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Market

GDP Growth Slower Than Expected For First Quarter

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WASHINGTON (4/29/13)--U.S. economic growth in the first quarter was slower than expected, with gross domestic product expanding at a 2.5% annualized pace, the Commerce Department said Friday.

With a decline in defense spending mitigating the largest increase in consumer spending in two years, the slow first-quarter growth could be setting the template for another year of slow growth (The Wall Street Journal, Bloomberg.com and The New York Times April 26).

Economists in a Bloomberg survey forecast 3% growth, while a Dow Jones Newswires survey of economists predicted a 3.2% annualized expansion.

Rising home and stock prices boosted wealth and that, combined with reduced consumer savings, helped U.S. households mitigate an increase in the payroll tax now being felt by consumers, Bloomberg said.     

Given all the first-quarter economic headwinds, consumers displayed resilience, Michael Feroli, chief U.S. economist at JPMorgan Chase and Co. in New York, told Bloomberg.

The softening in government spending will be a factor that will make it hard to duplicate the first-quarter's economic performance in the second quarter, he added.

FHFA: National Average Mortgage Rate Is 354%

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WASHINGTON (4/26/13)--The National Average Contract Mortgage Rate for previously occupied home loans closed in March was 3.54%, the Federal Housing Finance Agency reported Thursday.

The average interest rate on conventional, 30-year, fixed-rate mortgage loans of $417,000 or less increased 12 basis points to 3.74 in March. Those rates are calculated from the FHFA's Monthly Interest Rate Survey of purchase-money mortgages.

The results reflect loans closed during the March 25-31 period. Typically, the interest rate is determined 30 to 45 days before the loan is closed. So, the reported rates depict market conditions prevailing in mid-to-late February, FHFA said.

The contract rate on the composite of all mortgage loans (fixed and adjustable rate) was 3.53%, up 11 basis points from 3.42% in February. The effective interest rate--which reflects the amortization of initial fees and charges--was 3.65%, up 10 basis points from 3.55% in February.

The report contains no data on adjustable-rate mortgages due to insufficient sample size, FHFA said.

For more information, use the link.

Redesigned $100 Bill To Start Circulating In October

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WASHINGTON (4/25/13)--The Federal Reserve Board Wednesday announced that a redesigned $100 note will begin circulating Oct. 8.

The note, which incorporates new security features such as a blue, three-dimensional security ribbon, will be easier for the public to authenticate but more difficult for counterfeiters to replicate, the Fed said.

The new design was unveiled in 2010, but its introduction was postponed following a production delay.

To ensure a smooth transition to the redesigned note when it begins circulating, the U.S. Currency Education Program is reaching out to businesses and consumers worldwide to raise awareness about the new design and inform them about how to use its security features.

For more information about the new design, as well as training and educational materials, use the link.

Home Prices Up, Existing-Home Sales Dip

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WASHINGTON (4/24/13)--U.S. home prices increased in the first quarter this year, while existing home sales dipped in March.

U.S. house prices rose 0.7% on a seasonally adjusted basis from January to February, according to the Federal Housing Finance Agency's monthly House Price Index. For the 12 months ending in February, prices increased 7.1%.

The U.S. index is 13.6% below its April 2007 peak and is roughly the same as the October 2004 index level. U.S. house prices have not declined monthly since January 2012.

For the nine census divisions, seasonally adjusted monthly price changes from January to February ranged from -0.6% in the Middle Atlantic division to 1.7% in the South Atlantic division. The 12-month changes ranged from 1.9% in the Middle Atlantic division to 15.3% in the Pacific division.

Also, March existing-home sales eased from inventory constraints, which continued to pressure home prices, according to the National Association of Realtors (NAR).

Total existing-home sales--completed transactions that include single-family homes, townhomes, condominiums and co-ops--declined 0.6% to a seasonally adjusted annual rate of 4.92 million, from a downwardly revised 4.95 million in February. However, the sales remain 10.3% higher than the 4.46 million-unit pace in March 2012.  

Sales have been above year-ago levels for 21 consecutive months, while prices show 13 consecutive months of year-over-year price increases, NAR said.

For more information, use the links.

FDIC ClosesThree Banks

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WASHINGTON (2/23/13)--The Federal Deposit Insurance Corp. announced that three U.S. banks were closed last week and their assets assumed by other banks. The three failures bring this year's total to eight.

First Federal Bank, Lexington, Ky., was assumed by Your Community Bank, New Albany, Ind. As of Dec. 31, First Federal had roughly $100.1 million in total assets and $93.9 million in total deposits. The FDIC estimates the failure will cost to the Deposit Insurance Fund $9.7 million.

Heritage Bank of North Florida, Orange Park, Fla., was assumed by First Atlantic Bank, Jacksonville, Fla. The cost of the failure will be $30.2 million, the FDIC estimates. Heritage Bank of North Florida had about $110.9 million in total assets and $108.5 in total deposits as of Dec. 31.

