Toxic Assets
BofA looks to sell toxic mortgages worth $1 billion: report link from: http://news.yahoo.com/s/nm/20101213/ts_nm/us_bankofamerica_toxic
BofA looks to sell toxic mortgages worth $1 billion: report link from: http://news.yahoo.com/s/nm/20101213/ts_nm/us_bankofamerica_toxic
Lending to U.S. small businesses fell in the third quarter, showing the companies that account for more than half of total job creation are still struggling to emerge from the recession. Net borrowing by non-financial non-corporate businesses shrank by $162.7 billion at an annual rate from July through September, the seventh consecutive quarterly decrease, according to the Federal Reserve’s Flow of Funds report released today in Washington. Still, it was the smallest drop of the contraction in lending that began in the first three months of 2009. Small companies are “still hurting and working toward healing and not borrowing,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who worked on the report as a Fed economist. “They’re paying down bank loans, they’re paying down mortgages.” Sales expectations at small businesses turned positive for the first time in five months in October, according to a survey last month by the National Federation of Independent Business, indicating firms may begin expanding in coming months. At the same time, the value of their assets has fallen, making it harder to qualify for loans, Coronado said. Fed Chairman Ben S. Bernanke has said these companies account for 60 percent of job creation, meaning bigger payroll gains a lower unemployment hinge on their willingness and ability to spend. Construction Companies Non-financial, non-corporate businesses are firms that are not publicly traded. While they can include large companies, many are small businesses, real-estate investment concerns and construction firms, said Coronado. Larger …Continue Reading
Fed changing unemployment rate.
The Federal Reserve faces a difficult decision at next month’s policy meeting on whether to offer further stimulus to a U.S. economy that is still growing but only slowly, St. Louis Fed President James Bullard said on Friday. Policymakers could wait until December if they felt the need for greater clarity on the outlook, Bullard told CNBC television, though he acknowledged that financial markets were already assigning a very high probability of Fed action at the November meeting. “This upcoming FOMC meeting is going to be a tough call, because the economy has slowed but it hasn’t slowed so much that it’s an obvious case to do something,” Bullard said. “I do think the risk of a double-dip recession has probably receded some in the last six to eight weeks.” Bullard, a self-proclaimed hawk, said the recent downward trend in inflation was a concern, but dismissed the argument that more Fed easing, which would take the form of further Treasury purchases, would be ineffective. He cautioned against allowing the United States to go the way of Japan, a country that has struggled with a prolonged period of depressed prices and economic stagnation. He indicated that, despite some reluctance about the risks of unconventional policies, the situation might require bond purchases beyond the more than $1.7 trillion the Fed has already conducted in response to the financial crisis. “It doesn’t seem like it’s going to come back toward (the Fed’s inflation) target unless we take further action,” Bullard said. After bouncing …Continue Reading
MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES (in billions of dollars) HOLDINGS 1/ AT END OF PERIOD Jul Jun May Apr Mar Feb Jan Dec Nov Oct Sep Aug Jul Country 2010 2010 2010 2010 2010 2010 2010 2009 2009 2009 2009 2009 2009 —— —— —— —— —— —— —— —— —— —— —— —— —— China, Mainland 846.7 843.7 867.7 900.2 895.2 877.5 889.0 894.8 929.0 938.3 938.3 936.5 939.9 Japan 821.0 803.6 786.7 795.5 784.9 768.5 765.4 765.7 754.3 742.9 747.9 727.5 720.9 United Kingdom 2/ 374.3 362.2 350.0 321.2 279.0 233.5 208.3 180.3 155.5 108.1 126.8 104.3 97.1 Oil Exporters 3/ 223.8 223.0 235.1 239.3 229.5 218.8 218.4 207.4 208.3 209.0 205.9 209.8 209.9 Brazil 162.2 158.4 161.4 164.3 164.4 170.8 169.1 169.3 165.8 164.9 153.6 146.0 146.8 Carib Bnkng Ctrs 4/ 150.7 165.2 165.5 153.4 148.4 144.6 143.8 128.5 123.5 114.4 116.9 125.3 138.8 Hong Kong 135.2 141.0 145.7 151.8 150.9 152.4 146.6 148.7 142.1 137.8 128.0 120.5 111.1 Russia 130.9 123.4 126.8 113.1 120.1 120.2 124.2 141.8 151.4 145.9 145.1 144.9 141.3 Taiwan 130.5 128.6 126.2 126.9 124.8 121.4 119.6 116.5 115.4 115.6 115.1 112.9 114.4 Switzerland 105.4 100.1 84.4 80.0 78.8 81.8 84.4 89.7 89.6 85.3 82.7 82.0 81.9 Canada 101.3 94.0 85.0 82.1 77.0 67.1 54.7 52.8 50.7 44.8 42.3 30.2 24.1 Luxembourg 98.9 97.5 76.3 77.6 84.6 77.9 79.1 88.4 80.2 79.5 87.5 83.0 80.8 Germany 56.4 53.5 55.4 54.3 53.7 49.9 49.0 47.8 48.7 47.9 48.8 50.1 51.2 …Continue Reading
