Morning Scan
Monday, November 16, 2009
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Receiving Wide Coverage ...
Credit Thaw: A front page story in the Journal said corporate failures have slowed, as companies once on the verge of default have found a new life. These companies are now refinancing their balance sheets with new debt, pushing out maturities on existing loans or using distressed-debt exchanges to avoid a bankruptcy filing. But the paper said many analysts worry the refinancing wave is just "kicking the can" down the road, without fundamentally fixing companies' deeper problems. Another story said companies around the world are racing into the bond market while investor demand remains hot, concerned that the window may slam shut at any moment. "While a rush to sell before markets wind down for the holidays is typical, this year the sense of urgency is greater. Central banks are preparing to stem the flow of easy credit that helped fuel this year's spectacular corporate-debt rally and some worry that the slowdown, if it comes too soon or too sharply, could cause a hitch in credit markets." A third story said demand is expected to be strong today for the first sale of commercial-mortgage-backed securities under a government rescue program designed, in part, to ease the mounting stress in the commercial-property sector. But this is partly a reflection of the conservative underwriting of the $400 million in bonds backed by 28 Developers Diversified Realty Corp. shopping centers. While the deal may help reopen a vital funding source for some commercial-property investors, it will likely provide little solace to owners of tens of billions of dollars of office buildings, shopping centers and other commercial real estate that are now worth less than their mortgages.
JPMorgan Chase: The papers, citing unnamed sources, said JPMorgan Chase is closing in on a deal to buy out the broker Cazenove Group's 50% interest in an investment banking partnership for a little less than $1.67 billion. Wall Street Journal, New York Times
The weekend papers said Jefferson County, Ala., filed a lawsuit seeking additional relief from JPMorgan Chase on $3.2 billion of county sewer bonds the bank helped underwrite. The Times said, "Even after a $700 million settlement with the federal government, JPMorgan Chase still faces troubles in Alabama." Wall Street Journal, New York Times
Wall Street Journal
The paper previewed a full-day presentation UBS's new CEO, Oswald Grübel, is set to give Tuesday providing "the first peek of his plans to turn around the Swiss banking giant." It said interest in the presentation is "sky-high, particularly on the back of disappointing third-quarter earnings that the bank reported Nov. 3."
The European Union's initiative towards a regulatory overhaul is going too quickly and the current deadline of Dec. 2 should be pushed back, a U.K. Treasury Committee said. In a report, the committee said the government should veto the plan if crucial changes aren't made.
Two senior Obama administration officials warned Friday that removing bank-oversight powers from the Federal Reserve would be a mistake. In a separate appearance, Austan Goolsbee, a member of the White House Council of Economic Advisers, said the Fed should retain a central role in supervising the banking sector and that moves to merge oversight into a single agency could cause industry "nervousness." The paper said the comments "were the latest salvo in an increasingly high-stakes debate about the central bank's future role." (Weekend)
B of A directors are hitting a new hurdle as they hunt for the giant bank's next CEO: Obama administration pay czar Kenneth Feinberg. The paper, citing unnamed sources, said William Demchak, senior vice chairman at PNC Financial Services Group., spurned a feeler last week from a recruiter for the Charlotte, N.C., bank, in part because of Feinberg's required approval of the compensation package for whomever succeeds Kenneth Lewis. (Weekend)
"Heard on the Street" asked, "Ratings firms have faced plenty of flak for failing to spot the risks of certain mortgage securities ahead of the crisis. Have they now overreacted?" (Weekend)
Regulators closed two banks in Florida, turning their deposits and branches over to Iberiabank Corp. of Lafayette, La., and shut another small one in California. In what the paper called "a sign that buyers are hesitant to step up and acquire failed banks," the FDIC accepted a 1.5% discount from Iberiabank on the deposits of both banks. (Weekend)
New York Times
An article looked at the evolution of digital money and the virtual wallet through services like PayPal's new ShopSavvy cell phone application. "The biggest barrier is not technological. It is that Americans think credit cards are already a fine solution. For a nation that thrives on plastic, pulling out a credit or debit card is just as convenient as pulling out a cell phone. It is also expensive for retailers to install machines to scan cellphones, and many phones' screens are too reflective for scanners to read."
Timothy Geithner and other senior officials at the Treasury Department invited economic bloggers to a background outreach session on Nov. 2. According to one attendee, the meeting had at least one benefit for the Treasury: "After meeting them, I feel I cannot refer to them as Timothy Geithner and his minions" anymore.
A Sunday Metro article profiled H. Rodgin Cohen, the chairman of Sullivan & Cromwell and, as per the headline, the "Trauma Surgeon of Wall Street," who took part in 17 financial deals last year. "For those of a populist bent — those, that is, who saw last fall as a potentially disastrous shift of risk from Wall Street to the taxpayer — there is certainly an urge to discern two horns and a tail on Mr. Cohen. …Still, it can be difficult to drum up rage against a man who is so mild, courtly and uncommonly unassuming."
In "Fair Game," columnist Gretchen Morgenson considered a tax break tucked inside the law extending the first-time the homebuyer tax credit, a look-back on losses that particularly benefits home builders. "This is getting to be a habit: companies that participated on the upside and are now reaping rewards from the taxpayers on the downside. The banks that underwrote so many dubious loans, for example, received government aid to get them lending again. Unfortunately, that hasn't been the result." (Sunday)
In "Mortgages," Bob Tedeschi wrote, "Buyers of homes in high-priced markets have some reason to cheer: the federal government recently extended through 2010 the maximum dollar amount for 'conforming loans.' This will probably mean better options for borrowers who might otherwise have had to take out "jumbo" mortgages." (Sunday)
An editorial about the Fed's new rules on overdraft protection called them "at best, half-measures," and called for Congress to pass the bills pending in both the House and Senate that would "put the overdraft scam to rest." (Saturday)
Washington Post
An article faulted the U.S. government for investing in weakened companies. In addition to bailout funds unlikely to be recovered from CIT Group, GM and AIG, about $400 billion of federal investments remain in the corporate sector, much of it channeled through Tarp. "Critics of the program say losses were inevitable, in many cases. Bankers, lawmakers, state banking regulators and oversight committees have faulted federal officials for providing funds to firms that were so sick that they couldn't recover and for failing to be open about how recipients were chosen. Some critics have also attacked the government for the types of investments they made."
An article looked at the expansion of TD Bank, a subsidiary of Toronto-Dominion, in the Washington area. It has opened five new locations this year and has more than 100 sites in the pipeline, said Kevin Gillen, TD's regional president for the area, and about half of those have already received the required local approval needed to break ground. The bank's longer-term goal is to open 200 branches in the Washington area. Alexandria-based banking consultant Bert Ely said the bank will need that kind of footprint if the company is ever going to reach critical mass in the region.
, with contributions from Maria Aspan.
