estimated the latest failure will cost its Deposit Insurance Fund roughly $64 million …
  • The U.S. Treasury Department is planning a public offering to sell $18 billion worth of American International Group Inc. (AIG) stock (The Wall Street Journal Sept. 8). The move will slash Treasury's stake in AIG by more than half and--for the first time since the financial crisis was at full bore in September 2008--make the government a minority shareholder in AIG. With the sale, the federal government will come closer to seeing a profit on its biggest bailout, which included $182 billion of committed aid. Also, AIG will revert to being primarily nongovernment owned, the Journal said …
  • Some major U.S. lenders are making commitments to buy back soured loans from Fannie Mae and Freddie Mac, which should help the government more quickly wind down the two government-sponsored enterprises (American Banker Sept. 7). However, it is not certain that banks with substantial mortgage exposure will follow the course set by SunTrust Banks, PNC Financial Services Group and First Horizon, the Banker said. Fannie and Freddie are showing more willingness to work with banks to determine banks' exposure levels, analysts said.  However, if banks incur a giant charge in one quarter only to have more problems arise in future ones, the institutions could risk alienating investors, the Banker said …

Market News (09/10/2012)

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MADISON, Wis. (9/11/12)

  • Stagnating wages for U.S. workers in a tepid job market are constraining consumer spending, which is necessary to propel the national economic recovery forward (Bloomberg.com Sept. 10). Constituting the smallest gain since record-keeping began in 2007, average hourly earnings in August were up 1.7% from a year earlier and barely changed from July, the Labor Department said last week. Last month, payroll growth declined to 96,000 from 141,000 in July, and the unemployment rate dropped to 8.1% from 8.3% because more workers left the work force, Bloomberg said. Soft wage and employment outlooks accompanied by the highest gasoline prices in four months are hurting consumers' budgets, following the weakest spending quarter in a year, Bloomberg said …
  • Worldwide business sentiment bounced back last week, following slippage the prior week related to a lower response rate for the Labor Day weekend, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Sept. 10). The survey's overall reading jumped to 18 for the week ended Sept. 7 from 10.7 the prior week. However, business sentiment remains lukewarm, with businesses still worried about their sales strength and weak pricing power, Moody's said. The rapidly approaching U.S. fiscal cliff and the ongoing European debt problems are causing concerns, but there are scant signs that the economic recovery is at risk, Moody's added …
  • With a widening gap between countries that are moving forward and those that are not, there is growing worry that the Basel III accord could be close to collapsing (American Banker Sept. 7). However, if regulators are willing to accept the real-world situation that harmonious financial services across the board probably is not achievable, the process may still be saved, according to a new paper issued Friday by Karen Shaw Petrou, a managing partner at Federal Financial Analytics Inc. She makes the case for a profound shift in thinking, postulating that regulators should dismiss the premise of a standard set of rules for nations worldwide, because of different banking structures and the growing probability that each country will implement rules that serve their own best interest, Petrou said. If regulatory supervisors don't change course, the integrity of the international regulatory system will be at risk and could lead to a much less robust system, she added …

Total U.S. consumer credit decreases by 1.5 in July

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WASHINGTON (9/11/12)--Total consumer credit in the U.S. declined by 1.5%--or $3.3 billion--in July, according to the Federal Reserve's Consumer Credit Report released Monday afternoon.  However, credit union members borrowed $2.8 billion more than they did in June.

Consumers borrowed a total of $2.705 trillion in July. Of that amount, $850.7 billion was in revolving debt--down 6.8% from June, while 1.855 trillion was in nonrevolving debt--up 1% from June, said the report.

July marked the second consecutive month that U.S. consumers reduced their credit card use, suggesting that they still are wary because of slow economic growth and high unemployment (The Associated Press Sept. 10).

Even though U.S. consumers increased their spending in July by the most in five months, per a government report released last week, consumer debt declined, the AP said.  

Credit union members borrowed $233.1 billion in July--about $2.8 billion more than they did June.     

