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Market News (03/31/2010)

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MADISON, Wis. (4/1/10)
* The number of private-sector jobs in the U.S. decreased by 23,000 in March, according to Automatic Data Processing (ADP). This figure compares with a 50,000 gain that economists projected in a recent Dow Jones Newswires survey (The Wall Street Journal March 31). The change in employment from January to February was revised to a decline of 24,000, from a decline of 20,000. The March unemployment rate is expected to stay at 9.7%. ADP, Roseland, N.J., processes payments for one in six U.S. workers ... * Mortgage loan application volume increased 1.3% from one week earlier, according to the Mortgage Bankers Association’s Market Composite Index released Wednesday. On an unadjusted basis, the index increased 1.5% compared with the previous week. The seasonally adjusted Refinance Index dropped 1.3% from the previous week and the seasonally adjusted Purchase Index increased 6.8% from one week earlier--the highest Purchase Index reading since Oct. 30. The average contract interest rate for 30-year fixed-rate mortgages rose to 5.04% from 5.01%, the average contract interest rate for 15-year fixed-rate mortgages increased to 4.34% from 4.33%, and the average contract interest rate for one-year adjustable-rate mortgages increased to 6.88% from 6.75%. Significant obstacles facing housing recovery and mortgage applications continue, according to Moody’s Economy.com (March 31). Layoffs are slowing, but solid job creation has yet to resume. Moody’s said it does not expect housing prices to stabilize until year-end ... * Small business owners’ confidence in the economy dropped to 75.7 in March, its lowest level in more than a year, according to Discover Financial Services (American Banker March 31). The figure was down 9.2 points from February. The index was 71.9 in February 2009. About 53% of small business owners surveyed last month said they expect economic conditions to worsen for their businesses during the next six months, compared with 37% who said the same in February. About 52% said they will decrease spending, compared with 43% who said so in February. Two percent said they think the economy is getting better, down from 31%. Roughly 58% of respondents said the economy is worsening, compared with 44% who said so in February ... * Corporate bonds returned 2.6% during the quarter ending March 30, following a 16.3% increase last year, according to a Bank of America Merrill Lynch index. The extra yield dropped 0.26 of a percentage point to 1.5 percentage points Tuesday, the slimmest since November 2007 (Bloomberg.com March 31). Borrowing costs dropped to the lowest level since 2005, triggering a $738 billion of bond issuance this quarter--an uptick of 27% from the final quarter last year ...

News of the Competition (03/31/2010)

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MADISON, Wis. (4/1/10)
* In February, about 68,675 homeowners with privately insured mortgages defaulted, compared with 80,758 who recovered, according to a report from Mortgage Insurance Companies of America (Bloomberg.com March 31). The last time the group reported recoveries exceeding defaults was in March 2006. In other news, the Treasury Department reported that lenders in the Home Affordable Modification Program converted 168,708 trial plans into permanent revisions through February, compared with 116,297 a month earlier. RealtyTrac said in January that about 2.82 million U.S. homeowners lost their homes to foreclosure last year and 4.5 million filings are expected this year. Robert Quint, Radian Group Inc. chief financial officer, said in February that he expects the level of new defaults to be flat the rest of the year. Radian is the second-biggest mortgage insurer in the U.S. ... * Dozens of lenders who provided credit to other banks--which were the only underlying collateral for the loans--are facing trouble as banks struggle to repay capital, according to American Banker (March 31). And when lenders face such scenarios, they are left with few options. Analysts noted the example of Midwest Banc Holdings Inc., which seeks to recapitalize. The bank has asked Marshall & Ilsley (M&I) Corp. to convert its credit line into equity. The conversion could help Midwest attract other capital, and M&I has few options to help the bank, they said. Analysts also noted the use of bank stock loans, which are becoming less common as banks are barred from extending such credit. Bank stock loans don’t necessarily post a threat to large banks, analysts said, but they could create problems for companies whose core business is to lend to other institutions. Other options Banker noted include granting forbearance, seek directors’ guaranties, obtain other collateral or restructure debt ...

News of the Competition (03/30/2010)

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MADISON, Wis. (3/31/10)
* Pamrapo Savings Bank SLA received a $5 million penalty Monday for Bank Secrecy Act (BSA) violations from the Office of Thrift Supervision, the Justice Department and the Financial Crimes Enforcement Network (American Banker March 30). Regulators issued the $558.5 million asset bank a fine for “ineffective” anti-money-laundering programs. The institution pleaded guilty in the U.S. District Court for the District of New Jersey to charges of conspiracy to violate the BSA. The thrift failed to file suspicious activity reports and currency transaction reports on $35 million in financial transactions, the Justice Department said ... * The Securities and Exchange Commission (SEC) has begun an inquiry into about 24 financial institutions to see if they followed accounting practices similar to those disclosed in a recent Lehman Brothers investigation. The agency said Monday it is interested in repurchase agreements and wants to know if the companies used tactics similar to Lehman’s to hide debt from investors. Lehman was accused of using Repo 105 in 2008 to hide $50 billion in debt. SEC did not name the companies to which it sent inquiry letters (The New York Times March 29) ... * Discover Financial Services has extended its network agreement with Wal-Mart Stores Inc. through 2015, the company said Monday. Discover has handled Wal-Mart’s Discover card transactions since 2005. The cards are treated as private label cards when used at Wal-Mart stores and as Discover cards at other retailers. The cards are issued by GE Money Bank (American Banker March 30) ...

Market News (03/30/2010)

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MADISON, Wis. (3/31/10)
* Consumer confidence recovered six points in March to 52.5 after dropping 10 points in February--its lowest level since April 2009, according to the Conference Board Index of Consumer Confidence. The decline in February was typical for months when severe snowstorms hit parts of the U.S., but the lack of a more complete recovery is disappointing considering past snowstorms and “the general improvement in consumer fundamentals that seems to be underway,” said Moody’s Economy.com (March 30). The present conditions component was at 26, compared with 21.7 in February, and the expectations component was at 70.2, compared with 62.9 in February ... * Home prices rose slightly in January, indicating that the housing market is exhibiting some areas of strength, according to media reports. The Standard & Poor’s Case-Shiller home-price index increased 0.3% to 146.32 from the previous month on a seasonally adjusted basis--matching the increase in December (Bloomberg.com March 30). The gauge was 0.7% lower than January 2009--the smallest year-over-year drop in three years, the newspaper said. Prices in 10 major metropolitan areas remained flat in January compared with a year earlier, while the index for 20 major metropolitan areas decreased by 0.7% year-over-year. Compared with December, the 10-city index increased 0.4% in January, while the 20-city index increased 0.3%. Unadjusted, the 10-city index dropped 0.2% and the 20-city index decreased by 0.4% (The Wall Street Journal March 30). Based on the figures, Moody’s Economy.com said it does not expect housing prices to stabilize until the second half of 2010 (March 30) ... * Mortgage servicers are expected to increase their hedging efforts to protect portfolios from rising interest-rate volatility--which will increase their costs, said American Banker (March 30). Servicers fear that a rise in rates will increase their portfolios’ value but also increase the need to hedge against unexpected changes in mortgage rates. Mortgage rates have fallen to historic levels since the Federal Reserve Board began buying mortgage-backed securities in late 2008. Average rates on 30-year, fixed-rate mortgages in October 2008 were 6.20%. After the Fed purchased the securities, the rate fell below 5%. In February, the rate averaged 4.99%. Last month, Citigroup Inc. said in a regulatory filing that it hedges a large portion of the value of its mortgage servicing rights through interest-rate derivative contracts. The Fed’s exit from buying the securities should not blindside large servicers like Citigroup, said Frank Palotta, executive vice president and managing partner of Loan Value Group LLC. Sachit Kumar, managing director at Mortgage Industry Advisory Corp., said the volatile interest rates would more likely affect small servicers ...

News of the Competition (03/29/2010)

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MADISON, Wis. (3/30/10)
* Regulators closed four banks Friday: Desert Hills Bank, Phoenix, assumed by New York Community Bank, Westbury, N.Y.; McIntosh Commercial Bank, Carrollton, Ga., assumed by CharterBank, West Point, Ga.; Key West (Fla.) Bank, assumed by Centennial Bank, Conway, Ark.; and Unity National Bank, Cartersville, Ga., assumed by Bank of the Ozarks, Little Rock, Ark., according to Federal Deposit Insurance Corp. press statements. The failures bring the 2010 total to 41 banks. The banks’ failures will cost the Deposit Insurance Fund about $320.3 million. As of Dec. 31, the four institutions had combined assets of about $1.2 billion ... * Yields on 10-year Treasury notes climbed to 3.92% last week from 3.53% in February. The 18 primary dealers of the bonds predict the rate will hit 4.2% this year--the highest since October 2008, according to a Bloomberg News survey (March 29). The high yields are the “canary in the mine,” former Federal Reserve Board Chairman Alan Greenspan told Bloomberg last week in a separate interview. The increases mirror concern over the federal deficit--which hit $1.4 trillion in 2009--and likely will drive Treasury sales to $2.43 trillion this year, according to a February survey of 10 bond dealers ...

Market News (03/29/2010)

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MADISON, Wis. (3/30/10)
* Consumer spending increased modestly in February for the fifth consecutive month, according to the Commerce Department Bloomberg News (March 29). The increase--0.3%--was the median that 70 economists forecasted in a Bloomberg survey. February’s increase followed a 0.4% uptick in January. However, personal incomes were flat at an upwardly revised 0.3% growth rate in February compared with January (The Associated Press via The New York Times and Moody’s Economy.com March 29). The report also noted that inflation rose 1.8% in February, compared with a 2.1% increase for the year ended in January. The increase in spending indicates that the economy’s recovering is proceeding at a “decent” pace, the newspaper said ... * Consumers are not cutting their spending as they did during the recession, according to Moody’s Economy.com (March 29). Consumer spending behaviors suggest that the recession has ended and the threat of job loss has subsided. The savings rate dropped to 3.1%, the lowest reading since October 2008. Real spending rose 0.3%. Core income is stable, rising at about 0.1% since May. Prices are about 1.8% higher than their year-ago level. While consumers are not spending aggressively, they are spending extra income, economists said. However, lack of income continues to affect spending, and the near-term economic outlook is troublesome with unemployment at 10% and wage income rising only modestly, Moody’s said ... * More than three in four option adjustable-rate mortgages (ARMs) are underwater, according to Fitch Ratings, and one third have a combined loan-to-value ratio of more than 150% (The Wall Street Journal March 29). Another 500,000 interest-only loans will reset in the next two years. Many have fixed rates and require interest payments only for a five- to seven-year period, the newspaper said. However, the number of loans set to adjust to bigger payments this year has dropped, partly due to loan modification programs that have helped borrowers avoid rising mortgage payments. Housing analysts have worried about aftershocks in the housing market due to defaults from ARMs. Such mortgages require low minimum payments and then reset to higher levels. Interest-only loans do not require principal payments for the first several years. On Friday, the Obama administration announced a plan that would force banks to write down loan balances when modifying mortgages ...

