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2024-08-01 | Bloomberg | Eminent Domain Battle Pits Homeowner Against Hospital | Robert and Patricia Castillo, a California couple who have already had their monthly mortgage payments cut by almost 60 percent, want the city of Richmond to reduce their debt by using its powers of eminent domain. That could be bad for hospitals in Missouri. The Castillos owe $436,500 on two loans on a three-bedroom home that’s now worth about $125,000. The hospitals are members of a mutual insurer that’s among investors in the Pimco High Yield Fund, which owns a slice of bonds backed by loans including the Castillos’. Richmond Mayor Gayle McLaughlin said “it’s our community that’s at stake here,” and the eminent domain plan is needed to help her city stem its foreclosure crisis. “There’s no way we’re going to back down on this” under threats from “Wall Street lobbyists,” she said on a call this week with reporters. At least a dozen cities, still dealing with the fallout of the housing bust , are studying proposals to confiscate home loans and write them down to help homeowners escape oversized debt burdens. Pacific Investment Management Co., which is known as Pimco and manages the world’s largest bond fund , is among mortgage-securities investors organizing a coalition to take legal action to oppose the push, according to three people with knowledge of the discussions. The program is advocated by Steven Gluckstern’s Mortgage Resolution Partners LLC, which would provide services and arrange for private investment funds that would profit by buying the loans for less than property values, and reworking them. Face Lawsuits The firm says it already is advising three other California cities and North Las Vegas , Nevada. Groups representing banks, bond investors, real-estate brokers and homebuilders have said any municipality that takes the unprecedented step of trying to use eminent domain to force sales of mortgages from bond trusts will face lawsuits, while lenders will be reluctant to make any new loans there. Eminent domain, the right of governments to take private property for the public good while providing fair compensation to the owner, has typically been used to seize real estate, such as to build highways or parks. Potential usage was expanded when the Supreme Court in 2005 ruled in a case called Kelo v. New London that governments could apply it for economic development, including taking property and transferring it to another private owner as long as they pay for it. States are free to restrict that authority. Intangible Assets Eminent domain has also been applied to intangible assets such as mortgages, saidRobert Hockett, a law professor at Cornell University , who has been among the biggest proponents. The federal government used it during the Great Depression, when the Home Owners Loan Corp. took possession of mortgages on family farms in the course of refinancing them, he said. “In this context what we’re talking about is the public purpose of reversing blight and preventing further blight in certain hard hit cities that have really pronounced, profound foreclosure crises,” Hockett said. “It’s a perfectly garden variety use of eminent domain authority.” The financial industry disputes that claim. It’s a “misguided approach” to solving a community’s housing problems, said BlackRock Inc. (BLK) Vice Chairman Barbara Novick, whose firm is the world’s largest money manager. “This is a flagrant misuse of an important public policy tool and will have negative impacts on availability of credit and cost of credit for the entire community while helping relatively few homeowners,” she said yesterday in an e-mail. It “will benefit a private-equity firm at the expense of everyday investors in mutual funds and beneficiaries in pension plans.” Furthest Along Richmond is furthest along in implementing the idea, which was considered and then abandoned by communities including San Bernardino County, California, and Chicago. Richmond, a city of 106,500 on the eastern shore of the San Francisco Bay , this week said Mortgage Resolution Partners was sending letters to servicers and trustees with offers to buy 624 mortgages. If they refused to sell, the city could then try to use its eminent domain powers to force the purchases. According to Mortgage Resolution’s program, a private investment fund would buy the loans at prices based on financial models or comparable trades. The mortgages would be reduced and refinanced into new debt insured by the Federal Housing Administration. The battle is a legacy of the housing bubble that began to burst seven years ago. Underwater Borrowers About 25.4 percent of U.S. homes with a mortgage -- 13 million properties -- were underwater in the first quarter, according to Zillow Inc., a real estate information service. A combination of foreclosures and the housing recovery has reduced the number of homeowners owing more than the value of their properties from 31.4 percent in the first quarter of 2012. Cities considering using eminent domain are worse off than the country as a whole, and proponents say it will reduce blight and costs to communities by heading off foreclosures caused by negative equity. In Richmond, 47 percent of homeowners with a mortgage were underwater in the first quarter, down from a high of 59 percent a year earlier, Zillow (Z) data show. In Irvington, New Jersey , it dropped to 46 percent from 56 percent. The rate fell to 64 percent in North Las Vegas from 81 percent. All are higher than the state averages in California, Nevada and New Jersey. The rate fell to 41 percent in California’s San Bernardino County, which earlier this year abandoned its consideration of idea, from 53 percent. Delinquencies Declined Delinquencies have also declined across the U.S. as more borrowers regained equity in their homes and the economy improves, according to data provider CoreLogic Inc. (CLGX) Completed foreclosures fell 20 percent to 55,000 in June from a year earlier. In Richmond, there were 47 pre-foreclosure filings this year through May, down 64 percent from the same period last year, CoreLogic data show. In North Las Vegas, pre-foreclosure filings dropped 44 percent to 57 properties during the same period. That compares with 175 filings in the Nevada city in one month, August 2009, at the peak of the housing collapse. Policy makers and lenders have been reluctant to embrace principal reductions to aid borrowers, arguing it’s not necessary and may encourage more defaults. Most modifications lower interest rates , extend the terms or take other steps to lower monthly costs without reducing the total amount owed. Loan Modifications Loan modifications that included a principal reduction accounted for about 1 percent of the 515,000 loans renegotiated by banks in the 12 months through March 31, according to a report by the Office of Comptroller of the Currency. Patricia Castillo, 41, said she feels trapped in the house that she and her husband bought in Richmond for $420,000 near the height of the housing boom in 2005, because they have no equity and no money to repair the deteriorating property. “I feel like we’re just renting,” she said in a telephone interview from the home, where she cares for her 24-year-old son, Leon, who is disabled. “I’m not building any equity to fix the house. It’s like it’s not our house.” Castillo and her husband Robert, 44, a school bus mechanic, received a loan modification in 2009 from their loan servicer that she said reduced monthly payments to $1,543 from about $3,700, including both their first and second mortgages. Under the new terms, including interest-only payments on the first loan of $638, their monthly obligations will rise to $1,862 in November, $2,181 a year later and $2,460 a year after for the rest of the loan. Lehman Bond Their mortgage was bundled into a bond transaction known as Lehman XS Trust 2006-GP4, according to a note to clients this week by RBS Securities Inc. strategist Scott Gimpel. The information he assembled on the loan was from CoreLogic and public records. The Castillos put no money down in buying the property, received their original modification four months after falling behind on payments and are now paying less than half on their first mortgage than it would cost to rent in the area, according to Gimpel. He wrote that they refinanced in 2006 into a type of mortgage that meant their balance would grow, causing the first-lien monthly payments to rise from $1,114 to $2,065 in 2008. Castillo said they need to own their home because their son needs a safe place where they aren’t subject to a landlord. She said their lender deceived them when they originally got their mortgage, which is why they support Richmond’s eminent domain effort. “We didn’t know any better,” she said. “I feel they should pay the consequences for giving us that loan.” Pimco Fund The $17.3 billion Pimco High Yield Fund is invested in one tranche of the Lehman XS Trust securities, and an investor in that fund is the Missouri Hospital Plan, according to data compiled by Bloomberg. The plan describes itself as the leading writer of medical professional and general liability insurance for the state’s hospitals, their employees and related entities. If the loan is acquired for too low of a price, it could lower the bond’s yield, and returns in the Pimco fund. Lower investment income could raise insurance costs for the plan’s members, though “you’d have to look at it in the context of the overall portfolio,” said Joe Moody, chief executive officer of the HSG Family of Companies , which manages it. The Castillos aren’t the only Richmond residents who say they are hoping for smaller loans through the use of eminent domain after previously receiving reductions in their payments. Loan Reworked Morris LeGrande got his loan reworked in 2009 under the federal Home Affordable Modification Program, he said on the July 30 call with reporters. Next year, his monthly payment will rise by $300, he said. “It will put me close to $3,000 a month to pay for a home that is currently valued at $130,000, and in 27 years there’s a balloon payment due of $194,000,” he said. “So effectively, I’m a homeowner by a technical expression only. I will never be able to pay for this home under the current conditions.” A government watchdog this month criticized the HAMP program, finding that more than 300,000 homeowners defaulted again after getting modifications. At the same time, monthly data from the Treasury Department shows that fewer than a quarter have been sent to foreclosure proceedings. More than 31 percent of borrowers got additional modifications, 5.1 percent were put on separate repayment plans to catch up and further actions are pending on 16 percent, the data based on a survey of eight servicers show. Eight percent became current on their loans again without new aid, and 0.9 percent paid off their debts. Made Happy Of the 624 loans being targeted in Richmond, 444 are currently being paid on time, according to Graham Williams, CEO of Mortgage Resolution Partners. Not every underwater mortgage should be targeted, according to Cornell’s Hockett. Those at risk of future foreclosure can be identified and bond investors made happy, he said. “There are some of these loans if you write them down it renders the homeowner and the bondholder better off,” he said. “If that premise is correct, there’s no reason you can’t have an amicable agreement.” The industry is wary of that view and Hockett said that he has been unable to persuade federal regulators to back a mediation process. The 32 servicers and bond trustees that oversee the loans aren’t likely to sell willingly, according toChris Killian, head of the securitization group for the Securities Industry and Financial Markets Association, Wall Street’s largest lobbying organization. That’s because of the nature of the bond contracts and their view that it’s generally a “bad idea.” Coalition Members Along with Pimco, other members of the coalition of mortgage-bond investors working with law firm Ropes & Gray LLP include BlackRock, according to the people, who asked not to be named because the talks are private. MetLife Inc. (MET) , TCW Group Inc. and Legg Mason Inc.’s Western Asset unit also may join, they said. Fannie Mae and Freddie Mac are considering the idea, depending partly on their regulator, the people said. Spokesmen for the firms declined to comment or didn’t return messages. Richmond Mayor McLaughlin said on the call with reporters that she would take the industry to court for illegal redlining, or restricting loans in certain areas such as minority or low-income neighborhoods, if they make it harder to borrow in her city. Any use of eminent domain would necessarily involve court oversight to determine if fair prices are being paid, which is why investors shouldn’t be concerned that the values will be too low, according to Mortgage Resolution Partners. “Of course we’ll see you in court,” Chief Strategy Officer John Vlahoplus said in a telephone interview. “We’ll sue you first.” To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net ; John Gittelsohn in Los Angeles at johngitt@bloomberg.net To contact the editors responsible for this story: Kara Wetzel at kwetzel@bloomberg.net ; Rob Urban at robprag@bloomberg.net |
2024-12-13 | Bloomberg | Structured Notes That Lack Protection to Sell Best, Poll Says | Structured notes that don’t protect investor principal are likely to be the top sellers in the U.S. next year, according to a poll by Incapital LLC. Thirty-one percent of 94 attendees at the firm’s 2012 Structured Investments Conference in October said securities without principal guarantees would be the “most popular,” according to a survey released yesterday by Incapital, the largest U.S. structured note underwriter that doesn’t issue the securities. Trailing at 25 percent were principal-protected notes, followed by inflation-linked securities at 19 percent and market-linked certificates of deposit, which are insured by the Federal Deposit Insurance Corp. up to $250,000, at 13 percent. More education would make structured products more popular with investors, 60 percent of respondents said, while 20 percent cited greater liquidity and 16 percent simpler structures. U.S. investors have bought $37.3 billion of structured notes this year, 15 percent less than the year-earlier period, according to data compiled by Bloomberg. Data on the structured CD market is incomplete as the investments aren’t registered with the Securities and Exchange Commission and the FDIC doesn’t track market-linked deposits separately. To contact the reporter on this story: Kevin Dugan in New York at kdugan4@bloomberg.net To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net |
2024-01-30 | Bloomberg | Canada November Employment, Earnings and Hours Report (Text) | The following is the text of Canada ’s employment, earnings, and hours report for November released by Statistics Canada. Average weekly earnings of non-farm payroll employees were $911 in November, up 0.5% from the previous month. On a year- over-year basis, earnings increased 3.2%. The 3.2% increase in earnings during the 12 months to November reflects a number of factors, including wage growth, changes in composition of employment by industry, occupation and level of job experience, as well as average hours worked per week. In November, non-farm payroll employees worked an average of 33.2 hours per week, up from 33.1 the month before and 32.9 in November 2011. Average weekly earnings by sector Year-over-year growth in average weekly earnings outpaced the national average in five of the largest industrial sectors: construction; accommodation and food services; professional, scientific and technical services; public administration; and educational services. Average weekly earnings in construction increased 6.6% in the 12 months to November to $1,172, with gains spread across all industries within the sector. In accommodation and food services, weekly earnings rose 4.6% to $373, led by growth in full-service restaurants and limited-service eating places. Weekly earnings in professional scientific and technical services increased 4.5% to $1,274. The most notable growth occurred in architectural, engineering and related services; computer systems design and related services; as well as legal services. Average weekly earnings in public administration increased 4.1% in November to $1,167, with gains among all levels of government. In educational services, weekly earnings rose 3.9% to $989, with the largest growth among universities. Average weekly earnings up in every province Average weekly earnings of non-farm payroll employees increased in every province in the 12 months to November. The largest growth rates were in Newfoundland and Labrador, Nova Scotia and Saskatchewan. In Newfoundland and Labrador, average weekly earnings increased 5.4% from 12 months earlier to $941, the highest year- over-year growth rate among the provinces. The growth in earnings was most notable in construction; manufacturing; and administrative and support services. Average weekly earnings in Newfoundland and Labrador were the second highest in the country after Alberta. Average weekly earnings in Nova Scotia were $817 in November, up 4.6% from November 2011. Despite a year-over-year growth rate above the national average since August, earnings in this province continue to be among the lowest in the country. In Saskatchewan, average weekly earnings rose 3.7% in the 12 months to November to $931. The main contributors to this increase were accommodation and food services; mining, quarrying and oil and gas extraction as well as finance and insurance. Earnings were still highest in Alberta at $1,086, a 3.4% increase from November 2011. Non-farm payroll employment by sector Total non-farm payroll employment edged up 3,100 in November, following a decline of 14,800 the previous month. In November, the number of payroll employees increased in administrative and support services; public administration; and mining, quarrying, and oil and gas extraction. At the same time, there were small declines in real estate and rental and leasing as well as professional, scientific and technical services. On a year-over-year basis, payroll employment rose by 228,400 (+1.5%). Among all sectors, mining, quarrying, and oil and gas extraction continued to post the highest 12-month growth rate in payroll employment at 8.3%. Growth was also strong in construction (+4.6%) as well as transportation and warehousing (+3.3%). The most notable declines were in forestry, logging and support services (-6.5%) and utilities (-3.2%). Note to readers The Survey of Employment, Payrolls and Hours (SEPH) is a business census of non-farm payroll employees. Its key objective is to provide a monthly portrait of the level of earnings, the number of jobs and hours worked by detailed industry at the national, provincial and territorial level. Estimates of average weekly earnings and hours are based on a sample and are therefore subject to sampling variability. Payroll employment estimates are based on a census of administrative data and are not subject to sampling variability. Statistics Canada also produces employment estimates from its monthly Labour Force Survey (LFS). The LFS is a household survey, the main objective of which is to divide the working-age population into three mutually exclusive groups: the employed (including the self-employed), unemployed and not in the labour force. This survey is the official source for the unemployment rate and collects data on the socio-demographic characteristics of all those in the labour market. As a result of conceptual and methodological differences, estimates of changes from SEPH and LFS do differ from time to time. However, the trends in the data are quite similar. Unless otherwise stated, this release presents seasonally adjusted data, which facilitates comparisons by removing the effects of seasonal variations. For more information on seasonal adjustment, see Seasonal adjustment and identifying economic trends ( http://www5.statcan.gc.ca/bsolc/olc-cel/colc - cel?catno=11-010-X201000311141&lang=fra). Non-farm payroll employment data are for all hourly and salaried employees, as well as the “other employees” category, which includes piece-rate and commission-only employees. Average weekly hours data are for hourly and salaried employees only and exclude businesses that could not be classified to a North American Industry Classification System (NAICS) code. All earnings data include overtime pay and exclude businesses that could not be classified to a NAICS code. Earnings data are based on gross taxable payroll before source deductions. Average weekly earnings are derived by dividing total weekly earnings by the number of employees. With each release, data for the current reference month are subject to revision. Data have been revised for the previous month. Users are encouraged to request and use the most up-to- date data for each month. Revisions With the March 27 release of January data, SEPH will start using the 2012 North American Industry Classification System (NAICS) instead of NAICS 2007. Data will be revised historically back to 2001. At the same time, seasonally adjusted data will be revised based on the latest seasonal factors. Historical revisions will also be made to a small number of industries by province or territory. These changes will have little impact on SEPH estimates. To contact the reporter on this story: Ilan Kolet in Ottawa at ikolet@bloomberg.net To contact the editor responsible for this story: Marco Babic at mbabic@bloomberg.net |
2024-08-21 | Bloomberg | Texting Can Wait. Awareness Cannot. | I'm on my way. I love you. The first message is what Xzavier’s mother was told had left her son, now 8, paralyzed from the diaphragm down and on life support. The second is the last missive Chandler sent before hitting an Amish buggy, killing three, ages 3, 5 and 17. These are two of four tales that comprise the documentary , "From One Second to the Next" by director Werner Herzog. AT&T, Sprint, Verizon and T-Mobile paid for the 35-minute film. It's part of AT&T's "It Can Wait" campaign to curb texting and driving, which the three other carriers joined this spring. The documentary, which will be distributed to more than 40,000 schools, already has more than 1.9 million hits on YouTube in the two weeks since it was posted. Steven Hyden, writing for Grantland, called it "quite likely the greatest driver’s ed film of all time." The New York Times devoted an editorial to it, remarking , "Maddening and moving, it may be the first example of a new genre: the arthouse public service announcement." Statistics on texting and driving are alarming and widely ignored. According to the National Highway Traffic Safety Administration , 3,331 people were killed and 387,000 injured in 2011 in motor vehicle crashes implicating a distracted driver -- a category that includes texting, eating, grooming and using a navigation system, among other actions. But texting is a triple threat , requiring a driver’s mind, hands and eyes. In 2011, 11 percent of drivers ages 15 to 19 in fatal accidents were reported to have been distracted; for 21 percent of those, a phone was the culprit. Herzog doesn't rely on statistics. He employs just one, at the film's beginning: "Over 100,000 accidents a year involve drivers who are texting. The numbers are climbing sharply." With that as ominous prelude, he goes into stories of trivial messages spurring tremendous tragedy. "I don't need to show blood and gore and wrecked cars," the director told NPR , insisting that he wanted to show the “interior side” of the stories: “It's a deep raw emotion -- the kind of deep wounds that are in those who were victims of accidents and also in those who are the perpetrators." The film plumbs the depths of interpersonal responsibilities. Xzavier's tearful mother tells of how she can no longer send her son out to play, how her dreams of screaming "X, X, X, X, X" from the stands at football games are shattered. Chandler reads aloud an inspirational letter from the father whose three children he killed, with the words "I always wonder if we take enough time with our children" juxtaposed against a scene of Chandler and his wife leading their young daughter by the hands. Megan details her journey from raw hatred of Reggie, whose texting helped precipitate her father's death, to an on-screen embrace. John speaks of driving the truck that hit the car with Megan's father in it -- after a texting Reggie sent that latter vehicle spinning. The boundaries defining "perpetrator" overlap with those defining "victim." Tragedy has its practical effects. A teenager's liability insurance pays for only $50,000 of the more than $1 million in hospital bills that result when Debbie is hit. (When Debbie talks on film, her halting speech requires subtitles.) The driver was sentenced to 30 days in jail, five months under house arrest and five years of probation. Reggie also spent 30 days in jail. His crash helped spur Utah to pass in 2009 what the New York Times called , "the nation’s toughest law to crack down on texting behind the wheel" -- with sentences of up to 15 years behind bars. Forty-one states, the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands now prohibit all drivers from texting and driving. (Some others ban only novices and/or school bus drivers.) But it's a tremendously hard temptation to resist and an equally difficult law to enforce. New legislation to combat texting while driving has initiated research suggesting that such bans may actually increase accidents, perhaps because drivers go to greater lengths to conceal their devices and their furtive glances. Where legislation fails, perhaps technology can succeed. Smartphone applications have been developed to read text messages and e-mails aloud, send auto-replies when a vehicle is moving above a certain speed, or alert parents when a child's phone is unlocked in a moving car. But such remedies are not foolproof, and can typically be turned off or uninstalled. Diverted eyes, minds and hands must be refocused on the road through enhanced technology, laws and awareness. For Herzog, the last is crucial. "What's more important than legislation is awareness," he said in an interview with CNN. "You can't legislate stupidity." (Zara Kessler is an assistant editor and producer for Bloomberg View. Follow her on Twitter.) |