Nonrevolving credit--including auto loans and student loans--for credit union members was $195.7 billion, or $2.7 billion more than in June.   

Credit union members' revolving credit--which includes credit card debt--remained the same in July, at $37.4 billion.

The Fed's consumer credit report does not track mortgage and real-estate loan data.

News of the Competition (09/07/2012)

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MADISON, WIS. (9/10/12)

  • Loan modifications surged 40% in July from June, as top-ranked U.S. loan servicers finished 66,000 proprietary modifications, according to the most recent report from the Hope Now alliance (American Banker Sept. 6). The impact of the $25 billion settlement with state attorneys general may be reflected in the quick spike in modifications that New Hope reported, the Banker said. The alliance represents 31 residential loan servicers--including the top five mortgage servicers that agreed to the settlement in 49 states to amp up their loan modification attempts and provide principal reductions if possible, the Banker said ...
  • Fiscal problems that U.S. municipalities are facing have caused an increasing number of cities to turn to banks to obtain tax anticipation notes as an alternative financing instrument (American Banker Sept. 6). Banks will search for more opportunities to offer the notes because if properly structured, notes are very safe and secure, Edward Grebow, president/CEO of Amalgamated Bank told the Banker. Such notes are short-term, and serve a key public purpose, and their safety is appealing as collateral, he added …
  • Companies, including banks, are finding that social media-based recruiting tools are helping discover and recruit work force talent (American Banker Sept. 6). Swiss company Silp is one of the most recent startups to use a social media site (Facebook) as a talent-pool resource, the Banker said. A hiring company will post a job opening on Silp's site and will find candidate matches, based on criteria such as work experience, interests and data compiled from users' Facebook-linked online resources such as LinkedIn profiles or Twitter, the Banker said …

Market News (09/07/2012)

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MADISON, Wis. (9/10/12)

  • The U.S. economy slowed in August after adding 96,000 jobs, following a gain of 141,000 in July, the Labor Department said Friday (The Wall Street Journal, The New York Times, Bloomberg.com and Moody's Economy.com Sept. 7). Economists surveyed by Dow Jones Newswires had expected a gain of 125,000 jobs last month. The unemployment rate unexpectedly dropped to 8.1% last month from 8.3% in July due to more Americans leaving the labor force, Bloomberg said. August's numbers were a clear step back for the labor market and economy, Michael Feroli, chief U.S economist at JPMorgan Chase & Co. in New York, told Bloomberg. The upcoming fiscal cliff and ongoing debt problems in Europe have contributed to an overall guarded business atmosphere, he added. In a related matter, the U.S. Monster Employment Index--a measure of help-wanted ads placed online by U.S. employers--increased nine points from July to 156 in August, according to Monster Worldwide Inc. (Moody's Economy.com Sept. 7) ...
  • The U.S. future inflation gauge dipped to 100.6 in August from 100.8 in July, according to the Economic Cycle Research Institute (ECRI) (Moody's Economy.com Sept. 7). The gauge has stayed at a reduced level so far in 2012, which coincides with ECRI's outlook for low inflation in the coming year due to moderate cost pressures soon. Also, the ECRI Weekly Leading Index, which measures economic growth, increased to 123.7 for the week ended Aug. 31--the fifth consecutive weekly gain--from 123.5 the prior week. Following three months of negative readings, the smoothed, annualized rate quickened to 1%, heading further into positive territory, ECRI said …

News of the Competition (09/06/2012)

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MADISON, Wis. (9/7/12)