News of the Competition (03/26/2010)

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MADISON, Wis. (3/29/10)
* The Securities and Exchange Commission (SEC) Thursday announced its plans to review the use of swaps and other derivatives marketed to individual investors through exchange-traded funds, mutual funds and other investment products. Driving the review seems to be an increasing number of funds that sought to use derivatives to engender outsize returns rather than to just monitor the performance of a market index, said The New York Times (March 25.) “Although the use of derivatives by funds is not a new phenomenon, we want to be sure our regulatory protections keep up with the increasing complexity of these instruments and how they are used by fund mangers,” said Andrew J. Donahue, director of SEC’s division of investment management … * More than a dozen U.S. banks and investment firms are under investigation by the Justice Department’s Antitrust Division into alleged price fixing and bid rigging in the municipal derivatives markets, according to court documents filed in U.S. District Court in Manhattan (The Wall Street Journal March 26). The banks and investment firms include units of JPMorgan Chase & Co., UBS AG, Citigroup Inc., Wells Fargo & Co., Bank of America Corp., General Electric Co., Lehman Brothers Inc. and Societe Generale. None of the banks or firms have been accused of criminal wrongdoing … * The Treasury Department plans to sell it 27% stake in CitiGroup Inc. The department will use a preset trading plan to lock in a schedule for selling the shares, said sources familiar with the matter (Bloomberg News via American Banker March 26). The plan could be announced in April and is similar to those used by executives to protect themselves against accusations of insider trading, the sources said. When the plan is implemented, the Treasury would be able to issue instructions regarding how many shares to sell, when to sell them and at what price, while avoiding concerns that the sales are predicated on nonpublic information, Bloomberg said …

Market News (03/26/2010)

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MADISON, Wis. (3/29/10)
* The U.S. economy grew at a 5.6% annualized rate during the fourth quarter 2009, and corporate profits also rose--engendering hope that businesses might begin hiring again and that the subsequent employment gains could widen the economic expansion and recovery, analysts said. Real gross domestic product (GDP) expanded at a 5.6% annual rate in the quarter, the Commerce Department said Friday. GDP growth was previously estimated at 5.9%. Corporate profits increased $109 billion in the quarter because of cost-cutting and stronger demand, analysts said. “Profits are a leading indicator of the economy and suggest continued growth and likely job gains in the second quarter of this year,” said John Silvia, chief economist at Wells Fargo Securities LLC (Bloomberg.com, The New York Times and Moody’s Economy.com March 26) … * The number of U.S. households facing foreclosure grew by 250,000 in the fourth quarter to at least 1.6 million, according to a report issued Thursday by the Office of the Comptroller of the Currency and the Office of Thrift Supervision. Although more homeowners are in worse trouble, fewer households are entering delinquency, the report said. In the quarter, the number of people who were just one payment behind dropped by 16,000, the report said. One cause of the surging number of delinquent borrowers is that foreclosure is evolving into a longer process, with many delinquent borrowers in trial modifications--which keeps the final stages of foreclosure in abeyance, said The New York Times (March 26) … * U.S. consumers remain depressed about current and future economic conditions, according to the University of Michigan Consumer Sentiment Index, which remained unchanged in March. The index registered 73.6 for the month--the same as February and less than a point below its January cyclical high. March--when compared with February--saw a small rise in assessments of current conditions offset by a small decrease in expectations. Inflation expectations also remained unchanged from February. The end of job losses, a dip in unemployment, gradually increasing wealth and housing market improvements have continued to raise hopes for a sustained increase in consumer confidence, analysts said. However, overall consumer fundamentals--including nearly 10% unemployment, higher gasoline prices, and difficulty obtaining credit--are still quite weak, analysts added (Moody’s Economy.com March 26) …

News of the Competition (03/25/2010)

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MADISON, Wis. (3/26/10)
* In the aftermath of violating federal mortgage disclosure rules, CitiFinancial Wednesday announced it had reached a $1.25 million settlement with 35 state regulators, reported American Banker (March 25). The violation was engendered by a computer programming error, said the mortgage company and regulators. The settlement constitutes the most-coordinated enforcement action undertaken by state regulators since they formed a committee in 2008 to monitor mortgage companies that operate across state lines, the publication said. The settlement indicates a move toward collaborations on investigations and enforcement, according to industry observers and regulators … * Bank of America Corp. (BofA) said Wednesday it would cut mortgage loan balances by as much as 30% for thousands of troubled borrowers--in response to pressure from Massachusetts prosecutors. BofA’s move could foreshadow a broader government initiative to compel banks to offer debt reduction initiatives to help mitigate the mortgage crisis, said The Wall Street Journal (March 25). The plan is one of the boldest moves to date in dealing with the predicament of millions of U.S. homeowners who are “under water”--owing more than their homes are currently worth, the Journal said. Most modifications involve reducing interest rates. Some also extend mortgage terms to 40 years to downsize monthly payments, the paper said …

Market News (03/25/2010)

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MADISON, WIS. (3/26/10)
* The U.S. real estate market implosion and the recession that followed have hurt Social Security, analysts said. In 2010, the system will pay out more in benefits than it takes in with payroll taxes--a key threshold it was not predicted to cross until at least 2016, said the Congressional Budget Office. While the congressional projections should hold up, the change will have no effect on 2010 benefits, and retirees would still receive their checks as usual, said Stephen C. Goss, chief security of the Social Security Administration. The crux of the problem is that during the economic downturn, payments have risen more than expected because jobs were cut and people began applying for benefits sooner than anticipated, he added. Also, the program’s revenue steeply declined because there are fewer paychecks to tax, Goss said (The New York Times March 26) … * U.S. initial claims for unemployment benefits dropped to the lowest level in six weeks because the economic recovery encouraged companies to make fewer payroll cuts, analysts said. Claims decreased 14,000, to 442,000 for the week ended March 20--double the decline anticipated, the Labor Department said Thursday. Economists expected claims to fall by 7,000, according to a Dow Jones NewsWires survey. Meanwhile, continuing claims declined by 54,000 to roughly 4.65 million for the week ended March 13. Taken as whole, the latest unemployment insurance claims report is positive and indicates a still-troubled labor market is making slow progress, analysts said. “The data are going mildly in the right direction, consistent with a very slow improvement in the labor market,” said Anna Piretti, a senior economist at BNP Paribas. “[At the same time], it’s not easing as much as we could have hoped” (Bloomberg.com, The Wall Street Journal and Moody’s Economy.com March 25) … * Personal income in the U.S. increased 0.9% in fourth quarter 2009 and was down an average of 1.7% for the whole year, according to the Bureau of Economic Analysis. Last year’s fourth-quarter rise in income followed a decline in the third quarter, and was the biggest increase in nominal income since the second quarter of 2008, the bureau said. The overall 2009 decline constituted the first annual decrease since 1949--when incomes dropped 1.4%, the bureau added. The fourth-quarter personal income increase is another sign that conditions in the labor market are slowly beginning to recover, the bureau said (Moody’s Economy.com March 25) …

News of the Competition (03/24/2010)

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MADISON, Wis. (3/25/10)
* Home loan refinancings constitute a larger percentage of Federal Housing Administration (FHA) early defaults, while there is an improvement in the performance of FHA purchase mortgages, said Potomac Partners, a consulting firm. “Refinancings are 44% of FHA originations and 70% of its early defaults and claims,” said Brian Chappelle, a partner in Potomac Partners. Refinancings historically have performed significantly better than purchase mortgages, analysts said. That changed in the fourth quarter 2008, when the default rate and claims--two years after origination--on refinancings reached 4.38%, they said. By the end of 2009, the rate reached 5.9%, compared with 5.05% for all FHA single-family loans. However, purchase mortgages are performing well. FHA experienced a 24-basis-point decrease in the overall default and claim rate, to 4.81%, in February. Both are positive developments, analysts said (National Mortgage News via American Banker March 24) … * The California attorney general’s office has shuttered two companies taking part in “fraudulent foreclosure-assistance” scams that provided consumers “false hope after paying up-front fees for nonexistent loan modification services,” the office said. Attorney General Edmund Brown secured $1 million in court-ordered restitutions against H.E. Servicing Inc. and U.S. Foreclosure Relief Corp. and their officers--Cesar Lopez and George Escalante--last weekend. An investigation found that “the defendants used aggressive telemarketing tactics to convince distressed homeowners to pay $1,800 to $2,800 in up-front fees for loan modification services that included reductions in principal and lower interest rates,” said Brown’s office. The state had jointly sued the firms with the Federal Trade Commission (National Mortgage News via American Banker March 24) … * JPMorgan Chase & Co. became the third U.S. mortgage servicer--joining Bank of America Corp. and Wells Fargo & Co.--to sign up for the Second-Lien Modification Program--known as 2MP. With 2MP, homeowners may have the interest rate on their second-lien loan reduced to 1% for five years. Borrowers must have completed a trial modification of their first mortgage to qualify for the program, analysts said (National Mortgage News via American Banker March 24) …

Market News (03/24/2010)

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MADISON, Wis. (3/25/10)
* Mortgage loan application volume decreased 4.2% for the week ended March 19, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association. On an unadjusted basis, the index decreased 3.9% compared with the previous week. The Refinance Index decreased 7.1% from the previous week and the seasonally adjusted Purchase Index increased 2.7%. The unadjusted Purchase Index rose 2.8% and was 15% lower than the same week one year ago. The four-week moving average for the seasonally adjusted Market Index is up 1.9%. The four-week moving average rose 3.6% for the seasonally adjusted Purchase Index, while this average is up 1.2% for the Refinance Index. For the MBA report, use the link … * Orders for long lasting (durable) goods increased 0.5% in February for the third consecutive month, generated partly by inventory restocking and greater foreign demand, the Commerce Department said Wednesday. Also, inventories and backlogs rose by the most in more than a year, a sign that the manufacturing rebound will keep sparking the U.S. economic recovery, analysts said. “Businesses are ready to invest, not just [in] inventories, but in equipment as well,” said Lindsey Piegza, an economist at FTN Financial. “These will be some of the key drivers of growth going forward” (The New York Times and Bloomberg.com March 24) …

New home sales drop means long slog CUNA to IBloombergI

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MADISON, Wis. (3/25/10)--With sales of new U.S. homes unexpectedly falling in February to the lowest level on record, it will be a long, arduous process for the sector to recover, Bill Hampel, chief economist at the Credit Union National Association, told Bloomberg Wednesday. “It’s going to be a long, slow slog, and the lagging sector will be new home sales because they have to compete with existing sales and foreclosures,” Hampel told Bloomberg. “New home sales probably have until the fourth quarter until they start recovering.” February purchases declined 2.2% to an annual pace of 308,000, the Commerce Department said Wednesday. Also, the median sales price rose by the most it had in two years, the department added. The month’s record-low likely was due to blizzards, foreclosures and unemployment, which depressed the housing market, Bloomberg said. Home sales were forecast to increase to a 315,000 annualized pace, according to the median estimate of 78 economists polled in a Bloomberg survey. The market for new homes is competing with foreclosure-induced price decreases for existing homes in an economy in which unemployment is projected to average 9.6% in 2010--almost a 26-year high, said the article. To read the article, use the link.

News of the Competition (03/23/2010)

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MADISON, Wis. (3/24/10)
* The number of U.S. banks missing the deadline for making payments under the Troubled Asset Relief Program (TARP) continued to increase in February, reported American Banker (March 23). Seventy-four institutions that collectively accepted nearly $3.4 billion in capital, failed to make their quarterly payment due Feb. 16--up from 55 institutions in November and 33 in August, according to data collected by SNL Financial LC. The Treasury Department’s right to elect two directors to a company’s board is triggered when a TARP participant fails to pay dividends for six consecutive periods. To-date, more than 74 companies have missed three or more consecutive payments, the publication said … * The Federal Reserve will probably maintain an “accommodative” interest-rate posture for a minimum of six months to support economic-growth momentum, said Charles Evans, president of the Federal Reserve Bank of Chicago. “I would expect it would hold for the next three or four meetings, that’s about six months,” said Evans, whose views contrast with some officials who want to abandon the Fed’s pledge to keep borrowing costs low for an extended period. “I won’t be surprised if it carried into 2011,” he said. Companies still are cautious about investment spending and hiring, and the recovery of the job market likely will take more time than it did after the 1990s’ recession, Evans said. However, the private sector will contribute more to second-half 2010 growth, he added (Bloomberg.com March 23) …

Market News (03/23/2010)

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MADISON, Wis. (3/24/10)
* Sales of U.S. existing homes dropped in February for a third consecutive month--a sign that a dearth of jobs is slowing government efforts to reinvigorate demand, analysts said (Bloomberg.com March 23). February sales declined 0.6% from January to an annualized rate of 5.02 million, but are 7% more than the 4.69 million-unit pace in February 2009, according to the National Association of Realtors (NAR). Modest gains in the Northeast and Midwest were offset by softer sales in the South and West, said NAR. Existing-home sales are finalized transactions that include single-family, townhomes, condominiums and co-ops. Lawrence Yun, NAR chief economist, said widespread winter storms in February may mask an underlying demand. “Some closings were simply postponed by winter storms, but buyers couldn’t get out to look at homes in some areas and that should negatively impact near-term contract activity,” he said. “Although sales have been higher than year-ago levels for eight straight months, and home prices are much more stable compared to the past few years, the housing recovery is fragile at the moment.” For the NAR report, use the link … * U.S. house prices dropped by 0.6%, seasonally adjusted from December to January, according to the Federal Housing Finance Agency’s (FHFA) monthly House Price Index. The previously reported 1.6 % decline in December was revised downward to a 2% decline. For the 12 months ending in January, U.S. prices fell 3.3%. The U.S. index is 13.2% below its April 2007 peak. The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine Census Divisions, seasonally adjusted monthly price changes from December to January ranged from –1.8% in the East North Central Division to 2% in the Mountain Division. For the FHFA news release, use the link … * The number of U.S. mass layoffs--involving at least 50 workers from a single establishment--dropped to 1,570 in February from 1,761 in January, according to the Bureau of Labor Statistics. The February layoffs involved 155,718 workers, compared with 182,261 in January. It is likely that inclement weather delayed hiring, causing the payroll drop-off in February, analysts said. However, that indicates the April jobs report should be better, they added. The February decrease in mass layoffs is most pronounced in manufacturing, which seems to indicate that the industry is leading the economy out of recession, analysts said (Moody’s Economy.com March 23) …

