Thursday, August 25

Breaking News This Morning ...

The Oracle to the Rescue: Warren Buffett's Berkshire Hathaway announced this morning that it was making a $5 billion investment in Bank of America. Markets quickly responded by sending the Charlotte company's stock up 23% in pre-market trading. Wall Street Journal, New York Times

Receiving Wide Coverage ...

Defending Bank of America: Bank of America's debt is a good buy, says the Journal's "Heard on the Street" column. Five-year debt yielding 5.7% looks attractive in these times. "One caveat: Investors have to be mindful of which BofA business actually backs the debt" and avoid Countrywide-backed debt. Meanwhile, after blogger Henry Blodget said this week that Bank of America needs up to $200 billion to clean up its balance sheet, and B of A's stock subsequently took a nose dive, some analysts on Wednesday rose to the Charlotte, N.C. bank's defense, the Times reported. Raymond James analysts Anthony Polini said recent reports about B of A were "absurd" and the company has excess liquidity and very high reserve levels. Analyst Meredith Whitney said B of A does not need to raise capital. Analyst Richard X. Bove blamed state regulators, out to punish B of A, for much of the sour feelings about the company. Wall Street Journal, New York Times

Meanwhile, rumors were swirling yesterday that JPMorgan Chase would take over B of A, so much so that B of A felt compelled to issue a memo to employees saying the speculation was "baseless" and made no "practical sense." Wall Street Journal, New York Times

Wall Street Journal

Commercial banks have tapped the European Central Bank's emergency lending facility more this week, indicating "some lenders are struggling to borrow from traditional funding sources."

As the investigation of SEC's destruction of records continues, investigators are trying to determine if officials misled the National Archives and Records Administration by saying they weren't aware of the documents' destruction.

Deceit seems to be in vogue. The Justice Department refreshed its charges against Deutsche Bank, claiming officials at the bank "knowingly lied" about mortgage quality of government-backed loans made by one of its units.

New York Times

The Obama administration is taking a look at a program to help homeowners refinance at today's lower rates, an action that one economist described as "low-hanging fruit" to help stimulate the economy. The pros include: the program would help millions of homeowners lower their monthly mortgage payments, and it wouldn't require the government to tap the $45.6 billion pool in Tarp set aside to help homeowners. Among the cons are: the likelihood that federal regulators would oppose such a program, and so might investors who hold government-backed mortgage bonds; and that the program does not address the problem of millions of Americans being underwater on their mortgages.

Washington Post

Did the Obama administration's 2009 stimulus package work? A round-up of nine studies breaks them down into sub-groups of econometric and modeling and gives us a synopsis of each. And what's the answer? Six said it worked, one said it worked a little bit, and two said it didn't.