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Market Archive

Market

News of the Competition (05/31/2011)

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MADISON, Wis. (6/1/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday the closing of one bank, bringing the total bank failures so far this year to 44, compared with 157 for the entire year in 2010. The failed bank is First Heritage Bank, Snohomish, Wash., which was assumed by Columbia State Bank, Tacoma, Wash. The closed bank held roughly $174 million in assets as of March 31. The FDIC estimated the newest failure will cost the Deposit Insurance Fund about $35 million ... * Wells Fargo & Co. is aiming to double its revenue during the next decade (Dow Jones via American Banker May 31). Wells, which already operates the fifth-biggest insurance brokerage worldwide by revenue, is looking to acquire insurance brokers, expanding its life insurance business and cross-selling more policies to customers who already bank with Wells, Neal Aton, CEO of Wells Fargo Insurance Series, told Dow Jones. The push for insurance expansion indicates John Stumpf, Wells CEO, is aiming to broaden revenue, Dow Jones said ...

Market News (05/31/2011)

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MADISON, Wis. (6/1/11)
* U.S. housing prices in March dropped to their lowest level since mid-2002, negating the last of the recovery since declines two years ago, according to data released Tuesday from the Standard & Poor’s Case-Shiller Home-Price Index (The New York Times and The Wall Street Journal May 31). The index for 20 large cities dropped 0.8% from February--the eight consecutive decline. Home prices now are 33.1% lower than their peak in July 2006. High unemployment and a glut of foreclosures are a drag on home prices and sales, causing the housing market to flounder, while other areas of the economy begin to show improvement, the Journal said. Paul Dales, a senior U.S. economist at Capital Economics LTD in Toronto, said home prices could continue their descent into fall this year and perhaps into next year because the abundance of foreclosures makes it unlikely downward pressures on prices will abate (Bloomberg.com May 31) … * With the outlook for business conditions and the labor market souring, U.S. consumer confidence unexpectedly fell in May to a six-month low (Bloomberg.com May 31). The Conference Board’s index of consumer confidence declined to 60.8 from a revised 66 reading in April, the New York-based private research firm said Tuesday. Economists had forecast a rise in May to 66.6, according to a Bloomberg News survey. Higher grocery bills and gasoline prices are taking a bigger bite out of consumers’ incomes, causing them to become more pessimistic, Bloomberg said. A paucity of wage and job growth means consumer spending--which constitutes 70% of the U.S. economy--could keep spending down and economic expansion from rising, Bloomberg said …

News of the Competition (05/30/2011)

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MADISON, Wis. (5/31/11)
* Two mortgage-servicing companies--Countrywide Home Loans Servicing and Saxon Mortgage Services--agreed to settle federal lawsuits alleging they illegally foreclosed on homes of at least 178 military service members, the Justice Department announced Thursday (The New York Times May 26). As part of the settlement, the two firms will earmark at least $22 million to compensate those victims. Countrywide is a subsidiary of Bank of America, and Saxon is a subsidiary of Morgan Stanley. The companies were charged with knowingly and repeatedly violating the Servicemembers Civil Relief Act--a federal law that provides financial and legal protections to military personnel. The companies were specifically accused of neglecting to get court orders before foreclosing on active-duty service members, the Times said … * Google Inc. said it plans to create a digital wallet--which would allow people with an Android Smartphone to pay for goods and services and receive coupons and special offers by waving the phone in front of special reader at a checkout counter (The Wall Street Journal May 26). Google is the most recent company to enter the mobile payments arena--which has the potential for high returns on investment and has attracted not just credit card companies and traditional banks, but also handset manufacturers and wireless carriers, the Journal said. In a related development, just hours after Google made its announcement, PayPal filed a 28-page lawsuit against Google and two executives--both former PayPal employees--for allegedly stealing trade secrets that helped Google launch the digital wallet (pcmgag.com May 27) … * Aiming to make older commercial buildings more energy efficient, Bank of America Corp. (BofA) is partnering with community development financial institutions (CDFIs) to provide $50 million in low-cost, long-term loans to as many as 12 CDFIs, BofA said Thursday (American Banker May 27). Recipients will be chosen based on the most “innovative” retrofit programs, BofA said. This is the bank’s second “green” initiative to counteract global warming. BofA earlier in May announced a plan to lower its energy consumption and reduce its greenhouse gas emissions by 15% worldwide during the next four years, the Banker said ...

Market News (05/30/2011)

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MADISON, Wis. (5/31/11)
* U.S. consumer spending slowed in April, indicating that escalating gasoline and grocery prices affected the economic recovery heading into spring (The Wall Street Journal May 27). Consumer spending rose 0.4%, following March’s 0.5% downwardly revised gain, the Commerce Department said Friday. Spending--when adjusted for inflation--increased just 0.1% for a second consecutive month. For a third consecutive month, incomes went up 0.4%. In a related matter, the Thompson/Reuters/University of Michigan index of consumer sentiment rose to a three-month high of 74.3 in May from 69.8 in April (Bloomberg.com May 27). The increase is attributed to a recent retreat in gasoline prices after they rose to the highest level since July 2008, giving some comfort to consumers, whose spending constitutes 70% of the U.S. economy, Bloomberg said ... * Pending home sales fell in April, with regional variations following increases in February and March, because unusual weather and economic softness added to problems that are hampering a recovery, according to the National Association of Realtors (NAR). The Pending Home Sales Index--a forward-looking indicator based on contract signings--dropped 11.6% to 81.9 in April from a downwardly revised 92.6 in March. The index is 26.5% below a cyclical peak of 111.5 in April 2010, when buyers were rushing to beat the contract deadline for the home buyer tax credit. The data reflect contracts but not closings, which normally occur with a lag time of one or two months. Lawrence Yun, NAR chief economist, said the dip in contracts may be due to temporary factors. “The pullback in contract signings is disappointing and implies a slower than expected market recovery in upcoming months,” he said. “The economy hit a soft patch in April from sharply rising oil prices, widespread severe weather with the heaviest precipitation in 20 years, and a sudden rise in unemployment claims.” For The NAR report, use the link …

News of the Competition (05/26/2011)

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MADISON, Wis. (5/27/11)
* Loan funds that are eligible Community Development Financial Institutions will soon be able to access lower-cost capital through the U.S. Treasury’s Small Business Lending Fund (SBLF), the Treasury announced Thursday. The SBLF is a $30 billion fund that encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion (while taking no similar measures for credit unions at no cost to taxpayers). The SBLF’s initial dividend rate will be 2% for the first eight years, then increase to 9% if the Community Development Loan Fund (CDLF) has not repaid what it borrowed, the Treasury added. CDLFs may apply for SBLF funding for to 5% of their total assets, the Treasury said. Institutions that wish to take part in the SBLF must have had positive net income over the past three years, cash and cash equivalents at least equal to operating expenses recorded during the past year, and year-end cash and cash equivalents equal to or greater than 25% of annual operating expenses for one or both of the two most recent fiscal years, the Treasury said. It also imposed additional net asset, loan loss reserve, and delinquency requirements. The Treasury will also require that a minimum of 10% of an institution’s total loans are Qualified CDLF Small Business Loans. Eligible institutions must apply for funds by June 22 … * Two states’ attorneys general are pressuring Bank of America (BofA) to change its mortgage-servicing and foreclosure practices because, the states said, BofA and four other servicers face $17 billion in lawsuit claims (Bloomberg.com and Dow Jones May 26). Connecticut Attorney General George Jepson said the bank failed to fix thoroughly documented problems in its mortgage servicing business, and Utah Attorney General Mark Shurtleff in a letter to BofA CEO Brian Moynihan accused the bank of breaking state law, according to letters released by their offices Wednesday. The attorneys general told the five largest mortgage servicers they would have to settle the nationwide investigation or deal with the $17 billion in civil lawsuits, according to a source familiar with the matter ...