News of the Competition (03/22/2010)

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MADISON, Wis. (3/23/10)
* Seven failed banks closed Friday by regulators have entered purchase-and-assumption agreements with other banks, according to the Federal Deposit Insurance Corp. (FDIC). The failures bring the 2010 total to 37 banks, following 140 failures last year. Friday’s failed banks include: American National Bank, Parma, Ohio, assumed by The National Bank and Trust Company, Wilmington, Ohio; Advanta Bank Corp., Draper, Utah, assumed by the FDIC; Century Security Bank, Duluth. Ga., assumed by Bank of Upson, Thomaston, Ga.; Bank of Hiawassee (Ga.), assumed by Citizens South Bank, Gastonia, N.C.; Appalachian Community Bank, Ellijay, Ga., assumed by Community & Southern Bank, Carrollton, Ga.; First Lowndes Bank, Ft. Deposit, Ala., assumed by First Citizens Bank, Luverne, Ala.; and State Bank of Aurora (Minn.), assumed by Northern State Bank, Ashland, Wis. The seven closed institutions held roughly $3.3 billion in aggregate assets as of Dec. 31. The FDIC estimated that the banks’ failures will cost the Deposit Insurance Fund about $1.28 billion … * CitiGroup Inc.--in the aftermath of reversing a plan to scale back home lending--will increase purchases of mortgages underwritten by other companies, and retain more loans on its balance sheet, analysts said. The New York-based banking company said it has determined that mortgages are a “core” product, along with consumer-banking mainstays such as savings account and credit cards, said Sanjiv Das, head of U.S. mortgage business for Citigroup (Bloomberg News via American Banker March 22) …

Market News (03/22/2010)

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MADISON, Wis. (3/23/10)
* The Federal Reserve Bank of Chicago’s national activity index dropped to -0.64 in February from a downwardly revised -0.04 --previously 0.02--in January. The index’s three-month moving average decreased to -0.39--consonant with an economy in the nascent stages of recovery, Moody’s analysts said. The index’s weakness in February was due in part to erosion in the housing market and partly to inclement weather, they added. Severe snowstorms hurt industrial activity during the month, so production should significantly increase in March. A housing market recovery is much less certain, analysts said. February housing starts dropped to a new all-time low. As prospective homebuyers exhaust their tax incentives, housing demand has deteriorated in recent months, said Moody’s Economy.com (March 22) … * “Acute” debt challenges will confront advanced economies when they address high public debt, and diminishing existing stimulus measures will not be nearly enough to take deficit levels back to sensible levels, said John Lipsky, first deputy managing director of the International Monetary Fund. With the exception of Canada and Germany, all G7 countries will have debt-to-gross domestic product ratios close to or above 100% by 2014, Lipsky said. “The surge in government debt is occurring at a time when pressure from rising health and pension spending is building up,” he added. Stimulus measures constitute about one-tenth of the projected debt increase, so cutting them back will not be sufficient to take deficits and debt ratios back to prudent levels, analysts said (Bloomberg.com March 22) …

News of the Competition (03/19/2010)

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MADISON, Wis. (3/22/10)
* After lagging behind in February, financial company bonds are beating industrial debt by the most this year--which is encouraging investors to obtain new issues from Credit Suisse Group AG and JP Morgan Chase & Co., analysts said. Debt sold by banks, brokers and insurers returned 0.81% this month through last Thursday--compared with 0.4% for the rest of the market, according to index data provided by Bank of America. U.S. banks costs for borrowing are the lowest since February 2008--with yields that dropped within 1.93 percentage points of Treasuries on Thursday (Bloomberg.com March 19) … * Two days before Lehman Brothers Holdings Inc. Sept. 15, 2008 bankruptcy, the company had a $42 billion liquidity pool that would have allowed it to meet demands for cash and weather a run on the bank, according to a memo from Buckingham Research Group issued Sept. 13, 2008. Because Lehman executives were “causing” the company to file misleading financial reports while its risks were increasing, there could be grounds for suing Lehman executives, said examiner Anton Valukas (Bloomberg.com March 19) …

Market News (03/19/2010)

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MADISON, Wis. (3/22/10)
* Regulators should require large financial institutions to hold more capital to gain more control over them, said Alan Greenspan, former Federal Reserve chairman, in a 48-page paper that he presented Friday to the Brookings Institution. In addition to enforcing capital and collateral requirements, regulators should limit or ban specific types of bank lending, and compel financial companies to develop “living wills” that specify how they are to be liquidated in a systematic manner, Greenspan said. He also acknowledged shortfalls in regulation--an area that Ben Bernanke, Greenspan’s successor at the Fed--has emphasized. Greenspan also acknowledged that the Fed did not grasp the magnitude of the housing bubble. However, he argued--as he had previously--that the Fed’s policy of low interest rates was not the culprit. Greenspan stuck to his position that not much could be done to identify the bubble before it burst or to prevent it (The New York Times March 18) … * The supply of U.S. foreclosed homes that banks need to sell is increasing again--a sign that there is more downward pressure on home prices in some parts of the country, analysts said. Banks and mortgage investors held 645,000 foreclosed homes in January--up 4.6% from 617,286 a month earlier, according to Barclays Capital mortgage analysts. The supply of foreclosed homes reached its zenith at roughly 845,000 in November 2008, and then decreased through 2009. The outlook for foreclosed-home sales depends on whether the economy continues to improve and creates sufficient jobs to spark demand for housing, analysts said (The Wall Street Journal March 19) … * In January, lenders originated $26.9 billion in Federal Housing Administration (FHA) single-family loans--down more than 10% from the previous month. January’s refinancings totaled $11.5 billion and accounted for 40% of the month’s originations, according to an activity report issued by the agency. For the prior five months, FHA originations had ranged from $25 billion to $30 billion per month. Meanwhile, FHA’s rate of serious delinquencies continues to increase--FHA loans 90 days or more past due were at 9.4% in January--up from 9.12% in December (National Mortgage News March 19) …

Economic stats overall good news--CUNA to TheStreet.com

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NEW YORK and MADISON, Wis. (3/19/10)--Statistics on the economy, including the gain on the index of U.S. leading economic indicators, coupled with employment stimulus legislation and other market activity, overall are good news, a Credit Union National Association (CUNA) economist told TheStreet.com. "It seems like about a year ago we were starting to talk about green shoots and these are clearly green shoots," said Mike Schenk, CUNA senior economist, about the data announced Thursday. "The numbers that we saw today are overall good news. We think the employment situation will look a lot better when the next nonfarm payrolls number comes out for three reasons: First, because February's bad weather dampened job growth; second, because of Census hiring; and third, from old-fashioned job growth," Schenk told the publication. "Having said that, we don't think growth will be overly fast or overly strong. It'll be subdued growth," he added. He cited the high level of debt held by the average household and a renewed effort to rebuild wealth by increasing savings. For the full article, use the link.

News of the Competition (03/18/2010)

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MADISON, Wis. (3/19/10)
* Hundreds of small community banks have yet to repay their federal bailout funds to the Treasury Department, while the largest U.S banks have been among the quickest to repay their Troubled Asset Relief Program (TARP) bailout funds, analysts said. And, more than 10% of the 700 banks that received federal bailouts and still have the money, failed to pay a quarterly dividend to the government in February, according to Linus Wilson, a finance professor at the University of Louisiana at Lafayette. The list of 82 delinquent banks is substantially longer than the 55 banks that failed to make payments in November, Wilson said. “The ones that are still in TARP are not as healthy as the ones that left,” he said. The missed payments likely indicate that the government “probably extended TARP too far, and did not do a lot of due diligence,” he added. Wilson estimated that the missed payments totaled $78.1 million in February. Banks thus far missed a total of $205 million in dividend payments to the government, he added (The Washington Post March 18) … * Wells Fargo & Co. Wednesday became the second U.S. mortgage servicer to take part in a government plan--known as 2MP--to modify second lines of borrowers who already have received a modification of their first mortgage, reported American Banker (March 18). Bank of America signed up for the plan in January. “When a customer has reduced payments, it frees up the cash flow to benefit everybody,” said Kevin Moss, an executive vice president of Wells Fargo’s home equity group. “This program will simplify the process” …

Market News (03/18/2010)

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MADISON, Wis. (3/19/10)
* Registering the smallest gain in nearly a year, the index of U.S. leading economic indicators increased 0.1% in February--a sign that the economy may grow at a slower rate in the second half of the year, according to the New York-based Conference Board, a private research firm. The rise in the board’s measure of the outlook for the next three to six months aligned with expectations and followed a 0.3% increase in January, the board said. The coincident indicator--a key marker for determining cycle peaks and troughs-- increased 0.1% in February, indicating the economy remains entrenched, the board added. “We don’t expect this to be an especially strong recovery,” said Scott Brown, chief economist at Raymond James & Associates Inc. “[At the same time] growth is positive [and the index] is still consistent with a gradual economic recovery” (Bloomberg.com and Moody’s Economy.com March 18) … * The U.S. consumer price index (CPI) remained unchanged in February--not rising for the first time since a decrease in March 2009, the Labor Department said Thursday. The core CPI increased 0.1%--consonant with forecasts--and marked the smallest year-over year gain since 2004, analysts said. Core CPI inflation is low--a sign of a weak job market and consumer confidence. Moderate energy prices also are exerting downward pressure on inflation, offsetting higher car prices, analysts said. “Inflation is certainly no imminent threat to the U.S. economy,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “It ties in with the Fed’s statement. We see the Fed on hold through this year” (Moody’s Economy.com, Bloomberg.com, and The Wall Street Journal March 18) … * Initial U.S. claims for unemployment benefits dropped by 5,000 to 457,000 for the week ending March 13, roughly matching expectations, the Employment and Training Administration said Thursday. The four-week moving average declined to 471,250 from 475,500. Meanwhile, continuing claims for unemployment benefits rose 12,000 to nearly 4.58 million for the week ended March 6. The March employment report is expected to be the first in quite some time to show good growth--sparked by stabilization in private payrolls, some payback for inclement February weather and Census Bureau hiring, the administration said (Moody’s Economy.com March 18) …

News of the Competition (03/17/2010)

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MADISON, Wis. (3/18/10)
* Discover Financial Services reported a $104 million net loss for the quarter ended Feb. 28. For the same period a year ago, the company reported net income of $120 million--which included roughly $297 million in after-tax income derived from antitrust settlements with MasterCard Worldwide and Visa, analysts said. Discover’s U.S. card unit recorded a 5% increase in revenue to $22 billion. The payment services segment pre-tax profit rose 28% to $37 million. Transaction volume increased 2% to $36 billion (PaymentsSource March 17) … * MasterCard Worldwide Monday introduced ATM-finder applications for Blackberry smartphones. The application allows owners of Blackberry smartphones to locate the nearest ATMs from MasterCard’s database. The move comes nearly a year after MasterCard launched the same free downloadable, customizable application for the Apple iPhone, analysts said. Blackberry owners can customize their searches based on different criteria--such as where to find their own financial institutions’ ATMs, wheel-chair accessible machines, other surcharge-free foreign ATMs, and drive-through ATM access, analysts said (PaymentsSource March 15) … * Kenneth I. Chenault, CEO of American Express Co. (AmEx), was paid $17.4 million in total compensation last year, while the company dealt with the quality of its card loans, shaky credit markets and its repayment of federal aid, according to a filing with the Securities and Exchange Commission (SEC). Chenault’s compensation included a $1.2 million base salary, a $5.1 million cash bonus, and $5.33 million in cash payments coming from the company’s non-equity incentive compensation, AmEx said in the proxy filing Tuesday with the SEC. Chenault made $28.8 million in 2008 and $33.9 million in 2007, according to the filing (Dow Jones Newswires via American Banker March 17) …

Market News (03/17/2010)

