Tuesday, February 9, 2010

Receiving Wide Coverage ...

Fed Explains Exit Strategy …: The Post said the Federal Reserve is beginning to explain how it will undo the aggressive growth-supporting steps that were put in place when the economy was in its deep dive — and has begun to be clearer about when that may happen. "Fed Chairman Ben S. Bernanke is betting that if the central bank is open about how it will phase out its expansive initiatives to prop up the economy, it will provide faith that the Fed will not allow inflation to flare down the road," the Post said. In an interview with the Journal, St. Louis Fed president James Bullard provided some specifics; he said the central bank should begin gradually selling its mortgage-securities holdings later this year despite concerns from some investors the move would raise mortgage rates. Bullard said the asset sales should happen before the Fed raises short-term interest rates, a sequencing the paper said is still being debated within the central bank. Wall Street Journal, Washington Post

… Fannie and Freddie Lack One: A front-page story in the Journal contrasted how "government officials have been racing to fix bailed-out car makers and banks and are pushing to reshape the financial-services industry," while the GSEs "remain troubled wards of the state, with no blueprints for the future and no clear exit strategy for the government." Another story looked at the unlikely coalition that has been formed by some housing activists and mortgage investors to "prod banks into sharply cutting the amounts owed by borrowers whose loans far exceed the depressed values of their homes. Principal reductions are the best incentive for such borrowers to keep making monthly mortgage payments, some activists and investors say."

More on Thain's New Gig: The Post ran an Associated Press story about CIT Group's appointment of former Merrill Lynch chief executive John Thain, as its new chairman and chief executive (as was reported in Monday's Journal). In the Times, a "Breakingviews" column called Thain's appointment "a good match," saying, "After its quick spell in bankruptcy, CIT needs a motivated financial technocrat, not an expert in the art of corralling bankers with big egos. The combination plays to Mr. Thain's strengths and offers him a chance at redemption, which he deserves." New York Times, Washington Post

Goldman Takes Hit: The Journal said the Obama administration's plans to prohibit banks from making private equity investments "could have by far the biggest impact on Goldman, whose private-equity holdings include business-jet maker Hawker Beechcraft Corp., Hyatt Hotels Corp. and Texas utility giant Energy Future Holdings Inc." A second looked at Goldman's disappointing investment in Hawker Beechcraft. Despite signs of an uptick in private-jet travel, Hawker will likely be "bumping along on this bottom for quite some time," said chief executive Bill Boisture in a recent interview.

Wall Street Journal

The paper said the judge who threw out a settlement between B of A and the SEC raised questions Monday about their new deal to end two federal lawsuits alleging the bank misled investors about its takeover of Merrill Lynch. At a court hearing in New York, U.S. District Judge Jed S. Rakoff asked an SEC lawyer why the agency didn't conclude that B of A fired its general counsel because he was seeking to disclose widening losses at Merrill in December 2008.

Hartford Financial and Lincoln National swung to fourth-quarter profits, helped by rallying stock and bond markets. Principal Financial, which avoided slipping into the red during the downturn, also delivered a fourth-quarter profit.

AIG, which was "nearly undone by risky derivatives," tapped derivatives pioneer Peter Hancock as its executive vice president overseeing finance, risk and AIG's investments.

Bob Greifeld, the head of Nasdaq OMX, said it appears "impossible" to separate banks' proprietary trading activities from customer and hedging positions. The paper said his comments, made on a post-earnings conference call, "are the loudest call to date from the exchange industry for a rethink of the proposals made to the Obama administration by former Fed chairman Paul Volcker."

In an Op-Ed, Elizabeth Warren, a law professor at Harvard and currently the chair of the TARP Congressional Oversight Panel, took issue with JPMorgan CEO Jamie Dimon's recent statement that crises should be expected every five to seven years. "New laws that came out of the Great Depression ended 150 years of boom-and-bust cycles and gave us 50 years with virtually no financial meltdowns. The stability ended as we dismantled those laws and failed to replace them with new laws that reflected modern business practices."

New York Times

A page-one article said New York's "royal real estate families," those that made a name for themselves buying up skyscrapers over the last several decades, were often outbid by new players at the height of the real estate boom. "But now that some of the record-breakers are desperately trying to fend off lenders or teetering at the edge of bankruptcy, these families are looking like wise veterans. They are in relatively healthy financial shape and eager to do deals," the paper said. A separate article said that developer Adam Hochfelder, "a man who once was one of the city's high-flying real estate moguls," had been arrested Monday on charges he swindled business associates and friends out of $2.5 million on phony real estate deals.

Several letters to the editor responded to an editorial from this weekend defending the budget deficit. One letter said "you state that the worst possible thing to do during an economic downturn is to cut government spending because it could lead to a downward economic spiral. There's some truth to this, but equally true is that raising taxes during an economic downturn could lead to the same kind of death spiral."

Washington Post

Credit unions, which are expanding their loan activities to small businesses, are campaigning to increase the federal limits on the share of their resources that can be devoted to small business lending. "Sympathetic legislators have introduced bills in the House and Senate that would more than double the business-lending capacity of credit unions. But banks vigorously oppose the idea, arguing that credit unions should remain focused on their traditional mission of making loans to consumers."

Despite the crippling winter storm that pounded the nation's capital last weekend, the paper noted that Treasury Department employees were told to report to work on Monday, even while the rest of the federal government remained closed. "The secretary had to be prepped for Capitol Hill testimony on the federal budget, scheduled for Wednesday. Initiatives to spark lending for small businesses urgently needed finalizing. And a proposed budget commission required in-depth discussions."