Market News (05/26/2011)

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MADISON, Wis. (5/27/11)
* U.S. gross domestic product--the broadest gauge of all the goods and services purchased in an economy--increased 1.8% at annualized rate in the first quarter, following a 3.1% rise in fourth quarter 2010, the Commerce Department said Thursday (The Wall Street Journal May 26). The first-quarter gain was unchanged from the advance estimate in April, which disappointed the consensus outlook. It was looking for a modest upward revision (Moody’s Economy.com May 26). Although private inventory investment, exports and nonresidential fixed investment were adjusted upward, those gains were mitigated by an unexpected downward revision in personal consumption expenditures, Moody’s said … * Initial claims for U.S. unemployment benefits unexpectedly increased last week, indicating the labor market is having a hard time finding traction (Bloomberg.com May 26). Claims rose 10,000 to 424,000 for the week ended May 21, the Labor Department said Thursday. Economists had forecast a decline to 404,000 in a Bloomberg Newssurvey. Consistent improvement in hiring is necessary to sustain consumer spending--which constitutes 70% of the U.S. economy, Bloomberg said. The unemployment rate “remains elevated” at 9%, Federal Reserve officials said. Meanwhile, continuing claims for unemployment fell to 3.69 million for the week ended May 14 from nearly 3.74 million the prior week. That number excludes millions more people on extended and emergency benefits (Moody’s Economy.com May 26) …

Market News (05/25/2011)

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MADISON, Wis. (5/26/11)
* Orders for U.S. long-lasting durable goods--goods built to last at least three years--dropped in April because demand for aircraft retreated and supplies of auto parts were disrupted by the earthquake and tsunami in Japan (The Wall Street Journal and Bloomberg.com May 25). Orders declined 3.6%--the biggest drop since October 2010--to a seasonally adjusted $189.9 billion, the Commerce Department said Wednesday. Shipments of durable goods also decreased, dipping 1%. Following the explosive pace of expansion in the past few months, manufacturing probably will moderate, Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Conn., told Bloomberg. However, consumer demand and investment demand are in good shape, he added … * Recording the biggest decline in nearly two years, U.S. home prices fell 5.5% in the first quarter from a year earlier because sales of discounted homes in foreclosure hurt real estate values, according to the Federal Housing Finance Agency (FHFA) (Bloomberg.com May 25). Prices dropped 2.5% from the fourth quarter 2010, FHFA said Wednesday in its report. The FHFA gauge--based on properties with loans backed by Fannie Mae or Freddie Mac--has declined for 15 consecutive quarters because lenders have seized homes and sold them at bargain prices that pulled down overall home values, Bloomberg said. Also, the FHFA purchase-only index decreased 0.3% from February to March and is down 5.9% from March 2010 (Moody’s Economy.com May 25) ... * U.S. mortgage applications increased 1.1% on a seasonally adjusted basis for the week ended May 20 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 0.9%. The Refinance Index went up 0.9% to its highest level since Dec. 10. The seasonally adjusted Purchase Index climbed 1.5%. The unadjusted Purchase Index increased 0.8% and was 3.1% higher than the same week one year ago. The refinance share of mortgage activity rose to 66.8% of total applications from 66.7%. For the MBA report, use the link ...

News of the Competition (05/25/2011)

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MADISON, Wis. (5/26/11)
* With more stringent credit standards imposed by lenders cutting the available supply, prices for charged-off credit card debt remain high (American Banker May 25). The highest prices go to the freshest paper, which gets 10 cents on the dollar and more, depending on the portfolio type, the Banker said. Some portfolios have seen prices of 12 cents or more, Aaron Hadam, a vice president at National Loan Exchange Inc., told the publication. He added that prices for the freshest paper will be the highest since there are fewer accounts charging off because originations are down. Since issuers of retail cards usually have more consistent underwriting standards, private-label portfolios fetch higher prices, the Banker said … * Google Inc. is teaming with Sprint Nextel Corp. to launch a mobile payment service today, available on Sprint phones, said sources familiar with the matter (Bloomberg News via American Banker May 25). Using the service, consumers with specially outfitted phones powered by Google’s Android operating system can purchase goods and redeem coupons with their handsets, the sources said. U.S. spending on mobile coupons may increase to $6.53 billion in 2014 from $370 million in 2010, according to Borrell Associates Inc …

News of the Competition (05/24/2011)

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MADISON, Wis. (5/25/11)
* U.S. banks earned $39 billion in first quarter 2011--the best quarter since the start of the financial crisis--because of a continual decline in loan-loss provisions, the Federal Deposit Insurance Corp. (FDIC) said Tuesday. That is an $11.6 billion improvement (66.5%) from the $17.4 billion in net income the industry reported in the first quarter of 2010. This is the seventh consecutive quarter that earnings registered a year-over-year increase. For the sixth consecutive quarter, reduced provisions for loan losses drove the improvement in earnings. “The industry shows continuing signs of improvement,” said FDIC Chairman Sheila C. Bair, “though there is a limit to how far reductions in loan-loss provisions can boost industry earnings.” More than half of all institutions (56%) reported better quarterly net income from a year ago, and only 15% had a net loss for the quarter. The average return on assets, a yardstick of profitability, rose to 0.87% from 0.53% a year ago. First-quarter loss provisions totaled $20.7 billion, less than half the $51.6 billion that insured institutions set aside a year ago. However, some of the benefits from lower provisions were offset by reduced revenues, the FDIC said. Net operating revenue--net interest income plus total noninterest income--was $5.5 billion (3.2%) lower than a year earlier, and realized gains on securities fell by $1.7 billion. For the complete Quarterly Bank Profile, use the link ... * Bank of America (BofA) agreed to a $410 million settlement in a case involving overdraft fees on debit cards that would allow more than a million BofA customers who overdrew their checking accounts to recoup some overdraft fees (The Wall Street Journal May 23). The settlement received initial approval from a Miami federal court judge Monday. The settlement stipulates that BofA place $410 million in an escrow account. The money in the account will be divided among people who were assessed overdraft fees because of checking-account or debit-card transactions dating back as early as 2001, the Journal said. Attorneys’ fees could constitute 30% of the settlement, according to a court document …

Market News (05/24/2011)

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MADISON, Wis. (5/25/11)
* U.S. new-home sales in April increased more than anticipated--after nose-diving to a record low two months earlier. However, the overall sales pace stayed weak for the troubled sector (The Wall Street Journal and Bloomberg.com May 24). Sales rose 7.3% from March to a 323,000 seasonally adjusted rate, the Commerce Department said Tuesday. Economists had forecast sales would stay unchanged at an annual rate of 300,000, according to a Dow Jones Newswires survey. Despite the unexpected rise, sales are significantly down from a year ago, having dropped 23.1% since April 2010--when the federal tax subsidy for first-time home buyers expired, the Journal said. Increased housing affordability and improvement in the job market could begin to help bolster a housing market that’s lagging the improvement in the rest of the economy, Bloomberg said ... * The International Council of Shopping Centers (ICSC) chain-store sales index fell 1% for the week ended May 21--the second consecutive week it has recorded a substantial decline, ICSC said (Moody’s Economy.com May 24). However, year-over-year growth remained at 3.1% because the decline was similar to a drop in the comparable week last year. Cool, wet weather was the driver behind negative sales last week, ICSC said, adding that customer traffic was more robust at discount stores than at department stores likely due to high gasoline prices pinching consumer budgets …

News of the Competition (05/23/2011)

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MADISON, Wis. (5/24/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday the closing of three banks, bringing the total bank failures so far this year to 43, compared with 157 for the entire year in 2010. The failed banks are: Summit Bank, Burlington, Wash., assumed by Columbia State Bank, Tacoma, Wash.; and Atlantic Southern Bank, Macon, Ga., and First Georgia Banking Co., Franklin, Ga., both assumed by Certus Bank, N.A., Easley, S.C. The three closed institutions held roughly $1.62 billion in assets as of March 31. The FDIC estimated the newest failures will cost the Deposit Insurance Fund about $446 million ... * A group of private investors and the U.S. government intend to sell $500 million of stock to the public through a real estate investment trust to spin off American International Group’s subprime lending and servicing division, Springleaf Financial (American Banker May 23). Springleaf already has approached one mortgage banker, who asked to remain anonymous, the Banker said. Springleaf, based in Evansville, Ind., was known as American General Finance until early March. It owns $13.4 billion of residential real estate loans and $3.5 billion of consumer finance loans, according to a filing with the Securities and Exchange Commission, the Banker said …

Market News (05/23/2011)

