Morning Scan
Wednesday, November 4, 2009
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Updated every business day, circa 9 a.m. ET. To receive by email, click here. Links may require registration/subscription. |
Receiving Wide Coverage ...
British Breakup: The U.K. finalized plans to inject aid into Lloyds Banking Group and Royal Bank of Scotland on the condition that they sell off major assets. The Journal said the announcement "shows how much has changed among European regulators now that worries about systemic risk are in the rearview mirror. Earlier in the banking crisis, the prevailing view was that regulators had to tolerate torrents of aid showered on banks by governments or else risk endangering the financial system." "Heard on the Street contrasted the fates of the two banks concluding, "Hey, that's politics."
An FT story describing the deals noted that the British government imposed new pay curbs on executives at the two banks, but said these curbs were meaningless. The paper's editorial said the British government's latest attempt to mitigate the impact of its capital injections into Royal Bank of Scotland and Lloyd's, isn't all it's cracked up to be. "Taxpayers are offloading less risk than meets the eye."
The Times said "On both sides of the Atlantic, government officials have resisted the idea of cleaving large banks into several pieces to reduce the potential risks posed by giant institutions. Both hope stricter capital requirements will help diminish the danger of bank failures."
UBS Disappoints: The Swiss banking giant reported a wider-than-expected loss, impacted by accounting changes. The Journal noted that UBS "showed little sign of stanching outflows from its private bank, which has experienced an exodus of bankers, two years of heavy losses and the effects of a scandal involving U.S. clients who had secret accounts with the Swiss bank." But the FT focused on the bank's underlying profitability. It said the results "suggested that even if the bank suffered another significant accounting charge in the current three-month period, underlying profitability was moving forward to plan - albeit helped by highly favourable markets." Wall Street Journal, Financial Times
Reshaping Regulatory Reform: The papers said Senate Banking Committee Chairman Chris Dodd will float legislation next week that will break with the Obama administration's prescription for regulatory reform by establishing a single bank regulator and curbing the Fed's power. The Post said the plan "would reshape Washington's oversight of Wall Street on a more dramatic scale than a parallel effort in the House," which would just eliminate the Office of Thrift Supervision. But the FT cited an Obama administration official who hinted that the President might be willing to support "a bolder consolidation of bank regulators" than first proposed. Financial Times, Washington Post
A story in the Journal looked at "sweeping exemptions" to financial-regulation legislation that would benefit small businesses, and the opposition from consumer groups and liberal lawmakers who contend that could compromise the effectiveness of the overhaul.
A Times editorial took issue with specific exemptions in the Investor Protection Act of 2009 that would block auditing requirements on small publicly traded companies. "If Congress and the White House won't get tough on accounting fraud at small public companies, how likely are they to take on tougher issues — and more powerful constituencies — when it comes to controlling the multitrillion-dollar derivatives market or downsizing too-big-to-fail firms?"
Wall Street Journal
Warren Buffett's Berkshire Hathaway Inc. has joined Goldman Sachs in a bid to buy $3 billion in tax credits from government-owned mortgage giant Fannie Mae, according to people familiar with the matter.
Morgan Stanley has restarted the sale of its stake in China's first joint-venture investment bank, China International Capital Corp., a deal that could fetch more than $1 billion and would remove a major roadblock in the Wall Street firm's effort to build a bigger presence in China.
The FHA is due to release its annual audit, which will show the value of its projected reserves has fallen below a federally mandated level, raising concerns that the agency may need taxpayer money.
MasterCard Inc. recorded a third-quarter profit; the paper said the results, combined with those of bigger rival Visa Inc. last month, could suggest a bottoming out of the economic downturn as consumers, who had scaled back in the recession, begin to stabilize spending.
Concerns are mounting that efforts by governments and central banks to stoke a recovery will create a nasty side effect: asset bubbles in real-estate, stock and currency markets, especially in Asia.
A closely watched deal that may help uncork the commercial-property debt market is picking up steam after being threatened by some queasiness by the Federal Reserve, according to people familiar with the matter.
Wells Fargo's strategy for modifying troubled Pick-A-Pay mortgages "looks like a game of kick-the-can-down-the-road." The bank is issuing thousands of interest-only loans that will defer borrowers' balances for as long as six to 10 years.
New York Times
An article reported that the Senate and House "are poised to agree on a compromise measure to extend unemployment benefits that also would expand a popular $8,000 tax credit for homebuyers, despite a recent government report on extensive mistakes and suspected fraud in the program."
, with contributions from Maria Aspan, Emily Flitter and Steven Sloan.