Chipola Community Bank, Marianna, Fla., was assumed by First Federal Bank of Florida, Lake City, Fla. Chipola Community Bank had about $39.2 million in total assets and $37.6 million in total deposits as of Dec. 31. The failure will cost the Deposit Insurance Fund $10.3 million, the FDIC said.

Consumer Sentiment Up To Five-year High

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NEW YORK (4/19/13)--Buoyed by record stock prices and a housing market rebound, U.S. consumer sentiment surged last week to the highest level in more than five years. Americans say they believe the economic expansion will continue, according to the Bloomberg Consumer Comfort Index.

The index rose to -29.2 for the week ended April 14--the highest level since January 2008--from -34 the prior week (Bloomberg.com April 18).

Each of the index's three subcomponents increased. Sentiment over the buying climate gained 5.7 points, the personal finances sub-index advanced 4.5 points, and perceptions of the state of the economy went up four points (Moody's Economy.com April 18).

Cheaper grocery bills and lower gasoline prices boosted perceptions of personal finances and the buying climate. Views of the state of the economy were bolstered by the ongoing improvement in the housing market, Moody's said.

Last week's confidence boost was the largest in more than a year. Because it was broad-based--with all geographic regions, every age group and most income brackets showing a gain--indications are that any decline in consumer spending will be short-lived, Bloomberg said.

The odds of a sustainable economic recovery appear particularly bright to upper-income citizens, said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.

Fed Districts' Beige Book Reports Moderate Growth

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WASHINGTON (4/18/13)--The Federal Reserve's 12 district banks reported that "overall economic activity expanded at a moderate pace" from late February to early April as housing and auto manufacturing improved, said the Fed's Beige Book released Wednesday.

That compares to the "modest to moderate" growth the Beige Book reported in January and March. The report, compiled by the Federal Reserve Bank of Dallas, describes current economic conditions in each district.

The report is no surprise and doesn't suggest any change will occur in quantitative easing--the Fed's policy of buying back $85 billion in bonds every month--at the April 30-May 1 Federal Open Market Committee meeting, Maninder Sibia, an economist at Contingent Macro Advisors said (MarketWatch April 17).

Five districts--Cleveland, Richmond, St. Louis, Minnesota, and Kansas City-- described the economy as growing at a "moderate" pace. Five others--Boston, Philadelphia, Atlanta, Chicago and San Francisco--noted "modest" growth.  New York and Dallas said expansion was reported "accelerated."

The districts reported increases in manufacturing activity, namely residential construction and automobiles; moderate increases in the demand for nonfinancial services; rising home prices; and rising home sales in most districts. Employment conditions remained unchanged or improved somewhat, with hiring most prevalent in manufacturing, residential construction, information technology and professional services. Wages were generally contained.

"Loan demand was steady to slightly up at most district banks that commented on lending," said the Beige Book. "The Philadelphia District, however, said loan volumes softened somewhat since the previous report." New York  noted widespread increases in loan demand, especially commercial loans and residential mortgages. Cleveland said business and consumer loan demand picked up since the last report.

Dallas "saw broad-based improvement in loan demand as energy-related lending remained strong and commercial real estate and home equity lending bounced up from low levels." San Francisco said "increased growth in automobile and mortgage loans spurred overall improvements in loan demand." Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Dallas and San Francisco noted loan pricing was very competitive."

Mortgage lending reports were "mostly favorable" with stronger refinancing activity in New York and Atlanta. Cleveland and Kansas City reported a shift from mortgage refinancing to new purchases. New York, Richmond, Dallas and San Francisco saw an uptick in residential mortgage loans.

Most districts' banks said credit conditions remained favorable, with improved credit quality for business and consumer loans.  For the full report, use the link.

March Housing Construction Highest Since 2008

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WASHINGTON (4/17/13)--New home construction in the U.S. surged in March to its highest level since the start of the financial crisis--buoyed by a gain in construction of multifamily projects.

Although total housing starts climbed by 7% last month to a seasonally adjusted annual rate of 1.04 million--the most since June 2008--single-family home construction declined, the Commerce Department said Tuesday (The Wall Street Journal, Bloomberg.com and Moody's Economy.com April 16).

The March rise follows a 6% upward revision for February to 968,000, the department said.

Economic growth is being supported by the bounce-back in construction as builders hustle to meet the growing demand for rental units, Bloomberg said.   

It doesn't matter if demand for housing is generated by homebuyers or renters because the end result is that roofs are going up "over peoples' heads," Aneta Markowska, chief economist at Societe Generale in New York, told Bloomberg. However, housing activity and prices still can improve--which is essential for the U.S. economy, she added.