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MADISON, Wis. (5/24/11)
* The largest banks and mortgage lenders in the U.S. have been steadily acquiring a surfeit of foreclosed homes that could exacerbate the housing slump and further slow the economic recovery (The New York Times May 22). RealtyTrac, a real estate data provider, said it owns more than 872,000 homes because of a foreclosure surge, which is nearly twice as many as when the financial crisis started in 2007. Also, those banks and mortgage lenders are currently foreclosing on an additional one million homes and are ready to take possession of several million more in the next few years, according to RealtyTrac. The increase in lender-owned homes could create another wild cycle in which the rising inventory of distressed properties lowers home values even more and leads to additional sales of distressed properties, the Times said … * Businesses worldwide remain primarily positive about their prospects, according to Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com May 23). Although sentiment has fallen from record highs in February, it remains strong. South American businesses are the most optimistic, while Japanese companies are the most nervous, which has been the norm through the current worldwide expansion, Moody’s said. Businesses report their sales are solid and they are solidly investing and hiring more workers. Although expectations for the outlook at year’s end remain good, they have significantly weakened in recent weeks and warrant scrutiny, Moody’s said. Sentiment is consonant with a global economy that is expanding at a pace above its potential growth rate, Moody’s concluded …

Delinquency rates up on mortgage loans

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WASHINGTON (5/23/11)--The delinquency rate for mortgage loans of one- to four-unit residential properties rose seven basis points (bp) at the end of first quarter from fourth quarter 2010, but there were also significant declines in 90+ day delinquencies and foreclosures, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey. Delinquency rate for the units was a seasonally adjusted 8.32% of all loans outstanding as of the end of first quarter 2011--a decrease of 174 bp from one year ago. The non-seasonally adjusted delinquency rate decreased 117 bp to 7.79% this quarter from 8.96% last quarter. The percentage of loans with foreclosure actions started was 1.08%, a decline of 19 bp from fourth quarter and down 15 bp from one year earlier, said MBA. The rate includes loans that are at least one payment past due; it does not include loans in the process of foreclosure. The percentage of loans that are seriously delinquent--those at least 90 days past due or in the process of foreclosure--was 8.1%. That's a decrease of 50 bp from the previous quarter and a decrease of 144 bp from a year earlier. The combined percentage of loans in foreclosure or at least one payment past due totaled 12.31%--a 129 bp decline from last quarter's 13.6%. "Most of these numbers point to a mortgage market on the mend," said Jay Brinkmann, MBA's chief economist. "Short-term delinquencies remain at pre-cession levels. Loans 90 days or more delinquent have now dropped for five straight quarters and are at their lowest level since the beginning of 2009," he said. Foreclosure starts are at the lowest level since December 2008, with the second largest drop on record, he added. The drop in the 90 days or more past due loans was "driven by improving numbers for loans originated between 2005 and 2007. These are the loans that drove the mortgage market collapse and now represent about 31% of loans outstanding but 65% of the loans seriously delinquent," Brinkmann said. "Given that loans originated during this period are now past the point where loans normally default, and that loans originated since then generally have better credit quality, mortgage performance should continue to improve."

Market News (05/20/2011)

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MADISON, Wis. (5/23/11)
* Existing-home sales dipped in April, although the market has seen six gains in the past nine months, according to the National Association of Realtors (NAR). Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops. They eased 0.8% to a seasonally adjusted annual rate of 5.05 million in April from a downwardly revised 5.09 million in March, and are 12.9% below a 5.80 million pace in April 2010. Sales surged in April and May of 2010 in response to the home buyer tax credit. Lawrence Yun, NAR chief economist, said the market is underperforming. “Given the great affordability conditions, job creation and pent-up demand, home sales should be stronger,” he said. “Although existing-home sales are expected to trend up unevenly through next year, unnecessarily tight credit is continuing to restrain the market, along with a steady level of low appraisals that result in contract cancellations.” For the NAR report, use the link … * Mass layoffs--the number of layoffs involving at least 50 workers from a single establishment--rose to 1,564 in April from 1,286 in March, according to the Bureau of Labor Statistics (Moody’s Economy.com May 20). The April layoffs involved 143,927 employees. The uptick in the total number of events and employees impacted will probably be a temporary erosion of the labor market--evidenced by the recent decrease in initial claims for unemployment insurance, Moody’s said. Compared with March, mass layoffs in manufacturing in April rose by 74 events, and initial claims increased by 7,403. The 10 industries reporting the most layoffs constituted 37% of total initial claims …

News of the Competition (05/20/2011)

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MADISON, Wis. (5/23/11)
* Goldman Sachs Group Inc. executives are anticipating the arrival of more subpoenas from federal prosecutors concerning mortgage-related business at the security firm, said sources familiar with the matter (The Wall Street Journal May 20). The Justice Department will demand specific documents and other information--perhaps within days--Goldman believes, according to the sources. The issuing of subpoenas doesn’t necessarily entail any inevitable criminal charges against Goldman or individuals at the company, the Journal said. Goldman already has submitted hundreds of millions of pages of documents to the Federal Crisis Inquiry Commission--a 10-member panel that looked into the causes of the financial crisis … * Encore Capital Group Inc., a huge debt-collection firm, allegedly deployed fraudulent “robo-signed” affidavits in lawsuits against consumers--triggering a lawsuit filed Thursday by Minnesota Attorney General Lori Swanson’s office (American Banker May 20). The complaint asserts employees of Encore’s Midland Funding LLC and Midland Credit Management Inc. unit testified under oath that they signed up to 400 affidavits per day without reading them, the Banker said. Based in San Diego, Encore purchases discounted debt from credit card companies and collect on the accounts …

News of the Competition (05/19/2011)

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MADISON, Wis. (5/20/11)
* A federal bankruptcy judge Thursday approved a settlement between Bank of America Corp. (BofA) and Lehman Brothers Holdings Inc. (Bloomberg News via American Banker May 19). BofA said it would settle a remaining dispute by paying Lehman $1.5 million, according to a Thursday court filing. BofA previously had been ordered to pay Lehman $500 million plus interest by U.S. Bankruptcy Judge James Peck. BofA had said it would appeal Peck’s final ruling on the case. In September 2008, Lehman filed the largest bankruptcy in U.S. history and is suing to recover money to pay creditors … * After almost being ousted in the financial crisis, Vikram Pandit, CEO of Citigroup, received a multimillion package from Citigroup to stay as the bank’s leader for at least four more years (The Wall Street Journal May 18). Pandit will get a multiyear, $10 million stock grant, along with new options valued at an estimated $6.7 million, plus profit sharing, through 2015, the Journal said. Pandit became Citigroup CEO in 2007, and presided over the New York bank’s near-collapse in 2008 related to losses he inherited, the Journal said …

Market News (05/19/2011)

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MADISON, Wis. (5/20/11)
* Following nine consecutive months of gains, the Conference Board’s index of U.S. leading economic indicators unexpectedly declined in April because of a rise in unemployment claims that indicate temporary setbacks, including shutdowns of auto plants (Bloomberg.com May 19). The Conference Board’s measure of the outlook in the next three to six months declined 0.3%, following a revised 0.7% increase in March, the New York-based private research firm said. Economists had predicted a 0.1% rise in April, according to a Bloomberg News survey. Unevenness in the job market was evident last month as job cuts rose and counteracted an increase in hiring, Bloomberg said. Also, during their April meeting, Federal Reserve policymakers said job prospects would continue to gradually improve and economic growth will stay at a moderate pace … * Initial U.S. claims for unemployment benefits decreased more than expected last week, indicating the probability that a swelling of claims last month was triggered by temporary events instead of a downturn in the labor market (Bloomberg.com May 19). Claims dropped 29,000--to 409,000--for the week ended May 14, the Labor Department said Thursday. Economists in a Bloomberg News survey had forecast a decline to 420,000. Hiring gains and a decrease in job cuts helped sustain consumer spending--which constitutes 70% of the U.S. economy--despite increases in food and fuel costs, Bloomberg said. Meanwhile, continuing claims for unemployment benefits declined to roughly 3.71 million for the week ending May 7 from about 3.79 million the previous week (Moody’s Economy.com May 19) ... * U.S. consumer confidence last week dropped to a nine-month low, in part because high fuel costs tightened consumers’ budgets (Bloomberg.com May 19). The Bloomberg Consumer Comfort Index dropped to -49.4 for the week ended May 15--the lowest level in nine months--from -46.9 the previous week. Americans have less money to spend on necessary items because of rising grocery bills and gas prices that remain close to $4 per gallon. A high unemployment rate and stagnant wages are likely the causes of the jaundiced view of the U.S. economy and household finances, said Joseph Brusuelas, a senior economist at Bloomberg LP in New York …

News of the Competition (05/18/2011)

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MADISON, Wis. (5/19/11)
* U.S. companies are rushing to borrow as much as they may need in the foreseeable future, based on concerns that interest rates will rise once the Federal Reserve ends its support for financial markets in June (The Wall Street Journal May 18). As evidence: Google sold its first bond ever, Johnson & Johnson implemented its largest bond deal on record Tuesday, and Texas Instruments raised debt Monday for the first time in more than a decade. Also, smaller companies, such as Great Plains Energy Inc., are filling up on debt at some of the lowest interest rates in history, the Journal said. On Monday and Tuesday, investment-grade firms sold $19 billion worth of bonds in the U.S., according to data provider Dealogic--which could make this week the year’s busiest to date, the Journal said ...