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MADISON, Wis. (3/18/10)
* Mortgage loan application volume for the week ended March 12 decreased 1.9% on a seasonally adjusted basis from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index dropped 1.7% compared with the previous week. The Refinance Index fell 1.7% from the previous week and the seasonally adjusted Purchase Index decreased 2.3% from one week earlier. The unadjusted Purchase Index declined 1.8% compared with the previous week and was 13.9% lower than the same week one year ago. The four-week moving average for the seasonally adjusted Market Index rose 0.8%. The four-week moving average is up 1.1% for the seasonally adjusted Purchase Index, while the average increased 0.8% for the Refinance Index. For the MBA report, use the link … * U.S. wholesale prices declined 0.6% in February--recording their largest drop in seven months--spearheaded by a steep drop in gasoline costs, the Labor Department said Wednesday. February producer prices indicate there are scant inflationary pressures building in the early stages of the economic recovery, analysts said. Most of the February decrease can be attributed to a 2.9% decline in energy-goods prices--and roughly 90% of the decline can be linked to the gasoline index, which fell 7.4%, analysts said. On a year- ago basis, wholesale prices still are 4.4% higher. Core prices for finished goods --excluding food and energy--were 0.1% higher, compared with a 0.3% increase in January. Core prices for intermediate goods went up 0.9% in February. Companies likely will continue to keep prices down because the economic recovery has not yet reduced enough excess capacity or created jobs, analysts said. “Disinflation is going to be with us for awhile,” said Julia Coronado, a senior U.S. economist at BNP Paribas. “That’s going to allow the Fed to stay on hold for a lot longer than the market is expecting” (Moody’s Economy.com, Bloomberg.com and The Wall Street Journal March 17) … * General Motors Co. (GM) said this week it will not attempt to regain control over GMAC Financial Services--GM’s former finance unit. GM had considered reacquiring the unit to improve sales and make itself more palatable to potential investors, said sources familiar with the matter. However, taking control of GMAC could create complications because GM sold a majority stake in GMAC in 2006 to improve the automaker’s credit standing and its access to capital. However, GM still is--in large part-- cut off from those markets, analysts said (The Wall Street Journal March 17). In a related matter, GM may be profitable in 2010--following five years of annual losses, said Chris Liddell, GM chief financial officer. The last time GM posted an annual profit was 2004 (Bloomberg.com March 17) … * Culminating a three-year investigation into United Kingdom (U.K.) bank charges on overdrawn customers, the U.K. Office of Fair Trading (OFT) said it will leave it up to banks to rectify their practices. Within two years, the OFT said, it would like to see more checking-account customers provided the opportunity to opt out of unarranged overdraft facilities. OFT also wants to see improved treatment of customers who experience financial difficulties due to often-steep overdraft charges. However, it is not putting forward any new legislation, the agency said (Dow Jones Newswires via American Banker March 17) …

News of the Competition (03/16/2010)

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MADISON, Wis. (3/17/10)
* The first case of fraud involving Troubled Asset Relief Program (TARP) was announced Monday by two bank regulators, a Manhattan federal prosecutor and other agencies. They allege that former Park Avenue Bank CEO Charles Antonucci lied--among other allegations--in the New York-based bank’s applications for TARP funds (American Banker March 16). The charges carry maximum penalties of 260 years in prison and $7.6 million in fines if Antonucci is convicted. The government’s complaint against Antonucci alleges he invested $6.5 million of his own money into Park Avenue Bank to convince bank regulators that its capital standing had improved and to help the bank obtain $11.2 million in TARP funding. “Our actions today will not be the last against a TARP applicant,” said Neil Barofsky, the special inspector general for the $700 billion bailout program, he told fraudsters: “You will be tracked down, you will be caught and you will be brought to justice.” Park Avenue Bank--which specialized in commercial real estate loans--failed on Friday after amassing more than $27 million in net losses last year, said the Federal Deposit Insurance Corp. (The Wall Street Journal March 16) … * Large banks JPMorgan Chase & Co. and Goldman Sachs Group Inc. are demanding unequal arrangements with hedge fund firms to secure cheap funding for over-the-counter derivatives. This forces the hedge fund firms to put up more cash collateral to mitigate risks on trades, while the banks put up less on their own wagers, analysts said. The imbalance provided Goldman Sachs with $110 billion at the end of December, according to a filing with the Securities and Exchange Commission (SEC). Goldman Sachs and JPMorgan are two of the largest traders of over-the-counter derivatives, they added. “If you're seen as a major player and you have a product that people can’t get elsewhere, you have the negotiating power,” said Richard Lindsey, a former director of market regulation at the SEC who ran the prime brokerage unit at Bear Stearns Cos. from 1999 to 2006. “Goldman and a handful of other banks are the places where people can get over-the-counter products today” (Bloomberg.com via American Banker March 16) …

Fed stays steady on low-rate policy

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WASHINGTON (3/17/10)--With the Federal Reserve policymakers staying steady Wednesday on keeping the federal funds interest rate at a record low "for an extended period," credit unions can expect the steep yield curve to go even steeper for the summer months, according to Credit Union National Association Senior Economist Steve Rick. "For those credit unions with strong loan demand, the steep yield curve should increase net interest margins in 2010 as low-rate, short-term deposits are used to fund longer-term higher-rate loans, " he told News Now. "The higher net interest margins should help credit unions cover loan chargeoffs and National Credit Union Administration assessments and therefore earn their way out of the current financial crisis." The Federal Open Market Committee's (FOMC) press release Wednesday "did not provide much in the way of describing the Federal Reserve's exit strategy from its current extraordinary loose monetary policy," said Rick. "The FOMC repeated its earlier language that economic conditions 'are likely to warrant exceptionally low levels of the federal funds rate for an extended period of time.'" He noted the federal funds future market "is currently pricing in a 25 basis-point increase in the fed funds interest rate target in the fourth quarter of this year, with the target reaching 0.75% by March 2011. The fed funds rate is important because it's used as a benchmark for many business and consumer loans," he told News Now. "The financial markets were hoping for some guidance on when and how the Federal Reserve plans to drain the $1.162 trillion dollars of excess reserves currently sitting on banks' balances sheets. This is up from $0.002 trillion ($2 billion) in the summer of 2008. "Bond traders are concerned that strengthening economic activity will entice banks to loan out the excess reserves, thereby creating the proverbial 'too many dollars chasing too few goods,' which is one way to describe inflation," Rick said. "If these concerns become more prevalent, inflation expectations and therefore longer term interest rates will rise. "So with the Fed maintaining the target range for the federal funds interest rate at 0 to 1/4 percent, and longer-term interest rates possibly heading up, the yield curve could steepen further through the summer months." In its press release, noted that "economic activity has continued to strengthen and that the labor market is stabilizing." It pointed out that household spending was stronger, although "constrained by high unemployment, modest income growth, lower housing wealth and tight credit," and noted an increase in business spending. However, housing remained weak. "While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the committee anticipates a gradual return to higher levels of resource utilization in a context of price stability," said the committee's statement. The committee "continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The Fed said its purchases of $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt are "nearing completion and the remaining transactions will be executed by the end of this month." It also noted that its Term Asset-Backed Securities Loan Facility--the only special liquidity facility left of the facilities created to support the market during the banking crisis--is scheduled to close June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time, the committee said. The only dissenter was Thomas M. Hoenig, who for the second consecutive meeting maintained that the exceptionally low levels of the fed funds rate for an extended period was no longer warranted. He said it could lead to a buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability. The committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability, it said.

Market News (03/16/2010)

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MADISON, Wis. (3/17/10)
* U.S. housing starts declined in February because record snowfall in some areas of the country impeded construction, analysts said. Fewer building permits indicate that demand for homes is stagnating, they added. Starts fell to a seasonally adjusted rate of 575,000 in February--a 5.9% drop from January--consistent with expectations, the Commerce Department said Tuesday. Homes under construction still are up slightly from one year ago, analysts said. Declines were noted in the Northeast and South. While construction of single-family homes decreased 0.6% from the prior month, multifamily starts--housing with two or more units--fell 30.3% to 76,000. Also, new construction on homes with five or more units nosedived 43.1% to 58,000--its biggest decline since January 1994, analysts said. Mounting foreclosures are making it more difficult to clear inventories, exerting downward pressure on prices and putting a damper on new construction, analysts said. Sustained job growth is essential to rejuvenate housing demand, they added. “[The report] definitely reflects the severe weather effect,” said Ellen Zentner, senior U.S. macroeconomist at Bank of Tokyo-Mitsubishi UJF Ltd. in New York. “Housing has now got enough support that it has stabilized. With or without support, the housing recovery will be slow going” (Moody’s Economy.com, The Wall Street Journal and Bloomberg.com March 16) … * The U.S. jobless rate won’t go much below its current 9.7% because employers won’t hire enough workers in 2010, three Obama administration economic officials said Tuesday. The percentage of Americans who won’t be able to find work is likely to “remain elevated for an extended period,” said White House Budget Director Peter Orszag, Treasury Secretary Timothy Geithner and Christina Romer, chairman of the Council of Economic Advisers. The three said they do not anticipate more decreases in unemployment in 2010 and that unemployment may even increase “slightly” during the next few months because discouraged workers likely will start looking for jobs again (Bloomberg.com March 16) … * In a sign there is scant inflationary pressure from abroad, prices of goods imported into the U.S. dropped more than anticipated in February, analysts said. Import prices decreased 0.3% between January and February--the first decline since July, the Labor Department said Tuesday. Energy is a factor with oil prices dropping 2.2% in February following January’s 4.4% increase. Import prices--excluding fuels--rose 0.2% in February--half the prices seen in previous months, analysts said. “Core inflation seems to be in full retreat and that will be the case through most of 2010,” said Douglas Porter, deputy chief economist at BMO Capital Markets. “Even if the recovery does build momentum, inflation will remain at full ebb” (Moody’s Economy.com and Bloomberg.com March 16) … * U.S chain store sales dropped 0.4% for the week ending March 13--reversing little of the big 3.9% gain the prior week, according to the International Council of Shopping Centers (ICSC) sales index. The year-ago change also declined slightly to 3.2%--which still remains one of the strongest growth rates since July 2007, ICSC said. The index remained strong despite being impacted by inclement weather in recent weeks, analysts said. Consumer fundamentals, although still weak, are gradually improving. The largest and most important detriment is job losses. Although job losses have likely ended--unemployment will remain elevated through the year, resulting in small wage income growth, analysts said (Moody’s Economy.com March 16) …

Fed policymakers debate next move today

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WASHINGTON (3/16/10)--Although an interest-rate increase isn't likely when the Federal Reserve's policymakers meet today, members of the Fed Open Market Committee (FOMC) likely will debate what language to use to indicate when it may raise rates in the future. The Fed has kept its target interest rate near zero since December 2008 (MarketPlace March 15). A year ago the Fed pledged to keep rates at "exceptionally low" levels for an "extended period." Economists say that "extended period" means at least six more months. Although low rates are still required to fuel the economy's recovery, the Fed will need to raise rates to keep inflation in check. But before the committee raises rates, it will have to signal that the credit will soon be tightened (Associated Press via Google.com March 15). Economists are expecting a change soon in language that would shorten that commitment, such as keeping the rates low "for some time." At FOMC's last meeting in January, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, favored changing the language to say rates would stay low "for some time," which would provide more flexibility to the Fed to raise rates. While some economists believe the "extended period" language will change today, others say such a wording change is more likely at the Fed's next scheduled meeting on April 27-28, after it has had more information on the nation's employment. News Now will post results of the meeting this afternoon and provide an analysis from Credit Union National Association's economists for Wednesday's issue.