2024-05-31 | Bloomberg | Argentine Grandfather Refused $10 Bill Under Fernandez Controls | Argentine lawyer Julio Cesar Duran wanted to exchange a pocketful of pesos for $10 to give as a gift to his two grandsons. With the government clamping down on dollar purchases, the tax agency rejected his request. President Cristina Fernandez de Kirchner’s tightening oversight of the foreign currency market is hitting international companies as well as average Argentines, who have traditionally bought dollars to protect their savings in a country with a history of devaluations and hyperinflation. In the unregulated market, the dollar costs about 40 percent more than the official rate of 4.47 pesos, a record gap. “I wanted to buy $10, not $10 million, and the tax agency says I can’t,” Duran, 59, said in a telephone interview from Mar del Plata, a seaside town in Buenos Aires province , where he tried to buy the dollars at an exchange house last week. “I didn’t intend to do something that would destabilize the country’s finances.” Duran hired a lawyer after his transaction was rejected, saying the government’s measures infringe his property rights and that the tax agency doesn’t have the authority to forbid exchange purchases. A federal judge is reviewing his request that the restrictions be lifted. “This measure is manifestly arbitrary,” said Gregorio Badeni, a constitutional lawyer based in Buenos Aires. “These decisions on limits to the foreign exchange markets can only be ordered by the central bank or by the federal government and it has to be reasonable.” Press officials at the national tax agency didn’t respond to a message left by Bloomberg News. Reserves-for-Debt With Argentina blocked from international credit markets since its 2001 default on $95 billion of bonds, Fernandez counts on the country’s trade surplus to bring dollars into the economy and boost central bank reserves , which she then uses to pay debt. The government plans on tapping $5.7 billion of reserves this year to pay debt, according to the budget. The purchase of dollars by individuals and companies drains central bank reserves. With $21.5 billion being pulled out of South America ’s second-biggest economy last year, up from $11.4 billion in 2010, Fernandez decided to staunch the losses following her October re-election. Money Laundering Within days of winning a second four-year term, Fernandez ordered mining companies including Xstrata Plc (XTA) to keep export revenue in the country, told insurance companies to repatriate investments and gave the tax agency the mandate for limiting dollar sales. The government said the moves were needed to limit money laundering and terrorist financing. In April, Fernandez banned Argentines from using their ATM cards to withdraw dollars abroad from peso-denominated accounts. Yet with Argentina’s nine-year economic expansion slowing and inflation accelerating to 23 percent, the fastest in the world after Venezuela , the demand for dollars this year in both the legal and unregulated market has picked up. “You can’t ask people to have faith in the peso with such fast inflation,” said Orlando Ferreres, a former deputy economy minister who now runs Orlando Ferreres & Asociados research company in Buenos Aires. “The government is trying to protect the dollars it has because it sees a more complicated landscape by the end of the year and next year.” Fernandez’s currency controls made the so-called blue-chip rate for the dollar, set by price gaps between Argentine securities in local and global markets, soar a record 30 percent in the past three months, signaling currency outflows are picking up. The central bank’s international reserves fell to $47 billion yesterday, the lowest since March 7. ‘Obsessed’ With Dollars Cabinet Chief Juan Manuel Abal Medina yesterday told Congress that Argentines are “obsessed” with dollars and that the government is seeking to “de-dollarize” the economy. “It’s a cultural problem,” Abal Medina said. “It’s very important that Argentines be more normal and use dollars only for the trade exchange as it happens in other places.” On May 17, tax agency officials caught a man offering dollars to passers-by in downtown Buenos Aires and arranged for his arrest by police. The crime is punishable by as many as eight years in prison, the agency said in a statement. Argentina’s history shows the peso can be a risky investment. In late 2001, then-President Fernando de la Rua limited bank withdrawals, a measure that led to violent protests and a string of five presidents in two weeks. His eventual successor, Eduardo Duhalde , converted U.S. dollar deposits into pesos after the country abandoned a decade-long 1-to-1 peg with the dollar and the exchange rate plummeted to more than 4-to-1. A decade earlier, hyperinflation led the government of President Carlos Menem to abandon the austral and create the peso peg. When Duran’s request was rejected, he tried to buy a single euro, and then just one dollar, but those transactions were also rejected. “I pay taxes, I have my house, I make a living from my profession,” said Duran. “I think it’s unfair and I can’t tolerate this ridiculousness.” To contact the reporter on this story: Eliana Raszewski in Buenos Aires at eraszewski@bloomberg.net To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net |
2024-04-24 | Bloomberg | Aflac Profit Increases 14% to $892 Million on Investments | Aflac Inc. (AFL) , the largest seller of supplemental health insurance, said first-quarter profit increased 14 percent as investing results improved. Net income rose to $892 million, or $1.90 a share, from $785 million, or $1.68, a year earlier, the Columbus, Georgia- based company said today in a statement. Operating profit, which excludes some investment results, was $1.69 a share, beating the $1.62 average estimate of 21 analysts in a Bloomberg survey. Chief Investment Officer Eric Kirsch, hired from Goldman Sachs Group Inc. in 2011, has scaled back bets on European financial firms that soured amid the financial crisis. Kirsch, 52, has favored U.S. corporate bonds over Japanese government debt in the portfolio that backs Aflac’s obligations in Japan. “It’s more important today, in the face of a weaker yen, to have these U.S. dollar-denominated assets,” Edward Shields, an analyst at Sandler O’Neill & Partners LP, said in an interview before results were announced. “It should ultimately help the earnings strength from the Japanese segment.” Aflac, led by Chief Executive Officer Dan Amos, 61, does most of its business in Japan and converts results from yen to dollars for reporting purposes. The yen slid 7.9 percent to 94.22 per dollar in the first three months of the year. Aflac rose 1.8 percent to close at $51.56 in New York and was little changed in extended trading. Shares have fallen 2.9 percent this year, making Aflac the only decliner on the 24- company KBW Insurance Index. (KIX) ‘Monitoring’ Japan Net realized investment gains were $102 million, compared with net losses of $29 million a year earlier. Book value , a measure of assets minus liabilities, fell to $33.34 per share as of March 31, from $34.16 three months earlier, as Aflac changed how it values some privately issued securities. “Our investment team is carefully monitoring Japan’s monetary and fiscal policies to evaluate investment options,” Amos said in the statement. “Low investment yields, particularly in Japan, remain a significant challenge. As such, we continue to invest a significant portion of our cash flows in U.S. corporate bonds.” Aflac forecast operating earnings for the current quarter that fell below some analysts’ estimates, as the weakening yen weighs on results. Operating profit will probably be as much as $1.56 a share in the period, the firm said, compared with the $1.57 average estimate of 20 analysts surveyed by Bloomberg. U.S. Sales Sales in Japan increased as customers purchased coverage ahead of a planned premium increase, Amos said. New annualized premium sales rose 2.6 percent to 53.8 billion yen or $578 million in the quarter, according to the statement. That compares with a 54 percent surge a year earlier. In the U.S., sales declined 5.2 percent to $332 million. Amos said U.S. sales “will be weighted more toward the latter half of the year,” and may increase as much as 5 percent in 2013. Aflac said it repurchased about $150 million of shares in the first quarter, and will buy back $400 million to $600 million this year. To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-06-16 | Bloomberg | Jobs Bill Blocked in U.S. Senate Amid Complaints Over Cost | A jobs bill that would raise taxes on buyout managers stalled today in the U.S. Senate amid complaints it would add almost $80 billion to the government’s budget deficit. With 60 votes needed to advance the legislation, 52 senators voted against the procedural move and 45 supported it. Eleven Democrats and independent Joe Lieberman of Connecticut joined 40 Republicans in opposing the motion. The defeat was anticipated by Democratic leaders; they agreed last night that if the measure failed, Senate Finance Committee Chairman Max Baucus would present a less costly substitute plan. Baucus said he will unveil his revised proposal later today. The vote is a setback for President Barack Obama , who called last week for an additional $50 billion in jobs-related spending. Lawmakers are increasingly caught between competing demands to spend more to boost the economy and cut the $1.5 trillion deficit. Baucus urged colleagues yesterday to back the legislation, saying that poorly timed belt-tightening could tip the economy back into recession. Provisions The blocked bill would extend unemployment benefits through November, increase taxes on the share of profits paid to managers of buyout funds, extend subsidies for municipal bonds, boost taxes on oil companies and extend aid to state governments struggling to stay within their budgets, among other provisions. Unemployment benefits for more than 300,000 Americans have lapsed while lawmakers debate the legislation. After declining to move forward on a vote on the overall bill, lawmakers agreed to attach a provision to it that would extend by three months -- to September 30 -- the deadline for closing home purchases under the government’s homebuyer tax- credit program. The amendment passed 60-37. Senate Majority Leader Harry Reid , a Nevada Democrat, said lawmakers were concerned many homebuyers could miss the existing June 30 deadline while waiting for banks to process a backlog of transactions. Lawmakers are considering cutting the bill’s cost by trimming weekly unemployment benefits by $25 to an average $310, a move estimated to save $6 billion. Paring Benefits Senator Claire McCaskill , a Missouri Democrat, said lawmakers want to begin paring the extended unemployment benefits created in response to the recession because “this is not something that can go on indefinitely.” McCaskill said that “if you don’t start having those discussions then it begins to look like a brand-new level of entitlement program, which is something that we really can’t afford to do right now in this country.” Lawmakers may also shorten the length of a reprieve for doctors from a scheduled 21 percent cut in the Medicare reimbursements. Democrats had already scaled back the bill after colleagues complained a previous draft would have cost almost $200 billion. House Democratic leaders last month dropped plans to extend subsidies to help the jobless buy health insurance and send another $24 billion to states before forwarding the measure to the Senate. Obama called last weekend for the increased spending, saying inaction could force states to fire hundreds of thousands of employees. “If we allow these layoffs to go forward, it will not only mean hundreds of thousands fewer teachers in our classrooms, firefighters on call and police officers on the beat, it will also mean most costs helping these Americans look for new work, while their lost paychecks will mean less tax revenues and less demand for the products and services provided by other workers,” Obama said. To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net Enlarge image Jobs Bill Blocked in U.S. Senate Amid Complaints Over Cost Jay Mallin/Bloomberg Senator Max Baucus is expected to present a less expensive plan to substitute the blocked jobs bill. Senator Max Baucus is expected to present a less expensive plan to substitute the blocked jobs bill. Photographer: Jay Mallin/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-06-23 | Bloomberg | U.S. Stocks Extend Drop After New-Home Sales Fall to Record Low | U.S. stocks fell, with the Standard & Poor’s 500 Index dropping for a third day, after new-home sales sinking to a record low spurred concern about the durability of the economic recovery ahead of the Federal Reserve’s announcement about interest rates. Caterpillar Inc., Microsoft Corp. and DuPont Co. fell more than 1.8 percent to lead losses in the Dow Jones Industrial Average. Adobe Systems Inc. dropped 5.3 percent after forecasting revenue that may miss the average analyst estimate. Freeport-McMoRan Copper & Gold Inc. slumped 3.2 percent as copper and gold declined. “Housing numbers are ugly with a capital ‘U’,” said Michael Mullaney , who manages $9 billion at Fiduciary Trust Co. in Boston. “It looks like we’re going to double dip in housing. Investors are concerned.” The S&P 500 declined 0.4 percent to 1,090.84 as of 10:55 a.m. in New York, extending this week’s slump to 2.7 percent. The Dow retreated 9.59 points, or 0.1 percent, to 10,283.93. Three stocks fell for every two that rose on U.S. exchanges. Purchases of new homes in the U.S. fell in May to a record low as a tax credit expired, showing the market remains dependent on government support. Sales collapsed a record 33 percent to an annual pace of 300,000 last month from April, less than the median estimate of economists surveyed by Bloomberg News and the fewest in data going back to 1963, figures from the Commerce Department showed today in Washington. Demand in prior months was revised down. ‘Tremendous Concern’ U.S. stocks sank yesterday as existing-home sales unexpectedly dropped and the S&P 500 slipped for a second day below chart levels monitored by analysts. The benchmark for U.S. equities has gained 3.6 percent since June 7 and completed its biggest two-week rally since November on June 18 as concern about Europe’s debt crisis eased. “There’s a tremendous amount of concern about the housing market,” said David Lutz , managing director of equity trading at Stifel Nicolaus & Co. in Baltimore. “Today is FOMC day and it should be a non-event, given the recent jitters in the global markets and the weaker housing data coming through.” The Federal Open Market Committee ends a two-day meeting and releases a policy statement today. Policy makers will hold the benchmark rate at the record-low range of zero to 0.25 percent today, a Bloomberg survey of economists showed. A gauge of raw-materials producers fell 1.4 percent as metals prices slumped on concern of slower demand. Freeport, the largest publicly-traded copper producer, tumbled 3.2 percent to $63.08. Adobe Adobe Systems Inc. had the biggest decline in the S&P 500, falling 5.3 percent to $31.03. The biggest maker of graphic- design programs forecast third-quarter revenue will be $950 million to $1 billion. Analysts on average estimated $962 million in sales. Jabil Circuit Inc. had the biggest gain in the S&P 500, rising 9 percent to $14.81. The St. Petersburg, Florida-based electronics manufacturer reported third-quarter profit excluding some items of 40 cents a share, beating the average analyst estimate of 34 cents a share in a Bloomberg survey. Philip Morris International Inc. surged 2.9 percent to $46.27. The world’s largest publicly traded tobacco maker forecast 2010 earnings per share will rise as much as 17 percent as improving markets and price increases offset the declining euro. EPS should be within a range of $3.70 to $3.80, Chief Executive Officer Louis Camilleri said today in a conference to investors in Lausanne, Switzerland. “Nobody said the recovery was going to be robust,” said James Dunigan , chief investment officer at PNC Wealth Management in Philadelphia, which oversees $104 billion. “However, businesses are doing well, valuations are in pretty good shape. There are some pretty good values out there.” To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net. A new Toll Brothers Inc. home is constructed in Raleigh, North Carolina. Photographer: Jim R. Bounds/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-11-15 | Bloomberg | Obama Health Plan Cancellation Fix Draws Cost Warnings | Just hours after President Barack Obama announced a one-year reprieve for canceled insurance plans, industry executives warned it would cost taxpayers and consumers while state officials split on their support for it. With only weeks until policies are due to lapse in 2014, there was skepticism the cancellations could be undone. Insurers said the move may threaten the viability of the new Obamacare exchanges by creating a parallel market operating under different rules. “The complexity of trying to un-cancel millions of canceled individual policies with only six weeks left in the year is staggering,” said Carl McDonald , a health-care analyst at New York-based Citigroup Inc. “We suspect many insurers will choose not to avail themselves of this ‘opportunity.’” The strategy Obama announced yesterday at a White House briefing imposes no penalty on insurers who choose not to extend coverage. It shifts the debate to the states, where the companies and the regulators who oversee them will have to decide whether to scrap changes made over three years to prepare for the opening of the new marketplaces created by the Patient Protection and Affordable Care Act of 2010 to offer benefits to millions of Americans without health coverage. How Do the Health Exchanges Fit In? The president said insurers can extend policies that were in force in 2013 for as long as a year, if state officials approve. The plans won’t be eligible for U.S. subsidies under the health law, and insurers can’t sell these policies to new customers. From 1 million and 5 million policyholders may be affected, Matthew Borsch , a Goldman Sachs Group Inc. insurance analyst, said in a note to clients. ‘Upsetting’ Lapse “I completely get how upsetting this can be for a lot of Americans, particularly after they heard assurances from me,” Obama said. “This fix won’t solve every problem for every person, but it’s going to help a lot of people.” Obama’s extension affects only a small slice of insured Americans, those with individual health plans rather than coverage through a company’s group plan or a government program such as Medicaid and Medicare. Related: Obamacare Deductibles 26% Higher Make Cheap Rates a Risk Mike Kreidler , Washington state’s insurance commissioner, said yesterday he wouldn’t approve any extensions, while California commissioner Dave Jones said he didn’t have authority under state or U.S. law to stop cancellations. “In the interest of keeping the consumer protections we have enacted and ensuring that we keep health insurance costs down for all consumers, we are staying the course,” Kreidler said yesterday in a statement. California’s Request Jones asked California’s insurance exchange, Covered California, to release health plans from a requirement that they cancel existing individual policies. He urged insurers in the state to reinstate policies. “There’s no question it will be challenging for the health insurers,” he said at a San Francisco news conference. There may not be enough time to change course, said Jim Donelon , president of the National Association of Insurance Commissioners. “In many states, cancellation notices have already gone out to policyholders and rates and plans have already been approved for 2014,” Donelon, who is an insurance commissioner in Louisiana, said in a statement. Fallout from Obama’s decision will vary, said Brenda Gleason , president of M2 Health Care Consulting in Washington, D.C. In large states with high numbers of uninsured residents, such as Texas, companies may extend policies and still win many new customers through Obamacare. In smaller states, continuing individual policies may leave few customers for plans sold through the exchanges that opened Oct. 1, she said. Market Adjustment “Any model that health plans built is now in question,” Gleason said in a telephone interview. “They’ll have to reassess once insurance commissioners around the country decide what they’re going to do.” Aetna Inc ., the third-biggest U.S. health insurer, will require “cooperation and expedited approval from state regulators,” Cynthia Michener , a company spokeswoman, said in an e-mail. The Hartford, Connecticut-based company will need approvals to “secure appropriate rates so we can get these plans back in the market.” Florida’s Blue Cross and Blue Shield, that state’s largest insurer, said after Obama’s announcement that it would extend policies. The company had previously said individual plans covering 300,000 people would be discontinued. Insurers ‘Reeling’ Insurance executives had little warning of the change ahead of time and were “reeling,” said Robert Laszewski , an industry consultant in Alexandria, Virginia. Insurers now must decide whether to deal with the “logistical nightmare” of withdrawing cancellations or face being “the goat that took away everyone’s insurance,” he said. The uncertainty left in doubt whether Obama would defuse the political crisis hatched from the cancellations. Republicans and some Democrats in Congress, meanwhile, said they would still seek a legislative fix. In six states whose insurance commissioners have declined to enforce the Affordable Care Act -- Arizona, Alabama, Missouri, Oklahoma, Texas and Wyoming -- insurers can decide on their own whether to extend existing plans. Under the policy announced by Obama, plans with renewal dates as late as Oct. 1, 2014, can be extended for as long as a year. That means some people may be able to stay on existing plans well into 2015. The move would free them from paying the health law’s penalty for those who don’t obtain coverage, equal to as much as 1 percent of a person’s taxable income. New Benefits Existing individual policies were being canceled because they didn’t meet new requirements of the health law. Among other changes, the law bars insurers from denying coverage or charging more based on a customer’s medical conditions. It bans annual or lifetime caps on benefits and requires plans to cover items ranging from prescription drugs to mental health visits. The proposal may rattle the new health insurance exchanges if it allows healthier customers to stay out of the markets. Allowing large numbers of policyholders to extend their current plans means the pool of customers who buy on the exchanges may be sicker than expected, the American Academy of Actuaries said in a statement. That could prompt insurers to raise premiums even higher than they otherwise would have next year, and increase the cost of subsidies for the federal government, said Cori Uccello , the academy’s senior health fellow, in a statement. If “fewer younger and healthier people choose to purchase coverage in the exchange, premiums will increase and there will be fewer choices for consumers,” said Karen Ignagni , president of America’s Health Insurance Plans, the industry’s Washington-based trade group. In a letter to insurance commissioners yesterday, the Obama administration said a health-law provision intended to reduce the risk of unexpectedly high medical claims for insurers “should help ameliorate unanticipated changes.” The program, known as a risk corridor and funded by the industry, may be modified to “provide additional assistance,” the letter said. To contact the reporters on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net ; Alex Wayne in Washington at awayne3@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-10-12 | Bloomberg | Warsaw Stock Exchange Wins Approval From Regulator to Sell Shares in IPO | Poland’s financial regulator approved the prospectus for an initial public offering by the Warsaw Stock Exchange, paving the way for the first trading debut by a central European bourse operator. Poland plans to sell 64 percent of the country’s sole exchange this month as part of a plan to raise 25 billion zloty ($8.8 billion) to help finance the 2010 budget gap and curb borrowing, the financial-services regulator said in e-mail. The government this year sold stakes in the nation’s biggest insurance, energy, copper and phone companies. The exchange will publish its IPO prospectus on its website early on Oct. 14, Anna Wisniewska, a spokeswoman for the Warsaw bourse said by phone. The Polish bourse is the third-largest in emerging Europe after Russia and Turkey, with a market capitalization of $187 billion and more than 550 companies listed on its main market and NewConnect platform. Poland has had the highest number of IPOs annually in the region since at least 2004, Bloomberg data show. Companies have raised $4.35 billion in 51 IPOs this year, with the largest offerings coming from energy utility Tauron Polska Energia SA and insurer Powszechny Zaklad Ubezpieczen SA. First in Region The bourse, created two years after the 1989 fall of communism, will be the first publicly traded exchange operator in central Europe. It’s the second exchange IPO this year, following a June listing by CBOE Holdings Inc., the last major U.S. securities exchange owned by its members. CBOE raised $339 million selling 11.7 million shares at $29 each after offering them at $27 to $29. Poland’s exchange posted net income of 91 million zloty in 2009. NYSE Euronext , the biggest operator of U.S. stock exchanges, currently trades at 11.8 times last year’s earnings, while Nasdaq OMX Group Inc. is valued at 10.9 times profit, according to Bloomberg data. The Warsaw bourse’s regional peers in Prague and Budapest, in which Wiener Boerse AG owns stakes, aren’t publicly traded. Warsaw’s benchmark WIG20 Index has increased 10 percent this year, compared with 9.9 percent for Hungary’s BUX Index and the Czech PX Index’s advance of 2 percent. The WIG20 Index added 0.4 percent to 2,636.64 at 2:05 p.m. today. Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co. and UBS AG will be the IPO’s global coordinators. Ipopema Securities SA, KBC Groep NV, Societe Generale SA, PKO Bank Polski SA, Bank Ochrony Srodowiska SA, Alior Bank SA, Banco Espirito Santo SA, IDM SA and Wood & Co. will also help manage the offering, according to the Treasury Ministry’s website. To contact the reporter on this story: Pawel Kozlowski in Warsaw pkozlowski@bloomberg.net To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net |