Market News (05/18/2011)

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MADISON, Wis. (5/19/11)
* The Federal Open Market Committee (FOMC) at its last meeting discussed how and when to exit from the Fed's low 0% to O.25% interest rate policy, according to minutes of FOMC's April 26-27 meeting, released Wednesday. Officials were divided about when to start tightening monetary policy, with some indicating that an increase in risks of inflation might bring an exit sooner than expected. However, others said early rate hikes likely would slow the nation's economic recovery. There is much uncertainty about the exit strategy because the Fed has never had to use the exit strategy before (Dow Jones via The Wall Street Journal May 18). Policymakers appeared to agree that letting the Fed's huge balance of $2.7 trillion in assets slowly shrink--through predictable sales of assets--would likely be the first step toward tightening monetary policy, but they also indicated that they would not implement the plan until they were sure the economy could bear it. To read the minutes, use the link … * The likelihood that the U.S. will be in a recession six months from now dropped to 21% in April from 22% in March (Moody’s Economy.com May 18). The improvement reverses a small portion of the previous month’s increase and places the risk of recession on an even level with its first-quarter average, Moody’s said. April’s mixed data indicate the economy doesn’t seem to have picked up much steam, which is preventing the probability of recession from showing a lesser likelihood, Moody’s said. Gross domestic product growth in the second quarter is forecast to rise at annual rate of roughly 3.5% … * Mortgage applications rose 7.8% for the week ended May 13 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 increased 7.1. The Refinance Index rose 13.2% and is at its highest level since the week ending Dec. 10. The seasonally adjusted Purchase Index decreased 3.2%. The unadjusted Purchase Index declined 3.3% and was 1.7% lower than the same week one year ago. “The 30-year fixed mortgage rate is now 53 basis points below its 2011 peak, and has decreased for five straight weeks,” said Michael Fratantoni, MBA vice president of research. “Over this five-week span, the Refinance Index has increased by about 33%. Refinance application volumes remain about 50% below the most recent peak last October. ” For the MBA report, use the link … * CEO turnover worldwide for 2010 saw the largest year-over-year decline of the past decade, falling to the lowest rate since 2003, according to a report released by Booz & Co., a New York-based management consulting firm (Bloomberg.com May 18). Last year, 291 CEOs left their companies. Also, CEO succession at the world’s 2,500 biggest public companies by market capitalization last year fell 19%--to 11.6%--the lowest rate since 2003 ...

News of the Competition (05/17/2011)

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MADISON, Wis. (5/18/11)
* New York Attorney General Eric T. Schneiderman has requested documents and information during the past few weeks from three major Wall Street banks concerning their mortgage securities operations during the credit boom, which may have contributed to mortgage losses in the billions of dollars (The New York Times May 16). Schneiderman’s office also has requested meetings with the three banks--Bank of America, Goldman Sachs and Morgan Stanley--in efforts to obtain information about their roles in the financial crisis, according to sources familiar with the matter. A spokesman for the attorney general said Schneiderman would have no comment on the investigation, which is just beginning … * By May 2013, mortgage bankers’ minimum capital requirements will go up, increasing the probability of a merger and acquisition boom, say industry advisers (American Banker May 17). In an ideal situation, nonbank depositories that are selling loans to Fannie Mae and Freddie Mac, or are obtaining guarantees from the Federal Housing Administration (FHA) should possess $3 million to $5 million in capital, Chuck Klein, managing partner of Mortgage Banking Solutions in Woodway, Texas, told the Banker. Fannie, Freddie and the FHA are phasing in the minimum capital requirements over three years to give smaller lenders more opportunity to either raise more funds or locate a mortgage partner, the publication said …

Market News (05/17/2011)

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MADISON, Wis. (5/18/11)
* U.S. home construction unexpectedly dropped in April because tornadoes and flooding in the South stymied construction sites--adding to the problems the struggling sector has had as it remains a drag on the two-year-old economic recovery (The Wall Street Journal and Bloomberg.com May 17). Home and apartment construction decreased 10.6% in April from March to a seasonally adjusted annual rate of 523,000, the Commerce Department said Tuesday. Economists forecast 569,000 houses to be constructed in April, according to a Bloomberg News survey. Home construction will be slow to gain momentum because of declining home values and the likelihood of more foreclosures entering the market, Bloomberg said … * Industrial production was unchanged in April after increasing 0.7% in March, according to the Board of Governors of the Federal Reserve System. Output in February is estimated to have declined 0.3%; previously it was reported to have edged up 0.1%. In April, manufacturing production fell 0.4% after rising for nine consecutive months. Total motor vehicle assemblies dropped from an annual rate of nine million units in March to 7.9 million units in April, mainly because of parts shortages from the earthquake in Japan. Excluding motor vehicles and parts, factory production rose 0.2% in April. The output of mines advanced 0.8%, while the output of utilities increased 1.7%. At 93.1% of its 2007 average, total industrial production was 5% above its year-earlier level. The rate of capacity use for total industry edged down 0.1 percentage point to 76.9%, a rate 3.5 percentage points below its average from 1972 to 2010. For the Fed release, use the link … * With confidence in the economic recovery strengthening, small and midsize U.S. companies intend to increase their work forces by an average of 6% in the next year, according to a survey released Tuesday by General Electric Co.’s (GE) finance unit, GE Capital. The survey includes data compiled from chief financial officers at 350 companies with annual sales of $50 million to $1 billion. Roughly 80% of those surveyed said they intend to hire more workers, and nearly two-thirds have already begun hiring, GE Capital said …

News of the Competition (05/16/2011)

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MADISON, Wis. (5/17/11)
*The U.S. Justice Department filed an antitrust lawsuit Thursday to block VeriFone Systems Inc.’s proposed $485 million acquisition of Hypercom, because the agency said the sale would “substantially lessen” competition for U.S. payment terminals (American Banker May 16). Consequently, VeriFone and Hypercom said they are contemplating a sale of Hypercom’s U.S. business to an “alternative buyer.” Antitrust questions have followed the deal since it was announced in November, the Banker said … * The Office of Thrift Supervision has granted Naugatuck Valley Financial Corp. in Connecticut permission to convert to a 100% stock-owned company from a mutual holding company (American Banker May 16). By selling between 3.3 million and 5.1 million shares at $8 apiece, the $567 million-asset Naugatuck aims to offer investors the 60% stake presently owned by the mutual fund holding company, the Banker said. Through the second-step offering, the company could raise up to $41 million--depending on investor demand, the publication said … * In efforts to expand beyond credit card loans, Discover Financial Services Thursday said it agreed to pay $55.9 million to purchase assets of Home Loan Center--which operates as Lending Tree Loans (American Banker May 16). Discover’s intention--just like Tree.com--is to originate mortgages and sell them to the secondary market instead of retaining them on its balance sheet, the Banker said. Because mortgage lending involves large loan amounts and a relatively small number of loans, it requires accumulating a lot of capital fast, compared with originating student loans and credit cards, Craig Focardi, a senior research director at TowerGroup, in Needham, Mass., told the publication. The problem is that mortgage markets still are wary about mortgage financing, he added …

Market News (05/16/2011)