Provisions to Provide Access to Capital 100% Exclusion of Small Business Capital GainsGenerally, non-corporate taxpayers may exclude 50 percent of the gain from the sale of certain small business stock acquired at original issue and held for more than five years. For stock acquired after February 17, 2009 and before January 1, 2011, the exclusion is increased to 75 percent. At the time of sale, however, 28% of the excluded gain will be treated as a tax preference item subject to the alternative minimum tax (AMT). Qualifying small business stock is from a C corporation whose gross assets do not exceed $50 million (including the proceeds received from the issuance of the stock) and who meets a specific active business requirement. The amount of gain eligible for the exclusion is limited to the greater of ten times the taxpayer’s basis in the stock or $10 million of gain from stock in that corporation. This bill would temporarily increase further the amount of the exclusion to 100 percent of the gain from the sale of qualifying small business stock that is acquired after the date of enactment in 2010 and held for more than five years. Additionally, the bill eliminates the AMT preference item attributable for that sale. This provision is estimated to cost $518 million over ten years. General Business Credit Carried Back Five Years.Under current law, a business’ unused general business credit may generally be carried back to offset taxes paid in the previous year, and the remaining amount …Continue Reading
• IPO for BankUnited: After being closed by regulators in May of 2009, recapitalized by Blackstone, Carlyle and WL Ross, BankUnited ($11.2B, FL) is now ready to go public in an effort to raise more than $500mm. Last quarter’s ROE was over 20% and it is now ranked in the top 10% of all banks in the country in terms of 2010 performance. • Prepayment Oddity: A rare occurrence is happening in the mortgage markets whereby lower coupons (5% and 5.5%s) are prepaying faster than higher ones (6% and 6.5%). The reason is a combination of vintage (when the loan was originated) and credit quality (lower coupons have more ability to refi). • Consumer Perceptions: A survey by the ABA asked people what effect various institutions had on society is sobering for bankers. In it, the top ranked institution was small businesses, which 71% of people felt contributed positively to society. That was followed by technology companies (68%), religious organizations (63%), the administration (45%), labor unions (32%) and the entertainment industry (33%). Well down the list, only 22% felt banks contributed positively to society vs. 69% that felt such contribution was negative. Clearly bankers need to continue to ramp up the marketing message. • Confidence Wanes: Discover reports its Small Business Confidence had its largest 1 month decline in June, as 62% of small business owners said the economy is getting worse. In addition, a record 55% of owners said they expect economic conditions to be unfavorable in the next …Continue Reading
By PETER WALLISON From the American Enterprise Institute The dominant theme of the 2,300-page Dodd-Frank Wall Street Reform and Consumer Protection Act is fear of instability and change, which the act suppresses by subjecting the largest financial firms to banklike regulation. The competitiveness, innovativeness, and risk taking that have always characterized U.S. financial firms will, under this new structure, inevitably be subordinated to supervisory judgments about what these firms can safely be allowed to do. But the worst element of this system is that the extraordinary power given to regulators–and particularly the Federal Reserve–is likely to change the nature of the U.S. financial system. Where financial firms once focused on beating their competitors, they will now focus on currying favor with their regulator, which will have the power to control their every move. What may ultimately emerge is a partnership between the largest financial firms and the Federal Reserve–a partnership in which the Fed protects them from failure and excessive competition and they in turn curb their competitive instincts to carry out the government’s policies and directions. In addition, with the creation of the Consumer Financial Protection Bureau, the act abandons a fundamental principle of the U.S. Constitution, in which Congress retains the power to control the agencies of the executive branch. These wholesale changes in traditional relationships are hard to explain except as the triumph of a fundamentally different view–a corporatist political model more characteristic of Europe–of the government’s role in the U.S. economy. Key points in this Outlook: …Continue Reading
Due to the passing of the Dodd-Frank Bill it is clear that tighter rules for securitization are right around the corning. Many agencies are concerned an uneasy about this new legislation. At worst, government efforts to rein in issuers of asset-backed securities could produce three separate regulations, each with its own elements. While the three rules would all largely do the same thing — strengthening disclosure and requiring issuers to retain 5% of the credit risk from a securitization — they have significant differences. A 5% requirement will cause for Bank pricing to increase and will be passed on to the consumer as a trickle down effect. In an interview Cristeena Naser, a senior counsel for the American Bankers Association said, “When there are all these balls up in the air, you can’t expect businesses to make systems changes … until the dust settles. They need to be coordinated. Nobody is saying that we don’t need changes to the process, but we need a uniform change to allow businesses to make decisions.” Regulators have stated that there is coordination across agencies however each regulator the FDIC and SEC are pursuing separate paths because they each deal with specialized jurisdictions. “Every regulator has jurisdiction over certain areas, and we have jurisdiction over the receivership rules. The SEC has jurisdiction over the securities rules,” said Michael Krimminger, the deputy to the FDIC chairman for policy. “Just because someone comes out first with a rule and someone comes out second with a rule …Continue Reading