2024-08-29 | Bloomberg | Morgan Stanley Smith Barney Valuation Delayed Before Sale | Morgan Stanley (MS) and Citigroup Inc. (C) agreed to delay setting a valuation for their brokerage joint- venture as they wrangle over the sale of a 14 percent stake. A determination of Morgan Stanley Smith Barney’s fair market value will be made Sept. 10 rather than this week, according to a statement yesterday from Morgan Stanley, which is buying the stake from Citigroup to boost its holding to 65 percent. Shannon Bell , a Citigroup spokeswoman, declined to elaborate. The companies hired Perella Weinberg Partners LP to help settle a disagreement this year over the unit’s value, which Citigroup estimated is about $13 billion more than an amount submitted by Morgan Stanley. Morgan Stanley Chief Executive Officer James Gorman , 54, has said the purchase of the whole brokerage is key to his strategy of making the firm less reliant on trading revenue and improving profitability. The two New York-based banks formed the joint venture in 2009 with more financial advisers than any brokerage. Morgan Stanley paid $2.75 billion for a 51 percent stake and the right to buy the rest over time. The bank announced in May it would exercise its option to increase its stake. It has the right to buy another 15 percent next year and 20 percent in 2014. Citigroup estimated in a July 19 regulatory filing that its 49 percent stake was worth $11 billion and said Morgan Stanley’s bid was 40 percent of that. Citigroup faces a writedown that could top $6 billion if Morgan Stanley’s valuation is accepted. That’s twice Citigroup’s $2.9 billion estimated third-quarter net income, according to the average of 13 analysts surveyed by Bloomberg. The brokerage, which is run by Morgan Stanley’s Greg Fleming , 49, is largely made up of the Smith Barney and Dean Witter businesses. Gorman said in June that he will change the name of the unit to Morgan Stanley Wealth Management. To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-06-28 | Bloomberg | In Health-Care Ruling, Roberts Writes His Own Law | In the end, most of the arguments about President Barack Obama ’s health-care overhaul turned out to be beside the point. The law’s defenders for the most part argued that Congress can require people to buy health insurance because the Constitution lets it regulate commerce “among the several states.” Their fallback argument was that Congress can impose the requirement because the Constitution gives it the power to make “all laws which shall be necessary and proper for carrying into execution” its regulations. Opponents of the law concentrated on knocking those arguments down. Most people on both sides assumed that the individual mandate would stand or fall on those grounds. So the conventional wisdom wasn’t just wrong about the outcome of the case -- a much more severe blow to the law was expected -- it was wrong about what the case would, in the minds of the justices, be about. A majority of the justices concluded that the mandate couldn’t be justified under the Commerce Clause, even with the necessary-and-proper backing. A different majority of the justices also declined to get rid of the mandate. Chief Justice John Roberts , the only one in both majorities, bought the administration’s second fallback argument: The mandate is an exercise of the government’s power to tax. Extra Money The mandate, in this argument, is like the tax deduction for charitable giving. If you don’t give to charity, you pay more to the federal government. The same goes for not buying insurance under Obama’s health-care law. In this view, the difference is merely that the health-care statute calls the extra money you pay the government a “penalty” for breaking the law rather than a “tax.” Not many people doubt that the government can make different groups of people pay different amounts of money based on economic decisions. Nobody thinks the charitable deduction is unconstitutional. So, Roberts and four colleagues conclude, it can also tax people differently based on whether they purchase health insurance. In defense of those of us who didn’t expect this argument to be decisive, no lower court had considered it compelling. In our further defense, it isn’t compelling. Many critics of Roberts’s decision have noted that Obama denied on national television that the mandate is a tax. Let’s leave that fact aside, on Justice Antonin Scalia ’s theory that the history of the debate over a piece of legislation should be ignored in favor of looking at the text. The text of the bill doesn’t help Roberts’s case. The problem isn’t just that the bill repeatedly uses the word “penalty.” It also refers to the mandate as a “requirement” and says that people “shall” buy insurance. That’s where the analogy to taxes breaks down. People aren’t required to donate to charity. The law doesn’t say that they “shall” be philanthropic. The health-care act, on the other hand, does suggest that people who refuse to get insurance are breaking the law (unless they are exempt from the requirement for one of the reasons listed in the law). Congress could have written a law that merely imposed an extra tax on non-purchasers of insurance, or that gave a tax break to purchasers. Maybe Congress would have done exactly that if it had known a majority of the court doesn’t believe it has the power to impose a mandate under the Commerce Clause. What Congress actually did was something different. Slippery Maneuver Roberts appeals to the idea that a court should read an ambiguous law in a way that renders it compatible with the Constitution. But he hasn’t read the law in this case so much as rewritten it. He claims that it leaves people free to make the “lawful choice” to forgo health insurance. In effect, then, he has ruled that the mandate isn’t a mandate at all. Roberts performs the same maneuver elsewhere in the opinion. Like the four justices who think the law should be struck down (and like two liberal justices), Roberts believes that the law unconstitutionally coerces the states by threatening to cut off all federal Medicaid funding if they don’t expand the program. Instead of striking down the law, however, he again rewrites it, so that only a portion of federal Medicaid funding is withheld from balky states. The resulting law may be a better one than Congress wrote. It is not, however, the law that Congress wrote. Roberts may think he has threaded a needle. He has avoided affirming an expansive reading of the Commerce Clause, which conservatives loathe, while refusing to give liberals the ammunition to call him a partisan for dismantling their cherished law. He acted cleverly. He also acted less like a judge than like a politician, and a slippery one. ( Ramesh Ponnuru is a Bloomberg View columnist and a senior editor at National Review. The opinions expressed are his own.) Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View editorials, columns and op-ed articles. Today’s highlights: the editors on why John Roberts saved Obamacare and why Mexico ’s next president must combat its economic cartels ; Stephen L. Carter in praise of Supreme Court secrecy ; Noah Feldman on Roberts’s restraint ; Jeffrey Goldberg on whether women can have it all ; William Pesek on Myanmar’s economic development ; Jonathan Weil on how the Bank for International Settlements sees the industry ; Steven Greenhut on using eminent domain to take over foreclosed homes. To contact the author of this column: Ramesh Ponnuru at rponnuru@bloomberg.net. To contact the editor responsible for this column: Timothy Lavin at tlavin1@bloomberg.net . |
2024-12-01 | Bloomberg | Madoff Country-Club Tips Offer Lessons: Susan Antilla | Investors are still miffed with the securities industry for the havoc that resulted from the credit crisis. Financial advisers are somehow escaping that wrath. At the annual meeting of the Securities Industry and Financial Markets Association last month, Kent Christian , president of Wells Fargo Advisors Financial Services Group, said that while investors are down on Wall Street as an industry, they often express “trust and confidence” when it comes to their financial advisers. From what I can tell, Christian is right, and that isn’t always good news for individual investors. Yet it may explain the results of some bad choices by people who are too trusting or too lazy to check a broker’s background. I’ve been watching in horror over the past year as cases have come public where financial advisers with blemishes on their records still managed to win the confidence of investors. In an arbitration won by actor Larry Hagman and his wife in October, Citigroup Inc. was ordered to pay $1.1 million in compensatory damages and $439,000 in legal fees related to the mishandling of the couple’s account by a broker who has seven customer disputes on her publicly available records with the Financial Industry Regulatory Authority -- excluding the Hagman case. Citigroup was also ordered to donate $10 million in punitive damages to charities of Hagman’s choice. Morgan Stanley Response The broker, Lisa Detanna , didn’t respond to telephone messages at her home and her office, but a Morgan Stanley spokeswoman, Christine Pollak , told me on Nov. 29 that Detanna “will be leaving the firm.” Citigroup, whose stockbrokers operate in a joint venture with Morgan Stanley, has filed a petition in California Superior Court in Los Angeles to have the award nullified. Finra’s records aren’t perfect: Brokers can get complaints expunged under some circumstances, and some black marks don’t show up at all. But this stuff isn’t brain surgery: Look up the less-than-perfect Finra BrokerCheck, invest two minutes in a Google search, and visit the “inmate locator” on the website of the Bureau of Prisons. The one thing you can probably count on: You’re asking for trouble if you’re picking a broker based on a tout from your country-club pals. If you don’t believe me, ask one of the suckers from Bernie Madoff ’s old client list. Avoidable Misfortunes Most of these misfortunes could have been avoided had investors done minimal checking: The Securities and Exchange Commission sued a Newport, Rhode Island, man in October after he allegedly misappropriated “substantially all” of the money he had obtained from 10 investors who invested in an online medical-registry company he was pitching. The investors should be embarrassed. David G. Stern had been convicted of mail and wire fraud in 2002, serving two years in prison -- or “a camp,” as he called it in a telephone interview -- and was disbarred as a lawyer by Massachusetts in 1997 after he transferred millions from a client’s trust to a company he had an interest in. The disbarment pops up on a two-second Google search. The prison record can be found at http://www.bop.gov. Stern told me he didn’t defraud anyone with his medical-registry company and that “everyone was repaid in full” from his previous legal difficulties. Maybe so. But wouldn’t it be smart to know about his past before you signed up to do business with him? Strippers and Gambling Then there is Keith Epstein. In a criminal complaint filed in the U.S. District Court for the Eastern District of Michigan on Nov. 22, a Federal Bureau of Investigation agent said the former broker had taken money from mostly elderly investors, indulging in jaunts at strip clubs, online gambling, and even handing over signed, blank checks to three exotic dancers. Ron Chapman , a Bloomfield Hills, Michigan lawyer who is handling $8 million in claims against Epstein, says one investor entrusted new money to Epstein as recently as three months ago. Michigan took away Epstein’s three insurance licenses in October 2009, describing his actions as “thievery” in a news release. Finra barred him from the securities business for two years beginning Jan. 20, 2009, a lenient temporary ouster considering they said he’d engaged in “misuse” of investor money. Why should any broker be let back in once that’s happened? Felony Trial Epstein was arrested in October and awaits trial on four felony counts in a jail at the Macomb County sheriff’s office. His criminal lawyer, Eva Tkaczyk of Warren, Michigan, didn’t return calls. Mark Kowalsky , a Southfield, Michigan, lawyer representing him in the civil suits against him, declined to comment. Sadly for investors, Finra knew in May 2007 that Epstein had been put under review by a former employer and then fired, but it doesn’t shares details like that with the public. Then there are cases like those of Irving Stitsky , a man with a long record of abuses who was barred from the securities industry in 1998 for his role in the New York securities firm Stratton Oakmont Inc. In July, federal Judge Kimba Wood sentenced him to 85 years in federal prison for his role in defrauding more than 250 people in a $23 million real estate investment. Stitsky’s New York lawyer, Denis Kelleher , said Stitsky has filed a notice of appeal and is “in the process of forming his brief.” The government said that Stitsky didn’t disclose his role in the real estate deal to investors. But when you consider how lax investors can be about checking the people to whom they entrust their money you have to wonder if it would make any difference. Not everyone is as careful as Stitsky about covering his tracks when he gets back into business after a regulatory tiff. Still, that makes it worth doing some checking. You should never be surprised to discover that the adviser who reminds you of your favorite nephew turns out to be a conman who stayed out of the headlines because he had a craftier lawyer than you could ever afford. ( Susan Antilla , the author of the 2002 book “Tales from the Boom-Boom Room,” is a Bloomberg News columnist. The opinions expressed are her own.) To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net |
2024-01-17 | Bloomberg | Goldman Keeping Lid on Pay Amid Rebound Cheers Investors | Goldman Sachs Group Inc. (GS) , the securities firm that set a Wall Street compensation record in 2007, is now demonstrating how little it can pay. The portion of revenue allotted for salaries, bonuses, stock awards and benefits was 38 percent in 2012, down from 42 percent a year earlier and the lowest since 2009, the company said yesterday in a statement. The move helped the bank post a fourth-quarter profit that beat analysts’ estimates and pushed return on equity to 10.7 percent for the year, up from 3.7 percent in 2011. The stock climbed the most in 10 months. “It’s a better time to be an investor than when bonuses are becoming ridiculous,” said Michael Vogelzang, chief investment officer at Boston Advisors LLC, which manages $2.4 billion including Goldman Sachs shares. “You’re seeing a massive amount of overcapacity in the business and it’s continuing to push down the price of labor.” Goldman Sachs still may be one of few Wall Street firms that pay employees more for 2012 because revenue surged 19 percent and it cut staff by 3 percent. JPMorgan Chase & Co. (JPM) , the biggest U.S. bank by assets, cut total compensation expense at its corporate and investment bank 3 percent last year as revenue at that division rose 1 percent. The pay expense was 33 percent of revenue for the year, down from 34 percent in 2011. ‘Operating Leverage’ Morgan Stanley, which is eliminating 1,600 jobs, will defer 100 percent of bonuses for some senior bankers and traders over three years as it reins in costs, a person briefed on the matter said earlier this week. Deutsche Bank AG is weighing 2012 bonus cuts of as much as 20 percent for investment bankers in Europe , while those in New York will see smaller declines, four people briefed on the matter said this week. Anton Schutz, president of Rochester, New York-based Mendon Capital Advisors, said control of expenses, which rose 1 percent during 2012 even as revenue climbed 19 percent, is something Goldman Sachs investors have craved. “One of the things we’ve been looking for in this space for a long time is operating leverage,” said Schutz, whose firm has about $150 million under management including Goldman Sachs stock. “That’s exciting for shareholders. I don’t think it’s so good for employees unless they own a lot of stock.” Goldman Sachs rose 1.7 percent to $143.50 by 10:52 a.m. in German trading after climbing 4.1 percent yesterday in New York to $141.09, the biggest advance since March. The shares have gained 11 percent this year on top of a 41 percent advance in 2011. Market Rebound The bank derived about 70 percent of its revenue last year from investments with the firm’s own money or trading with clients. The performance of those businesses is often tied to the rise or fall of asset prices. A stock-market rebound and a $500 million profit from selling a hedge-fund-administration unit helped revenue recover from the lowest first half since 2005 as the company booked its first annual revenue gain in three years. Revenue in Investing & Lending, the segment that includes the firm’s stakes in stocks, bonds, real estate, private equity and hedge funds, almost tripled last year to $5.89 billion from $2.14 billion. Ed Najarian, an analyst at International Strategy & Investment Group LLC, said he raised his estimates for Goldman Sachs’s earnings per share through 2015 because he expects the annual compensation ratio to hold below 40 percent. He kept a neutral rating on the stock because he expects gains from private-equity and debt holdings to be lower this year and predicts regulations will limit trading revenue, according to a research note yesterday. Reinsurance Business Goldman Sachs said yesterday that $1.08 billion of the firm’s $8.2 billion of equity trading revenue was from the bank’s reinsurance business, marking the first time that the company disclosed revenue from that segment. The firm is considering selling a majority stake in that unit, said Harvey M. Schwartz, who will replace Chief Financial Officer David A. Viniar, 57, at the end of this month. The bank still doesn’t have enough information on proposed regulatory changes to give a target for future return on equity, Schwartz, 48, said on a conference call with investors. The 10.7 percent figure for 2012 was “not particularly aspirational,” he said. “We’d like to do better.” Central bank policies have boosted asset prices, and that’s likely to continue to contribute to higher profits at firms like Goldman Sachs, said Boston Advisors’ Vogelzang. He said he expects the bank’s return on equity to reach the “mid-teens.” “The way we view the ROE target is this is a very cyclical business, highly dependent on capital markets ,” Vogelzang said. “Our outlook for particularly the U.S. equity markets is quite strong, and they’re going to be levered to that.” Better Balance Chief Executive Officer Lloyd C. Blankfein, 58, has undertaken a $1.9 billion expense-reduction effort since mid- 2011. That helped reduce the compensation ratio, which was part of an effort to strike a better balance between rewarding employees and shareholders, Schwartz told analysts. “This year we hope we got the balance right,” he said. The bank employed 32,400 people as of Dec. 31, 900 fewer than the end of 2011. It allocated $12.9 billion for compensation, up from $12.2 billion in 2011. That averages $399,506 per employee. While that’s up from $367,057 in 2011, it’s 40 percent less than the $661,490 average for 2007. That’s a reflection of how much the market has changed, Vogelzang said. “It’s a very interesting case study in the supply-demand equation for high wage-earning, white-collar workers,” he said. “We’ve certainly seen it in manufacturing, we’ve seen it in lower-level services, but we’re now seeing it at places like Goldman and Morgan Stanley. (MS) ” To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-05-30 | Bloomberg | RBC Joins CIBC Posting Profit Gains on Canadian Lending | Royal Bank of Canada , the country’s largest lender, and Canadian Imperial Bank of Commerce posted higher second-quarter profits amid gains in domestic consumer lending and a decline in provisions for bad loans. Profit for the period ended April 30 rose 26 percent to C$1.94 billion ($1.88 billion), or C$1.27 a share, from C$1.53 billion, or 99 cents, a year earlier, Royal Bank said today in a statement. Canadian Imperial, the country’s fifth-largest bank, raised its dividend after posting an 8 percent increase in profit to C$876 million, or C$2.12 a share, from C$811 million, or C$1.90. Both Toronto-based banks benefited from profit growth in domestic retail banking even as Canadians reduce borrowing amid a consumer-lending slowdown. Royal Bank’s domestic personal and commercial banking profit jumped 11 percent to C$1.04 billion from a year earlier, while CIBC’s retail and business banking rose 8.6 percent. “Consumer lending hasn’t slowed yet,” Kash Pashootan, a portfolio manager at First Avenue Advisory of Raymond James Ltd., said in a phone interview. “We need to see consumer debt stabilize before we can say loan growth has peaked, but the banks are still milking the rise.” Royal Bank earned C$1.31 a share excluding some items, according to the statement, missing the C$1.32 average estimate of 12 analysts surveyed by Bloomberg. CIBC’s adjusted profit was C$2.12 a share, the lender said, beating by five cents the average estimate of 14 analysts. Loan Reserves CIBC fell 1.5 percent to C$79.22 at 4:10 p.m. in Toronto trading, the most since March 26, and Royal Bank declined 1.8 percent to C$62.84, the worst performer today on the eight-company Standard & Poor’s/TSX Commercial Banks Index. Royal Bank set aside C$288 million for bad loans, down 17 percent from a year earlier. CIBC reserved C$265 million in provisions, 14 percent less than the same period last year. Royal Bank’s results were also helped by contributions from buying out partner Banque Internationale a Luxembourg SA in their RBC Dexia Investor Services joint venture in July, and its Feb. 1 takeover of the Canadian auto-financing and deposit business of Ally Financial Inc. (ALLY) Canadian banks, ranked the world’s soundest for the past five years by the Geneva-based World Economic Forum, are facing a slowdown in domestic consumer lending as the housing market cools and Canadians are urged to curb borrowing. Investment Banking Household debt rose to a record 165 percent of disposable income at the end of last year, according to Statistics Canada. The International Monetary Fund last month cut its 2013 growth forecast for Canada to 1.5 percent, the slowest among Group of 20 countries outside Europe and down from a 2 percent estimate in October. Bank of Montreal yesterday reported results that included a 0.7 percent decline in domestic banking, hurt by higher costs and lower net interest margins. Toronto-Dominion Bank, Canada ’s second-largest lender, said May 23 that domestic consumer-banking profit rose 4.8 percent, while National Bank of Canada had a 1.8 percent increase in consumer lending. Bank of Nova Scotia reported a 19 percent surge in Canadian banking profit, aided by its C$3.1 billion takeover of ING Groep NV’s Canadian operations. Personal and commercial-banking profit at Royal Bank, which included Caribbean operations, rose 12 percent to C$1.06 billion from a year earlier, helped by lower provisions and C$12 million of earnings from the Ally acquisition. ‘Hard Work’ “While the Canadian personal-lending market is slowing down there is still some growth, we’re still picking up volume,” Janice Fukakusa, chief financial officer, said in an interview. “You see the results of a lot of hard work around looking at productivity and making sure our spending doesn’t get ahead of our revenue growth.” Investor and treasury services posted profit of C$67 million, compared with a year-earlier loss of C$121 million tied to costs from the RBC Dexia deal. Insurance earnings rose 9.9 percent to C$166 million while wealth-management profit increased 6.1 percent to C$225 million. RBC Capital Markets, the firm’s investment-banking unit, reported profit of C$386 million, up 4 percent from a year earlier. “With wealth management and capital market performances lackluster, focus will be on retail banking, and domestic in particular, which is also not likely to be warmly received by the market,” John Aiken, an analyst with Barclays Plc, said of RBC’s results in a note to clients. Raises Dividend CIBC also reported gains in investment banking, with profit from its wholesale unit surging 51 percent to C$198 million. Wealth-management earnings rose 16 percent to C$92 million from a year earlier. The bank raised its dividend 2.1 percent to 96 cents a share, joining Montreal-based National Bank as the only other lender in the quarter to raise its quarterly payout. CIBC continues to negotiate with Aimia Inc. on its Aeroplan card partnership and is considering alternatives if the deal doesn’t go through, Chief Executive Officer Gerald McCaughey said on a conference call after reporting earnings. The bank said it’s spending more than C$50 million over four quarters to create an alternative card if the agreement isn’t renewed. To contact the reporters on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net ; Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net ; David Scanlan at dscanlan@bloomberg.net |