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MADISON, Wis. (5/17/11)
* Global business sentiment has remained relatively unchanged this spring, with a prevailing positive mood, according to Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com May 16). Sentiment is consonant with a worldwide economy that is growing at a rate above its potential, Moody’s said. Businesses indicate that they are making robust investments and that sales are steady. Although hiring remains soft, it is resilient. In recent weeks, pricing pressures have diminished somewhat--mirroring lower oil and commodity prices, Moody’s said. South American businesses and business services are the most upbeat, while Japanese businesses remain the most uncertain, Moody’s added … * Global demand for U.S. assets--stocks, bonds and other financial instruments--fell in March from the previous month because China decreased its holdings of government securities, the Treasury Department said Monday (Bloomberg.com May 16). Net long-term capital flows to the U.S. dropped to $24 billion in March--the fifth consecutive monthly slowing--from $27.2 billion in February. Foreign entities bought a net $116 billion--when including short-term securities such as stock swaps--compared with net buying of $95.6 billion the prior month. Foreign official institutions, including sovereign wealth funds and central banks, cut back their holdings of U.S. long-term securities, while private investors bolstered their holdings (Moody’s Economy.com May 16) …

News of the Competition (05/13/2011)

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MADISON, Wis. (5/16/11)
* Although a recent global survey indicated 54% of analysts, investors and traders had an unfavorable opinion of Goldman Sachs Group Inc., 78% of those surveyed said accusations that the New York firm misled clients will have no effect on the investment company or will hurt the firm's reputation without driving away clients (Bloomberg News via American Banker May 13). Irrespective of history or morality, investors will continue to place their money in the hands of capable institutions, Christian Contino, a survey participant who is a consultant for the investment management section of the United Nations’ International Fund for Agricultural Development, told Bloomberg … * JPMorgan Chase & Co. and Morgan Stanley likely will handle the next sale of General Motors shares, said source familiar with the matter (Bloomberg.com May 13). Chase and Morgan Stanley led investment banks when GM held its initial public offering. The U.S. Treasury Department--GM’s biggest shareholders with a 33% stake--won’t sell more shares until at least August so it can allow the stock price time to climb, sources familiar with the decision, told Bloomberg

Market News (05/13/2011)

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MADISON, Wis. (5/16/11)
* U.S. consumer prices increased in April, pushed by rises in food and fuel costs that are lifting inflation to its highest level in two years, although inflationary pressures have eased in May (The New York Times and Bloomberg.com May 13). The Consumer Price Index rose 0.4% last month, the Labor Department said Friday. Prices have risen 3.2% during the past 12 months--the largest 12-month gain since October 2008, the Times said. Excluding volatile food and energy components, prices inched up 0.2% and have increased just 1.3% in 2011. Later his year, food and gas prices should retreat, economists say. The core price index was forced up by the rising cost of new and used cars, medical care and clothing, the Times said … * Consumer confidence in the U.S. rose more than anticipated in May because citizens became more optimistic that employment upturns will solidify, helping them contend with high food and fuel costs (Bloomberg.com May 13). The Thomson/Reuters/University of Michigan consumer sentiment index increased to 72.4--a three-month high--from a final reading of 69.8 in April. The measure was forecast to increase to 70, according to a survey of 62 economists by Bloomberg News. Higher prices still are definitely a drag on consumer sentiment, resulting in very small, gradual gains in spending, Omar Sharif, an economist for RBS Securities Inc., in Stamford, Conn., told Bloomberg. Meanwhile, short-term inflation expectations decreased, while the five-year price outlook inched upward (Moody’s Economy.com May 13) … * Basel III global banking rules likely will lead to banks having too much cash--being over-capitalized--by 2019, UBS AG Chief Executive Oswald Grubel said Thursday (The Wall Street Journal May 12). Although Grubel predicts there will be overly liquid, overcapitalized banks, that fact also portends a paucity of growth, he told the Journal. If stricter capital requirements are enforced in Switzerland and the United Kingdom, investment banking could shift to the U.S., Grubel told the Journal while discussing changes in the global balance of power and its consequences …

Market News (05/12/2011)

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MADISON, Wis. (5/13/11)
* Initial claims for U.S. unemployment benefits declined less than expected last week, a sign the labor market recovery is taking time to pick up steam (Bloomberg.com May 12). Claims fell 44,000--to 434,000--for the week ended May 7, the Labor Department said Thursday. Economists had predicted 430,000 claims, according to a Bloomberg News survey. The number of people on unemployment benefits rolls increased while those receiving extended payments decreased. Meanwhile, continuing claims for unemployment benefits dropped to roughly 3.69 million for the week ended April 30 from 3.77 million the previous week, although that figure excludes millions more on emergency and extended benefits, Moody’s said ... * U.S. retail sales increased in April mirroring gains at grocery stores and service stations because food and fuel prices rose (Bloomberg.com Mary 12). The 0.5% gain was the smallest since July, after a 0.9% March gain, the Commerce Department said Thursday. Escalating grocery and gasoline bills are leaving citizens with less money to put toward other purchases, Bloomberg said. Excluding gas stations, where sales were buoyed by rising prices, retail growth was 0.2%--the slowest this year (Moody’s Economy.com May 12). Large sales declines were seen by appliance, electronics, furniture, hobby and sporting goods stores. Retail sales were 7.6% above their year-ago level ... * U.S. wholesale (producer price) costs increased more than anticipated in April spearheaded by higher food and fuel prices (Bloomberg.com May 12). The 0.8% gain in the producer-price index, exceeds the 0.6% forecast by economists in a Bloomberg News survey, according to Labor Department figures released Thursday. However, inflation should not be a worry beyond food and energy prices, Sean Incremona, a senior economist at 4Cast Inc., told Bloomberg ... * For a fourth consecutive week, mortgage rates in the U.S. declined, placing borrowing costs at the lowest level since December, according to mortgage finance company Freddie Mac (Bloomberg.com May 12). The average rate for a 30-year loan fell to 4.63% for the week ended May 12, from 4.71% the prior week--the lowest since the week ended Dec.9--Freddie said. The 15-year rate dipped to 3.82% from 3.89% a week ago, Freddie added …

News of the Competition (05/12/2011)

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MADISON, Wis. (5/13/11)
* Michael Stores Inc. said its debit breach is worse than originally reported (American Banker May 12). The national crafts supply retailer said Wednesday the personal identification (PIN) pad-tampering attack it announced last week is impacting at least 90 payment terminals in 20 states. The extensive geographic reach of the intrusion portends the work of a sophisticated organized-crime group, Julie Conroy McNelley, a senior risk and fraud analyst at Aite Group Inc., told the Banker. Michaels said it has disabled and quarantined all suspicious PIN pads and also took out an additional 7,200 pads from its U.S. stores … * Average balances of 401(k) retirement plan in the U.S. reached the highest level since 1998, when Fidelity Investments tracking account values (Bloomberg.com May 11). As of March 31, the average U.S. account balance increased to $74,900--a nearly 12% increase from last year, according to a Fidelity report released Wednesday. The Boston mutual fund manager is the largest provider of 401(k)s with 11 million participants in nearly 16,500 employee-sponsored defined contribution plans …

Market News (05/11/2011)

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MADISON, Wis. (5/12/11)
* The U.S. trade deficit grew more than expected in March--even though domestic companies sold the most goods and services abroad in nearly two decades--because the highest oil prices in more than two years lifted imports, mitigating the record exports (The New York Times and Bloomberg.com May 11). The trade gap increased 6% to $48.2 billion, the Commerce Department said Wednesday. That constitutes the highest level since June 2010 and is up $45.4 billion from February. Exports rose to $172.7 billion--the most on record going back to 1993, in part because a weaker dollar has made U.S. goods cheaper abroad, the Times said. The other factor in heightened exports is the rapid growth of developing countries, with U.S. firms exporting more agricultural goods, autos and chemicals, the Times said … * Mortgage loan application volume in the U.S. increased 8.2% on a seasonally adjusted basis for the week ended May 6 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 8.3%. The Refinance Index went up 9% and is at its highest level since the week ending March 18. The seasonally adjusted Purchase Index climbed 6.7%. The unadjusted Purchase Index increased 7.1 and was 25.8% lower than the same week one year ago. “Rates dropped again last week as the Federal Reserve continued its QE2 asset purchase program,” said Michael Fratantoni, MBA vice president of research. “The 30-year fixed mortgage rate is now 46 basis points below its 2011 peak, and has decreased for four straight weeks by a total of 31 basis points. Over this four-week span, the refinance index has increased by about 18%. Despite the recent increases however, refinance application volumes remain more than 50% below levels seen last fall.” For the MBA report, use the link …

