Receiving Wide Coverage ...
Double Duty: Fed chairman Ben Bernanke defended the central bank’s dual mandate — control inflation and unemployment — in testimony before Congress. He reassured Republican lawmakers that the Fed is balancing the two goals rather than giving employment a higher priority. New York Times, Washington Post
Wall Street Journal
Goldman Sachs and Morgan Stanley have clarified that their pay clawback policies apply not only to traders who make reckless bets but also their managers. The disclosures were made to avoid a proxy fight with New York City comptroller John Liu. He runs Gotham's pension funds, which are significant shareholders in the investment banks.
Speaking of the Big Apple, a speculative office tower in Times Square finished more than a year ago is 60% vacant, and the $720 million construction loan, held by a syndicate led by PNC, is due in May. The see-through building's owners — a fund run by Prudential Financial and a New Jersey developer — may have to put more cash into the property, which cost $950 million to build. "Given the building's current value, experts believe Prudential would be able to refinance the construction loan for no more than about $600 million — leaving a painful $120 million hole."
Household borrowing, excluding mortgages, grew at annual rates greater than 9% in November and December, according to the Fed. "That was the biggest two-month surge since late 2001, when auto makers rolled out zero-percent financing after the Sept. 11 terrorist attacks."
Low interest rates are spurring banks to buy up billions of dollars worth of collateralized mortgage obligations. These repackaged mortgages (or rather re-repackaged, since a CMO is assembled from simpler pass-through mortgage-backed securities) are attractive for their relatively juicy yields and their customization — a bank can buy the part of the CMO that matches up well with its liabilities, and the securities are structured to offer a greater degree of protection from prepayment risk than raw MBS. And despite a superficial similarity to the notorious CDOs that blew up during the crisis, the underlying collateral for CMOs is guaranteed by the government through Fannie and Freddie.
New York Times
The Fed is expected to vote today on Capital One’s deal to acquire ING Direct — the first time the regulator will consider systemic risk in a merger application, per Dodd-Frank.
Another setback for the ever-elusive mortgage servicing settlement: New York Attorney General Eric Schneiderman, one of the dissident AGs who complained the proposed terms would let banks off too easily, abruptly called off a press conference where he was expected to finally give the deal his blessing.
Tom's Guide: This tech news website reports that Microsoft has applied to patent a "mobile wallet and digital payment" service that presumably would compete with the offerings from Google, PayPal and American Express.