2024-03-04 | Bloomberg | Stocks Rise, Treasuries Fall; Oil Slides to Two-Month Low | U.S. stocks rose, with the Dow Jones Industrial Average closing within 40 points of a record, amid optimism the Federal Reserve will continue to provide monetary stimulus. Commodities dropped on concern changes in China ’s policies may slow growth and hurt the global recovery. The Dow rose 38.16 points to 14,127.82 while the Standard & Poor’s 500 Index advanced 0.5 percent to 1,525.20 after retreating 0.4 percent earlier. The S&P GSCI Index of commodities fell for a fifth day, the longest slump of the year, as oil dipped below $90 a barrel for the first time this year. Japan ’s five-year rate slid two basis points to a record 0.095 percent. Italy ’s 10-year yield rose amid concern the country may need to hold another election. U.S. Treasuries fell. Financial stocks helped lead gains as Federal Reserve Vice Chairman Janet Yellen said the central bank should press on with $85 billion in monthly bond buying while tracking possible costs and risks from the program. Earlier losses in global stocks followed data showing China’s service industries grew last month at the slowest pace since September and the cabinet last week tightened mortgage rules to cool the property market. “The Fed is going to be our friend for an extended period of time,” Michael Mullaney, chief investment officer at Boston- based Fiduciary Trust Co., which manages $9.5 billion, said by telephone. “And as the old adage goes, don’t fight the Fed,” he said. “Risk assets are going to do reasonable well as long as the Fed and other central banks have got their checkbooks open, which is what they have right now.” Budget Talks While President Barack Obama phoned Democratic and Republican legislators over the weekend, his aides and congressional leaders signaled automatic spending cuts would continue for weeks, possibly months. Both sides indicated that revisiting the reductions would begin after they resolve a looming confrontation over legislation that’s needed to keep federal agencies running beyond March 27, placing a premium on avoiding a government shutdown. “It’s going to be choppy this month,” said Michael Mullaney, chief investment officer at Boston-based Fiduciary Trust Co., which manages $9.5 billion. “We have this March 27th debt ceiling limit coming up. The partisan rancor is probably going to be pretty active coming out of Washington for the next few weeks.” Investors have reduced bearish stock bets to the lowest level since at least 2007 as the bull market in American equities begins its fifth year. Short Interest Short sales in the S&P Composite 1,500 Index fell to 5.6 percent of shares available for trading in February, down from a record 12 percent during the credit crisis and the lowest ever in data compiled by Bespoke Investment Group and Bloomberg starting six years ago. The last time the number of shares borrowed and sold short approached this level, the equity gauge lost 3.3 percent in the next three months. Bulls say the capitulation by market bears shows the rally remains intact and that more money will flow into stocks after individuals sent $37.9 billion to mutual funds in January, the most since 2004. It also means a source of demand is diminishing, a traditional signal for caution in an aging bull market. Less than 1 percent of the shares of Ford Motor Co. and Cabot Oil & Gas Corp. (COG) have been borrowed and sold short by speculators hoping to return them to owners once prices fall. Billionaire investor Warren Buffett said stocks will do well and the greater risk is to sit out the market’s rally. ‘Do Fine’ “American business will do fine over time. And stocks will do well just as certainly,” Buffett said in his annual letter to shareholders. “Since the basic game is so favorable, Charlie and I believe it’s a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of ’experts,’ or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it,” he said, referring to Berkshire Hathaway Vice Chairman Charles Munger. The S&P 500 Financials Index climbed 0.9 percent and the consumer-discretionary gauge rose 1 percent to a record to help lead gains among the 10 main groups in the S&P 500 today. Home Depot Inc. and Citigroup Inc. rallied almost 2 percent paced the advance. Airlines Rally Delta Air Lines Inc. rose 5.6 percent to a five-year high of $15.65, pacing a rally in airlines, after increasing the lower end of its guidance for unit revenue. This will be Delta’s best first quarter in over 12 years, President Ed Bastian said today on a webcast of a presentation at a JPMorgan Chase & Co. transportation conference in New York. The NYSE Arca Airline Index (XAL) rallied 3.3 percent as lower oil prices also boosted the group. Hess Corp. jumped 3.5 percent after saying it will exit energy trading, marketing and retail businesses while doubling its dividend and announcing plans to buy back as much as $4 billion in stock. Yahoo! Inc. climbed 3.5 percent after an analyst at Barclays Plc raised his rating on the company to overweight from equalweight. Treasury 10-year yields added three basis points to 1.875 percent. The Stoxx Europe 600 Index closed little changed after losing as much as 0.6 percent earlier. Commodity producers posted the biggest decline among 19 industry groups in the benchmark index , sliding 2.1 percent. HSBC Holdings Plc retreated 2.5 percent as Europe’s largest bank said profit fell 5.6 percent in 2012 after taking a $5.2 billion charge for revaluing its own debt. Debenhams Plc (DEB) plunged 15 percent, the most since 2008 on a closing basis, after predicting that pretax profit will drop in the first half of the year because of snow in January. Repsol Gains Repsol SA added 2.5 percent as Spain’s largest oil producer sold a 5.04 percent stake to Temasek Holdings Pte, Singapore ’s state-owned investment company. The oil producer had said it would consider selling shares after Argentina ’s government seized its YPF business last April. European finance ministers were meeting in Brussels today, while a top aide to Italy’s Democratic Party leader Pier Luigi Bersani said the country may need to hold another election this year. The drop in Italian 10-year bonds sent yields up nine basis points to 4.88 percent, near the highest in more than three months. German 10-year yields were little changed at 1.42 percent after falling to 1.39 percent, the lowest since Jan. 2. The euro slipped 0.2 percent versus the yen and was little changed at $1.3021. The Aussie dollar tumbled as much as 0.9 percent to $1.0115, the lowest level since July. Norway ’s krone strengthened against all 16 major counterparts. The gain in Japanese bonds came after Haruhiko Kuroda, the nominee to be Bank of Japan (8301) governor, said he would do whatever is needed to end 15 years of deflation. The yield on the benchmark 10-year note fell four basis points to 0.61 percent. Crude oil lost 0.6 percent to a two-month low of $90.12 a barrel in New York after dropping to as low as $89.33. Commodities “We have disappointing economic news out of China,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “There are problems out there for the economy and for oil demand; $90 is a critical level and we are poised to fall rather quickly down to $88.” Wheat fell for the first time in five days, snapping the longest rally in six weeks, after a survey showed reserves will top a government forecast in the U.S., the world’s biggest exporter. Lead and zinc declined at least 0.9 percent as 15 of 24 commodities tracked by the S&P GSCI Index fell. U.K. natural gas for delivery today jumped as much as 69 percent after exports from Norway into Europe’s biggest market decreased to a four-month low. Emerging Markets The MSCI Emerging Markets Index (MXEF) slid 1 percent. The Shanghai Composite Index slipped 3.7 percent, the most since August 2011, as property developers slumped after China’s Cabinet on March 1 called for higher downpayments and interest rates for second-home mortgages in some cities. The non- manufacturing Purchasing Managers’ Index fell to 54.5 in February from 56.2 in January, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday. Taiwan’s Taiex slipped 1.2 percent While South Korea’s Kospi, Russia ’s Micex Index and Brazil ’s Bovespa fell at least 0.6 percent. To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net ; Sarah Pringle in New York at springle1@bloomberg.net ; Moming Zhou in New York at mzhou29@bloomberg.net To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net |
2024-08-15 | Bloomberg | Canada’s Dollar Gains as Wagers on Fed Weigh on U.S. Currency | Canada’s dollar gained the most this week as speculation the Federal Reserve will begin slowing stimulus as soon as September weighed on demand for assets denominated in the U.S. currency. The Canadian dollar strengthened as crude oil, the nation’s biggest export, advanced for a fifth day, the longest winning stretch since April. U.S. stocks and Treasuries dropped, while gold, which Canada produces, rallied. Claims for jobless benefits in the U.S. unexpectedly dropped and the cost of living rose, bolstering bets the Fed will soon slow its bond buying. “All the U.S. assets are down -- stocks are down, bonds are down, the dollar is down,” Marc Chandler , the global head of currency strategy at Brown Brothers Harriman & Co., said by telephone from New York. “If I’m right, we’re in a weak U.S.- dollar environment for a little bit. That means the Canadian dollar is going to strengthen; maybe there’s scope for another percent or so.” The loonie, as Canada’s currency is nicknamed for the image of the aquatic bird on the C$1 coin, appreciated 0.4 percent, the most on a closing basis since Aug. 9, to C$1.0306 per U.S. dollar at 5 p.m. in Toronto. It declined earlier to C$1.0364 after touching C$1.0370 yesterday, the weakest since Aug. 8. One loonie buys 97.03 U.S. cents. The U.S. dollar fell against 12 of its 16 most-traded counterparts tracked by Bloomberg, while the loonie advanced against 10. “What’s bad for the U.S. dollar is good for the Canadian dollar in this case,” said Greg T. Moore, currency strategist at Toronto-Dominion Bank, by phone from Toronto. Stocks, Bonds The Standard & Poor’s 500 Index slid 1.4 percent, and U.S. Treasury 10-year notes dropped, with yields touching 2.82 percent, the highest since August 2011. Canada’s benchmark 10-year government bonds fell, pushing yields up four basis points, or 0.04 percentage point, to 2.67 percent. Yields climbed as much as eight basis points to 2.71 percent, the highest intraday level since July 2011. The price of the 1.5 percent securities maturing in June 2023 lost 34 cents to C$90. The loonie strengthened as oil, Canada’s biggest export, rose on speculation turmoil in Egypt may upset Middle Eastern supply. Crude futures climbed as much as 1 percent to $107.87 a barrel in New York. “Oil is actually rising quite significantly, so that’s quite a boost to Canada,” Sebastien Galy , a senior currency strategist at Societe Generale SA, said by phone from New York. Gold Gains Standard & Poor’s GSCI Index (SPGSCI) of 24 commodities also rose for a fifth straight day, with the spot price of gold reaching its highest in almost two months. The gauge increased 0.8 percent, and gold climbed as much as 2.5 percent to $1,370.13, the highest since June 19. The world’s two largest gold producers by market value, Goldcorp Inc. (G) and Barrick Gold Corp. (ABX) , are both Canadian. The Fed buys $85 billion in Treasuries and mortgage bonds each month to put downward pressure on borrowing costs and spur economic growth. The purchases also tend to devalue the American dollar. Canada ’s dollar declined earlier on speculation slowing the stimulus would benefit the dollar. Bets the central bank may begin slowing the purchase pace as soon as next month were boosted by U.S. Labor Department data that showed the number of applications for unemployment insurance benefits in the U.S. declined to 320,000 in the week ended Aug. 10, the fewest since October 2007, from a revised 335,000 the week before. Economists surveyed by Bloomberg called for an increase to 335,000. Consumer Prices The U.S. consumer-price index increased 0.2 percent last month after a 0.5 percent gain in June, Labor Department figures showed. The advance matched the forecast in another Bloomberg survey. The core measure, which excludes food and fuel, also climbed 0.2 percent from June. American industrial production was unexpectedly unchanged in July as a slowdown at factories overshadowed an increase in mining, another report showed. A 0.3 percent rise was forecast. Canada’s currency has lost 0.6 percent this month against nine developed-nation peers tracked by the Bloomberg Correlation Weighted Index. The U.S. dollar has weakened 1.3 percent. To contact the reporter on this story: Ari Altstedter in Toronto at aaltstedter@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net |
2024-03-15 | Bloomberg | U.S. Probing UBS Over Possible Libor Rate Manipulation, Bank Report Says | UBS AG (UBSN) , Switzerland ’s biggest bank, said it received subpoenas from U.S. authorities investigating possible attempts to manipulate the setting of the London interbank offered rate. The company received subpoenas from the U.S. Securities and Exchange Commission, the U.S. Commodity Futures Trading Commission and the U.S. Department of Justice , Zurich-based UBS said in its 2010 annual report published today. The bank also received an order to provide information to the Japan Financial Supervisory Agency concerning “similar matters,” it said. “UBS understands that the investigations focus on whether there were improper attempts by UBS, either acting on its own or together with others, to manipulate Libor rates at certain times,” the bank said. “UBS is conducting an internal review and is cooperating with the investigations.” Libor rates are set daily by the British Bankers’ Association , based on data it gets from a panel of banks on what it would cost them to borrow funds for various periods of time and in different currencies. The validity of Libor, a benchmark for more than $350 trillion of derivatives and corporate bonds, was questioned during the credit crisis as banks became wary of lending to each other because of mounting losses. UBS didn’t say what time period the Libor investigation is focused on. Serge Steiner, a spokesman for the bank, declined to comment beyond the statement in the report. Funding Difficulties Bank for International Settlements officials said in 2008 after a report on the Libor-setting process that they couldn’t rule out that rates may have been manipulated. The March report said if there were attempts to manipulate rates, the procedure whereby the highest and lowest estimates are stripped out probably “minimized their impact.” The London-based BBA said three months later that it would increase the number of banks setting Libor and consider adding a second daily survey to reflect U.S. trading. “We are committed to retaining the reputation and integrity of BBA Libor,” the BBA said in an e-mailed statement today. “We observe rigorous standards in our scrutiny and governance of the Libor mechanism, and work with the industry to ensure their continued full confidence in one of its most accurate and reliable benchmarks.” UBS, whose default-insurance costs rose 919 percent between July 2, 2007 and April 15, 2008 as it racked up $38 billion of writedowns and losses, quoted dollar-borrowing costs that were lower than its rivals on 85 percent of the days during that period, Bloomberg data shows. Banks routinely misstated borrowing costs to the BBA to avoid the perception they faced difficulty raising funds as credit markets seized up, turning Libor into “a lie,” Tim Bond, head of asset allocation at Barclays Capital , a unit of Barclays Plc, said in a Bloomberg Television interview in May 2008. To contact the reporters on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-04-09 | Bloomberg | Medicare Is Probing Advantage Rates Leak, Tavenner Says | Medicare is probing the possible leak of a government decision regarding health insurers’ payments for next year, administrator Marilyn Tavenner said. The potential leak is a “huge issue,” Tavenner said in testimony today before the U.S. Senate Finance Committee as President Barack Obama ’s nominee to head the U.S. Centers for Medicare and Medicaid Services. Humana Inc. (HUM) surged as much as 9.5 percent on April 1, leading health insurers’ shares higher about 40 minutes before a decision on rates was released. “When information leaks from the administration that has the ability to cause significant market movement, it is wrong and quite possibly illegal,” said Senator Charles Grassley , the Iowa Republican who has been probing leaks from government agencies and Congress to Wall Street. “I hope you agree that, ultimately, you’re responsible,” he told Tavenner. Tavenner’s agency has jurisdiction over the rates the government pays insurers as part of Medicare Advantage, a private-sector alternative to the traditional Medicare program, the U.S. health plan for the elderly and disabled. She has been the agency’s acting administrator since 2011, and Obama re- nominated her to lead it on Feb. 7. “I do not consider this a small issue. I consider this a huge issue,” Tavenner told Grassley. “We will do a thorough investigation of it and give you feedback.” The inspector general for the Department of Health and Human Services, who has subpoena power, is looking into the matter, she said. Don White, a spokesman for the HHS inspector general, said he could neither confirm nor deny whether the agency was investigating the incident. Stock Surge Health insurance stocks rose on April 1, about 40 minutes before the government’s official announcement on new Medicare Advantage rates, shining a spotlight on the ties among Congress, U.S. agencies and certain investment advisers. At issue is a private e-mail from a politically connected research firm that alerted recipients the rates, scheduled to drop under a preliminary decision, would increase instead. The Washington-based investment research firm, Height Analytics LLC, e-mailed its clients at 3:40 p.m. April 1, saying “a deal has been hatched to protect Medicare Advantage rates,” according to the copy received by Bloomberg News. It was followed less than three minutes later by a sharp rise in the stocks of Louisville, Kentucky-based Humana and Minnetonka, Minnesota-based UnitedHealth Group Inc. (UNH) , the biggest U.S. health insurer, which participate in the Advantage program. 4 Million Shares From the time the memo was sent to when the market closed 20 minutes later, about 4 million shares for Humana changed hands, according to data compiled by Bloomberg. That’s equivalent to $305 million in market value and compares with a daily average volume of 2.17 million shares over the past year. One of Height’s founders is Andrew Parmentier, a former staffer for the House Financial Services Committee and previously an aide to former House Majority Leader Dick Armey. “Height Securities is an SEC registered broker dealer and not a lobbying or political consulting firm,” Parmentier said in an e-mail. “We issue research reports in accordance with a comprehensive regulatory regime. We are highly confident our April 1 report was based on good research, conducted in accordance with this regulatory regime. We look forward to demonstrating this to Senator Grassley .” Grassley’s Request Grassley last week wrote Tavenner demanding the timeline of a decision to reverse a planned cut to rates Medicare pays insurance companies. While it’s not clear where the information to Height Analytics came from, the senator’s letter asked the agency about anybody who might have been told of the news early, including the administration and members of Congress. Tavenner said she doesn’t know whether her agency leaked the Medicare Advantage information. “Obviously I have a lot of pride in our agency, and so I don’t want to believe our agency leaked anything, ever,” she told reporters after the hearing. “We have a lot of market- sensitive information that we handle all the time and for that reason we’re very careful about it. But we will go through a complete review of our agency.” The incident has drawn scrutiny on the world of political intelligence firms, which sell investor clients information about what action government agencies or legislators are likely to take. Grassley has proposed that firms like Height register their employees, much as lobbyists must do. Cantor Endorsement Tavenner’s confirmation hearing was largely amicable, as her husband, daughter and son-in-law watched from the front row of the audience. U.S. Representative Eric Cantor , the Virginia Republican who is the House majority leader, introduced Tavenner and endorsed her. Tavenner, 61, would be the first confirmed administrator of the Medicare agency since 2006. She is a former executive at HCA Holdings Inc. (HCA) , the largest publicly traded U.S. hospital company, and a former Virginia Secretary of Health and Human Resources. Tavenner told senators she would recuse herself from U.S. decisions involving HCA or the Virginia state government. One decision her agency faces is whether state governments may use Medicaid money to allow newly eligible recipients to buy private health insurance. Medicaid is the joint federal-state medical program for the poor. Arkansas Governor Mike Beebe, a Democrat, is negotiating with his state’s Republican-led legislature to expand Medicaid as set out in the Affordable Care Act, the 2010 health overhaul. Beebe has asked Tavenner’s agency to allow the state to spend Medicaid money on private insurance for those new participants. Senator John D. Rockefeller IV, a West Virginia Democrat, asked Tavenner why she would allow such a plan, which he said would cost more than covering people with state-run Medicaid. Tavenner told Rockefeller that her agency has no “formal proposal” from Arkansas and “we have not approved anything.” To contact the reporters on this story: Alex Wayne in Washington at awayne3@bloomberg.net ; Drew Armstrong in New York at darmstrong17@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-07-02 | Bloomberg | Greece May Not Avoid Default, Swiss Re’s Kielholz Tells Boersen | Greece ’s efforts to reduce its debt may not be enough to avert a default, Swiss Reinsurance Co. Chairman Walter Kielholz told Germany’s Boersen-Zeitung in an interview. “The measures are necessary but they are probably not sufficient,” Kielholz was quoted as saying. “Certain market participants are currently still assuming a partial default, which is reflected in the prices for Greek government bonds.” Kielholz said he still considers U.S. Treasuries the safest investment, the newspaper wrote. To contact the reporter on this story: Jana Randow in Frankfurt at jrandow@bloomberg.net. To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net |
