Receiving Wide Coverage ...
Fed Leaves Rates Unchanged: Recent data "suggests that the economy has been expanding moderately," the central bank said after the last policy meeting of the year, though it left its policy options open for 2012. A return to purchases of mortgage-backed securities remains a possibility, but for now the Fed will simply continue to reinvest principal repayments in new MBS. Wall Street Journal, Financial Times, New York Times, Washington Post
A Symbolic Exit: Citigroup sold off its remaining shares in the life insurer Primerica. The FT notes that Primerica was "a crucial building block in Sandy Weill's attempt to create a financial supermarket in the 1990s. … Weill and Jamie Dimon, his then lieutenant and now chief executive of JPMorgan Chase, acquired the company and used it in 1993 to buy Travelers" before merging with Citicorp to form Citigroup in 1998. Current Citigroup CEO Vikram Pandit, who's been cleaning up the mess that resulted from Weill's empire-building, spun off Primerica through an IPO last year and has been selling down its stake since. Wall Street Journal, Financial Times, New York Times
Morgan Stanley Settles With MBIA: The bond insurer will pay the investment bank $1.1 billion to end litigation over commercial and residential mortgage securities that soured. Morgan Stanley will book a $1.8 billion loss as a result of the deal, but “BreakingViews” in the Times says it will boost regulatory capital, helping the firm prepare for Basel III. And perhaps more significantly, the market’s warm reception for news of the settlement “could encourage the remaining five banks — including Bank of America — still engaged in a legal battle with MBIA to consider similar deals.” Wall Street Journal, Financial Times, New York Times
Wall Street Journal
The Federal Housing Finance Agency, conservator for Fannie Mae and Freddie Mac, sued the city of Chicago over an ordinance that makes mortgage creditors liable for upkeep of vacant properties, even those that haven't been seized. Under the law, mortgagees must inspect properties monthly to determine if they are vacant and pay a $500 fee to register those that are. The FHFA says this unfairly imposes the costs of ownership on Fannie and Freddie without conferring any of the benefits, and the agency also cites federal preemption. But we think a comment posted by a Journal reader makes a stronger case against the law, at least vis-à-vis the GSEs: "As a taxpayer, I will not only have the upkeep of my property, but now be responsible for the upkeep of property in states that I don't live in." We'd also like to point out that an agency in the Obama administration is suing a city run by Obama's former chief of staff. Though granted, acting FHFA director Ed DeMarco has chafed Democrats, including administration colleagues, on other matters too.
With home lending standards tight (a condition to which DeMarco's FHFA has surely contributed), more prospective homebuyers are turning to family members and peer-to-peer lending websites for financing. "This year, one-third of first-time home buyers received a cash gift or a loan for a down payment from family or friends, according to the National Association of Realtors. That is up from a historical average of 27%."
The government plans to curtail production of dollar coins. "Nobody wants them," Vice President Joe Biden said. Just to be clear: we're talking about the U.S. Mint here, not the Fed; this doesn't mean Washington will stop printing dollars in the figurative sense (see first item in today's Scan).
New York Times
“Shares in JPMorgan tumbled after the trustee liquidating MF Global’s brokerage unit affirmed that he might investigate the bank for its actions as the firm collapsed.”
Elsewhere ...
The New Yorker: Columnist James Surowiecki writes that there’s an “obvious and offensive” moral double standard for corporations that strategically default on their debts and consumers who do so. “Homeowners are getting lambasted for doing what companies do on a regular basis. Walking away from real-estate obligations in particular is common in the corporate world, and real-estate developers are notorious for abandoning properties that no longer make economic sense.” Surowiecki notes that American Airlines chose to file for bankruptcy protection despite having ample cash to continue servicing debt payments; restructuring its balance sheet will help the company return to profitability while imposing losses on creditors. It’s just business, so why is it considered sinful when the retail borrower thinks and acts the same way? We told you someone was going to there eventually.