News of the Competition (03/15/2010)

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MADISON, Wis. (3/16/10)
* Three failed banks were closed Friday by regulators and entered purchase-and assumption agreement with other banks, according to the Federal Deposit Insurance Corp. (FDIC). The failures bring the 2010 total to 30 bank failures, following 140 failures last year. Friday’s failed banks include: The Park Avenue Bank, New York--assumed by Valley National Bank, Wayne, N.J.; Old Southern Bank, Orlando, Fla.--assumed by Centennial Bank, Conway, Ark.; and Statewide Bank, Covington, La.--assumed by Home Bank, Lafayette, La. The four closed institutions held roughly $1.08 billion in aggregate assets as of Dec. 31. The FDIC estimated that the four banks’ failures will cost the Deposit Insurance Fund about $183 million … * American International Group (AIG) plans to retain $21 million in bonus payments to former employees, said a source familiar with the situation. That could lead to more legal battles regarding employment agreements--something AIG has been embroiled in for the past year. The bonus holdback occurs while AIG pays out $46 million to current and former employees of its financial products unit--the division responsible for the bad trades that triggered the huge government rescue of the company in 2008. The source said the goal of the holdback has two components. One is to help AIG cone up with $5 million more to meet pay czar Kenneth Feinberg’s demand that the company recoup $5 million of the bonuses paid in March following public outrage. The second is to reduce overall retention bonuses to some employees--a goal of former CEO Edward Liddy (The Wall Street Journal March 14) …

Market News (03/15/2010)

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MADISON, Wis. (3/16/10)
* A U.S. housing market recovery is positioned to contribute to annual economic growth for the first time since 2006, analysts said. The housing market should rebound later this year--withstanding the end of government and federal economic stimulus programs, they added. More available affordable homes, credit and jobs will help offset the termination of the Federal Reserve’s purchases of mortgage-backed securities this month and the end of a federal first-time homebuyer tax credit in April, analysts said. In 2010, sales will increase about 6%, and housing will constitute 0.25 of percentage point of the 3.6% growth, according to predictions by Dean Maki, chief U.S. economist for Barclays Capital. “I would bet even odds that we’re at a bottom and that we’re going to see improvement in the coming months,” said Karl Case, professor of economics at Wellesley College and co-creator of the Standard & Poor’s/Case Schiller home price index (Bloomberg.com March 15) … * Moody’s Investors Service issued a report Monday warning the U.S., United Kingdom and other major economies that they have moved “substantially” closer to losing their top AAA credit ratings because the cost of servicing their debt has risen. Ratings of AAA governments, which also included Germany, France, Spain and the Nordic countries, currently are “stable,” and “their ‘distance-to-downgrade’ has in all cases substantially diminished,” Moody’s wrote in the report, said The New York Times (March 15). “Growth alone will not resolve an increasingly complicated debt question,” Moody’s said. “Preserving debt affordability”--the ratio of interest payments to government revenues--“at levels consistent with AAA ratings will invariably require fiscal adjustments of a magnitude that, in some cases, will test social cohesion” (Bloomberg.com March 15) … * Global demand for long-term U.S. financial assets--or net long-term capital flows to the U.S.--declined in January to $19.1 billion from $63.3 billion in December. The drop was propelled by a huge sell-off of private corporate bonds, the Treasury said Monday. Private foreign investors decreased their net holdings of private corporate bonds by $24.8 billion--the biggest decline on record--because of strong aversion to risk, analysts said. Also, China and Japan---the two largest holders of Treasuries--reduced their positions, analysts added. Chinese officials have raised questions about the dollar’s role as a reserve currency and recently sought assurances about the safety of U.S. government debt--with the budget deficit widening to a projected record $1.6 trillion in 2010. “Foreign central banks stopped buying Treasuries in January,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “If this were to continue, if China were to stop recycling its dollars into U.S. Treasuries, it could have dire implications for Main Street America in that mortgage rates could move higher” (Moody’s Economy.com and Bloomberg.com March 15) … * U.S. total industrial production rose 0.1% in February--for the eighth consecutive month--but manufacturing output dropped 0.2%, dampening hopes for quick economic recovery, the Federal Reserve said Monday. A series of major snowstorms afflicted the country in February, slowing factory activity. Much of the slowdown is projected to be temporary, the Fed added. Excluding the snowstorms, the trend in manufacturing is still upbeat, with expansion being driven by a good mix of final demand growth and a positive--yet lessening--contribution from inventories, analysts said. With inventories at very thin levels, businesses will need to place more orders to meet even small growth in demand, analysts said. However, once businesses have replenished inventories, the recovery will gain traction only if consumer demand increases, economists said (Moody’s Economy.com, The New York Times and the Wall Street Journal March 15) …

Wave of defaults brings consumers debt down

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WASHINGTON (3/15/10)--A wave of defaults on mortgages and other obligations has produced the first annual drop in the U.S. consumers' debt since 1945, when the Federal Reserve first began monitoring the statistic, the Federal Reserve reported Thursday. Total U.S. household debt--including mortgages and credit card balances--dropped 1.7% to $13.5 trillion in 2009. That averages out to $43,874 for each U.S. resident (The Wall Street Journal March 12). Still, total household debt at the end of 2009 was 122.5% of annual disposable income, down from a record high of 130.6% in January 2008. A debt of 100% is considered "sustainable" by economists, said The Wall Street Journal. The debt decline reflects the impact that the economic recession's job losses and housing market woes have had. However, the defaults are leaving many people with more cash to save and spend, which in turn is speeding up the adjustments needed for the economy to grow. However, their spending is still well below the long-term average growth of 2.6%. Total debt for financial firms, which tightened credit and cut back on risks, also fell in 2009--to $15.7 trillion or a decline of 8.4%. Banks and investors wrote off an estimated $200 billion in mortgage debt for 2009, said the article. While U.S. households aren't spending much, they managed to save 4.1% of their disposable income during fourth quarter of 2009--about 1.2% more than they saved during the same period in 2008. At year-end 2009, the average U.S. resident's net worth totaled $175,600, according to the Commerce Department and the Federal Reserve. Adjusted for inflation, that amounts to a 5.7% increase from year-end 2008. The highest net worth was registered in the second quarter of 2007--at $218,650. The net worth figures include the market value of property and investments minus debts such as mortgage, credit card and other debt.

News of the Competition (03/12/2010)

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MADISON, Wis. (3/15/10)
* LibertyPointe Bank, New York, was closed Thursday by regulators and entered into a purchase-and-assumption agreement with Valley National Bank, Wayne, N.J., according to the Federal Deposit Insurance Corp. (FDIC). The closure brings the 2010 total of bank failure to 27, following 140 failures last year. LibertyPointe held roughly $209.7 million in total assets as of Dec. 31. The FDIC estimated that the failure will cost the Deposit Insurance Fund about $28.4 million … * Lehman Brothers Holdings Inc. used “materially misleading” accounting gimmicks to hide the dire state of its finances, according to a 2,200-page bankruptcy examiner’s report released Thursday. Lehman deployed off-balance-sheet transactions to play down its leverage in 2007 and 2008, duping shareholders about its ability to weather losses, the report said. Richard Fuld, Lehman CEO at the time, was “at least grossly negligent” for allowing Lehman to file financial reports in which a paramount measure of strength was “reverse-engineered” through transactions known as Repo 105s, said bankruptcy examiner Anton Valukas in the report. Ernst & Young LP, which audited Lehman, could be accused of “professional malpractice,” he added. “The balance sheet manipulation was intentional, for deceptive appearances, has a material impact on Lehman’s net leverage” and caused financial reports to be misleading, Valukas wrote. Higher leverage undercuts a company’s ability to tolerate financial shock, analysts said (Bloomberg.com and The New York Times March 12) … * The Federal Reserve Bank of New York has entered into a loss-sharing deal with American International Group (AIG) for as much as $450 million in losses connected to AIG’s Japan real estate deals. Their agreement is a component of the sale of a division to MetLife Inc. The settlement allows MetLife to split most declines in value on $1 billion in commercial mortgages included in the $15.5 billion purchase of the AIG unit, American Life Insurance Co., according to company officials in a regulatory filing. A corporate vehicle owned by the New York Fed and AIG will use MetLife stock from the sale to pay for future real estate losses. The future losses will diminish the assets remaining to repay taxpayers. The New York Fed agreed to the deal because it expects to be repaid for its $9 billion investment in the insurance company vehicle, said sources with knowledge about the situation (Bloomberg.com via American Banker March 12) …

Market News (03/12/2010)

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MADISON, Wis. (3/15/10)
* Despite severe winter weather, U.S. retail sales showed surprising resilience, rising 0.3% in February--the fourth gain in the past five months, according to Commerce Department data released Friday. Wall Street analysts had forecast a 0.2% decline for the month. Core sales excluding autos and gas stations increased 0.9%. Segments normally impacted by winter weather, including building supply stores and restaurants, posted robust gains, although electronics and grocery stores were the growth leaders, analysts said. Drug stores and vehicles were the only major segments to experience sales declines. “The storms were apparently not quite as disruptive as anticipated,” said Adam York, an economist at Wells Fargo Securities LLC. “As we start adding jobs in the spring, employees will gain income and hours, and retail sales should follow” (Bloomberg.com, Moody’s Economy.com and The New York Times March 12) … * U.S. consumer confidence unexpectedly dropped for a second consecutive month in March, indicating that people are discouraged about the labor market, analysts said. The Reuters/University of Michigan Consumer Sentiment Index dropped to 72.5 from a final reading of 73.6 in February. Economists had forecast the index would increase to 74, according to a survey by Bloomberg News. Confidence gains that could encourage consumers to increase their pace of spending depend on payroll growth in the aftermath of 8.4 million job losses during the past two years, analysts said. Retail sales unexpectedly rose last month, the Commerce Department said in a separate report Friday. “Spending will be holding up relatively well for the remainder of this year but it is not going to come roaring back until we get the jobs necessary to lower the unemployment rate,” said Ryan Sweet, an economist at Moody’s Economy.com (Bloomberg.com and Moody’s Economy.com March 12) … * Total money market mutual fund assets in the U.S. declined by $36.2 billion to $3.09 trillion last week, the Investment Company Institute said Thursday. Also, assets of the U.S.’ retail money market mutual funds for the latest week dropped by $9.87 billion to $1.034 trillion. For the week ended Wednesday, assets of taxable money market funds in the retail category fell by $8.07 billion to $808.65 billion, said the Washington-based mutual fund trade group. Retail tax-exempt fund assets decreased by $1.8 billion to $225.11 billion. For the same period, assets of institutional money market funds dropped by $26.35 billion to $2.057 trillion (The New York Times March 12) …

Total dollars in at-risk auto loans down 10

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SCHAUMBURG, Ill. (3/15/10)--The total dollar value of at-risk automotive loans for fourth quarter 2009 dropped 10% from the same period a year earlier, according to a quarterly analysis of U.S. vehicles released last week by Experian Automotive.The total dollar value was $26.58 billion, a decrease from $29.58 billion in fourth quarter 2008. The growth rates for 30-day and 60-day delinquencies, while still rising, saw minimal increases in fourth quarter 2009, with 30-day delinquencies rising 1% to 3.34% delinquencies, and 60-day rate rising 3.5% to 0.96% delinquencies, said Experian Automotive. Experian analysts attributed the drop to fewer loans during the past two years and more conservative lending practices during the credit crisis. "While delinquencies are still higher than the industry would like, we have not seen an alarming run-up in delinquencies like we did a year ago," said Scott Waldron, president of Experian Automotive. "These are positive signs that the automotive lending industry is getting back on solid footing. Credit loosened slightly, with subprime financing for used vehicles at 36.42% in fourth quarter 2009, compared with 33.99% in third quarter. Other findings:
* The average credit score for a new-vehicle customer remained steady at 775 for the second consecutive quarter; * The average credit score for used-vehicle cusotmers fell to 680 from 684 n third quarter 2009; * The average loan for a new vehicle was $25,580 in fourth quarter, compared with $22,712 in third quarter; and * The average loan amount for a used-vehicle rose to $16,276 in fourth quarter from $15,720 in third quarter.
For more detail about the report and about credit unions' auto loans, use the resource links.