2024-09-28 | Bloomberg | EU Proposes $78 Billion-a-Year Financial Transaction Tax to Start in 2014 | The European Union proposed a financial-transactions tax that would take effect in 2014 and raise about 57 billion euros ($78 billion) a year, prompting renewed opposition from the U.K. The proposal would apply a tax of 0.1 percent on trading of stocks and bonds, with a 0.01 percent rate for derivatives contracts, the European Commission, the EU executive, said today in Brussels. Those minimum rates would apply throughout the 27- nation bloc. The measure would deliver “a fair contribution from the financial sector,” EU Tax Commissioner Algirdas Semeta said. European governments are split over the merits of a transactions tax, while British banks warn that an EU-only measure would drive business to other regions. The U.K., home to Europe ’s biggest financial center, has opposed the move, which requires the unanimous support of all EU countries. The U.K. Treasury reiterated today that such a levy would need to apply globally. “The consensus is that anything less than a globally applied, uniform tax would distort the markets and reward dissenting low-tax regimes rather than raising significant revenue,” the British Bankers’ Association, which lobbies for the country’s banking industry, said in a statement. “The U.K. would be particularly affected by any such tax as it is the world’s financial center.” ‘Frictions’ EU member states will discuss the proposal before the commission presents the plan to the Group of 20 nations at a November summit. U.S. Treasury Secretary Timothy F. Geithner said this month that a transaction tax could create “frictions” that would worsen the impact of a crisis without offering a protective reduction in volatility or risk-taking. “Europe needs to focus on rebuilding its economies and fostering recovery. This proposal will do nothing to support either of those aims,” the Association for Financial Markets in Europe, a lobby group that represents banks and brokers including Goldman Sachs Group Inc., Deutsche Bank AG and UBS AG, said in an e-mailed statement. “Europe’s leaders should reject this proposal as potentially damaging to their economies and the financial system.” The proposed tax is aimed at banks, investment firms, insurance companies, pension funds, stockbrokers and hedge funds , among other types of financial firms, the EU said. Spot foreign-exchange trades would not be covered by the tax, while currency derivatives are included. Bond Auctions Transactions with the European Central Bank and other central banks wouldn’t be covered by the tax, according to the proposal. It also features an exemption for the “primary market,” which includes sovereign and corporate bond auctions. “The tax would aim at covering 85 percent of the transactions that take place between financial institutions,” according to the proposal. The EU is seeking to insulate households and small businesses from the levy, and says banks could charge “not excessive” fees such as a 10-euro fee on a 10,000-euro stock purchase. The tax would “ensure that the financial sector makes a fair contribution at a time of fiscal consolidation,” the commission said. It would affect market behavior and financial- industry business models, such as high-frequency and automated trading, the EU said. Additional Tax The BBA said “banks conduct transactions for their customers, therefore any tax on transactions would be an additional tax on customers.” The plan drew support from Oxfam International and Catholic Development Agencies, who said the measure would increase justice and provide funding for environmental and social goals. Oxfam said the U.K. has existing taxes that haven’t had a big negative effect on London business, suggesting that the EU proposal also would not do harm. French President Nicolas Sarkozy and German Chancellor Angela Merkel have called for the EU to introduce its own transactions tax irrespective of whether other regions follow suit. The finance ministers of Spain and Belgium said on Sept. 17 that the euro area’s 17 governments should consider introducing their own transaction tax if no agreement were possible at the global or EU level. Tax Commissioner Semeta, speaking in a press briefing today in Strasbourg, France , downplayed the prospect of narrowing the proposal’s scope. ‘Clear Benefits’ “There are clear benefits of the proposal for the United Kingdom,” Semeta said. “It will give additional revenues to our member states including the United Kingdom. Many member states need consolidation efforts and these additional revenues would be also beneficial for the U.K. At the same time, it would reduce the contribution of the United Kingdom to the EU budget.” U.K. Business Secretary Vince Cable earlier today said taxation is a “national competence issue” and EU proposals for a levy on financial transactions cannot be forced on the U.K. Cable was speaking to Bloomberg Television from Istanbul. Today’s announcement follows a 2010 proposal that failed to draw agreement among member nations. The financial industry says a transaction tax would affect the broader economy because banks would pass on costs to clients. An impact assessment accompanying the proposal says that the plan would have a “long-run” negative impact of 0.5 percent of gross domestic product. To contact the reporters on this story: Rebecca Christie in Brussels at rchristie4@bloomberg.net To contact the editors responsible for this story: James Hertling at jhertling@bloomberg.net |
2024-07-30 | Bloomberg | Black Holes at China's Shadow Banks | When I speak of cracks in China’s institutional foundation, I’m thinking in large part of China’s banking system -- which as far as I can tell, isn’t really a banking system the way that we think of it. Banks are controlled by the government, with interest rates for both deposits and loans set by fiat. The government also feels free to tell banks how much to lend, and to mandate that they buy government bonds at particular prices. When I went to China in 2010, one of the bankers there told us that a huge chunk of their Tier One capital consisted of special government bonds that couldn’t be sold and paid about 5 percent interest -- at a time when inflation was, according to most of the experts I talked to, well above that. In a Western banking system, you’d expect this to lead to a crisis. But what would that even mean in China? Its currency isn’t convertible, and financial links to the outside world are tenuous. Maybe the government can just keep ordering banks to keep making loans at low interest rates, and declare by fiat that the loans are performing. That seems like a crazy thing to say, but it’s also hard to describe how a crisis would happen. In the years since I visited China, I’ve asked various experts to explain its banking system to me in a way that makes sense. No one has been able to so far. The fact that the mechanics of a crisis are hard to sketch out doesn’t mean that the system works well. You know those Chinese ghost cities, the eerie forests of apartment buildings and commercial complexes equipped with everything except people? Those homes are a major store of value for Chinese families. With bank account interest rates fixed, a fledgling stock market full of speculative issues, and few financial connections to the outside world, the Chinese have been forced to look into nonfinancial stores of value for their massive savings rate. Like us, they often choose real estate. But not to rent, because that would devalue the property; the Chinese place a high value on new. No, they buy the houses and keep them empty, as stores of value rather than places to live. In recent years, China has moved to liberalize things slightly, since obviously it makes no sense to plunge so much of the nation’s investment capital into empty houses and similar “assets.” But this, too, creates issues, as a recent New York Times article on China’s shadow banking system illustrates : "China’s regulators -- and a fair number of economists, policy makers and investors -- worry that legitimate banks are using lightly regulated wealth management products to repackage old loans and prop up risky companies and projects that might not otherwise be able to borrow money. Analysts warn that shadow banking is helping drive the rapid growth of credit in a weakening economy, which could lead to -- in the worst situation -- a series of bank failures. “This is the biggest uncertainty I’ve seen in my 18 years following the China market,” Dong Tao, an economist at Credit Suisse, said of shadow banking. “You don’t know how banks are deploying capital. And you don’t know the credit risks.” What banks are doing, analysts say, is pressing customers to shift money from the old, regulated part of their operations — savings deposits — into the new, less regulated part consisting of high-yielding wealth management products that can circumvent government interest rate controls and be used to finance high-interest loans to desperate customers." The old system worked, in the sense that it was probably quite stable, but it caused wildly inefficient capital allocation. The new system may ease some of the inefficiencies, but at the price of instability. Apparently, shadow banking has created a credit boom that the government would like to choke off. But when they try, the resulting squeeze threatens the growth they need to maintain political peace. If China wants to make the transition to an advanced economy, it will eventually need to regularize its banking system, dismantling a lot of its current controls and mandates and replacing them with a comprehensive regulatory and monetary regime. But can it do this before an economic slowdown creates a crisis? We’ve never watched a transition like China’s before. What we can say is that there are a lot of institutional problems that will need to be fixed — and it would be better to fix them before the fixes are truly and desperately necessary. |
2024-10-25 | Bloomberg | Batista Only Using $1 Billion OGX Option at Premium: CFO | Billionaire Eike Batista will only exercise an option to buy $1 billion of OGX Petroleo & Gas Participacoes SA (OGXP3) at a premium relative to the market price to avoid harming minority shareholders, the company’s finance chief said. OGX, the Rio de Janeiro-based oil explorer Batista controls, would consider a “non-negotiable” rights offering extended to all shareholders if the price exceeds the 6.30 reais set for Batista’s put option, Chief Financial Officer Roberto Monteiro said in an interview. OGX is also considering selling stakes in some of its more developed oil projects or selling future oil production to raise cash if needed, he said. “It’s not like the main shareholder is going to dilute the smaller shareholders,” Monteiro said by telephone from Rio. “This is not the case.” OGX soared the most in three months after Batista announced he was granting the put option at a 36 percent premium to yesterday’s close. It rose 4.5 percent to 4.84 reais at 3:21 p.m. in Sao Paulo after climbing as much as 8.2 percent, the most intraday since July 27. The put option is designed as an “insurance policy” to guarantee OGX has enough money to participate in the government’s upcoming auction for exploration areas next year or other oil assets for sale in Brazil, Monteiro said. The company’s $2.9 billion of cash at the end of June is enough to set up four production vessels and produce enough oil to make cash flow positive, he said. “We still would have a cash cushion of $400 million,” he said. The company has ordered three floating, production, storage and offloading vessels from OSX Brasil SA (OSXB3) , also controlled by Batista, and will order a fourth after it explores the area where the equipment will be used, he said. OGX needs to know what type of oil is in the area to complete designing the vessel, he said. To contact the reporter on this story: Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net |
2024-12-13 | Bloomberg | Erste, RZB Preparing Participation Capital Swap, Regulator Says | Austria’s financial watchdog FMA expects Erste Group Bank AG (EBS) and Raiffeisen Zentralbank Oesterreich AG to swap non-voting capital held by private investors into capital that is recognized internationally. “Almost all participation capital constructions have the option of a swap,” FMA Co-Chairman Helmut Ettl told reporters in Vienna late yesterday. “It just depends on the conversion conditions.” Erste and RZB, the majority owner of Raiffeisen Bank International AG (RBI) , in 2009 sold so-called participation capital to private investors as part of their deal to get funds from the government. RZB and other Austrian banks have sold participation capital also on other occasions before and after the 2009 deal. While those securities are loss-absorbing and counted toward the banks’ core Tier 1 capital, they were disqualified by the European Banking Authority for its stress tests this year and don’t help banks reach the EBA’s 9 percent minimum by mid-2012. This saddles the banks with securities which pay an 8 percent coupon and can’t be counted as capital. The banks are “preparing a conversion and are confident” that such a swap would work, Ettl said. RZB, which had a capital shortfall of 2.1 billion euros ($2.8 billion) in EBA’s most recent stress test , may swap as much as 1 billion euros of participation capital issued by RZB and Raiffeisen into common shares or contingent convertible bonds, Raiffeisen Chief Executive Officer Herbert Stepic said on Nov. 17. Erste Chief Financial Officer Manfred Wimmer said on Dec. 9 that the bank, which had a capital gap of 743 million euros, could convert about half of its private participation capital into CoCos. Wimmer said that this was part of Erste’s fall-back option should its planned asset reductions fail. Erste sold 540 million euros of participation capital in 2009, 250 million euros of which was taken up by Vienna Insurance Group AG. To contact the reporters on this story: Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net ; Boris Groendahl in Vienna at bgroendahl@bloomberg.net To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net |
2024-12-11 | Bloomberg | Blind Banker Loses RBS Discrimination Lawsuit at U.K. Tribunal | A blind former Royal Bank of Scotland Group Plc banker, who had to quit after his sight deteriorated, lost a discrimination lawsuit seeking disability benefits worth about 500,000 pounds ($804,500). RBS’s actions were “a proportionate means of achieving a legitimate aim,” employment judge NS Walker said in a written decision rejecting Paul Ryb’s claim, dated Nov. 19. The tribunal doesn’t give out judges’ first names. Ryb, a telecommunications equity salesman, said the bank had denied him the full amount owed under a disability- insurance plan. Bankers suing their former employees have had a run of defeats at London’s specialist employment courts. Fired UBS AG trader Ramon Braga lost an unfair dismissal case in July when a judge found he manipulated security prices, while ex- Credit Agricole SA (ACA) banker Edward Willems failed to get any compensation in his April whistle-blowing suit. Ryb, who is legally blind, was “shocked and angry” when RBS said he’d get 132,000 pounds a year, not the 158,400 pounds he was expecting under the disability plan, according to his witness statement from the case. Ryb’s lawyer John Turnbull and RBS spokeswoman Linda Harper didn’t immediately respond to requests for comment. It was his second lawsuit alleging unfair treatment by a bank. Ryb also sued his former employer Nomura Holdings Inc. (8604) in 2009 after claiming he was fired for complaining that its clients were being misled. That claim ended in a confidential settlement, the details of which weren’t disclosed in the RBS case. To contact the reporters on this story: Kit Chellel in London at cchellel@bloomberg.net ; Jeremy Hodges in London at jhodges17@bloomberg.net To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net |
2024-07-07 | Bloomberg | Diamonds Lure Insurance Investor Cowdery as Gems Beat Gold | Clive Cowdery, the Resolution Ltd. (RSL) founder who made about $240 million buying and selling insurers, is betting on diamonds after prices rose five times faster than gold this year on surging demand from China and India. Cowdery, 48, is among startup investors in Diamond Capital Ltd.’s $20 million fund that will manage a portfolio of the polished gems valued at as much as $400,000 apiece. Rajeev Misra, UBS AG’s securities business joint head, is also backing the London-based project, Diamond Capital said. “I’m conscious of the need to balance out my investment risk ,” Cowdery said in an interview. “Something that is as non-correlated with financial-market movements as this fund was attractive.” Diamond prices jumped 26 percent in the first six months as rough gem production failed to match surging demand from jewelry buyers in the swelling middle classes of China and India. That compares with 5.6 percent for gold, which reached a record $1,577.57 an ounce in May. Investors disappointed at bullion’s performance or the 4 percent advance in the MSCI World Index of stocks in the first half may still prove hard to sell on diamond funds. “I’m not a great supporter of them, but I can understand why high net-worths find them quite attractive,” said Des Kilalea, an analyst at RBC Capital Markets Ltd. “You rely really keenly on the guy who is doing the buying to know what he is doing.” Strategy Meetings The new fund’s diamond trading will be headed by Rishi Khandelwal, who established a gem wholesaler and retailer in Dubai in 2006. He is part of a three-member board that will meet quarterly to set strategy, said Peter Langdon, investor- relations director for the fund. Diamond Capital joins Harry Winston Diamond Corp. (HW) and Fusion Alternatives in planning funds to profit from soaring prices. Harry Winston said in May it proposes a $250 million diamond fund for institutional investors, while Fusion plans one backed by polished stones this year. Supplies of rough diamonds, which are turned into polished gems, are forecast to remain flat in the next five years and will fail to match demand driven by China and India, according to RBC. De Beers, the world’s largest producer, said June 9 demand will surpass output for at least the next five years because of a lack of new mines. Insurance Salesman Last year polished gems advanced 17 percent, according to data compiled by polishedprices.com, while gold gained 30 percent. Prices advanced a further 2.2 percent in the past week to the highest since at least 2002, according to polishedprices.com data. Diamond Circle Capital Plc (DIAM) , the first publicly listed fund to invest in the stones, has plunged 54 percent since selling shares in 2008. The fund slumped as the financial crisis reduced investor appetite for its $1 million-plus gems. The first diamond investment trust, set up by Thomson McKinnon Securities Inc. in the 1980s, was wound up after a decline in the market, according to press reports at the time. Cowdery, a former life insurance salesman, made his fortune by buying closed life insurance funds through Resolution Plc between 2003 and 2007. He sold the firm for 5 billion pounds ($7.2 billion) in May 2007, before the financial crisis, to Pearl Group Ltd., which was then headed by Punch Taverns Plc (PUB) founder Hugh Osmond. ‘City Personalities’ Cowdery declined to say how much he’s placed with Diamond Capital, which opened for minimum investments of $75,000 on June 13. It’s targeting $20 million and will stop accepting money on July 22, said Langdon. Misra, 48, who joined UBS in 2009 as global head of credit at its investment bank after leaving Deutsche Bank AG in June 2008, said June 17 he was considering making an investment. He hasn’t returned calls since seeking further comment. “We’ve got some strong support from some high-profile City personalities who like the concept and back the idea,” Langdon said in an interview. “Diamond prices have been increasing. There is definitely demand there for diamonds as an investment.” The Diamond Capital fund seeks to be different from predecessors by trading the stones as well as holding them in anticipation of prices rising, Langdon said. The fund will lend stones from its inventory to jewelery retailers and allow them to sell the gems on its behalf at a profit. The advantage for shops is that they can offer a greater choice of diamonds, rather than be limited to what they can buy upfront. Banker Customers The arrangement will enable jewelers like Dominic Carr to meet the demanding tastes of his City of London banker customers who pay anything from 5,000 pounds to 100,000 pounds for the pieces, the store owner said. “People like myself will have access to huge stock which wouldn’t normally be available,” said Carr, who has been in the industry for 25 years and has two shops on Liverpool Street. “The main thing is having an inventory of $20 million of diamonds within 48 hours.” China has surpassed Japan as the second-biggest buyer of diamonds behind the U.S., where demand rose 7 percent last year, compared with 25 percent in China and 31 percent in India, according to De Beers. Polished diamonds, like fine art or wine, lack fully transparent price data. They typically attract investors who are betting on excess demand and, unlike gold, haven’t traditionally been used as an inflation hedge. The new fund’s diamond holdings will be valued quarterly using prices from RAPnet, the world’s largest diamond-trading network, to determine whether investors make money. Diamond Capital, which may expand the fund to $100 million within four years, will buy stones of between 1 carat and 5 carats, said Sanjay Khandelwal of Emdico. The family-owned business will help manage the fund’s gem inventory and invest a minimum of $500,000, he said. To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net |
2024-07-08 | Bloomberg | Macquarie Enters U.S. Commercial-Mortgage Business as Delinquencies Surge | Macquarie Group Ltd. , Australia’s largest investment bank, is forming a group to originate U.S. commercial-property loans and trade securities tied to the debt, seeking to gain a toehold as delinquencies and maturities surge. Randy Reiff , who ran commercial mortgage finance and commercial mortgage-backed securities at Bear Stearns Cos. and JPMorgan Chase & Co., will head the New York-based group, Macquarie said in an e-mailed statement. Reiff, 39, was most recently president of Spartan Real Estate Capital. Macquarie’s credit trading division is entering the commercial-mortgage business amid plunging prices and record defaults. More than $60 billion in loans bundled into bonds mature in 2011, according to Bank of America Corp. Macquarie aims to take part in restructurings and refinancings as the debt comes due, said Michael McLaughlin , head of Macquarie’s New York-based credit trading unit and to whom Reiff will report. “We want to be in a position to capture that in whatever format it takes,” McLaughlin said in a telephone interview. Borrowers are struggling to refinance with values down 41 percent from October 2007 highs, according to Moody’s Investors Service. Late payments on commercial property loans packaged into securities are at a record 7.5 percent, according to Moody’s, and may reach 11 percent by yearend. Macquarie, based in Sydney, intends to start originating commercial mortgages as many banks pull away from real estate lending, creating a void, McLaughlin said. The loans may be pooled with others to be sold in newly issued commercial mortgage-backed bonds, he said. ‘The Big Cleansing’ Macquarie’s credit trading group, started in March 2008, focuses on high-yield and distressed corporate credit, and the bank will target similar buyers with real estate investments. “A lot of commercial real estate risk is on the books of banks and insurance companies,” McLaughlin said. “The market has been waiting for the big cleansing.” Mark Lebowitz , 44, New York-based Spartan’s director of capital markets, and James Conopask , 41, the firm’s chief investment officer, are also moving to the new group. Three other Spartan employees joining the Macquarie team are Simon Breedon, 31, Matthew Weinstein, 28, and Andrew Flack, 27. A record $251.1 billion of bonds tied to commercial mortgages were sold in 2007 after $223.3 billion in 2006, according to data compiled by Bloomberg. Sales of the debt halted in 2008 as the credit crisis sapped demand, choking off funds to borrowers. Even with government aid, only $3.04 billion of the debt was issued last year. About $1.67 billion has been sold in 2010. To contact the reporter on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net |