News of the Competition (05/11/2011)

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MADISON, Wis. (5/12/11)
* A federal Jury Wednesday convicted Raj Rajaratnam, founder of hedge fund Galleon Group, on all 14 counts of securities fraud and conspiracy (The Wall Street Journal May 11). The verdict, which came after 11 days of deliberation, will provide the U.S government with a substantial victory to ramp up production of insider trading on Wall Street and in the U.S. corporate world, the Journal said. The trial shed light on the behind-the-scenes activities of a hedge fund that once was held in high regard. However, Galleon Group gained access to highly sensitive information about--among other matters--Goldman Sachs Group Inc.--at the height of the financial crisis. The amount of illegal profits and losses avoided through the schemes by Galleon was put at $63.8 million … * To meet gradually growing demand for its products, General Motors (GM) Tuesday revealed it would invest $2 billion in U.S. factories, following its government-sponsored bankruptcy (The New York Times May 10). The U.S. automaker said it intends to renovate 17 plants in eight states in a move that would create or save more than 4,000 jobs. GM did not specify when and where it would make all the improvement investments, the Times said …

News of the Competition (05/10/2011)

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MADISON, Wis. (5/11/11)
* The level of competition in certain markets can provide important context for the merits of a deal, as merger and acquisition activity rebounds, according to American Banker (May 10). Markets such as the Chicago and Kansas City metropolitan statistical areas (MSAs) are among the most competitive, and markets such as the Charlotte, N.C., and Buffalo, N.Y., MSAs are some of the most concentrated, according to the standard antitrust scale. A region could be ready for consolidation if businesses in it are disjointed among many smaller institutions, the Banker said. Regions dominated by a few big players that potentially have some pricing power could indicate room for new entrants or, alternatively, keen competition for institutions working with a narrow purchase, the Banker added ... * Goldman Sachs Group Inc. disclosed the Commodity Futures Trading Commission is investigating one of its units (The Wall Street Journal May 10). The Commission is examining Goldman Sachs Execution and Clearing division’s role involvement as a clearing broker for an unnamed Securities and Exchange Commission-registered dealer. The agency told Goldman it intends to file aiding and abetting, civil fraud and supervision-related charges against the company’s operation pertaining to its clearing services for the unnamed broker-dealer …

Market News (05/10/2011)

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MADISON, Wis. (5/11/11)
* U.S. import prices increased more than expected in April, pushed by higher fuel and food costs that could compel some companies to hike their prices (Bloomberg.com May 10). A 2.2% rise in the import-price index followed a revised 2.6% March gain, the Labor Department said Tuesday. Economists had predicted a 1.8% rise in April, according to a Bloomberg News survey. Prices excluding fuel climbed 0.6%. The cost of foreign goods could be forced upward by growing demand from economies in Latin America and Asia in concert with a weaker dollar, Bloomberg said. Import prices rose 11%, compared with a year earlier--just above the 10% jump forecast by economists in a Bloomberg news survey … * U.S. wholesale inventories increased less than sales in March, an indication companies will continue to bolster stockpiles to meet demand (Bloomberg.com May 10). Inventories rose 1.1%--just below the 1% gain predicted by economists in a Bloomberg News survey, according to data released by the Commerce Department Tuesday. Sales bounced back, strongly increasing a solid 2.9% in March after declining an upwardly revised 0.3% in February (Moody’s Economy.com May 10). The inventory-to-sales ratio dropped to 1.13 from 1.15 … * In an indication small-business confidence hasn’t recovered, the National Federation of Independent Business (NFIB) index dropped to 91.2 in April from 91.9 in March (Moody’s Economy.com May 10). Uncertainty in the aftermath of the Japanese earthquake and tsunami, coupled with the threat of higher oil prices and persistent worries about Middle East political unrest are significant drags on business sentiment, Moody’s said …

News of the Competition (05/09/2011)

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MADISON, Wis. (5/10/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday the closing of another bank, bringing the total bank failures so far this year to 40, compared with 157 for the entire year in 2010. The failed bank is Costal Bank, Cocoa Beach, Fla., assumed by Premier American Bank NA, Miami, Fla. The closed institution held roughly $130 million in assets as of March 31. The FDIC estimated the newest failures will cost the Deposit Insurance Fund about $13 million ... * Bank of America Corp. (BofA) is considering the implementation of a text message feature that would allow customers--if they are short of funds--to use overdraft coverage on an individual debit transaction at the point of sale (American Banker May 9). The feature, which is still in a nascent phase and won’t be more broadly tested until early 2012, is a change in the manner in which BofA is addressing the overdraft issue, the Banker said. In March 2010, BofA caused a stir by instituting a comprehensive policy denying debit card purchases at the point of sale if a customer had insufficient funds to cover a purchase. The change was implemented ahead of federal regulations requiring banks to provide customers the means to opt out of overdraft protection and avoid paying large fees for small-dollar transactions, the Banker said. Now BofA concedes its customers want more overdraft options, the Banker added ... * In April, National Bancorp Holdings Inc. foreclosed on Generations Bank, a rare occurrence in the banking industry, which requires special circumstances (American Banker May 9). The buyer, National Bancorp, had to make its way through the uniform commercial code to purchase the Overland, Kan.-based Generations following a default by its owners on a loan from a unit of Dickinson Financial Corp. Some people in the industry have forgotten this can happen, Walter Moeling IV, a partner at Atlanta-based law firm Bryan Cave, told the Banker. The reason such an event hasn’t been recently seen is because the lender needs to perceive some value in foreclosing on a bank, Moeling said, adding he thinks this type of foreclosure will become a real issue for many banks ...

Market News (05/09/2011)

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MADISON, Wis. (5/10/11)
* First-quarter U.S. home values saw the largest drop since late 2008, causing many economists to extend their estimates of the length of time it will take before housing-market prices hit a bedrock level (The Wall Street Journal May 9). First-quarter home values declined 3% from fourth quarter 2010 and 1.1% in March from February, forced downward by an excess of foreclosed homes on the market, according to data released Monday by real estate website Zillow.com. Home prices have decreased for 57 consecutive months, Zillow said. In 2010, the housing market showed indications of improvement as price depreciation began slowing in some markets and solidified in others. However, housing market improvements imploded after federal programs that gave buyers up to $8,000 in tax credits expired last summer, and have been sliding downward ever since then, the Journal said ... * U.S household debt increased 0.3% in the first quarter, in part because mortgage balances saw a “small increase,” according to a Federal Reserve Bank of New York survey (Bloomberg.com May 9). At the end of March, consumer indebtedness tallied $11.5 trillion--an increase of $33 billion from Dec. 31, according to the quarterly report on household debt and credit released Monday. In a related matter, more than 28% of U.S. homeowners were underwater--owed more than their properties were worth in the first quarter, Zillow Inc.--which operates a website with real-estate listings and property-value estimates--said Monday (Bloomberg.com May 9). Homeowners with negative equity rose 22% from a year earlier because home prices slid 8.2% during the past 12 months, Zillow said …

Consumer credit rose 3 in March declined at CUs

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WASHINGTON (5/9/11)--U.S. consumers borrowed more than expected in March--with credit totaling $2.46 trillion, the Federal Reserve said Friday. That was 3% or $6 billion more than in February. Credit unions lent $219.7 billion during the month--about $2.2 billion less than in February. While credit card debt stayed the same as in February for credit unions, their March nonrevolving loans slipped $2.2 billion. March's overall consumer credit outstanding was the sixth consecutive month that borrowing had increased, following February's increase of $7.6 billion, said the Fed. Economists surveyed by Dow Jones Newswires had estimated a $4.8 billion gain in consumer credit (The Wall Street Journal May 6). Overall revolving credit card debt and nonrevolving loans such as auto, student and mobile home loans each increased 3% during March, said the Fed. Overall credit card debt totaled $796.1 billion, compared with $794.2 billion in February. March marked the second time in 31 months that credit card debt increased, signaling that American consumers may be letting their credit debt grow again (The Atlantic May 6). Analysts offered several possible explanations for the increase in credit card debt. One possible explanation is related to rising gas and food prices forcing some consumers to run a credit card balance to make ends meet, said The Atlantic. Or it could be that consumers are eager to spend again. According to Bloomberg.com, gains in payroll may be giving consumers the ability to borrow more, and consumers are more confident about the economic outlook and their financial situation. For credit unions, credit card debt remained at $35.3 billion, same as in February, but $6 million less than in January, said the Fed's report. Credit unions lent $184.5 billion in revolving loans, compared with $186.7 billion in February and $188.2 billion in January, the report said. Overall nonrevolving credit totaled $1.629 trillion, nearly $4.1 billion more than in February. In credit unions, nonrevolving loans totaled $184.5 billion, compared with $186.7 billion in February and $188.2 billion in January.