Market News (03/11/2010)

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MADISON, Wis. (3/12/10)
* U.S. initial claims for unemployment benefits declined for a second consecutive week, a sign that companies are approaching the end of job reductions because the economy is recovering, analysts said. First-time claims decreased by 6,000 to 462,000 for the week ended March 6, the Labor Department said Thursday. Analysts had anticipated a drop to 460,000 from 469,000 the previous week, according to a Reuters poll. The four-week moving average of new claims, which adjusts for week-to-week volatility, increased 5,000 to 475,500--the highest level since late November, analysts said. Meanwhile, continuing claims rose by 37,000 to roughly 4.56 million for the week ending Feb. 27. “The net rise in the last two months was because of temporary factors, notably weather effects,” said James O’Sullivan, global chief economist at MF Global Ltd. “Claims will likely have to resume a downward trend if payrolls are to improve, which we think will happen” (Bloomberg.com, The New York Times and Moody’s Economy.com March 11) … * Because demand for foreign oil and automobiles declined, the U.S. trade deficit unexpectedly narrowed in January, analysts said. The gap decreased 6.6% to $37.3 billion in January from a revised $39.9 billion deficit in December, the Commerce Department said Thursday. Moody’s Economy.com had anticipated a widening to $42.2 billion. Key developments in January were the declines in gross exports and gross imports, analysts said. To promote American goods abroad, President Barack Obama signed an executive order Thursday to create an Export Promotion Cabinet, with representatives from the Agriculture, Commerce, State and Treasury departments, and other federal agencies involved in trade. The president aims to double U.S. exports during the next five years (Moody’s Economy.com, The New York Times and Bloomberg.com March 11) … * Delinquency rates continued to increase in the fourth quarter for most commercial/multifamily mortgage investor groups, according to the Mortgage Bankers Association’s (MBA) Commercial/Multifamily Delinquency Report, issued Thursday. Between the third and fourth quarters, the 30-plus-day delinquency rate on loans held in commercial mortgage-backed securities rose 1.63 percentage points to 5.69%. The 60-plus-day delinquency rate on loans held in life company portfolios decreased 0.04 percentage points to 0.19%. Also, the 60-plus-day delinquency rate on multifamily loans held or insured by Fannie Mae increased 0.01 percentage points to 0.63%. The 90-plus-day delinquency rate on multifamily loans held or insured by Freddie Mac went up 0.04 percentage points to 0.15%. And the 90-plus-day delinquency rate on loans held by Federal Deposit Insurance Corp.-insured banks and thrifts increased 0.49 percentage points to 3.92%. “The ongoing impact of the economic fallout on commercial real estate markets continued to drive up commercial and multifamily mortgage delinquencies for most investor groups in the fourth quarter,” said Jamie Woodwell, MBA vice president of commercial real estate research. “Continued job losses, consumer restraint and a lack of household growth all sustained the pressure on commercial real estate operations and mortgages during the fourth quarter,” he added. For the MBA report, use the link … * For the second consecutive week, U.S. mortgage rates stayed below the 5% level--weeks before a federal government program that has been keeping rates down is scheduled to end, analysts said. This week, the average rate on a 30-year fixed-rate mortgage was 4.95%--down from 4.97% a week earlier, government-sponsored mortgage finance company Freddie Mac said. In December, rates fell to a record-low 4.71% and have remained around 5% since then--kept low by a Federal Reserve campaign to stabilize the housing market by lowering mortgage rates, analysts said (The New York Times March 11) …

News of the Competition (03/11/2010)

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MADISON, Wis. (3/12/10)
* Consulting firm Mercatus LLC conducted a recent survey that indicated banks garnering high trust scores from customers obtain an average 38% of their clients’ business, while the average share for banks with low trust scores is 27%, reported American Banker (March 11). For the biggest U.S. banks, the average share of business has fallen to 33% from 40% since the beginning of the financial crisis--the lowest rank among financial services segments, the survey said. That’s why Bank of America’s recent decision to stop authorizing debit card purchases against accounts lacking sufficient funds and charging a $35 overdraft fee is the right decision, the publication said. Credit unions were not involved in the survey … * HSBC said Thursday that theft of its Swiss client data about three years ago by a former HSBC employee was much larger than previously thought--involving possibly 24,000 accounts. The theft specifically involved “approximately 15,000 existing clients who had accounts with the bank in Switzerland before October 2006” and 9,000 closed accounts, HSBC said. The company has about 100,000 clients. Last year, HSBC had said only 10 clients’ data had been stolen. The company said it is spending roughly $100 million for security upgrades to avoid a repeat incident (The New York Times March 11) …

News of the Competition (03/10/2010)

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MADISON, Wis. (3/11/10)
* Bank of America (BofA)--in a move to stay ahead of new comprehensive federal regulations--was set to announce Wednesday that it is eliminating $35 overdraft fees on debit card purchases. That means any customer who attempts to make a purchase with insufficient funds will be denied at the point of sale, analysts said. The change will affect people who get assessed overdraft charges in small everyday transactions such as groceries, subway passes or a cup of coffee without knowing their account is running a deficit, analysts said. BofA has 37 million debit card customers who generate 60% of all overdrafts at the bank. The new BofA policy starts June 19 for new customers and in August for existing debit-card holders. Citigroup has a similar policy already in effect. In 2009, the banking industry collected $38.5 billion in overdraft fees (The Wall Street Journal and PaymentsSource March 10) … * Citigroup Inc. intends to double the size of its North American private banking force from 130 bankers to roughly 260 during the next several years “We have 22 locations in North America and will add selectively by putting talent in key markets,” Peter Charrington, CEO of Citi Private Banks North America , told Dow Jones Newswires. Building up the private bank is a key growth area for Citi after the bank formed a joint venture with Morgan Stanley and its Smith Barney brokerage nearly a year ago, analysts said (The Wall Street Journal March 10). Meanwhile, Citi is trying to raise capital--after repaying its bailout funds to the Treasury--by selling trust preferred securities. The bank plans to raise as much as $2 billion of the securities, known as TruPS--30-year fixed-to-floating-rate securities with an initial yield of about 8.875%, analysts said (Bloomberg.com March 10) … * A new securities market could become a productive source of capital for banks--a by-product of the rescue of the banking industry, reported American Banker (March 10). Warrants that allow holders to buy stocks of bailed-out lenders at a set price during the next decade have become some of the most sought after securities in finance in the past three months, traders and analysts said. Warrants could morph into a common way for banks to raise equity and manage capital, experts said. “Banks could have made a warrant market on their own, but the fact that it was made by the government created something [that wasn't there before],” said Linus Wilson, an assistant professor of finance at the University of Louisiana at Lafayette. “It’s possible that it could be such a popular market that banks start issuing warrants on their own without government influence.” If the warrant market matures, banks could voluntarily issue them to raise capital without immediately diluting their shares. That is because warrants aren’t converted into common stock until they’re exercised--which could take several years because of the way they are structured and priced, the publication said …

Market News (03/10/2010)

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MADISON, Wis. (3/11/10)
* Mortgage loan application volume increased 0.5% on a seasonally adjusted basis for the week ended March 5 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index rose 1.2% from the previous week. The Refinance Index decreased 1.5%, and the seasonally adjusted Purchase Index increased 5.7%. The unadjusted Purchase Index went up 7.2% compared with the previous week and was 10.7% lower than the same week one year ago. The four-week moving average for the seasonally adjusted Market Index rose 0.8%. The four-week moving average is up 0.7% for the seasonally adjusted Purchase Index, and up 1% for the Refinance Index. For the MBA report, use the link ... * U.S. unemployment rates rose across the board in January despite an equally broad increase in employment, according to Bureau of Labor Statistics. Thirty-one states and the District of Columbia reported higher nonfarm payroll employment from December to January--which is nearly three times the number reporting a rise between November and December, analysts said. However, overall unemployment rates went up in 30 states and the District of Columbia. The U.S. unemployment rate decreased in January--dropping by 0.3 of a percentage point to 9.7%. Although most state labor markets are heading in a positive direction, only sustained increases in employment will be able to lower unemployment rates, analysts said (Moody’s Economy.com March 10) … * U.S. wholesale inventories unexpectedly dropped 0.2% in January after falling by a downwardly revised 1%--previously 0.8%--in December the Commerce Department said Wednesday. Analysts had expected inventories to increase by 0.2% in January. Surging demand sparked sales of goods, analysts said. Sales rose by 1.3% in the month--up from December’s upwardly revised 1.2%--previously 0.8%. The inventory-to-sales ratio decreased by two basis points to 1.10 in January. A reduction in inventories looks to be positive news for the U.S. economy, analysts said. A pileup in inventories doesn’t usually benefit future production or future economic growth, while a decline could portend that demand is outpacing supply, they added (The Wall Street Journal and Moody’s Economy.com March 10) …

Market News (03/09/2010)

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MADISON, Wis. (3/10/10)
* U.S. hiring and job openings rose in January while separations declined, according to the Job Openings and Labor Turnover Survey (JOLTS) released Tuesday by the Bureau of Labor Statistics. During the month, 4.08 million people accepted new jobs--up from four million in December. Available jobs increased to 2.7 million from 2.5 million in December. January’s separations fell to 4.1 million, from 4.2 million in December. That means the gap between hiring and separations is closing, analysts said. In a related matter, employment expectations are improving in most of the world, although a mild weakening is evident in some economies, according to the Manpower Employment Outlook Survey. Hiring expectations in Asia, South America and the U.S. for the second quarter have improved from a year ago, analysts said. However, conditions in the U.S. slightly worsened from the first quarter (Moody’s Economy.com March 9) … * Small businesses in the U.S. are showing a lack of confidence that is consonant with a forecast for a downturn in growth during the second quarter, according to the National Federation of Independent Business (NFIB). The NFIB index dropped to 88 in February from 89.3 in January. During the past year, the index has not measurably improved and tough credit conditions present problems for small business, the NFIB said. Although firms are still moving toward employment and inventory reductions, they are not as big as those experienced in the second half of 2009. Overall, gross domestic product should increase at a roughly 2.5% annualized rate in the second quarter--less than half the gain experienced in fourth quarter 2009, NFIB said (Moody’s Economy.com March 9) … * Stock market analysts are debating whether the market can return to steady growth after years of working off excessive prices, analysts said. Optimists contend that the down markets have left cheap and attractive stocks--particularly if the government’s initiatives for an economic recovery reach fruition. A recovery in corporate performance could lead to good results for investors, they added. However, some analysts warn that troubles during the past decade could resurface. Government economic interventions in 1998, 2001 and 2008 kept stocks from completely correcting, they said. Some analysts see signs of bubbles beginning to inflate again--especially in some developing-country markets (The Wall Street Journal March 9) …

News of the Competition (03/09/2010)

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MADISON, Wis. (3/10/10)
* The Federal Reserve conducted an auction Monday for $25 billion in 28-day credit through its term auction facility. Results of the auction include: total propositions submitted and accepted of $3.410 billion; a stop-out rate of 0.5%; a bid/cover ratio of 0.14; and a total of 53 bidders. The awarded loans will settle Thursday and mature on April 8. Institutions that submitted winning bids were contacted by their respective Reserve Banks Tuesday … * The Treasury Department Monday announced public offerings of Troubled Asset Relief Program warrants to purchase common stock of three banks. The Treasury announced offerings of 595,829 warrants to buy New York-based Signature Bank stock and 758,086 warrants to buy stock of Texas Capital Bancshares Inc. The Treasury also said it has begun public offerings of slightly more than 1.7 million warrants to buy stock of Washington Federal Inc. The auction was scheduled for Tuesday with a minimum bid price per warrant of $5. The Treasury has received warrants in several financial institutions to maximize returns in its $700 billion government initiative to save the financial sector, analysts said (Dow Jones Newswires March 9) …

News of the Competition (03/08/2010)

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MADISON, Wis. (3/9/10)
* Four failed banks were closed Friday by regulators and entered purchase-and-assumption agreements with other banks, according to the Federal Deposit Insurance Corp. (FDIC). The closures bring the 2010 total of bank failures to 26, following 140 failures last year. Friday’s failed banks include: Sun American Bank, Boca Raton, Fla., taken over by First-Citizens Bank & Trust Company, Raleigh, N.C.; Bank of Illinois, Normal, Ill., taken over by Heartland Bank and Trust Company, Bloomington, Ill.; Waterfield Bank, Germantown, Md., taken over by Waterfield Bank, FA, a new depository institution chartered by the Office of Thrift Supervision and insured by the FDIC; and Centennial Bank, Ogden, Utah, taken over by Zions First National Bank, Salt Lake City. The institutions held roughly $1.01 billion in aggregate assets as of Dec. 31. The FDIC estimated that the failures will cost the Deposit Insurance Fund about $305 million … * American International Group Inc. (AIG) agreed Sunday to sell a second major insurance unit--American Life Insurance Co. (Alico)--for $15.5 billion to MetLife Inc. MetLife will pay $6.8 billion in cash and $8.7 billion in equity securities for American Life. On March 1, AIG said it would sell AIA Group Ltd. to Prudential Plc for $35.5 billion, including $25 billion in cash. “AIG has pulled off two massive asset sales marking major milestones in its road to recovery,” said David Havens, managing director in credit trading at Nomura Securities International Inc. in New York. “A year ago, AIG getting more than $50 billion for AIG and Alico, mostly in cash, seemed unthinkable” (Bloomberg.com and The New York Times March 8) … * Capital One Financial Corp.’s bottom line could be impacted more than other credit card companies by the federal government’s more stringent stance on late fees, analysts said. Capital One--a credit card issuer that became a bank--derives more income from late fees than its top competitors. Its customer base contains a large number of less-creditworthy borrowers who tend to fall behind on their payments, analysts said. Concerns are growing in the financial sector that the Federal Reserve’s proposal geared to preventing late fees from exceeding a customer’s minimum payment could hurt the card company’s income stream, analysts said (Dow Jones Newswires March 8) …