  • Next week, the Federal Deposit Insurance Corp. (FDIC) will release the most recent nationwide estimates of the number of unbanked consumers in the U.S. (American Banker Sept. 5). More than one in four U.S. households were unbanked or underbanked, according to the first National Survey of Unbanked and Underbanked Households conducted in 2009. The U.S. Census Bureau conducts the survey for the FDIC. The survey indicated lower-income populations were more prone to being unbanked or underbanked. Also, most underserved areas were in the South, the survey found. The second survey, conducted in June 2011, will be released at the Wednesday meeting of FDIC's Advisory Committee on Economic Inclusion …
  • As part of a plan to repurchase $5 billion worth of its own stock, insurance behemoth American International Group (AIG) said Thursday it intends to sell a $2 billion stake in its Asian insurance unit (The New York Times DealBook and The Wall Street Journal Sept. 6). The move is a component of AIG's most recent effort to cast off assets and pay back the federal government after the company got a $182 billion bailout in 2008, the Times said …
  • The Mid-size Bank Coalition of America is a group formed by senior executives at banking companies with assets between $7 billion and $30 billion to lobby for banks that are larger than community banks but not big enough to be leaders in the industry--and which have separate concerns from both (American Banker Sept. 5). The group was loosely created in 2009 by Russell Goldsmith, president/CEO of $24.8 billion asset City National in Los Angeles when Congress debated the Dodd-Frank Act, the Banker said. Collectively, the coalition's members have assets that total more than $450 billion in 41 states, the Banker said ...

Market News (09/06/2012)

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MADISON, Wis. (9/7/12)

  • Initial claims for U.S. unemployment benefits fell last week, mitigating worries that the labor market could erode in the second half of the year (Bloomberg.com and Moody's Economy.com Sept. 6). Claims declined 12,000--to 365,000, the fewest in a month--for the week ended Sept. 1 from the prior week, the Labor Department said Thursday. Because demand necessitates keeping current workers, employers are limiting job cuts, and that in turn is helping bolster consumer spending, which constitutes the largest component of the U.S. economy, Bloomberg said. Meanwhile, continuing claims for unemployment benefits dropped 6,000--to 3.32 million for the week ended Aug. 25. In a related matter, U.S. job cut announcements affected 32,239 workers in August--the lowest total since September 2010, according to the Challenger Report issued by Challenger, Gray and Christmas Inc. Employers announced plans to hire 12,079 in August, Challenger said. Also, U.S. private businesses hired 201,000 workers in August--surpassing economists' consensus forecast of 145,000--according to a national employment report compiled by payroll processor Automatic Data Processing Inc. and consultancy Macroeconomic Advisers (The Wall Street Journal Sept. 6) …
  • U.S. service industries grew at a faster pace in August than expected, providing help to an economy that lost steam in the first half of 2012, according to the Institute for Supply Management's (ISM) nonmanufacturing index (Bloomberg.com and Moody's Economy.com Sept. 6). The index rose to a three-month high of 53.7 from 52.6 in July. Readings above 50 indicate expansion. Economists had forecast a 52.5 reading for August in a Bloomberg survey. In terms of growth, the service sector is performing better than manufacturing, which is different than what has occurred in the past few years, Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, told Bloomberg ...
  • The International Council of Shopping Centers (ICSC) chain store sales index decreased 0.4% for the week ended Sept. 1, almost wiping out the previous week's 0.5% gain (Moody's Economy.com Sept. 5). Overall, customer traffic slumped--with discount stores leading the weakness, ICSC said. Year-over-year sales growth increased to 3.7% from 3.4% the prior week--marking the fourth consecutive week above 3% …
  • U.S. consumer confidence improved slightly last week but remained near an eight-month low, with consumers taking a hit from high unemployment and escalating gasoline prices, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com Sept. 6). The index was at -46.5 for the week ended Sept. 2, up from -47.3 the prior week. It was the fifth consecutive week the index has been below 40--the level normally indicating extreme economic discontent, Bloomberg said. Consumers still are negative about their personal finances and the state of the economy despite strong discounting from retailers and automaker General Motors that have strengthened retail sales, said Joseph Brusuelas, a senior economist with Bloomberg LP in New York …

News of the Competition (09/05/2012)

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MADISON, Wis. (9/6/12)

