Receiving Wide Coverage ...
Big Fat Fannie Swings to Black: Mortgage-finance giant Fannie Mae reported a $2.7 billion first-quarter profit, its strongest performance since Uncle Sam rescued it nearly four years ago. The financial turn-around will enable Fannie to repay $2.8 billion to the U.S. government. That will shave Fannie's bailout bill to a mere $93 billion out of the $116 billion originally received from taxpayers. All told, bailouts of Fannie and its sibling, Freddie Mac, will cost taxpayers $53 billion between 2011 and 2020, according to the New York Times, citing a Congressional Budget Office estimate. Fannie said it had benefited in the first quarter from the slowing pace of home-price declines and that it lost less than in recent quarters on sales of foreclosed properties. "We expect our financial results for 2012 to be significantly better than 2011," Susan R. McFarland, Fannie Mae's chief financial officer, said in a statement. "
The Chinese Are Coming: "A landmark" is how the Wall Street Journal described the Federal Reserve's Wednesday announcement that it has approved plans by three state-backed Chinese banks to expand in the U.S. The approval sets the stage for the Chinese to carry out the first acquisition of a U.S. retail-banking network by a state-owned Chinese lender. That deal will involve Industrial & Commercial Bank of China Ltd., one of the world's largest banking companies, buying 80% of the U.S. subsidiary of Bank of East Asia, a Hong Kong company with 13 branches in New York and California. The decision could open the door to more Chinese takeovers. Yet the Journal terms as "unlikely" significant Chinese inroads into the U.S. banking industry anytime soon. (Remember what happened to the Japanese?) The Fed also gave the nod to two Beijing-based banks, Agricultural Bank of China Ltd. and Bank of China Ltd., to build branches in New York City and Chicago, respectively. The approvals mark a change of direction for the Fed, which during the financial crisis rejected a bid by China Minsheng Banking Corp., to buy San Francisco lender UCBH Holdings Inc., the holding company for United Commercial Bank. "The Federal Reserve effectively is giving its seal of approval to China's bank-regulatory system, a big step for U.S. regulators given their past concerns about the adequacy of Chinese supervision of banks," the Journal reports. The approval follows the U.S.-China Economic Dialogue last week during which U.S. officials said they were "encouraged" by a positive review of Chinese banking supervision by the International Monetary Fund and World Bank, according to the Financial Times. A "slam dunk" is how Ernie Patrikis, a partner at White & Case who represented ICBC, characterized a U.S. government communique that described Chinese regulation of banks as meeting a standard of "comprehensive, consolidated supervision." It's a phrase that's come back to haunt in the past.
The Debt in Spain Falls Mainly on the Banks: Told ya so. That's what many observers of the slow-motion train wreck that is Spain's financial crisis are thinking this morning. After tuning out a growing international chorus calling for bailouts, the Spanish government on Wednesday caved in and announced it has taken a major stake in Bankia, the country's third-largest bank by assets. The Bank of Spain said Bankia and BFA, its parent company, had informed it that they will convert €4.47 billion of state aid in the bank into 45% of outstanding ordinary shares. "The value destruction by Bankia, the country's third-biggest bank by assets, is immense," according to the FT. The paper describes Bankia's troubles in a manner that's worthy of the best Wall Street scandals. They involve a public listing only last summer that raised €3.3 billion while disguising what is believed to have been a mountain of bad property loans behind bogus analyst research and a bank holding company that "kept up a pretence of normality" until recently when Deloitte refused to sign off on its accounts. Spain's ministry of economy said the bailout was "a necessary first step to ensure its [Bankia's] solvency, the tranquility of depositors and dispel doubts about the entity's capital needs," the FT reports. The third leg of the tottering stool that is the Spanish economy, along with the troubled banks and a government-in-denial: the non-financial sector. Its debt is 134% of gross domestic product, ranking second in the industrialized world behind only troubled Ireland, according to a McKinsey study cited by the New York Times.
Wall Street Journal
When the next crisis brings a major financial firm to its knees, U.S. regulators will
Wonders never cease. Democrats and Republicans appear to be on the verge of agreeing on something that doesn't involve toppling a foreign despot. It's President Obama's two nominees to the Federal Reserve Board—with backing, no less, from big financial institutions like JPMorgan Chase (JPM) and Goldman Sachs (GS). Wall Street firms have been pressing Sen. David Vitter, R-La., to
New York Times
The Consumer Financial Protection Bureau is planning to propose