2024-03-07 | Bloomberg | States Seek to Direct Medicaid Patients to Exchanges | Lower-income residents eligible for Medicaid may be directed to buy coverage from health insurance exchanges using tax dollars, an option the Obama administration is weighing. Multiple states have asked about the arrangement, Gary Cohen, the director of the U.S. Center for Consumer Information and Insurance Oversight, said today on a conference call with reporters. Cohen, whose agency is implementing much of the 2010 health-care law, didn’t say how many governors made the request to use Medicaid money as a conduit for people to obtain private health plans next year through the new exchanges. “We’re exploring avenues in which that might be able to happen,” Cohen said. Under the health law, the Affordable Care Act, states have the option of expanding their Medicaid programs to cover everyone earning about one-third more than the federal poverty level -- about $31,322 for a family of four this year. States with Republican governors or Republican-led legislatures have balked at the expansion, saying it may cost too much even though the federal government will pay the entire expense until 2017. After 2017, the states’ share of the cost of the newly eligible residents never exceeds 10 percent. Spokesmen for Cohen’s agency didn’t immediately respond to an e-mail seeking more information about the issue. Governor’s Request Arkansas Governor Mike Beebe, a Democrat, asked Health and Human Services Secretary Kathleen Sebelius on Feb. 18 if his state would be allowed to have people newly eligible for Medicaid use the exchanges instead. The idea came from Republicans in the state legislature, said Matt DeCample, a spokesman for the governor. “The answer we got was that we had the flexibility to take the entire expansion population, that we could take as many as we wanted to, and route them through the exchange into private insurance plans,” DeCample said in a Feb. 28 phone interview. The exchanges are insurance marketplaces due to begin enrolling people Oct. 1 for coverage that begins in January. They will offer private plans from insurers such as UnitedHealth Group Inc. (UNH) to people who don’t get policies at their jobs. The coverage will be subsidized for those earning as much as four times the poverty level, or about $94,200 for a family of four this year. Coverage in the exchanges will likely be more expensive for taxpayers than Medicaid, DeCample said. Medicaid programs in most states pay hospitals, doctors and other health providers less than commercial insurers. To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-10-26 | Bloomberg | China’s Stocks Decline Most in Five Weeks on Earnings Concerns | China’s stocks fell, dragging the benchmark index down by the most in five weeks, as companies from Maanshan Iron & Steel Co. (600808) to ZTE Corp. (000063) reported losses. Maanshan Steel tumbled the most in 14 months after its third-quarter loss was wider than analysts estimated. ZTE, China’s second-largest maker of telephone equipment, retreated 2 percent to its lowest level since 2008. Hisense Electric Co. (600060) , the biggest maker of flat-panel televisions, plunged by the 10 percent maximum limit after profit dropped. The National Bureau of Statistics is due to release industrial companies’ September earnings tomorrow. Profits fell 6.2 percent in August. “The market is still worried about the magnitude of the economic recovery and deterioration of corporate earnings,” said Wu Kan, a fund manager at Dazhong Insurance Co. in Shanghai , which oversees $285 million. The Shanghai Composite Index (SHCOMP) dropped 1.7 percent to 2,066.21 at the close, the most since Sept. 20. The CSI 300 Index (SHSZ300) declined 1.9 percent to 2,247.91. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong retreated 1.3 percent. The Bloomberg China-US 55 Index (CH55BN) , the measure of the most-traded U.S.-listed Chinese companies, added 0.3 percent in New York yesterday. The Shanghai Composite dropped 2.9 percent this week, capping its first decline in four weeks. The measure, which has slumped 6.1 percent this year, trades at 9.8 times estimated earnings for this year, compared with the 17.8 average since Bloomberg began compiling the weekly data in 2006. China’s 1,175 investment funds lost 74.9 billion yuan ($12 billion) in the third quarter, as stock prices continued to fall and bond yields rose, the China Securities Journal said, citing TX Investment data. Low Expectations Domestic fund managers don’t have “high expectations” about stock performances this quarter as economic recovery is likely to be weak and the economy faces “structural” transformation, the Shanghai Securities News reported today, citing funds’ quarterly reports. Fund managers increased holdings of food, beverage and pharmaceutical stocks in the third quarter, the newspaper said. A measure of 54 material stocks in the CSI 300 slumped 3.3 percent, the biggest loss among the 10 industry groups. Maanshan Steel declined 4.4 percent to 1.97 yuan, the biggest retreat since August 2011. The company posted a third- quarter loss of 1.24 billion yuan, compared with a mean estimate for a 653 million yuan loss, according to three analysts in a survey. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. (600111) , China’s biggest producer of rare earth, tumbled 7 percent to 28.92 yuan for a sixth straight day of declines. Fortune CLSA Securities Ltd. cut its rating to sell from underperform and lowered the share-price estimate to 25 yuan, citing concerns over “destocking pressure” and caution over future prices. Company Earnings The rare-earth producer said this week it halted output at some of its smelting units for one month as prices declined. ZTE dropped 2 percent to 8.77 yuan, closing at its lowest level since November 2008, after saying it swung to a third- quarter net loss of 1.95 billion yuan from a profit of 299.3 million yuan a year earlier. Hisense Electric dropped 1 yuan to 8.97 yuan. Third-quarter profit declined 9.8 percent from a year earlier, the television maker said late yesterday. Shenyin & Wanguo Securities Co. cut its earnings-per-share forecasts for the company for this year and 2013 by 12 percent respectively as product prices fell and panel costs rose, Zhou Haichen, an analyst at the brokerage, wrote in a report today. Corporate Profits Out of the 937 companies in the Shanghai Composite, 293 have reported third-quarter earnings with an average drop of 3.3 percent from a year earlier, according to data compiled by Bloomberg. That compares with profit growth of 0.6 percent in the second quarter, the data showed. Publicly traded companies are required to release results by the end of the month. Speculative “hot money” to emerging markets unleashed by quantitative easing in the U.S. and Europe won’t likely flow to the A-share market in large enough levels to push up share prices, the China Securities Journal reported today, citing unidentified analysts. Net purchases of A shares by qualified foreign institutional investors were 4.6 billion yuan last week, the biggest weekly purchases of the year so far, the Guangzhou Daily reported today, citing market data. Hot Money China may see moderate hot money inflows in the fourth quarter, Ting Lu and Xiaojia Zhi, economists at Bank of America Corp. said in a report to clients dated yesterday. They amended their forecast for Chinese reserve-ratio reductions this year to “at most” one cut from two because of the changing direction of capital flows. The People’s Bank of China has cut interest rates twice since early June and lowered reserve ratios three times from last November. China’s capital flight may decline on the recovering economy, improved risk appetite, better liquidity, easing concern about yuan depreciation, QE3 and policymakers’ efforts to support financial market stability, the economists wrote. Thirty-day volatility in the Shanghai Composite was at 17.3 today, compared with this year’s average of 17.2. About 7.9 billion shares changed hands in the gauge, 2.6 percent higher than the daily average in 2012. The iShares FTSE China 25 Index Fund , the biggest Chinese exchange-traded fund in the U.S., climbed 0.9 percent to $37.53 in its second day of gains in New York yesterday. --Zhang Shidong. Editors: Richard Frost, Darren Boey To contact Bloomberg News staff for this story: Zhang Shidong in Shanghai at szhang5@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-05-08 | Bloomberg | Christie Weight-Loss Step May Be Key If White House-Bound | New Jersey Governor Chris Christie ’s acknowledgment of having secret stomach surgery may reassure voters who’ve wondered whether he’s fit to be president. The governor, who has struggled with excess pounds for most of his adult life, told reporters in Newark yesterday that he had the procedure Feb. 16 for the benefit of himself, his wife, Mary Pat, and their children. He denied it was a political move. “Just because I have a public office and I have some measure of notoriety doesn’t mean that my feelings about my family and my concerns about their future are any different than yours,” Christie said. “I did it because I want to try to put myself, as I get older, in the best position I can be to spend as much great time with them as I possibly can.” Political Capital: Christie Confronts 2016, Springsteen's Bouncers, Fleece Jokes The 50-year-old governor is running to win a second term in November. He turned down fundraisers’ overtures to embark on a 2012 presidential campaign less than two years ago, saying, “Now is not my time.” Christie hasn’t ruled out a 2016 bid. “He has to realize that it’s a lot easier to run for president if you can actually run,” Matthew Hale, who teaches politics at Seton Hall University in South Orange, New Jersey, said by telephone. “It also has to be in the back of his mind that the physical requirements of walking through Iowa county fairs and things like that really are not easy.” Loss Undisclosed Christie, who’s about 6 feet (1.8 meters) tall, hasn’t publicly disclosed his weight and didn’t say yesterday how much he may have lost since February. He said he considered the matter personal, and his family “is not thrilled” that the surgery, first reported by the New York Post, became public. The governor said he used a false name when he checked in for the 40-minute surgical procedure at New York University Langone Medical Center’s Weight Management Program in Manhattan. The operation was covered by his state health insurance, he said. He wouldn’t say what his out-of-pocket costs were. He went into the hospital at 7:30 a.m. and was home in Mendham at 5 p.m., he said. He didn’t transfer his state powers to Lieutenant Governor Kim Guadagno. Christie said he spoke with coach Rex Ryan of the National Football League ’s New York Jets before having the surgery. Ryan underwent the procedure in 2010, performed by surgeon George Fielding, and lost almost a third of his weight, according to the Post. Christie had Fielding do his operation. A telephone call to the doctor’s office was referred to Craig Andrews, a hospital spokesman, who declined to comment. Jets spokesman Bruce Speight didn’t respond to a voice message and e-mail seeking comment. Health Concern “It is a long-term health issue for me, and that is the basis on which I made the decision,” Christie said yesterday. “It’s not a career issue.” Physical fitness for presidents and candidates for the office has been stressed by advisers since at least the administration of Gerald R. Ford, the Republican who replaced Richard M. Nixon in the White House in 1974. Ford, caught on camera as he stumbled on the Air Force One steps, was mocked for “being a klutz,” said Peter Woolley , who teaches politics at Fairleigh Dickinson University in Madison, New Jersey. “The White House countered and said, ‘What are you talking about?’” Woolley said by telephone. “This guy’s an athlete. He was a Division I football player.” Gore, Huckabee Al Gore , Democrat Bill Clinton ’s vice president, and Mike Huckabee , the Republican former Arkansas governor, both lost pounds before campaigning unsuccessfully for president. U.S. Senator John McCain , a Republican from Arizona who survived torture in a Vietnamese prisoner-of-war camp and three bouts with skin cancer, was dogged by health questions before Democrat Barack Obama beat him in the 2008 presidential race. On Feb. 4, less than two weeks before Christie had his surgery, he appeared on CBS Corp (CBS) .’s “Late Show with David Letterman ,” munching a doughnut as a gag. He told the comedian that he had normal cholesterol and sugar levels in his blood, calling himself “basically the healthiest fat guy you’ve ever seen in your life.” His comments led a former White House physician, Connie Mariano, to tell CNN that the governor’s weight put him at risk of heart attack, stroke or death. Christie responded by calling the doctor a “hack” and telling her to “shut up” because she hadn’t examined him. For Christie, the prime political benefit now is that he “owns and controls” the story of his weight, said Patrick Murray , director of the Monmouth University Polling Institute in West Long Branch , New Jersey. Unneeded Distraction “Why give voters fodder for questions of your ability to serve, whether that means your physical fitness or ability to keep yourself under control?” Murray said by telephone. “You can’t get around the fact that being overweight raises questions in people’s minds, whether that’s right or wrong.” Christie’s weight hasn’t been an issue to most New Jersey voters recently. In a Quinnipiac University poll released March 26, 64 percent of 1,129 of those asked said they were comfortable with the governor’s girth. In July 2011, Christie went to a hospital for emergency treatment of his chronic asthma and told reporters when he was discharged that his weight “exacerbates everything.” More than 500 million people worldwide are obese, according to the World Health Organization. About 200,000 Americans undergo weight-loss surgery each year, and roughly a third choose gastric banding, involving small rubber devices that constrict part of the stomach. To contact the reporters on this story: Elise Young in Trenton at eyoung30@bloomberg.net ; Terrence Dopp in Trenton at tdopp@bloomberg.net. To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net |
2024-02-18 | Bloomberg | Telecom Italia Holders Said to Plan Writing Down Stake | Telco SpA, the largest shareholder of Telecom Italia SpA , is considering writing down the value of its stake in Italy’s biggest phone company by at least 900 million euros ($1.2 billion), according to a person familiar with the matter. Telefonica SA , Intesa Sanpaolo SpA , Assicurazioni Generali SpA and Mediobanca SpA , which together own 22.4 percent of Milan-based Telecom Italia through holding company Telco, will meet tomorrow to review the stake’s value, said the person, who asked not to be identified because the plan is private. The Telco board may lower the value by at least 30 cents a share from 1.5 euros, the person said. A reduction would be the fourth in as many years as Telecom Italia and Europe’s other former phone monopolies struggle with losses of fixed-line customers and intensifying wireless rivalry. Telecom Italia’s own board agreed today to start exclusive talks with Cairo Communication SpA on selling the La7 television channel, exluding La7’s 51 percent MTV Italia stake. Telco’s board will review a suggestion by adviser Lazard Ltd., which is giving a fairness opinion on the value of the stake in Telecom Italia, the person said. Officials at Intesa, Telefonica, Generali and Mediobanca declined to comment. A Lazard representative didn’t return a call seeking comment. Debt Pile The shareholder cut the value of its holding by about 4 billion euros in the past four years. It valued Telecom Italia shares at about 2.7 euros each in 2008, cutting that to 2.2 euros in 2009, to 1.8 euros in 2011 and to 1.5 euros last year. Telecom Italia stock , which has lost 25 percent in the past 12 months, rose 1.5 percent to 62.45 cents in Milan trading today, giving the company a market value of 11.7 billion euros. Telco’s owners, which bought their holdings for 4.1 billion euros in 2007, agreed in May on a 3.4 billion-euro financing package, including a 600 million-euro capital increase, to help repay loans obtained to buy the stakes. The holding company posted a full-year loss in the fiscal year ended in April of 903 million euros because of the impairments on Telecom Italia’s value. “Telco’s investors haven’t a way out, they made a bad investment at the peak of the market and can only try to limit damages, considering it’s impossible to sell their stake at the current levels,” said Fabrizio Spagna , a managing director at Axia Financial Research in Padua, Italy, who tracks Italian stocks. “I expect they will lobby to get higher dividends, even if there is little room for that.” Dividend Cut On Feb. 8, Telecom Italia reported debt missing its target, forecast declining earnings for this year and said it plans to cut its dividend. The company’s adjusted net debt fell to 28.3 billion euros at the end of December from 29.5 billion euros at the end of September. It had predicted it would drop to about 27.5 billion euros. The carrier is halving annual dividends to 450 million euros to preserve cash. Directors will discuss goodwill writedowns of as much as 4 billion euros at a meeting today, Italian business newspaper Il Sole/24 Ore said last week. Telecom Italia’s decision to cut the dividend followed Dutch carrier Royal KPN NV’s plan to sell 4 billion euros in shares after pouring cash into fast-wireless spectrum in the fourth quarter. To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-09-28 | Bloomberg | Texting Bans Fail as Drivers Ignore Rules, Insurer Study Says | Bans on texting while driving fail to reduce crash rates because motorists ignore the rules, according to a study by the Highway Loss Data Institute, a group funded by the insurance industry. Crashes increased in three of four states it surveyed where driver texting was banned, according to the group’s statement released today. The study focused on collision claims in the states before and after they enacted bans. Laws against texting from mobile phones have been enacted in 30 states since 2004, and almost half of them this year, the group said. The Obama administration has called for a federal law outlawing driver texting. More than 5,800 traffic deaths were tied to distracted driving in 2008, according to the U.S. Department of Transportation. “Texting bans haven’t reduced crashes at all,” said Adrian Lund , president of the Highway Loss Data Institute and the Insurance Institute for Highway Safety, in the statement. Transportation Secretary Ray LaHood said the results were misleading. They don’t match up with his agency’s research showing that deadly distracted driving declines when laws are strictly enforced, he said in a statement. The “narrow findings” of the report fail to indicate that all texting bans fail, and no evidence exists that state bans on driver texting cause crashes, the National Safety Council said in an e-mailed statement today. The council said the study took place in the four states “when consistent, uniform and effective enforcement was not in place.” Laws must combine enforcement and public education for texting bans to work, according to a statement today from Allstate Corp. , the largest publicly traded U.S. home and auto insurer. “Legislation is only the first step,” said Joan Walker , vice president of corporate relations for the Northbrook Illinois-based company. “To have real impact, laws must be strongly enforced.” The Highway Loss Data Institute study covered four states that prohibited driver texting in 2008 and 2009, California, Louisiana, Minnesota and Washington. Lund said that the bans may worsen the problem as drivers moved their phones out of sight to avoid detection, shifting their eyes farther from the road. Young drivers are more likely than older people to text while driving, and collision rates among drivers younger than 25 increased in the four states studied. The biggest crash increase in the study was among young drivers in California, where collision claims rose 12 percent after the bans were enacted. Drivers aged 18 to 24 were also the most likely to ignore the laws, the study said. In states with bans, 45 percent of that age group reported flouting the law, compared with 48 percent of drivers who said that they text while driving in states without bans. Crash increases among all drivers ranged from one percent in Washington to nine percent in Minnesota, the study said. Texting rose 60 percent, to 1.6 trillion in 2009, from 1 trillion messages in 2008, the institute said. To contact the reporter on this story: Natalie Doss in New York at ndoss@bloomberg.net. To contact the editor responsible for this story: Dan Kraut in New York at dkraut@bloomberg.net . |
2024-05-06 | Bloomberg | Why Cash Can't Replace Health Insurance | Since the release of the Oregon Health Study last week, conservative columnist Ross Douthat and liberal blogger Matt Yglesias have both written articles broaching the idea that the government should offer poor people more cash benefits in place of health benefits. Douthat argues more broadly for re-conceiving health insurance as something akin to homeowners insurance: a backstop against catastrophic losses, not a comprehensive package covering everyday expenses. They might be right. But they are eliding a key reason that the U.S. -- along with every other advanced country -- has health-care policies aimed at providing people with coverage for both routine and extraordinary expenses. The Douthat and Yglesias plans would each make insurance against catastrophic losses universally available and provide redistribution from the rich to the poor, but they would do much less than Obamacare (or even the status quo) to redistribute from the healthy to the sick. Some people have the misfortune to have chronic illnesses -- diabetes, HIV infection, kidney disease -- that can cost thousands of dollars a year to treat. A system of catastrophic-only coverage, say one that only covered health expenditures exceeding 10 percent of income, would leave these people poorer while making healthy people better off, even if it came with cash grants funded by the savings from reduced health-care costs. Comprehensive insurance that covers routine care is not “insurance” in the sense of covering expenses that are unexpected at the individual level. But it is social insurance that covers the unexpected event of being a person with high ongoing needs for routine care. Switching to a catastrophic coverage model would mean giving up this social-insurance component of Medicaid, Medicare, the Obamacare exchange subsidies and every other government policy that aims to make comprehensive insurance available. Maybe that is an acceptable outcome. The government does not enact policies to compensate people for every instance of bad luck. Doing so for poor health might be especially wrongheaded, since it often arises from a mix of luck and choices; offsetting the financial penalty associated with chronic illness may be reducing people’s incentives to stay healthy. And if health-care costs continue to rise faster than overall inflation, a universal guarantee of comprehensive coverage would require ever-higher marginal tax rates and eventually become untenable. Still, that a policy will reduce the real incomes of the sick while increasing the real incomes of the healthy -- thereby increasing the inequality of happiness, if not necessarily inequality of income -- is a factor that should weigh against a switch to catastrophic-only coverage. I'd be curious to see whether Douthat and Yglesias disagree. (Josh Barro is lead writer for the Ticker. Follow him on Twitter.) |