March Retail Sales See Biggest Drop In Months

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WASHINGTON (4/15/13)--With employment slackening, U.S. retail sales decreased in March by the most in nine months, according to Commerce Department figures released Friday.

The decline indicates households were less stable at the end of the first quarter, and that tax increases at the beginning of this year have zapped energy from the economy (Bloomberg.com and The New York Times April 12).

Retail sales fell 0.4% in March, the department said, bolstering the view that the economy's struggles are ongoing and that it hasn't performed at the level analysts had forecast just a few weeks ago, the Times said. Several analysts now have downgraded their first-quarter forecasts, the Times added. 

The increase in the payroll tax is a negating factor, Ian Shepherdson, an economist at Pantheon Macroeconomic Advisers in New York, told the Times.

Heading into the second quarter there is no economic momentum, Ellen Zentner, a senior economist at Nomura Securities International Inc. in New York, told Bloomberg.

To adjust their spending accordingly, households now have to make difficult choices, Zentner added.

FOMC Minutes Show Debate On Tapering Off QE

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WASHINGTON (4/11/13)--Federal Reserve policymakers debated when to begin winding down its quantitative easing bond-buying program during the Federal Open Market Committee's (FOMC) last meeting on March 19-20, according to the FOMC Minutes of the meeting.

Some members said the Fed should begin winding down the program, in which the Fed buys back $85 billion in mortgage-backed securities each month, in mid-year and end it by the end of 2013.

The minutes, usually released at 2 p.m. ET three weeks after the FOMC meeting, were released five hours earlier than usual because they were mistakenly sent Tuesday to congressional staff and trade organizations (Bloomberg.com and The Wall Street Journal April 10).

Members saw the economic outlook for the period ahead "as little changed since the previous meeting, and, consequently, all but one member judged that a highly accommodative stance of monetary policy was warranted in order to foster a stronger economic recovery  in a context of price stability," the minutes reported.

"Many participants, including some of those who were focused on the increasing risks (of continuing the asset purchase program), expressed the view that continued solid improvement in the outlook for the labor market could prompt the committee to slow the pace of purchases beginning  at some point over the next several meetings, while a few participants suggested that economic conditions would likely justify continuing the program at its current pace at least until late in the year," said the minutes.

Members expressed a "range of views about the economic and labor market conditions that would call for an adjustment in the pace of purchases," said the minutes. "Many participants emphasized that any decision to reduce the pace of purchases should reflect both an improvement in their overall outlook for labor market conditions, as implied by a wide range of available indicators, and their confidence in the sustainability of that improvement."

"A couple of these participants noted that if progress toward the committee's economic goals were not maintained, the pace of purchases might appropriately be increased. A number of participants suggested that the committee could change the mix of its policy tools if necessary to increase or maintain overall accommodation, including potentially adjusting its forward guidance or its balance sheet policies," the minutes said.

The next FOMC meeting will be April 30 to May 1.

For the full minutes, use the link.

Fed Announces FOMC's 2014 Meeting Schedule

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WASHINGTON (4/8/13)--The Federal Reserve's monetary policymaking group, the Federal Open Market Committee, has announced its tentative meeting schedule for 2014.

The meetings, all on Tuesdays and Wednesday, are scheduled for:

  • Jan. 28-29;
  • March 18-19;
  • April 29-30;
  • June 17-18;
  • July 29-30;
  • Sept. 16-17;
  • Oct. 28-29;
  • Dec. 16-17; and
  • Jan. 27-28, 2015.
The committee decides what measures the Fed will take to ensure a stable economy, including the current policy of purchasing bond assets and maintaining the target Fed funds rate at between 0% and 0.25%.  The FOMC's next meeting this year will be April 30-May 1.

Consumer Credit Rises 78%, Up At CUs For Feb

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WASHINGTON (4/8/13)--Consumers ' debt in February rose $18.1 billion or 7.8%, seasonally adjusted, the highest jump in borrowing in six months, according to the Federal Reserve's Consumer Credit report released Friday.

Consumers borrowed more than $2.799 trillion during the month. Of that amount, $246.1 billion was borrowed from credit unions.

Most economists surveyed had forecast February's debt would expand by $15 billion (BusinessInsider.com and The Wall Street Journal April 5).  The $18.1 billion debt increase compares with January's increase of $12.7 billion or 5.5% (MarketWatch April 5).

The $2.799 trillion in debt compares with $2.780.9 trillion in January and $2.650.9 trillion during first quarter of 2012.

The $246.1 billion members borrowed from credit unions also reflects an increase--from $245.7 billion borrowed in January, and $223 billion in first quarter last year.

Nonrevolving debt--auto loans, personal loans and student loans--totaled $1.951 trillion overall in February--a 10.9% gain from the $1.933.5 trillion borrowed in January. During first quarter 2012, nonrevolving debt totaled more than $1.808 trillion.