Market News (03/08/2010)

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MADISON, Wis. (3/9/10)
* Global business confidence has remained mostly unchanged since the beginning of the year--remaining consonant with a modest worldwide economic recovery, according to Moody’s Economy.com Survey of Business Confidence. Moody’s index rose to 16.6 for the week ended March 5 from 14.9 the previous week. Businesses are positive when generally evaluating current conditions and the outlook through the summer, but are cautious when assessing hiring, inventories and sales strength, Moody’s said. North Americans are the most nervous about conditions, and South Americans are the most positive, analysts said. Financial and business-services firms are the most confident, while those who work in government and real estate are the least confident. Manufacturing firms are in the middle, analysts said (Moody’s Economy.com March 8) … * A new federal program beginning April 5 will allow homeowners who are delinquent on their mortgages to sell their properties for less than they owe and garner some cash in the process. “We want to streamline and standardize the short sale process to make it much easier on the borrower and much easier on the lender,” said Seth Wheeler, a senior adviser at the Treasury. Those homeowners who have not been helped by the government’s $75 billion mortgage loan modification program can shed their houses through a short sale, which sells property for less than the balance of the mortgage, analysts said. Lenders must accept the deal and forgive the difference between the property’s market price and what they are owed, analysts added (The New York Times March 7) … * A “new mix”--driven more by business investment and exports than the traditional forces of consumption and housing--could be the paradigm for the economic future of the U.S., analysts said. In the fourth quarter, the new mix propelled 5.9% annualized growth-the fastest since 2003, they added. The new mix of demand will lift the economy by 3.7% in 2010 and set the stage for 3.5% average annual increases thereafter, said Joseph Carson, an economist with AllianceBernstein. “What’s going to change is how we generate growth, not how fast we can grow,” Carson said. “That’s how I come up with a new mix rather than a new normal” (Bloomberg.com March 8) …

Jobs improving but fragile CUNA tells IWash. PostI

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WASHINGTON. (3/9/10)--The economy is on the mend, but it is still fragile, a Credit Union National Association (CUNA) economist told The Washington Post Saturday. “The economy seems to be improving gradually, but the improvement is so gradual and fragile that we’re hunting around for clues of where we’re truly going,” Bill Hampel, CUNA chief economist, told the Post. The U.S. shed 36,000 jobs in February and the unemployment rate remained at 9.7%, according to a Labor Department report last week. The largest February job losses were in the construction sector, which lost 64,000 positions, supporting the idea that snowstorms nationwide negatively affected employment, the newspaper said. Many hourly construction workers were unable to work during the second week of February, when much of the Northeast had two feet of snow on the ground, the paper said.

Consumers borrowing more CUs see debt drop

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WASHINGTON (3/8/10)--American consumers increased their debt by $4.96 billion, or 2.4%, to $2.46 trillion during January, according to Federal Reserve data released Friday. It was the first increase in a year. Consumers borrowing from credit unions bucked that trend and dropped to $235.8 billion from December's $237.2 billion. January's credit outstanding at credit unions was the lowest since second quarter 2009. The unexpected monthly gain in overall outstanding consumer credit more than reversed a revised $4.57 billion drop in borrowing during December. Driving the reversal was nonrevolving credit, which includes items like loans to buy new cars and boats. Revolving credit, which includes credit cards, declined for a 16th consecutive month. Wall Street analysts surveyed by Reuters had forecast that January consumer credit would contract by $4.5 billion rather than rise (Reuters March 5). The last time that overall consumer credit rose more strongly than in January was July 2008, when it jumped $7.29 billion before beginning a slide as a financial crisis swept through the U.S. economy. January's nonrevolving credit rose by $6.62 billion on top of a $4.86 billion sprout in December. The Fed offered no explanation for the rise. So far during 2010, car sales have been soft. Like revolving credit, nonrevolving credit at credit unions dropped--to $200.9 billion from $201.7 billion in December. Revolving credit decreased by $1.67 billion after a $9.43-billion plunge in December. The decline reflects consumers' wariness about their discretionary spending, the tightening of credit by banks, and banks' willingness to raise fees on credit card use, said Reuters. Revolving credit at credit unions also declined, to $34.9 billion in January from December's $35.9 billion.

News of the Competition (03/05/2010)

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MADISON, Wis. (3/8/10)
* The Treasury Department sold its warrants to purchase shares of Bank of America Corp. stock for $1.5 billion--the most the Treasury has earned from selling warrants of one institution, the agency announced Thursday. It priced a secondary public offering of more than 150.4 million warrants with a strike price of $13.30 per share for $8.35 each. It sold 121.8 billion with a strike price of $30.79 per warrant for $2.55 each. The Treasury received warrants in several financial institutions to maximize its returns on a $700 billion bailout package for the financial sector ... * Wells Fargo Advisors, the brokerage unit of Wells Fargo & Co., plans to begin recruiting more than 10,000 brokers to add to its 15,000 member advisory force, it said Friday. It did not specify a specific timeline for the hires. The unit ranks third in number of employees. Morgan Stanley Smith Barney has 18,135 advisers, while Bank of America Corp.'s Merrill Lynch reports 15,006. (The Wall Street Journal March 5) ... * Los Angeles-based City National Corp. has completed repaying the government the $400 million the Treasury Department invested in it under the Troubled Asset Relief Program (TARP). City National had indicated it would repay the funds when it raised $550 million in debt and equity issuances last year. However, on Dec. 30, it repaid only $200 million. City National was the top bidder to acquire La Jolla, Calif.-based Imperial Capital Bank and its $3.26 billion in assets when Imperial Capital failed in December (American Banker March 5) ...

Market News (03/05/2010)

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MADISON, Wis. (3/8/10)
* The U.S. unemployment rate for February held steady at 9.7%, better than expected, indicating the tenuous economic recovery may be gaining momentum, reported the Labor Department Friday (The New York Times, The Wall Street Journal and Bloomberg.com March 5). Analysts had expected more jobs to fall because of last month's stormy weather along the East Coast. During the month, roughly 36,000 jobs were eliminated, compared with a 26,000 (revised from 20,000) decrease the month before and with more than 650,000 jobs lost during February 2009. About 15 million Americans remained unemployed in February, with more than four in 10 on the unemployment rosters longer than six months. Those "underemployed"--whose hours have been cut or who work part-time positions because they can't find full-time work--reached 16.8% last month, up from 16.5% during January ... * Pending home sales declined during January, and more declines are expected from abnormal weather conditions, according to the National Association of Realtors (NAR). NAR's Pending Home Index for January fell 7.6% to 90.4 from December's upwardly revised 97.8. The January figure remains 12.3% more than in January 2009, which recorded at 80.5. Lawrence Yun, NAR chief economist, noted that sales remained much lower than expected "given that a large number of potential buyers are eligible for the expanded home buyer tax credit. Moreover, the abnormally severe and prolonged winter weather, which affected large regions of the U.S., hampered shopping activity in February." He predicted "weak near-term sales followed by a likely surge of existing-home sales in April, June and June." "The real question is what happens in the second half of the year. If there is sufficient job creation, housing can become self-sustaining with stable to modestly rising home prices because inventory has been trending downward," Yun said ... * Commodity prices contributed to a decline in the ECRI future inflation gauge (FIG) for the U.S. in February, with the FIG dropping to 101.4 from January's 102.1 and breaking its run of 10 consecutive gains (Moody's economy.com March 5). The figure remains well below its last high of 125.1, which was recorded in October 2005. The smooth annualized growth rate dropped to 31.3% from 38%. Inflation pressures are not expected to be a problem soon because the economy remains in early recovery mode ...

News of the Competition (03/04/2010)

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MADISON, Wis. (3/5/10)
* The Federal Deposit Insurance Corp’s (FDIC) Inspector General (IG) is recommending changes to the agency’s loan-modification program to make it mesh more easily with the Obama administration’s program for workouts, reported American Banker (March 4). The IG’s report suggested that the FDIC bolster the program to make it more consistent with the administration’s Home Affordable Modifications Program--which made $75 billion available to promote loan workouts. Specifically, the IG said the FDIC should improve the program’s underwriting and reporting requirements, how assuming institutions monitor and detect fraud in loan modifications, and agreements with failed-bank acquirers for complying with the agency’s program … * Decreasing the Federal Reserve’s supervisory power would be a mistake because it could hamper the federal government’s capacity to deal with the next financial crisis, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, told American Banker (March 4). “Removing the central bank from a supervision role designed to provide totally current, firsthand knowledge and information will weaken defenses against recurrence of financial instability,” Lockhart said in prepared remarks. “Flawed defenses could be calamitous in a future we cannot see” … * Richard Fisher, president of the Dallas Federal Reserve Bank, is pushing for the creation of an international agreement to break up banks whose collapse could be a threat to the financial system. Fisher’s position goes beyond that of other Fed officials (American Banker March 4). “The disagreeable but sound thing to do with companies deemed ‘too big to fail’ [would be] to dismantle them over time into institutions that can be prudently managed and regulated across borders," Fisher said in a speech Wednesday at the Council on Foreign Relations in New York ... * The U.S. central bank should adjust the way it infuses money into the economy in the same manner it usually adjusts interest rates when the economy changes, said a senior Federal Reserve official. “The quantitative policy should be conducted in a manner analogous to interest rate policy,” said James Bullard, president of the St. Louis Federal Reserve Bank. “This means adjusting the policy according to incoming information in the economy.” Bullard is a voter this year on the Fed’s interest rate-setting panel (The New York Times March 4) …

Market News (03/04/2010)

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MADISON, Wis. (3/5/10)
* U.S. initial claims for unemployment benefits declined for the week ended Feb. 27 from a three-month high a week earlier. The decline indicates an uptick in a labor market that is slow to improve, analysts said. Claims dropped 29,000--to 469,000, the Labor Department said Thursday. Meanwhile, continuing claims dropped by 134,000 to 4.5 million for the week ended Feb. 20. Some companies still are paring payrolls to contain costs because of weak sales while the economy recovers from recession, analysts said. “We are in this limbo state where it is not clear if job growth has started yet,” said Ethan Harris, head of economics for North America at Bank of America Merrill Lynch Global Research. “Many companies say they over-reacted and fired a lot of people, more than they needed to, with the news of the recession. So, we’re expecting broad-based re-hiring.” The decline reported Thursday follows initial claims that unexpectedly jumped in the two prior weeks of February, which caused concern among some observers, analysts said. “Firings appear to have stopped, but hiring has not yet resumed at a steady pace,” said Anna Piretti, senior economist for BNP Paribas. “There is still a very large pool of unemployed people out there, and it’s going to take years before they are reabsorbed into the work force” (Bloomberg.com, The New York Times, The Wall Street Journal and Moody’s Economy.com March 4) … * Contracts signed to buy previously owned U.S. homes unexpectedly fell in January--a sign that the extension of the first-time homebuyer tax credit is engendering scant interest, analysts said. The index of purchase agreements--or pending home sales--declined 7.6% to a level of 90.4, following a revised 0.8% increase in December, the National Association of Realtors (NAR) said Thursday. Pending sales in the West experienced the biggest decline during January, falling 13.2%. However, all four regions shared in the decline. A year-ago, pending home sales rose 12.3%, NAR said (Bloomberg.com Moody’s Economy.com and The New York Times March 4) … * U.S. productivity growth for the fourth quarter was revised higher to a 6.9% seasonally adjusted annual rate above the consensus forecast, according to the Bureau of Labor Statistics. The revision was caused by a bigger output gain and a smaller increase in workers’ aggregate hours, analyst said. As the U.S. economy comes out of recession, productivity growth is strong because there are no inflationary pressures from the labor market and falling unit-labor costs are sparking profits, analysts said (Moody’s Economy.com March 4) …

News of the Competition (03/03/2010)