News of the Competition (05/06/2011)

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MADISON, Wis. (5/9/11)
* Although U.S. banks have promised to find efficiencies and cut costs, they have been short on specifics in accomplishing those goals, raising questions about how serious they are in controlling costs (American Banker May 6). At a conference hosted Thursday by RBC Capital Markets that included leaders of several major banks, analysts attending were interested in whether the cost cuts would come from banks’ retail operations or elsewhere, the Banker said. Although staffing levels and branch offices were likely to be placed under greater scrutiny, some banks such as Wells Fargo--which spent the last 10 years building branches--remain reticent to consider substantial cuts to retail operations--Brian Foran, an analyst for Nomura Securities, told the Banker … * The number of U.S. banks will fall below 5,000 in the next five years and below 2,500 in the next 10 years, from today’s 7,600, Gerald H. Lipkin, chairman, president/CEO of Valley National Bancorp in Wayne, N.J., told an investor conference in Boston (American Banker May 6). The regulatory environment is forcing consolidation, particularly for small banks, which have fewer resources to handle the increased costs of regulatory compliance with the Dodd-Frank Act and other legislation passed in the aftermath of the financial crisis, Lipkin said … * The Securities and Exchange Commission (SEC) has served JPMorgan Chase & Co. with a subpoena because of failed mortgages, said a source familiar with matter (Bloomberg.com May 6). The SEC is investigating banks including Credit Suisse Group AG (CS) for allegedly failing to share refunds from sellers of faulty debt. U.S. investigators are examining firms in the mortgage industry after the worst implosion of home prices since the Great Depression, Bloomberg said …

Market News (05/06/2011)

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MADISON, Wis. (5/9/11)
* U.S. employers added more jobs than predicted in April, with the economic recovery continuing to gain momentum in the face of higher fuel prices (The New York Times and Bloomberg.com May 6). Payrolls grew by 244,000--the largest gain since May 2010--following a revised 221,000 in March, the Labor Department said Friday. In a separate report, the department said the unemployment rate increased to 9% in April from 8.8% in March. The whole increase in jobs came--as it has for several months--from private employers, which added 268,000 jobs in April, following a revised 231,000 additions in March, according to the Labor Department. Government entities--fighting to balance budgets and manage declining revenues and growing deficits--cut 24,000 jobs in April. Most reductions were at the local level, where 14,000 jobs were cut in April, after a decline of 15,000 in March, the Times said … * The Economic Cycle Research Institute (ECRI) weekly leading index, which measures economic growth, declined to 128.7 for the week ended April 29 from a revised 129.2--previously 129.3--the prior week (Moody’s Economy.com May 6). The smoothed annualized growth rate dropped to 6.7% from an unrevised 7.5%. In an indication the economic recovery could lose some momentum in the coming months, the index has inched downward in recent weeks. However, that does not portend another recession, Moody’s said …

News of the Competition (05/05/2011)

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MADISON, Wis. (5/6/11)
* Government-sponsored mortgage finance company Freddie Mac posted a first-quarter profit of $676 million, fueled by a diminishing inventory of delinquent loans and foreclosed properties (Bloomberg.com May 4). The financial result will allow Freddie to avoid seeking an infusion of Treasury Department aid, Bloomberg said. Freddie Thursday reported net worth of $1.2 billion, following a payment to the Treasury of $1.6 billion in quarterly dividends on the government’s roughly 80% stake in the company. The enterprise reported a $6.7 billion loss for the same period a year ago … * Mortgage-revenue declines in the first quarter--caused by long-term interest rates climbing late last year--were larger than most U.S. community banks anticipated (American Banker May 5). The steep drop from the previous quarter surprised many industry analysts and executives and has left them at loss on how to fill the revenue hole, the Banker said. Other factors that caused the drop in mortgage revenues are: weakened motivation for wholesale lenders engendered by compensation rules for mortgage brokers under the Dodd-Frank Act; and the first quarter typically being shorter than the other quarters, with some sections of the U.S. enduring a tough winter, according to some bankers … * Several large U.S. banks have already replaced their free checking account product with one that has fees attached, and U.S. Bancorp is following that lead (American Banker May 5). The Minneapolis bank said it would start moving customers with a free checking account to a product called Easy Checking, which has a monthly fee of $8.95, or $6.95 if the customer opts out of paper statements. The monthly fee can be waived if customers maintain an average monthly balance of at least $1,500 or if they make a direct deposit of at least $500 per month …

Market News (05/05/2011)

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MADISON, Wis. (5/6/11)
* Initial claims for U.S. unemployment benefits unexpectedly increased last week to their highest level since summer, driven by shutdowns of auto plants and the massive earthquake and tsunami in Japan (The Wall Street Journal and Bloomberg.com May 5). Claims surged 43,000--to 474,000 for the week ended April 30--the most since August, the Labor Department said Thursday. Several one-time administrative factors--rather than economic factors--caused the surprising increase in claims, a Labor Department analyst told the Journal. The factors included additional auto industry claims, a new emergency benefit program in Oregon, and additional layoffs in New York state because of spring break. In a related matter, the Monster employment index, which measures help-wanted ads placed online by U.S. employers, jumped nine points between March and April--a third consecutive monthly increase (Moody’s Economy.com May 5) … * Nonfarm business productivity of U.S. workers slowed in the first quarter, and labor costs increased as the recovering economy caused firms to bolster their payrolls (Bloomberg.com May 5). The gauge of employee output per hour rose at a 1.6% annual rate, following a 2.9% gain in fourth quarter 2010, according to figures released Thursday by the Labor Department. First-quarter expenses per employee grew at a 1% rate after falling 1% the previous quarter. As they gear up output, companies are beginning to hire more workers, causing productivity growth to ease, Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Conn., told Bloomberg. In coming months, employment will see stable, but unspectacular, gains in employment, he added … * The highest gasoline prices in nearly three years caused U.S. consumer confidence to fall to a five-week nadir, according to the Bloomberg Consumer Confidence Index. The prices dampened consumers’ attitudes toward the buying climate, prompting the index to decline to -46.2 for the week ended May 1--the lowest level since the end of March--from -45.1 the prior week. Single Americans and young adults were among the groups losing the most confidence the past two weeks, the report indicated. A still struggling labor market and escalating gasoline prices probably will slow demand and be a drag on growth in the second quarter--particularly for lower-income groups, Joseph Brussels, a senior economist at Bloomberg LP in New York, told Bloomberg

News of the Competition (05/04/2011)

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MADISON, Wis. (5/5/11)
* Although U.S. car sales have been on the upswing, the small auto-lending boom that financial institutions have experienced appears to be dissipating because competition has been driving down auto loan rates--making them less profitable for all lenders (American Banker May 4). Ally Financial Inc., a top U.S. car lender, said earnings declined 15.8% at its North American auto finance division--the prime lender to Chrysler and General Motor dealers--compared with a year earlier. However, Ally’s used- and new-car loan originations nearly doubled, the Banker said … * MasterCard Inc. said it doesn’t anticipate feeling the effects of the Federal Reserve Board’s debit interchange cap--which is slated to take effect July 21--until at least 2012 (American Banker May 4). Under the current Fed proposal, debit-card interchange rates would be capped at 12 cents per transaction for issuers with more than $10 billion in assets. Card issuers obtain revenue from interchange--not the card brands--and many issuers will not instantly change their policies when interchange rates are reduced from the current average of 44 cents per transaction, the Banker said. Many of the adjustments banks are contemplating would restrict consumers’ debit card use, and when that occurs, MasterCard will be impacted, the Banker said. The Credit Union National Association (CUNA) opposes the proposal in Congress capping interchange fees and has told federal lawmakers that such action would harm consumers by driving up costs of debit cards, limiting consumer options, and harming competition and technological innovation. Interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants, CUNA said. CUNA is urging Congress to delay implementing the rule for further study on its impact ... * A survey of U.S. retailers indicates that 80% of retailers surveyed ended banking relationships in the past 18 months, while 90% began new ones (American Banker May 4). The survey, which was released Tuesday, polled 111 finance professionals at retailers about their relationships with their banks, and was conducted by Fifth Third Bank and the Association of Financial Professionals. It said the prices of services--not access to credit--was many times the determining element for a change. Three-fourths of retailers that ended relationships with banks said they did so to rein in costs. More than half of those that switched banks said they found better deals elsewhere. Just 15% of retailers that left banks, and 24% that began new relationships, said access to credit was their reason for leaving ...