2024-01-15 | Bloomberg | Swiss Stocks Advance, Extending Four-Year High | Swiss stocks advanced for a third day, extending a four-year high, amid increasing optimism over revenue growth at the nation’s companies and as a slump in the Swiss franc signaled gains for exporters. Swatch Group AG (UHR) rose after forecasting sales of 1 billion Swiss francs ($1.1 billion) from Harry Winston within five years. Geberit AG (GEBN) and Lindt & Spruengli AG (LISN) each rallied at least 2.5 percent after saying 2012 revenue increased. Swiss Re Ltd. added 0.9 percent after saying global life-insurance premiums will grow this year. The Swiss Market Index (SMI) climbed 1 percent to 7,272.31 at the close of trading in Zurich, for the longest stretch of gains in five weeks. The gauge has surged 6.6 percent since New Year as U.S. lawmakers reached a budget compromise and averted automatic deficit-reduction measures. The broader Swiss Performance Index increased 0.9 percent today. “It’s really a combination of two things,” said John Plassard, vice president at Mirabaud Securities LLP in Geneva. “Companies giving good figures and also the foreign exchange effect.” The franc dropped to the weakest since December 2011 against the euro amid speculation the region’s debt crisis is easing, sapping demand for the Swiss currency as a haven. The franc also fell against the U.S. dollar. The volume of shares changing hands on SMI-listed companies was 15 percent higher than the average of the last 30 days, data compiled by Bloomberg showed. Debt Ceiling In the U.S., where lawmakers have until the next month to raise the government’s borrowing limit , President Barack Obama said yesterday he won’t agree to link the negotiations with the debate on deficit-reduction measures. The American Treasury has already reached the debt ceiling and resorted to emergency measures to pay for the government’s expenses. These measures will only work until mid-February to early March, Treasury Secretary Timothy F. Geithner said. Since 1960, Congress has raised or revised the limit 79 times, including 49 times under Republican presidents, according to the Treasury. Standard & Poor’s lowered the U.S. credit rating in August 2011 after the most recent showdown over the threshold. Data released in Washington showed that U.S. retail sales rose 0.5 percent in December, following a 0.4 percent gain in November. The Federal Reserve Bank of New York ’s general economic index fell to minus 7.8 from minus 7.3 in December. Swatch, Geberit Swatch, the world’s biggest maker of Swiss watches, climbed 1.7 percent to 521.50 francs. Chief Executive Officer Nick Hayek told Le Temps newspaper that sales from the Harry Winston watch and jewelry brand, which Swatch has agreed to acquire, will reach 1 billion francs within five years. Geberit advanced 2.8 percent to 211 francs, the highest price in 20 months. The maker of pipes and sanitary systems said revenue last year rose 3.1 percent to 2.19 billion francs, beating analysts’ estimates of 2.13 billion francs. Lindt gained 3.2 percent to 3,260 francs, the highest price since June 2008. The maker of the Lindt chocolate bunny said 2012 sales increased 7.3 percent to 2.67 billion francs, in line with estimates. Swiss Re added 0.9 percent to 69.50 francs. Global life insurance premiums will grow 3 percent in 2013, driven by a rebound in emerging Asian markets, The world’s second-biggest reinsurer said in a statement. Cie. Financiere Richemont SA, the owner of the Cartier brand, rose 2.1 percent to 78.85 francs. Givaudan, the Swiss maker of perfumes and fragrances, added 0.8 percent to 991.50 francs. Nestle SA (NESN) , the world’s biggest food company, added 1.6 percent to 62.15 francs, the highest price since Oct. 17. Syngenta AG (SYNN) rose 2 percent to 387 francs, its highest level since shares began trading in November, 2000. Bank of America’s Merrill Lynch unit raised the target price on the Swiss maker of agrochemicals to 440 francs from 380 francs citing “significant upside” to consensus earnings. Logitech International SA (LOGN) , the world’s largest maker of computer mice, slid 4.4 percent to 6.90 francs. The stock was downgraded to underperform from neutral at Credit Suisse, which said the company is “struggling to diversify from personal- computer related businesses.” Transocean Ltd. (RIGN) dropped 1.9 percent to 49.82 francs. The world’s largest operator of offshore oil rigs gained 2.9 percent yesterday after billionaire investor Carl Icahn acquired a 1.56 percent stake. To contact the reporter on this story: Tom Stoukas in Athens at astoukas@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-09-02 | Bloomberg | Banks Overwhelmed by Mortgage Refinancing After Job Cuts | Mortgage rates near historic lows have sparked a refinancing boom that has U.S. lenders struggling to handle the surge. “There’s just so much volume,” said Kristin Wilson, a senior loan officer in Bloomington, Minnesota , for Fairway Independent Mortgage Corp., who has seen clients seeking lower rates climb to about half of her business from 20 percent a month ago. “We can’t just ramp up by hiring inexperienced people because they don’t know what they’re doing.” The lending logjam extends to the nation’s biggest banks, which fired thousands of mortgage workers after interest rates rose in November through February, chilling refinancing demand. Now, the time needed to close a loan has as much as doubled to 60 days, according to Wilson and other bankers, and lenders are holding some mortgage rates higher than they could be to slow the torrent of customers, data show. Refinancing applications are up 83 percent from this year’s low in February, according to an index compiled by the Mortgage Bankers Association , a Washington-based trade group. After topping 5 percent that month, the average rate on 30-year fixed loans fell two weeks ago to 4.15 percent, the lowest in surveys dating back to 1971 by Freddie Mac , the second-largest U.S. mortgage-finance company. Compounding the delays are stricter underwriting and disclosure requirements implemented in the past few years, which leave no room for shortcuts, said Stew Larsen, head of the mortgage unit at San Francisco-based Bank of the West. Wells Fargo & Co. (WFC) , the largest U.S. home lender, is no longer hiring temporary staff and outsourcing firms when applications jump because of separate rule changes , according to Franklin Codel, head of national consumer lending at its mortgage unit. Obstacle for Obama “The industry has come a long way in terms of automation, but it’s still a people-driven industry,” Larsen said. “Mortgage insurers, appraisers and title companies, all those surrounding industries, they downsized as well.” Lenders’ capacity to handle loan applications could be an obstacle for the Obama administration, which is weighing options for spurring a housing recovery, including steps to promote refinancing for underwater borrowers, or those who owe more than their property is worth. Almost 27 percent of single-family homeowners with mortgages have negative equity, according to Zillow Inc., a Seattle-based real estate data provider. Mortgage Bonds Underperform Refinancing can provide a boost to the economy by reducing monthly mortgage payments and putting more money in the hands of consumers. Banks can profit from making new loans at lower rates because the existing, more expensive mortgages are mostly held by investors in the form of bonds or by other lenders. The refinancing bank collects fees and other revenue. The $5.3 trillion of mortgage securities with government- backed guarantees underperformed U.S. Treasuries last month by the most since 2008 on speculation that the government will ease refinancing rules. That could speed up repayment of the mortgage bonds and deprive investors of their higher yields. Refinancing is a cyclical business tied to yields on Treasuries, and lenders sometimes don’t let their rates fall as low as possible to avoid being overwhelmed. Today’s mortgage rates could be lower, based on their recent relationship with yields demanded by investors buying mortgage-backed bonds. Yield Spreads The difference between the average rate on a 30-year fixed loan and Fannie Mae-guaranteed bonds widened last month to more than 100 basis points, or 1 percentage point, from an average of 60 basis points in the first half, according to data compiled by Bloomberg and Bankrate.com, a North Palm Beach, Florida-based financial-information provider. The gap, which never exceeded 75 basis points in the decade through 2007, shows that banks have increased their margins on average. “With the consolidation of the mortgage-lending industry during the housing bust, there is a lack of capacity to meet a surge in refinancing,” Mark Zandi , chief economist at Moody’s Analytics Inc. in West Chester , Pennsylvania , said in an e-mail. “Mortgage lenders have been slow to lower primary lending rates, which is likely due in part to their lack of capacity.” When the books close at Fairway Independent Mortgage, Wilson’s employer, August may turn out to have been the second- busiest month in the company’s 15-year history, said Dan Cutaia, president of capital markets and risk management. The Sun Prairie, Wisconsin-based lender operates in 47 states and originated $4 billion of mortgages last year. Looming Test The test for banks will come in a couple months when newly approved borrowers expected to close, Cutaia said. “We took in all this volume,” he said. “Now we have to do the best we can to have them processed, underwritten and closed.” A smooth process requires underwriters, title insurance companies and appraisers to work quickly. The turnaround time for an appraisal, usually five business days, now is as long as 14 days in some parts of the country and probably will get longer because of new valuation requirements that will take some getting used to, according to Betty Graham, senior vice president of operations at Frisco Lender Services LLC, a unit of Fairway in Fort Wayne, Indiana. New York Condos In New York City , managing agents at condominiums and cooperative apartment buildings are swamped by requests for information from appraisers, said Norman Calvo, president and chief executive officer of Universal Mortgage Inc. in Brooklyn. Calvo said his refinancing work has tripled since June, and borrowers who took on new loans a few months ago are applying to lower their rates again. “It was one of our greatest months in more than 10 years, and it keeps on coming,” Calvo said. Mortgage companies, which kept their loan-servicing operations lean during the housing boom, similarly were unequipped to handle the avalanche of defaults in the four years since the crash, resulting in paperwork snafus that continue to delay foreclosures and the recovery of the property market. One proposal to expand the administration’s refinancing program for homeowners hit by the decline in property values would remove the cap on negative equity and exempt participants from risk-based fees charged by Fannie Mae and Freddie Mac. The mortgage-finance companies would also be required to inform all of their borrowers that the program is available, according to legislation filed by U.S. Senators Barbara Boxer , a California Democrat, and Johnny Isakson , a Georgia Republican. Bob Walters, chief economist for Detroit-based Quicken Loans Inc., the largest online lender, said mortgage companies in the past depended on independent brokers to field borrower applications. The number of brokers dwindled after the housing bubble burst, he said. Slashing Jobs “All of a sudden now we see a smaller universe of people handling the volume,” Walters said. “So what’s happening is when the volume hits, people hit capacity much quicker.” Bank of America Corp. (BAC) said Aug. 31 that it plans to sell or shut its correspondent-mortgage unit, which buys loans from smaller companies, a move that may exacerbate the crunch. Earlier this year, the Charlotte , North Carolina-based bank joined lenders across the industry in cutting staff added during a refinancing boom that crested in October. In April, Wells Fargo, based in San Francisco , said it aimed to cut 4,500 employees from its mortgage unit, and Bank of America, its biggest competitor, said it trimmed its mortgage workforce by 1,500 employees and 2,000 contractors. Wells Fargo’s Codel said the bank shut a handful of refinancing offices it had opened around the country that employed as many as 300 back-office workers each. The company is now reaching out to staff it let go and holding job fairs in an effort to add employees within a few weeks. Warning Customers Mortgage-industry jobs fell to 239,100 on June 30 from 259,700 at year-end and more than 500,000 in 2003, according to Department of Labor data cited by Bank of America bond analysts and MortgageDaily.com, an industry-news website. MortgageDaily.com says the data are skewed by how individuals at some firms are counted, and puts net layoffs this year at more than 2,200, including those in lending and servicing divisions. While Bank of the West held its mortgage staff steady earlier this year, it’s also being challenged by higher volumes, telling consumers a refinancing is likely to take 45 days, said Larsen, whose 137-year-old bank is owned by France ’s BNP Paribas (BNP) SA. Its customers can usually close within 30 days. Keeping rates higher than the bank might otherwise to ward off business is “certainly in the playbook, but that’s not something we’ve had to go with yet,” Larsen said. “Some lenders do that more than others.” Managing Expectations Wells Fargo has sometimes offered less competitive rates because “we look at it all around the country and there are times when we do that to control volume,” Codel said. The bank has stopped offering the option to lock in rates for 30 days, as a way to curb consumer expectations that loans will close that quickly. Longer rate locks, which it continues to provide, can cut down on applications because they carry higher rates, he said. Both Wells Fargo and Bank of the West said they often extend rate locks if consumers can’t close on time because of processing delays. Meeting Demand Bank of America can cope with refinancing demand with its current staffing, partly by moving work among different departments, Terry Francisco, a Calabasas, California-based spokesman for the lender, said in an e-mail. Some local offices aren’t as inundated as call centers working with online applicants, he said. “We seek to price competitively but not at a level that will cause volumes to spike and disrupt our ability to close loans within a customer’s requested closing date,” Francisco said. Lenders’ decisions on pricing depend on several issues, including their ability to handle volume and their own costs to borrow money, said Doug Lebda, founder and chief executive officer of Charlotte, North Carolina-based Tree.com Inc. (TREE) , which runs the LendingTree mortgage website. “In a market that is very volatile, there are wide varieties of pricing,” Lebda said. “Now it’s more important than ever to comparison shop.” To contact the reporters on this story: Jody Shenn in New York at jshenn@bloomberg.net ; Prashant Gopal in New York at pgopal2@bloomberg.net To contact the editors responsible for this story: Kara Wetzel at kwetzel@bloomberg.net ; Alan Goldstein at agoldstein5@bloomberg.net |
2024-07-17 | Bloomberg | Ayala, Chunghwa, Pos Malaysia, Samsung Life: Asia Ex-Japan Equity Preview | The following companies may have unusual price changes today in Asian trading, excluding Japan. Stock symbols are in parentheses, and share prices are from the previous close, unless noted otherwise. Philippine banks, builders: Funds sent home by Filipinos working and living overseas grew 6.9 percent in May to $1.7 billion from a year earlier, accelerating from a 6.3 percent gain in April, according to the central bank. Remittances from overseas Filipinos usually pass through banks and help fund purchases of property. Banco de Oro Unibank Inc. (BDO) , the nation’s largest bank by assets, increased 0.9 percent to 57 pesos. Ayala Land Inc. (ALI) , the nation’s biggest developer, rose 0.6 percent to 16.20 pesos. China Zhongwang Holdings Ltd. (1333) (1333 HK): The manufacturer of extruded aluminum products said profit for the six months ended June 30 is expected to decline “substantially” from a year earlier on lower export sales to the U.S., according to a statement to the Hong Kong stock exchange. China Zhongwang lost 2.2 percent to HK$3.60. Chunghwa Telecom Co. (2412 TT): Taiwan’s largest phone operator may invest more than NT$200 billion ($6.9 billion) in fixed-line infrastructure over 10 years as part of local telecommunications companies’ commitment to next-generation networks, the National Communications Commission said in a statement. Chunghwa Telecom and Taiwan Mobile Co. (3045 TT), the second-largest, may invest a total of more than NT$26.8 billion in wireless networks in four years, it said. Chunghwa advanced 1 percent to NT$105.50 and Taiwan Mobile rose 0.5 percent to NT$76. First Philippine Holdings Corp. (FPH) : The company bought back 129,530 of its own shares at 60.90 pesos each in the open market, a stock exchange-filing showed. The stock climbed 0.6 percent to 61.25 pesos. Fortescue Metals Group Ltd. (FMG) : The Australian iron- ore producer is discussing a ship order worth as much as $480 million with yards in China and South Korea , TradeWinds reported. Fortescue slipped 0.2 percent to A$6.41. Pos Malaysia Bhd. (POSM) : The national postal company signed an agreement with Korea Post to cooperate on undertaking new postal services and seek new business opportunities, it said in a statement. Pos was unchanged at 3.21 ringgit. Samsung Life Insurance Co. (032830 KS): South Korea’s biggest life insurer will spend 652.8 billion won ($615 million) to develop commercial land in Beijing, according to a regulatory filing. Samsung Life climbed 0.6 percent to 95,400 won. Universal Microelectronics Co. (2413 TT): The maker of electronic components plans to buy back 3 million shares, or 2.32 percent of those outstanding, the Taichung, Taiwan-based company said in an exchange filing. Universal Microelectronics rose 1.5 percent to NT$13.40. To contact the reporter on this story: Berni Moestafa in Jakarta at bmoestafa@bloomberg.net To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net |
2024-10-12 | Bloomberg | Citigroup Japan Probe, Volcker Rule, Recruiting: Compliance | Citigroup Inc. (C) stopped soliciting clients for some retail banking products in Japan as it awaits the outcome of a government investigation into its compliance with local rules, two people with knowledge of the matter said. The U.S. bank told employees at its Japan retail unit in late June not to market financial products such as investment trusts and foreign currencies, said the people, who declined to be identified as the information is confidential. Citibank Japan Ltd. is reviewing its compliance processes and offering training to staff to improve internal controls, the people said. Citigroup, which has 32 branches and offices in Japan with 1,780 employees, still helps customers exchange currencies or buy products if asked, they said. Mika Nemoto, a Tokyo-based spokeswoman for Citigroup, declined to comment on the lender’s response to the investigation. The U.S. bank faces a possible penalty from the Financial Services Agency in Japan by as early as Dec. 31 for failing to fully explain product risk to retail customers, two people familiar with the situation previously said. Compliance Policy Dodd-Frank’s Volcker Rule Released by Regulators for Comment U.S. regulators requested public comment on Dodd-Frank Act restrictions that would ban banks from making short-term trades for their own accounts and prevent them from owning or sponsoring hedge funds and private-equity funds. The so-called Volcker rule, released yesterday by the Federal Reserve , the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, is aimed at heading off risk-taking that helped fuel the 2008 credit crisis. The language of the rule is little changed from drafts that have been leaking in recent weeks. It would ban banks from taking positions held for 60 days or less, exempt certain market-making activities, change the way traders involved in market-making are compensated, and make senior bank executives responsible for compliance. The board of the FDIC voted 3-0 yesterday to seek comments on the proposal through Jan. 13. The Federal Reserve also said it would accept feedback by that date. For more, click here. CFTC May Finish Curbs on Speculation for Oct. 18, Gensler Says The top U.S. commodities regulator may complete Dodd-Frank Act limits on speculation in oil, natural gas and other markets at an Oct. 18 Washington meeting, said Gary Gensler , chairman of the Commodity Futures Trading Commission. At the same meeting, the agency’s five commissioners may also vote on rules governing clearinghouses that stand between buyers and sellers in derivatives markets, Gensler said in a speech prepared for a Futures Industry Association conference yesterday in Chicago. In addition, the agency may vote to delay until next year regulations that were originally scheduled to be completed by last July and already were postponed to the end of the year. The CFTC and Securities and Exchange Commission , which are leading U.S. efforts to write new derivatives rules, are also working on a final rule that will define which Wall Street banks, energy firms and other companies are considered swap dealers or other major swap participants. Those definitions will lead companies to have higher capital and margin requirements to limit risk in trades. A requirement to clear swaps may not take effect until the second quarter of 2012 with some smaller participants in the derivatives markets having an additional nine months to comply, Gensler said. Stockbrokers Balk at Australian Fees to Fund New Regulator Plans to make users of Australia’s securities markets pay some of the costs of regulation are too expensive and unfair, according to brokers, exchanges and industry associations. The complaints are contained in industry responses to a plan by the Australian Treasury to raise almost A$30 million ($29.9 million) in the first 18 months toward the budget of the Australian Securities and Investments Commission , the country’s market regulator. The government is proposing flat supervision fees for exchanges based on market share, charges for the cost to connect to new technology platforms and imposts for both trades and computer messages for market participants. ASIC, as the regulator is known, took over direct supervision of financial markets in August 2010 from the country’s main bourse, ASX Ltd. (ASX) The transfer was part of a plan by the Labor Party government of Prime Minister Julia Gillard to turn Australia into a financial hub by introducing competition in the Asia-Pacific’s fourth-largest equity market. Opponents of the charges say the plan will deter new operators. The total estimated cost recovered by Treasury from the charges will be A$29.8 million in 18 months from Jan. 1, 2012, to June 30, 2013. The charges will be reviewed after that. A major point of contention among industry participants is a proposed fee related to computer messaging by brokers using ASIC’s computer system to execute trades. A draft consultation by Treasury says it intends to charge more to those with greater trading volume. A response submitted by the Australian Financial Markets Association , which represents more than 140 banks, brokers, securities companies, fund managers and trading companies, notes this inherently charges more to traders using high-frequency strategies. For more, click here. Compliance Action Goldman May Drop Bank Status on Volcker Rule Cost, Hilder Says Goldman Sachs Group Inc. (GS) and Morgan Stanley (MS) may consider dropping their status as bank holding companies to avoid expenses tied to the Volcker rule, said David Hilder , an analyst at Susquehanna Financial Group LLP. The Volcker rule in its current form would impose costs on lenders and drive capital to non-bank market makers, causing the two New York-based firms to consider whether to stop being banks, Hilder said in a note yesterday, when four regulatory agencies issued a 298-page draft of the rule for public comment. Goldman Sachs and Morgan Stanley were the biggest U.S. securities firms before they converted to bank holding companies after the September 2008 bankruptcy of Lehman Brothers Holdings Inc. Both became subject to regulation by the Federal Reserve and won access to central bank programs such as the discount window, which are designed to protect deposit-taking banks. David Konrad, a bank analyst at KBW Inc. (KBW) , said in a telephone interview that Goldman Sachs and Morgan Stanley are unlikely to change their status as bank holding companies to dodge the Volcker restrictions because Congress would then amend the rule to include systemically important banks rather than holding companies. Goldman Sachs Chief Financial Officer David Viniar said Jan. 21, 2010, the same day President Barack Obama announced his support for the Volcker rule, that it was “unrealistic” to imagine the firm won’t be a federally supervised bank. The rule was included in last year’s regulatory overhaul to rein in risky trading. Stephen Cohen, a Goldman Sachs spokesman, and Morgan Stanley’s Mark Lake declined to comment. EBA Asks Banks for More Debt Information in Capital Review The European Union’s top banking regulator asked lenders for more information on sovereign debt holdings as part of its review of financial industry capital levels, four people familiar with the