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MADISON, Wis. (3/4/10)
* U.S. banks are retreating from the decades-long bank branch building boom, analysts said. For the first time since 2002, the total number of U.S. retail bank branches is on track to decline this year, according to SNL Financial, a research firm that tracks branch data filed with banking regulators. Although deposits continue to flow into U.S. banks, the long-time practice of building brick-and-mortar locations to garner money is outweighed by banks trying to hold onto their remaining capital in a recession-ravaged economy, analysts said. There are 98,913 U.S. bank branches--a decline of roughly 300, or 0.3%, since June 2009, SNL said (The Wall Street Journal March 3) … * Although the Federal Reserve has forced mortgage rates down to the lowest levels in nearly half a century, millions of U.S. homeowners have not reaped the benefits because they can’t or won’t refinance, analysts said. Declining home prices have left many homeowners with scant or no equity--making it more difficult for them to qualify for refinancing, analysts said. Also, more stringent lending standards, higher fees from banks and mortgage behemoths Fannie Mae and Freddie Mac, and declining personal incomes have made it harder and less attractive for borrowers to look for new loans, analysts added (The Wall Street Journal March 3) … * Two Florida court rulings will make foreclosures in a state with a severely impacted housing market even more difficult for lenders, reported American Banker (March 3). Last month, the state Supreme Court ruled that prior to foreclosing, a lender must verify that it possesses all pertinent documents--including proof it owns the mortgage in question. That actually can be difficult due to the past decade’s securitization boom, in which mortgages usually were sold several times over, the publication said. If a lender cannot produce the papers when pressed by a borrower, the institution could be fined for perjury, the court ruled. In December, the state supreme court also ruled that all foreclosure cases must go through mediation. Bankers said that could make foreclosure expensive for lenders, according to the publication …

Market News (03/03/2010)

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MADISON, Wis. (3/4/10)
* Nine out of 12 Federal Reserve Regional Districts reported that economic activity improved at the beginning of 2010, but blizzards that hit in February hurt several regions and caused most increases to be modest, according to the Fed's Beige Book report released Wednesday. Consumer spending improved slightly but was hampered by storms in several regions. Manufacturing activity strengthened in most regions. Residential real estate markets improved in several districts while others noted soft or weak activity due to weather. Commercial real estate and construction activity was weak or declined in most districts with few signs of modest improvement. Loan demand was weak, and lending standards remained tight across the country, said the report. Price pressures were mostly limited, with the exception of some increased raw materials prices. Competition and limited pricing power kept prices stable. Some districts reported an increase in hiring or a slowdown of layoffs, but labor markets generally remained soft throughout the nation. The report, prepared by the Federal Reserve Bank of Kansas City, surveys economic conditions in the Fed's districts. Its data, collected on or before Feb. 22, will be used at the U.S. central bank's next policy-setting meeting March 16 ... * Mortgage loan application volume increased 14.6% on a seasonally adjusted basis for the week ended Feb. 26 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the Index rose 15.5% from the previous week. “Mortgage applications rebounded last week, particularly refis, as rates dropped back below 5%,” said Michael Fratantoni, MBA vice president of research and economics. “Purchase activity remains subdued, with application volumes remaining within the narrow range seen in the last few months.” The Refinance Index rose 17.2% from the previous week and the seasonally adjusted Purchase Index increased 9% from one week earlier. The unadjusted Purchase Index jumped 11.7% compared with the previous week and was 9.8% lower than the same period one year ago. The four-week moving average for the seasonally adjusted Market Index is up 0.4%. The four-week moving average is down 2.7% for the seasonally adjusted Purchase Index, while this average is up 1.8% for the Refinance Index. For the MBA report, use the link … * U.S. companies cut the fewest jobs in two years during February, according to a private report based on payrolls, issued Wednesday by ADP Employer Services. The 20,000 drop in jobs was consistent with forecasts and followed a revised 60,000 decline in January, ADP said. Companies will be reluctant to add workers until they see consistent gains in sales, analysts said. “This report is pretty encouraging,” said Joel Prakken, chairman of Macroeconomic Advisers LLC. The economy should experience job gains in the next month or two, he added (Bloomberg.com March 3). In a related matter, the February Challenger report issued by Challenger, Gray and Christmas Inc. indicated job cuts fell to their lowest level since July 2006. Employers announced cuts for the month affecting 42,090 workers--down from 71,482 in January and 77% less than the level for February 2009 (Moody’s Economy.com March 3) … * Service sectors of the U.S. economy expanded in February at the quickest pace in two years, according to a survey released by the Institute for Supply Management’s (ISM). The ISM nonmanufacturing survey index rose to 53 in February from 50.5 in January, signaling that growth in gross domestic product services is strengthening, analysts said. Readings over 50 indicate more companies said business is improving than said it was worsening. The employment index was substantially up, which suggests the labor market is on the cusp of job growth, analysts said. Regarding the overall economy, the more balanced situation of manufacturing and services growth is a positive development consonant with a more robust recovery, which could occur later this year, ISM said (Moody’s Economy.com and MarketWatch March 3) …

Bankruptcies up 13 in February

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MADISON, Wis. (3/3/10)--U.S. bankruptcies in February were up 13% from a year ago--the second-highest on a daily basis since October 2005 when the bankruptcy law changed. For the month, bankruptcy filings rose 14% from January, according to data culled from court records by Automated Access to Court Electronic Records (AACER) (Bloomberg via Business Week March 2). Consumer bankruptcies surged 14% from a year earlier to more than 111,000--with per-capita filings being led by Nevada, Georgia and Tennessee, according to the American Bankruptcy Institute. Commercial bankruptcy filings were unchanged from January and rose 3% from February 2009, ACCER said. Last year, total U.S. bankruptcy filings rose to 1.44 million--a 32% jump from 2008, ACCER said. Also, commercial bankruptcies climbed 38% last year. In 2005, bankruptcy filings totaled a record 2.1 million as 630,000 Americans looked for legal protection from creditors in the two weeks before federal bankruptcy law revisions made it harder for individuals to wipe out debts, analysts said.

Market News (03/02/2010)

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MADISON, Wis. (3/3/10)
* General Motors (GM) reported a 12% rise in U.S. sales in February--including a 32.2% jump for the four brands it is retaining: Buick, Cadillac, Chevrolet and GMC. Because snowstorms kept consumers out of dealer showrooms nationwide last month, results for January fell short of analysts’ forecasts for a 20% increase, Bloomberg analysts said. GM said it sold 141,951 vehicles in the U.S. in February, compared with 127,296 a year earlier. GM’s results could be a sign of an erosion of the auto market’s bounce-back from the 2009 slump in industry sales, which were at the lowest levels in 27 years, analysts said. “Any bad news in a fragile environment like this will certainly hinder recovery,” said Jesse Toprak, chief forecaster for researcher TrueCar.com. “[Weather and the recalls] messed up momentum and trajectory of the industry” (Bloomberg.com, The New York Times and The Wall Street Journal March 2) … * Ford Motor Co. said its U.S. sales surged 43.1% to 142,285 units in February. Car sales jumped 54%, while truck sales also were strong--rising 36% from February 2009. The automaker’s total U.S. market share is roughly 17%--up three percentage points from a year earlier, Ford estimated (MarketWatch March 2) … * U.S chain store sales dropped 0.8% for the week ended Feb. 27--with inclement weather as the major factor for the decline, according to the International Council of Shopping Centers (ICSC) sales index. The year-ago change fell to 0.7%, which continues a series of weak readings, ICSC said. This time of year, volatility is the norm because sales volumes are low and recent movements have been exceptionally large, ICSC said. Consumers are more apt to spend now than this time last year when sales were nosediving, but they continue to lack the cash and desire to aggressively spend, analysts said (Moody’s Economy.com March 2) …

News of the Competition (03/02/2010)

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MADISON, Wis. (3/3/10)
* Goldman Sachs Group Inc. issued $2 billon of bonds at a yield premium that’s 44% less than the last time it sold similar-maturity debt, analysts said. The issuance is mining demand that has pushed borrowing costs to the lowest level in nearly five years, they added. The 10-year, 5.375% notes were priced to yield 5.493%--or 190 basis points--more than Treasuries, according to Bloomberg data. In its last 10-year sale in May, Goldman Sachs paid a spread of 337.5 basis points, or 3.375 percentage points, the data indicate (Bloomberg.com March 2) … * The Treasury Department said Monday it will auction warrants today that it procured by rescuing Bank of America Corp. (BofA) in 2008 and 2009. Treasury owns two separate blocks of BofA warrants, analysts said. The department said it intends to begin bidding for 150.4 million warrants with a strike price of $13.30 per share at $7 each. It also plans to start bidding on 121.8 million shares with a strike price of $30.79 at $1.50 each (Dow Jones March 2) …

News of the Competition (03/01/2010)

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MADISON, Wis. (3/2/10)
* Two more U.S. banks were closed Friday by regulators and entered purchase-and-assumption agreements with other banks, according to the Federal Deposit Insurance Corp. (FDIC). The closures bring the 2010 total of bank failures to 22, following 140 failures last year. Friday’s failed banks include: Rainier Pacific Bank, Tacoma, Wash.--taken over by Umpqua Bank, Roseburg, Ore.; and Carson River Community Bank, Carson. Nev.--taken over by Heritage Bank, Reno, Nev. The two closed institutions held about $769 million in aggregate assets as of Dec. 31. The FDIC estimated that the two banks’ failures will cost the Deposit Insurance Fund about $103 million. (See related story: Shuttered Washington bank was former CU) … * When the era of near-zero interest rates ends and rates begin to rise, some lenders in the banking industry will profit handsomely, reported American Banker (March 1). “Some commercial banks should benefit from higher rates because, traditionally, when rates are at zero, your demand deposits aren't earning any money,” Fred Cannon, co-director of research at Keefe, Bruyette & Woods Inc., told the publication. “They can't wait for rates to rise.” Commercial banking companies such as Comerica Inc. and M&T Bank Corp., which either have large core deposits or many variable-rate loans, could become large sources of cash when rates rise, the publication said … * American International Group Inc. (AIG) announced that Prudential Plc of Britain will buy AIG’s life insurance business in Asia--American International Assurance (AIA) for $35.5 billion--constituting AIG’s biggest sale since it was bailed out by the U.S. government, analysts said. Prudential--the U.K.’s biggest insurer--will pay $25 billion in cash and $10.5 billion in stock and other securities. “We are combining the two strongest international life insurers in Asia,” Tidjane Thaim, Prudential CEO, said Monday. Acquiring AIA hastens a strategy Thiam delineated to significantly increase the firm’s Asian revenue, analysts said. Because of a culture of saving and rising affluence in several countries, Asia is considered one of the fastest growing life insurance markets, analysts said (The New York Times and Bloomberg.com March 1) …

Market News (03/01/2010)

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MADISON, Wis. (3/2/10)
* For a fourth consecutive month, U.S. consumer spending rose more than expected in January,indicating that the largest part of the economy--spending accounts for 70%--could contribute more to growth soon, analysts said. Personal spending increased 0.5%--slightly above expectations, the Commerce Department said Monday. “It’s a good start [for the year],” said Brian Bethune, chief financial economist at IHS Global Insight. “[Still], consumption is not going to be the driver [of economic growth].” Also, personal income in January rose 0.1%--substantially below the 0.4% economists had anticipated and the slowest growth since September. The personal income growth follows downwardly revised growth of 0.3% in December. Wage income growth increased to 0.4%, but was revised downward for previous months, analysts said (Bloomberg.com, The New York Times and Moody’s Economy.com March 1) … * U.S. construction spending dropped for a third consecutive month in January because delayed commercial activity such as hotels and office buildings offset a bounceback in the housing sector, analysts said. Construction spending fell 0.6% in January from the previous month--slightly less than the 0.7% economists had forecast, the Commerce Department said Monday. Housing construction increased 1.3% and spending on nonresidential projects declined 2.1%. Public construction in the month also fell--indicating continued fiscal restraints on local and state governments, analysts said. January construction spending stood at a seasonally adjusted rate of $884.12 billion--down 11.5% from a year ago (The New York Times and Moody’s Economy.com March 1) … * For a seventh consecutive month, U.S. manufacturing grew in February--a sign that factories are spearheading the economic recovery, analysts said. The Institute for Supply Management’s (ISM) manufacturing index decreased to 56.5 from 58.4 in January--the highest reading since August 2004. Readings larger than 50 indicate expansion. The bigger-than-anticipated decline was led by new orders and production, analysts said. Also, the employment index grew at the fastest pace in five years, rising to 56.1 from 53.3--a sign that manufacturing will be positive for nonfarm employment for the second consecutive month, analysts said. In February, the inventories index went up by less than one point. In total, the February survey is consonant with more gains in industrial production and is consistent with ISM’s forecast of a real gross domestic product increase of 2.5%, ISM said (Moody’s Economy.com and Bloomberg.com March 1) …