  • Speculation concerning bank mergers and acquisitions has been renewed by M&T Banks' $3.7 billion deal to purchase Hudson City--the biggest whole bank deal of 2012  (American Banker Sept. 4). Analysts and investment bankers say five more banks could be the next targets of acquisition. They include: Astoria Financial, based in Lake Success, N.Y., with $17.8 billion in assets; BancorpSouth, Tupelo, Miss., with $13.8 billion in assets; First Commonwealth Financial, Indiana, Pa., with $5.9 billion in assets; OceanFirst Financial, Toms River, N.J., with $2.3 billion in assets; and Texas Capital Bancshares, Dallas, with $9.14 billion in assets …
  • The August sales pace for U.S. automobiles is the strongest in three years since the government-sponsored "cash for clunkers" rebates spawned an upsurge of trade-ins, automakers reported Tuesday (USA Today Sept. 5). The main impetus for last month's upswing is the average age of autos in the U.S.--10-plus years. Consumers need to replace them, the newspaper said. Last month, the seasonally adjusted annual sale rate was 14.5 million, according to Autodata.  Chrysler reported its U.S. sales increased 14% last month, with the Ram pickup posting its best August in the past five years (The New York Times and The Wall Street Journal Sept. 4). Ford saw a 13% sales gain, and General Motors reported a 10% increase …
  • The Dan Beard Council of the Boy Scouts of America based in Cincinnati is amping up consumer purchases for its annual popcorn sale by using a mobile card reader from Verifone (American Banker Sept. 4). The scouts are accepting payment with a Sail--a Verifone product that competes with the Square mobile card reader. Troop leaders taking part in the program must register for a merchant account and will each receive multiple mobile card readers. When that is done, Boy Scouts' parents can accept transactions on their Android and Apple mobile devices, the Banker said …

Market News (09/05/2012)

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MADISON, Wis. (9/6/12)

  • U.S. mortgage application volume decreased 2.5% for the week ended Aug. 31 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). The Refinance Index declined 3% to the lowest level since May. The seasonally adjusted Purchase Index dropped 0.8%. The unadjusted Purchase Index fell 3% and was 1% higher than the same week one year ago. The refinance share of mortgage activity remained unchanged at 79%. The adjustable-rate mortgage share of activity increased to 5% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.78% from 3.8%, with points (including the origination fee) declining to 0.37 from 0.42 for 80% loan-to-value ratio loans. The effective rate dropped from last week. For the MBA report, use the link …
  • U.S. nonfarm business productivity bounced back more than originally estimated in the second quarter while employers attempted to protect their profits (Bloomberg.com and Moody's Economy.com Sept. 5). The gauge of employee output per hour increased at a 2.2% annualized rate--revised from an initial 1.6% gain forecast in the preliminary report--following a 0.5% decline in the first quarter, the Labor Department said Wednesday. Expenses per worker rose at a 1.5% rate. During the current economic expansion, the largest productivity gains likely already have occurred as companies realized they must increase staff to boost output, and as investment in new equipment abates, Bloomberg said. Meanwhile, businesses still will search for ways to operate more efficiently because an eroding global economy is already dampening business earnings, Bloomberg said …
  • Worldwide business sentiment dipped for the week ended Aug. 31 from the prior week and businesses show no sign of regaining their optimism, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com Sept. 4). The rapidly approaching U.S. fiscal cliff and continuing economic troubles in Europe still are substantial concerns to businesses, Moody's said. However, there are scant signs the economic recovery is in peril, Moody's added. The percentage of neutral responses--neither positive nor negative--to the survey is at a high in the 10-year-old business survey's history, Moody's said. Investment still is solid, and workers in business and financial services remain more positive, the survey indicated  …

Small businesses are hurting says new Intuit index

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MOUNTAIN VIEW, Calif. (9/6/12)--U.S. small businesses are being squeezed by declining revenues that have affected their employment numbers, according to the Intuit Small Business Employment and Revenue indexes.

The report adds weight to concerns about small businesses shut out of traditional loans needed to expand or maintain business in the economy.