Market News (05/04/2011)

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MADISON, Wis. (5/5/11)
* Payrolls of U.S. private-sector companies in April expanded--although below expectations--indicating only gradual improvement in the labor market (The Wall Street Journal May 4). Private-sector jobs increased 179,000 in April from a revised 207,000 the previous month, according to figures released Wednesday from ADP Employer Services. The employment gain indicated by ADP may not be sufficient to aid the economy in gathering momentum after a spike in food and fuel costs caused economic growth to drop to a 1.8% annualized rate in the first quarter (Bloomberg.com May 4). In a related matter, announced layoffs by U.S. employers declined in April, for a second consecutive month, by 12.1% to 36,490 from 41,500 in March (Moody’s Economy.com May 4) … * Mortgage applications rose 4% for the week ended April 29 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 increased 4.1%. The Refinance Index went up 6%. The seasonally adjusted Purchase Index climbed 0.3%. The unadjusted Purchase Index increased 1.1% and was 36.9% lower than the same week one year ago. The four-week moving average for the seasonally adjusted Market Index is down 0.9%. That average declined 2.4% for the seasonally adjusted Purchase Index, while it remained unchanged for the Refinance Index. For the MBA report, use the link …

News of the Competition (05/03/2011)

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MADISON, Wis. (5/4/11)
* The U.S. has sued Deutsche Bank AG, the largest German bank, and its MortgageIT unit for more than $1 billion for allegedly “recklessly” selecting mortgages to be included in a federal government insurance program that insures mortgages (The New York Times May 3). The U.S. government stated in a complaint filed in federal district court in Manhattan that Deutsche Bank and its subsidiary had chosen programs that broke program rules “in blatant disregard” of whether borrowers could make mortgage payments, the Times said. From 1999 to 2009, MortgageIT endorsed more than 39,000 mortgages with principal of more than $5 billion for Federal Housing Administration insurance--which indicates the mortgages were backed by the federal government … * MasterCard Inc.--the second-largest bank-card network in the world--said it first-quarter profit soared 24%. It attributed the growth to customers worldwide continuing to eschew cash and checks for plastic cards, and increasing spending (Bloomberg.com May 3). Net income increased to $562 million, or $4.29 per share, from $455 million, or $3.46 per share, in first quarter 2010, MasterCard said Tuesday in a statement … * U.S. bankers are becoming apprehensive about the economic future and often are determining that the best option is to sell to another institution, said American Banker (May 3). Although many banks are starting to put their credit problems behind them--a true bounce-back could take years, the Banker said. The median value for 34 first-quarter deals was 1.07 times book value--down from 1.08 in 2010 and on par with 2009, according to SNL Financial. Deals completed in April had a median value of 0.95 times book value. A fear of mispricing an acquisition has been a paramount obstacle in recent years, the Banker said. But because more asset writedowns have brought clarity to some institutions’ actual health, the pricing of banks now is easier than it was a year ago, the publication said …

Market News (05/03/2011)

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MADISON, Wis. (5/4/11)
* For the fifth consecutive month, U.S. factory orders rose in March. Also, businesses’ capital spending spiked because manufacturers were selling to markets abroad amid a weakened dollar (The Wall Street Journal May 3). Orders for manufactured goods rose 3% from February to nearly $463 billion, the Commerce Department said Tuesday. The factory rebound--which is at the forefront of the economic recovery--is being driven by investments in new equipment, the necessity to increase stockpiles, and exports to emerging economies such as China (Bloomberg.com May 3) … * Global sales of luxury goods are swelling in 2011 propelled by a rebound in the more mature markets of the U.S. and Europe and double-digit growth in China, according to a recent study from Bain & Co. (The Wall Street Journal May 3). Luxury spending is forecast to increase 8%--to $274 billion--in 2011, according to Bain’s Luxury Goods Worldwide Market Study released Tuesday. In a related matter, General Motors Co.’s (GM) U.S. auto sales surged 26% in April, based on stronger demand for its passenger cars from buyers purchasing more fuel-efficient vehicles, the Journal said. More than a third of GM’s sales are cars that average 35 miles per gallon. That percentage is up from 20% in 2007. Also, nearly half of buyers are choosing four-cylinder vehicles rather than more-powerful V6 engines, the Journal said …

News of the Competition (05/02/2011)

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MADISON, Wis. (5/3/11)
* The Federal Deposit Insurance Corp. (FDIC) announced Friday the closing of another five banks, bringing the total bank failures so far this year to 39, compared with 157 for the entire year in 2010. The banks are: Community Central Bank, Mount Clemens, Mich., assumed by Talmer Bank & Trust, Troy, Mich.; First National Bank of Central Florida, Winter Park, Fla., and Cortez Community Bank, Brooksville, Fla., both assumed by Premier American Bank, NA, Miami, Fla.; and First Choice Community Bank, Dallas, Ga., and The Park Avenue Bank, Valdosta, Ga., assumed by Bank of the Ozarks, Little Rock. Ark. The closed institutions held roughly $2.16 billion in assets as of Dec. 31. The FDIC estimated the newest failures will cost the Deposit Insurance Fund about $643 million … * Because it sold more cars--especially Dodge and Jeep vehicles--at higher prices, Chrysler Group LLC Monday reported its first quarterly profit since coming out of bankruptcy reorganization in 2009 (The New York Times and Bloomberg.com May 2). First-quarter net income was $116 million, compared with a net loss of $197 million in the same period a year earlier, Chrysler said in a statement Monday. A rejuvenated product lineup helped Chrysler gain marketplace momentum and improve sales and financial performance in the first quarter, Sergio Marchionne, CEO of Chrysler and its Italian partner, Fiat, said in a statement. As of March 31, Chrysler had $9.9 billion in available cash--an increase of $2.6 billion during the past three months, and $13.3 billion in debt, the company said …

Market News (05/02/2011)

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MADISON, Wis. (5/3/11)
* U.S. manufacturing slowed less than anticipated in April with solid growth that’s leading to expansion, although escalating costs remain a concern (Bloomberg.com and The Wall Street Journal May 2). The Institute for Supply Management’s (ISM) manufacturing index dropped to 60.4 from 61.2 in April. Economists had projected an April decline to 59.5, according to a Dow Jones Newswires survey, the Journal said. Readings above 50 indicate expansion. “While the manufacturing sector is definitely performing above most expectations so far in 2011, manufacturers are experiencing significant cost pressures from commodities and other inputs,” the ISM report said. U.S. manufacturing still is seeing strong demand from other areas--especially Asia, Paul Dales, a senior U.S. economist at Capital Economist Lt. in Toronto, told Bloomberg. For four consecutive months, the index has been above 60, and is well above its historical average of 52.7 (Moody’s Economy.com May 2) … * Worldwide business confidence remains mostly steady throughout the majority of industries in spite of soaring oil prices, the Japanese earthquake and tsunami, European debt problems and U.S. budget battles, according to Moody’s Analytics Survey of Business Confidence (Moody’s Economy.com May 2). Investment in sales and equipment remain strong, while office demand has increased noticeably since the start of 2011, Moody’s said. Areas of concern include businesses’ modest hiring and more aggressive pricing, Moody’s added …