At credit unions, nonrevolving debt for February totaled $206.7 billion, up from $206.3 billion in January and $186.6 billion in first quarter 2012.

Overall revolving credit rose 0.8% as consumers began to use their charge cards more frequently for a few expenses. Consumers charged $848 billion--up from $847.5 billion in January and from first quarter 2012's total of $842.2 billion.

At credit unions, members charged the same amount as in January: $39.4 billion, compared with $36.4 billion in revolving debt during the first quarter of 2012.

Debt held in real estate, such as home equity loans and mortgage loans, is not included in the Fed's Consumer Credit G.19 report.

To view the report, use the link.

Foreclosed Homeowners Getting Second Chance

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NEW YORK (4/4/13)--Of the seven million mortgage holders who left their homes since 2007 because of foreclosures or short sales, more than one million are getting a second chance, with eligibility for Federal Housing Administration (FHA)-backed mortgages. And that will grow to two million by 2014.

FHA requires a three-year waiting period and a 3.5% minimum down payment to be eligible, Moody's Analytics Inc. Chief Economist Mark Zandi told Bloomberg.com (April 3).

Some consumers will still experience barriers, caused by insufficient income, savings and credit, but by the end of 2014, eligibility for mortgages could increase to nearly two million, and that could trigger a housing demand, said Zandi.

During the recovery so far, consumers have worked on improving their credit scores, with more mortgage borrowers now seeing scores of 800 or more than in 2011. More consumers are also reaching the 560-660 credit-score range, said FICO in the article. In 2012, the median credit score was 714, up from 711 in October 2011.

Another factor in the increase in mortgages: Lenders are loosening credit score requirements for a conventional home mortgage to 761 in February, compared with 764 a year earlier.

Veterans United Home Loans told Bloomberg that borrowers who rebounded from short sales or foreclosures made up about 6% of its $3.3 billion in loans last year.

The article also noted that  some borrowers are experiencing  unnecessary delays in eligibility for mortgages because Fannie Mae's automated underwriting system treats foreclosures and short sales alike. Those who foreclosed are barred from obtaining a Fannie Mae or Freddie Mac mortgage for seven years, while short sales can qualify in as little as two years, according to the National Consumer Reporting Association.

Amex Is Latest To Endure DDoS Attack

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MADISON, Wis. (4/2/13)--American Express Co. is the most recent financial company to be victimized by a distributed denial of service (DDoS) attack.

The cyberattack on Thursday knocked Amex's website offline for two hours, and 43 customers reported they were unable to access their accounts (Bank Technology News March 29).

There was no evidence that customers' data were compromised, Amelia Woltering, AmEx company spokeswoman, told Bank Technology

In the past week, similar DDoS attacks impacted Wells Fargo and TD Bank. That is part of a wave of disruptions that began in September, disrupting many of the websites of the biggest U.S. financial institutions, the publication said. 

Wells Fargo was hit with a DDoS attack March 26 that prevented some customers--184 reports in a 24-hour period--from accessing their online accounts (American Banker March 26).

JPMorgan Chase and BB&T had recently sustained similar attacks, the Banker said. JPMorgan Chase Monday told its customers through Twitter that it was "experiencing  intermittent issues," and advised them to use the bank's  mobile service while it worked to resolve the issues (American Banker April1).

The al-Qassam Cyber Fighters hacktivist group has claimed responsibility for many of the attacks against banks and two credit unions.

Also, Spamhaus, an anti-spam service, was disrupted Thursday with the biggest DDoS ever seen, according to several security firms (computerworld.com March 27).  

Computerworld noted the attacks, which have been going on since March 19, allegedly started after Dutch hosting provider Cyberbunker was placed on Geneva-based Spamhaus' global blacklist, according to a New York Times report. Cyberbunker is known for being willing to host nearly any website--except those associated with child pornography or terrorism,  Computerworld said.   

Consumer Spending Rose In February

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WASHINGTON (4/1/13)--U.S. consumer spending in February increased by the most in five months, while savings and personal incomes also rose, adding to signs of heightened economic activity in the first quarter, according to a Commerce Department report released Friday.

Consumer spending--which gauges purchases that span from autos and clothing, to health care and travel, and which constitutes  70% of the U.S. economy--rose 0.7%, after a 0.4% gain in  January (The Wall Street Journal, The New York Times and Bloomberg.com March 29).

Personal incomes increased 1.1% in February. That boosted the savings rate up from a five-year low, Bloomberg said.  

Progress in the labor market and a gain in household wealth--linked to increasing home values and stocks--helped buffer the impact of more expensive fuel and higher payroll taxes, Bloomberg added.

The economy is ahead of fiscal restraint, so it is in a good spot right now, Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, told Bloomberg. With consumers "in the driver's seat," the recovery is sustainable, he concluded.