The August index inched up to 91.01 from 90.87 in July--a 0.16% gain. That translates to 30,000 jobs added in August, down from a net job gain of 45,000 in July (Moody's Economy.com Sept. 5).

"This month's indexes indicate that small businesses are hurting," said Susan Woodward, the economist who created the indexes with Intuit.

For the 10th consecutive month, hours worked by employees dipped. Pay raises were tepid because of soft business and labor mark conditions, Intuit said.

Bars, restaurants and retail stores recorded the biggest revenue decline among all industries, the report indicated.

Small-business revenue collectively dropped 0.6% last month from July (Business Wire Sept. 6). Small-business retail was the most impacted, seeing revenue decline 6.1% from January through July.

During the next six to nine months, more declining revenues could be on tap for small businesses because consumer sentiment remains lax due to a weak labor market recovery. That could result in further erosion of consumer spending as 2012 draws to a close, Moody's said.

The Credit Union National Association (CUNA) and credit unions are urging Congress to increase credit unions' member business lending (MBL) cap to 27.5% of assets from 12.25% so that more loans could be made to small businesses, considered a staple in the economy. CUNA and credit unions say that increasing credit unions' MBL cap would open up more opportunity to offer MBLs, inject $13 billion in business loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers.

News of the Competition (09/04/2012)

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MADISON, Wis. (9/5/12)

  • Regulators and banks started a movement after the 2008 collapse of Bear Stearns and Lehman Brothers to create legal-entity identifiers (LEIs)--or codes that identify firms the same way Social Security numbers identify individual consumers (American Banker Aug. 31). Using the codes throughout a financial institution's databases would allow it to gather and combine customer-account data for internal and regulatory reports and instantly allow it to see company-wide problems that lead to collapses, the Banker said. Regulators also could use this type of system to ascertain the exposure of their constituents to imperiled firms industry-wide, the Banker said. Worldwide, roughly 1.5 million legal entities that are counterparties on financial transactions among classes of assets would be required to obtain LEIs, the Banker said ...
  • The California Reinvestment Coalition, a high-profile consumer group, is asking why the top five U.S. mortgage servicers are receiving principal forgiveness on short sales in states where they already are prevented from going after borrowers for the unpaid debt (American Banker Aug. 31). Borrowers cannot be personally held responsible in 12 nonrecourse states that include Arizona and California for a loss in a short sale when a home is sold for less than the value of the mortgage. Financial institutions in those states are required to absorb the losses; therefore, borrowers are not garnering any additional relief from the settlement, Kevin Stein, associate director of the coalition, told the Banker

Market News (09/04/2012)

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MADISON, Wis. (9/5/12)

  • For a third consecutive month, U.S. manufacturing contracted in August, with production, new orders and employment all declining, according to  the Institute for Supply Management's (ISM) manufacturing index report released Tuesday (The Wall Street Journal, The New York Times, Bloomberg .com and Moody's Economy.com Sept. 4). The ISM index for factory output dipped to 49.6 last month--the lowest reading since July 2009--from 49.8 in July. Since the recession ended in June 2009, U.S. factories have been an important source of jobs and economic growth. However, in recent months the sector has shown signs of weakness, the Times said. Although factories continued to hire in July, production steeply declined to 47.2 in August from 51.3 in July, the ISM report indicated. Manufacturing has generally stagnated, Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, told Bloomberg. Although consumer spending increased somewhat in August and should help stabilize manufacturing, there likely won't be a strong pick-up in manufacturing anytime soon, he added …
  • The CoreLogic Home Price Index rose 1.3% in July from June and is 3.8% higher than its level in July 2011---the biggest year-over-year gain since 2006 (Moody's Economy.com Sept. 4). Nondistress sales are pushing market prices higher, CoreLogic said. The excluding-distress-sales index rose 1.7% in July and is 4.3% higher than its level in July 2011, the company said. For five consecutive months, both indexes have risen, signaling the whole housing market may have bottomed out, CoreLogic said. However, foreclosure inventories could still continue to substantially hamper near-term price gains, CoreLogic said …

Market News (09/01/2012)

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MADISON, Wis. (9/4/12)
  • The Economic Cycle Research Institute (ECRI) weekly leading index rose to 123.6 for the week ending Aug. 24, the fourth consecutive week of gains, according to ECRI. It was the highest reading in 15 weeks and is more than the 122.9 it recorded a year earlier. The index had risen from 123.3 the previous week (Moody's Economy.com Aug. 31). The smooth, annualized grow rate accelerated to 0.6, the highest level in 14 weeks and moving from indications of a recession to indications of future growth, said Moody's.  "This means the economy did not slow as much as previously thought," said Moody's, which noted that 11 months ago the institute had predicted a new recession in the spring. That recession prediction was recalled when the economy picked up at the beginning of 2012. The current indicators mean the economy is growing modestly instead of contracting, Moody's said …
  • Unlike Hurricane Katrina, which had a large impact on the production of natural gas and gas prices in 2005 because of refineries shut down along the Gulf Coast, Hurricane Isaac's impact on natural gas is barely making a dent. That's because of the rapid development of shale gas production. On Thursday, roughly 72.5% of current daily natural-gas production in the Gulf shut down because of Isaac. On Wednesday prices for natural gas futures rose only 2%, compared with the 14% hike seen during Katrina. Natural-gas production from the Gulf of Mexico, as a percentage of total U.S. output, has significantly declined over the past few years, and shale gas is mostly to blame, said several analysts  (MarketWatch Aug. 31) …

Fed to provide additional policy accommodation as needed

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NEW YORK (9/4/12)--Federal Reserve Chairman Ben Bernanke indicated Friday that the Fed would "provide additional policy accommodation as needed" to boost the economy--a reiteration of the Fed's policymakers' statement after meeting in June. However, he did not specify details or indicate when the Fed would provide that accommodation.

Bernanke's speech, made in Jackson Hole, Wyo., at the Federal Reserve Bank of Kansas City Economic Symposium, was highly awaited by economists hoping he would talk about what the Fed could and could not do to help the economy and whether he would indicate implementation of another round of quantitative easing and when.

The Fed's policymaking group, the Federal Open Market Committee (FOMC), meets for its Sept. 12-13 meeting, and in the past Bernanke has used speeches to hint at upcoming changes in the FOMC statements for monetary policy.

In his speech Friday, Bernanke reviewed the Fed's policy actions through the financial crisis in terms of keeping the target federal funds rate to the 0% to 0.25% range since December 2008, the Fed's use of greater of communication, and its implementation of "non-traditional tools" such as its $2.3 trillion bond purchases program, known as quantitative easing.

He noted they have been effective in boosting growth and improving financial conditions, but it has been a process of "learning by doing."

Calling the rate of the improvement in the labor market "painfully slow," Bernanke said that "the economic situation is obviously far from satisfactory. The unemployment rate remains more than two percentage points above what most FOMC participants see as its longer-run normal value, and other indicators, such as the labor force participation rate and the number of people working part time for economic reasons--confirm that the labor force utilization remains at very low levels."

He cited studies that indicate the Fed's asset purchases have been "economically meaningful" and have "significantly lowered long-term Treasury yields" while boosting stocks.

Bernanke noted that "it appears reasonable to conclude that nontraditional policy tools have been and can continue to be effective in providing financial accommodation, though we are less certain about the magnitude and persistence of these effects than we are about those of more traditional policies."

He concluded that "the costs of nontraditional policies, when considered carefully, appear manageable, implying that we should not rule out the further use of such policies if economic conditions warrant."

Bernanke's speech also was the first of several events that likely will influence markets before the next FOMC meeting, said The New York Times (Aug. 31). The next event is a meeting of the European Central Bank this week to discuss plans for a bond-buying program to support Europe's economies, which have weakened.

To access the full speech, use the link.