situation said. The European Banking Authority asked banks for “the difference between the book value and the fair value of sovereign assets” in their “held to maturity and loans and receivables portfolios,” according to a data template seen by Bloomberg News. Banks were also asked for “relevant changes” to their balance sheet made since June. Ben Fischer , a spokesman for German financial regulator Bafin, said in an interview that the request for information isn’t a new stress test. He described it as “more of an update of numbers on foreign exposure, a follow-up to the old stress test.” European Commission President Jose Barroso is expected to propose measures today to recapitalize banks gripped by the region’s sovereign-debt crisis. Heads of state are scheduled to meet in Brussels later this month to discuss the proposals. Lenders haven’t been told what the EBA intends to do with the anticipated data, said one of the people, who declined to be identified because the process is private. Fed Requests Comment on Simplifying Reserve Requirement Rule The Federal Reserve requested comment on proposed rules that would simplify so-called Regulation D, a rule focused on reserve requirements for banks. The proposals are “intended to simplify the administration of reserve requirements and reduce administrative and operational costs for both depository institutions and Reserve Banks,” the Fed said yesterday in a statement in Washington. The rules would create a common two-week maintenance period for all depository institutions, set up a “penalty-free band” around reserve balance requirements and eliminate the contractual clearing balance program. The Fed is seeking comment within 60 days of the proposed rule’s publication in the Federal Register. Banks May Face Fraud, Municipal Claims After Settlement U.S. banks may still face state securities-fraud claims and municipal lawsuits over unpaid mortgage fees under a settlement that is “getting closer,” the official leading talks for state attorneys general said. Iowa Attorney General Tom Miller said in an interview Oct. 10 that any settlement wouldn’t prevent a growing number of municipalities from suing banks for allegedly cheating them out of millions of dollars in filing fees, or individual states from pursuing securities claims against banks. State attorneys general and federal officials have been negotiating a settlement with the largest mortgage servicers. Officials are seeking an agreement that would fund loan modifications for homeowners and set requirements for how the banks conduct foreclosures. For more, click here. Bank Failures Will Cost $19 Billion Through 2015, FDIC Says U.S. bank failures through 2015 will drain $19 billion from the Federal Deposit Insurance Corp. fund for covering losses from shutdowns, the agency said in an update of its reserve ratio projections. The $19 billion figure reported by the FDIC yesterday is a decrease from the estimated $23 billion needed to cover bank failures in 2010, reflecting both the slowing rate of bank shutdowns and the impact of assessment increases imposed by the FDIC to bolster the Deposit Insurance Fund. Yesterday’s report shows that the FDIC may have gone farther than it needed to in increasing assessments, according to James Chessen , chief economist for the American Bankers Association. Failed Bank’s Executives Sued by SEC for Concealing Losses Three former United Commercial Bank executives misled investors by concealing at least $65 million in loan losses before the San Francisco-based lender collapsed in 2009, the U.S. Securities and Exchange Commission said. Thomas Wu, who was the bank’s chief executive officer, worked with chief operating officer Ebrahim Shabudin and senior officer Thomas Yu to hide impaired assets from auditors, causing UCBH Holdings Inc. to understate 2008 operating losses, the SEC said in a complaint filed yesterday in California. Shabudin and Yu will face related criminal fraud charges under a federal grand jury indictment unsealed in San Francisco. “Hundreds of banks have failed in the financial crisis and the regulators need to blame someone,” Steven Bauer, Wu’s attorney at Latham & Watkins LLP, said in a statement. “Thomas Wu is counting on our justice system to clear his good name.” United Commercial was one of the 10 biggest bank failures to result from the 2008 credit crisis, causing a $2.5 billion loss to the Federal Deposit Insurance Corp.’s insurance fund, the SEC said. Craig On, the bank’s former chief financial officer, separately agreed to pay $150,000 and accept a five-year suspension from practicing before the SEC to resolve claims that he helped the fraud, the agency said. On, 59, didn’t admit or deny wrongdoing in settling the SEC’s claims. Phone calls to James Lassart, a lawyer for Shabudin; Stephen Kaus, a lawyer for Yu; and Nanci Clarence, an attorney for On, weren’t returned. The FDIC said yesterday in a separate release it fined 13 former United Commercial employees more than $1.7 million combined. Interviews/Speeches Trading Rebates on Exchanges Should End, ICE’s Sprecher Says The pricing system used by the majority of U.S. stock exchanges should be banned because it encourages trading aimed only at collecting rebates, according to Jeffrey Sprecher, chief executive officer and chairman of IntercontinentalExchange Inc. (ICE) Regulators shouldn’t let venues offer maker-taker pricing, in which an exchange charges some firms to trade and gives others rebates, Sprecher said yesterday at a Futures Industry Association conference in Chicago. He said the pricing structure discourages some traders from owning stock. The number of U.S. stock and options exchanges has risen to 13 and nine, respectively, and one way they try to differentiate themselves is with pricing plans. Maker-taker pricing is mainly used to compensate market makers and other providers of bids and offers, while traders who execute against those orders pay a fee. Most futures exchanges charge trading fees and offer no rebates. The maker-taker system is reversed on some markets to pay firms that trade against orders supplied by market makers or others who are charged a fee. That pricing, called taker-maker, in conjunction with the more popular structure may allow traders to be paid to supply orders on one market and get rebates when they trade against bids or offers elsewhere. For more, click here. Maughan Says Capital Requirement ‘Wall’ Curbs New Banks Simon Maughan , head of sales and distribution at MF Global Ltd., discussed the Independent Commission on Banking ’s proposed changes to the U.K. financial industry. He talked from London with Andrea Catherwood and Elliott Gotkine on Bloomberg Television’s “Last Word.” For the video, click here. Erste’s Treichl Says Europe Should Enact Basel Uniformly Erste Group Bank AG (EBS) head Andreas Treichl said Europe should implement new rules by the Basel Committee on Banking Supervision in a uniform way and refrain from rules that differ from country to country. “It’s not going to be a level playing field in Europe,” Treichl told European Union lawmakers in Brussels yesterday. “There are too many people and countries in Europe who are trying to improve it on their own,” he said. “Why don’t we just agree that we all accept Basel III as it is. It’s great and it’s going to make banking safer.” He added that it is a “dangerous path” to change bank capital rules without first resolving the European debt crisis. Treichl, whose bank is the biggest in Austria and the second-biggest in eastern Europe, said he “just can’t accept” that the new Basel accord doesn’t help lending to companies “whose only mistake is that they are too small to get a rating.” “While we increase the capital requirements for lending to the real economy, high-frequency trading has tripled over the last three years,” he said. “I’d love to have something that kills this stupid business tomorrow.” Erste generates more than three-quarters of its revenue from retail clients and small and medium-sized companies. Comings and Goings EU Bank Recruiting Hurt by Global Bonus Rules, FSB Says European Union banks face tougher pay and bonus rules than rivals in other countries, putting them at a competitive disadvantage in attracting talent, the Financial Stability Board said. The U.S, Australia, Canada, Hong Kong and Japan have given banks “more flexibility” than the U.K. and other EU countries in applying international rules limiting bonuses, the FSB said yesterday following a review of global practices. National regulators should address the “level playing field” issues, the FSB said. EU regulators approved laws to impose limits on cash payouts and on the size of bankers’ bonuses. Thirteen of the FSB’s member countries, including EU nations, have implemented the FSB pay guidelines, the FSB said. All but one of the standards have been adopted in the U.S, Switzerland and Australia. Argentina and South Africa are among countries that have made the least progress. For more, click here. To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net. To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net . |
2024-04-24 | Bloomberg | Edwards’ Sales Increase on U.S. Introduction of Sapien | Edwards Lifesciences Corp. (EW) , the largest maker of artificial heart valves worldwide, said first- quarter sales rose 14 percent as U.S. doctors began implanting its Sapien device. Edwards generated $41 million in U.S. sales for Sapien, which was approved by the Food and Drug Administration in November to replace a failing aortic valve without cracking open the chest. The Irvine, California-based company reduced its forecast for Sapien’s 2012 sales by $30 million to $530 million to $600 million because of an expected delay in approval for broader U.S. use, European market pressure and foreign exchange rates, the company said today in a statement. Net income rose to $65.1 million, or 55 cents a share, from $63.9 million, or 53 cents, a year earlier, the company said today in a statement. Profit excluding certain items of 53 cents a share topped the average estimate of 48 cents from 22 analysts compiled by Bloomberg. Revenue rose to $459.2 million in the quarter, beating the $449.9 million average estimate. “The launch here in the U.S. got off to a slow start in January, but the momentum built throughout the quarter,” said Glenn Novarro, an analyst at RBC Capital Markets in New York. “That’s why the results came in better than expected. Physicians and hospitals are embracing the technology. The sites that have launched have healthy waiting lists.” Edwards rose 4.2 percent to $76.39 in extended trading at 5:51 p.m. New York time after closing at $73.33. The shares declined 12 percent in the past 12 months. FDA Panel Sapien is approved for patients who can’t tolerate open heart surgery. Edwards has been working to train more doctors how to implant the $30,000 device and ensure insurance coverage. An FDA advisory panel is slated in June to review whether the device should be allowed for patients who would be eligible, though at high-risk of complications, for open-heart surgery. The June panel hearing means the second, broader approval won’t come until the second half of the year, later than the company originally anticipated, Novarro said in a telephone interview. The surgery-eligible U.S. patients aren’t likely to have access to Sapien until the end of the year, he said. The company lowered its forecast for 2012 earnings excluding one-time items to $2.58 a share to $2.68 a share, from $2.70 to $2.80. Analysts had estimated $2.67 a share. Sapien Forecast Sales for 2012 will be at the lower end of the previously given range of $1.95 billion to $2.05 billion, the company said. Edwards lowered the top of its range for U.S. Sapien sales to $200 million to $240 million for 2012, from an earlier estimate of $200 million to $260 million. The reduced sales forecast was less than might have been anticipated for a three-month delay in the next approval because demand for Sapien among patients who can’t tolerate surgery has been faster than anticipated, Chief Executive Officer Michael Mussallem said today in a conference call with analysts. Edwards has trained 60 medical centers to implant Sapien since it was approved in the U.S., he said. While uncertainly about insurance reimbursement caused some facilities to postpone training and delay procedures, others stepped into their slots, he said. “Physician and hospital interest in our Sapien program remains very high,” Mussallem said. “We still expect to train 150 to 250 new commercial sites in the first 12 months.” To contact the reporter on this story: Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net To contact the editor responsible for this story: Reg Gale at Rgale5@bloomberg.net |
2024-09-24 | Bloomberg | Canaccord Shuts 16 Canada Branches, Buys U.K. Unit | Canaccord Financial Inc. (CF) said it will shut 16 branches at its wealth management unit, half the total, as it tries to revive profit at the division. The outlets account for 16 percent of the C$13.1 billion ($13.4 billion) of assets the division manages for clients, the Toronto-based company said in a statement today. The firm will record a C$11.5 million charge in its fiscal second quarter. Canaccord said last month it would eliminate a further 60 jobs after posting a larger-than-estimated loss for the first quarter. After the cuts, the wealth management unit will operate on a “near break-even basis,” the company said today. “This initiative will allow us to make additional investments in markets where we see the most opportunity for future growth,” John Rothwell, president of Canaccord Wealth Management in Canada , said in the statement. The company today agreed to buy the private wealth management division of Eden Financial Ltd. for 12.8 million pounds ($20.8 million) to expand its business in Britain. The purchase follows Canaccord’s December acquisition of London-based Collins Stewart Hawkpoint for 253.3 million pounds. Eden manages 835 million pounds of assets for 2,500 clients. “Our expanded client base will benefit from a wider variety of investment opportunities and the backing of an independent, global financial services company,” Alexis de Rosnay, chief executive officer of Canaccord’s U.K. and European operations, said in the statement. Canaccord fell 34 cents, or 5.6 percent, to C$5.76 at 4 p.m. trading in Toronto, the biggest one-day decline since Aug. 2, according to Bloomberg data. To contact the reporter on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net |
2024-10-24 | Bloomberg | U.S. Stocks Fall to Seven-Week Low as Fed Offsets Economy | U.S. stocks declined, sending the Standard & Poor’s 500 Index to a seven-week low, as the Federal Reserve ’s call for moderate growth offset signs of improvement in Chinese factory output and America’s housing market. Netflix Inc. (NFLX) plunged 12 percent after the world’s largest online video service cut its forecast for domestic growth. Altera Corp. (ALTR) slumped 8.4 percent as the maker of programmable chips used in phone systems predicted sales that fell short of estimates. D.R. Horton Inc. (DHI) and Toll Brothers Inc. (TOL) added at least 1.5 percent to pace gains in homebuilders. Facebook Inc. (FB) , the world’s biggest social networking site, surged 19 percent after reporting sales that topped analysts’ projections. The S&P 500 declined 0.3 percent to 1,408.75 at 4 p.m. New York time, dropping 1.8 percent in two days. The Dow Jones Industrial Average lost 25.19 points, or 0.2 percent, to 13,077.34. Volume for exchange-listed stocks in the U.S. was 6.1 billion shares, or about in line with the three-month average. “It’s been a pretty lackluster market,” Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama , said in a telephone interview. “There’s nothing new or encouraging in terms of the Fed’s outlook regarding the economy. In addition to that, top line growth of companies has been disappointing.” Equities erased gains as the Fed said the economy is still growing modestly and unemployment remains elevated as it maintains $40 billion in monthly purchases of mortgage-backed securities aimed at spurring the three-year expansion. An earlier advance was driven by a survey signaling a smaller contraction in China’s manufacturing. Purchases of new homes in the U.S. rose to the highest level in more than two years. Earnings Season Forty-four companies in the S&P 500 (SPX) were scheduled to release results today. Earnings at about 69 percent of the index’s companies beat analysts’ estimates, according to data compiled by Bloomberg. Third-quarter sales missed forecasts at 60 percent of companies, according to data compiled by Bloomberg, the data showed. Concern about a worsening of the earnings picture has sent the S&P 500 down 3.9 percent from this year’s high on Sept. 14. The decline has extended its October loss to 2.2 percent after the index capped four straight months of gains. The benchmark measure is still up 12 percent in 2012 on speculation central bankers will keep economies expanding. Netflix lost 12 percent to $60.12. The company is counting on its profitable U.S. streaming and mail-order DVD businesses to pay for overseas growth, a plan analysts question with dwindling gains at home. Switching Away Altera retreated 8.4 percent to $29.89. Two customers are switching away from Altera’s processors to alternatives, the company said on a conference call with analysts yesterday. That’s taking a bite out of fourth-quarter revenue. One of the customers is Huawei Technologies Co., China’s biggest maker of telecommunications-network equipment, representing $150 million in lost sales, according to a report by Chris Danely, an analyst at JPMorgan Chase & Co. IAC/InterActiveCorp (IACI) slid 8.4 percent to $48. The company founded by Barry Diller forecast a 2013 operating loss for units that include Newsweek , which it plans to convert to an online- only publication after 80 years of print. Eli Lilly & Co. (LLY) lost 2.7 percent to $50.50 after reporting third-quarter earnings that missed analyst estimates after generic competition reduced revenue from the schizophrenia treatment Zyprexa, once the company’s top-selling drug. Mattress Maker Tempur-Pedic International Inc. plunged 19 percent to $25.66. The mattress maker acquiring rival Sealy Corp. cut its 2012 profit forecast amid increased U.S. competition and weakening sales in Europe. Brinker International Inc. (EAT) sank 10 percent to $30.01. The owner of the Chili’s and Maggiano’s dining chains forecast profit that was less than analysts estimated. A measure of 11 homebuilders in S&P indexes added 1 percent. D.R. Horton advanced 1.5 percent to $21.41. Toll Brothers increased 2 percent to $35.25. Facebook surged 19 percent to $23.23. Ads delivered to people on mobile devices generated about $150 million during the quarter, or 14 percent of all advertising revenue. That compares with about $10 million in the second quarter, according to an estimate by Brian Wieser , an analyst at Pivotal Research Group. The shares were raised to buy from hold at Stifel Nicolaus & Co. Dow Chemical Co. (DOW) climbed 4.7 percent to $29.88. The chemical producer eliminating 2,400 jobs to cope with a slowing economy reported better-than-expected earnings as volumes rose and plastics output benefited from low-cost natural gas. Higher Forecast Lockheed Martin Corp. (LMT) increased 2.1 percent to $93.92. The world’s largest defense contractor said third-quarter profit rose 9.3 percent and raised its full-year earnings forecast. The company also projected a decline in 2013 sales. US Airways Group Inc. (LCC) jumped 2.3 percent to $12.37. The carrier that wants to merge with American Airlines said third- quarter profit more than doubled as passenger traffic increased and the price it paid for jet fuel declined. Molina Healthcare Inc. (MOH) rallied 14 percent to $25.81. The insurer specializing in Medicaid plans for the poor reported a profit on improved results from its biggest market. Yelp Inc. (YELP) climbed 7.4 percent to $25.77. The U.S. website that lets users review businesses ranging from plumbers to pet shops announced an acquisition to expand in Europe and reported sales that topped estimates. The S&P 500 will advance 5 percent to about 1,480 over the next two weeks before the rally ends and stocks fall, according to Tom DeMark, the creator of indicators to show turning points in securities. Above High The gain would push the benchmark index above the 2012 intraday high of 1,474.51 reached on Sept. 14 before buyers are exhausted, said DeMark, whose prediction last year that the S&P 500’s decline would stop at 1,076 proved prescient when the index bottomed at 1,074.77 on Oct. 4, 2011. The advance will fizzle, with the S&P 500 heading for a potential decline of 12 percent to 17 percent, he said in an e-mailed statement. “There is still some unfinished business upside that will totally surprise and shock most market followers,” DeMark, the founder of Market Studies LLC, wrote. The S&P 500 “rally is a solo move in a sense that the overall market trend has been down since Sept. 14,” he wrote. To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-09-14 | Bloomberg | Enrolling Uninsured Expands Health Insurer Base | Health insurers, pharmaceutical companies, hospitals and consumer groups kicked off an effort to sign up a record 49.9 million uninsured Americans for coverage under the health-care law. The coalition, called “Enroll America,” pledged a $6 million payment today to cover operations as the U.S. Census Bureau reported the unprecedented number of Americans lacking health insurance in 2010. While some companies opposed the health-care law, participants benefit from more enrollees, organizers said. “Within the group, there are varying views on health reform, but there’s a recognition that it is the law and it’s a good thing to get as many people covered as possible,” said Paul Markovich, executive vice president and chief operating officer of Blue Shield of California , part of the group’s advisory board. The Congressional Budget Office estimates 32 million uninsured Americans will get coverage under the law by 2019 through tax credits for private plans or expansion of the Medicaid program for the poor. Added enrollment will translate into new revenue for insurers, drugmakers and health providers, organizers said. Legal challenges to the law are making their way through the courts as Republicans pledge to dismantle the overhaul. Drug companies pledged $2.5 million, insurers promise $1.5 million, hospitals agreed to $825,000 and foundations represent $1.3 million. Members include the American Hospital Association trade group, generic drugs maker Teva Pharmaceuticals USA, the National Association of Health Underwriters and Kaiser Permanente. For Related News and Information: Today’s most popular health-care stories: MNI HEA Top health news To contact the reporter on this story: Carol Eisenberg in Washington at Ceisenberg1@bloomberg.net To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net . |
2024-08-09 | Bloomberg | China Factories Turn to Undocumented Labor as Local Wages Jump | China ’s embrace of higher wages to help bolster consumer spending has sparked a jump in factories along the east-coast export corridor bringing in undocumented and lower-paid workers from Myanmar and Vietnam. Border police found 59 illegal immigrants from Vietnam in a bus heading for the Pearl River Delta on July 29, the official Xinhua news agency reported on Aug. 6. “Thousands” of workers from Vietnam and Myanmar were discovered working illegally in Shenzhen between 2010 and 2012, the state-run China News Service reported, citing a local prosecutor. China, the world’s most populous nation, faces elevated labor costs as the government drives up incomes and the working-age population starts to shrink. While official data show domestic migrant workers currently earn an average 2,477 yuan ($405) a month, some illegal employees made about 1,400 yuan a month in 2011, with 200 yuan of that going to snake-heads, a term for labor traffickers, China News said. “The problem will become more serious, as salary gaps between China and neighboring countries such as Vietnam are actually widening,” Qu Jian, a researcher with the China Development Institute, said in a telephone interview from Shenzhen. “It’s time for the government to think of a systematic approach to address the issue, say making it easier to hire overseas laborers legally,” said Qu, whose research group provides advice to the government. Happy Hiring Employers are happy to hire undocumented immigrants because they don’t have to pay pensions or health-care insurance, China News Service reported. The minimum monthly wage at Vietnam state firms and government agencies was $55 in June, according to the Vietnam labor ministry’s website. The share of China’s population that’s of working age saw its first consecutive annual decline since at least 1995 last year, statistics bureau data show. A survey of 325 members of the American Chamber of Commerce in China in November and December found that rising labor costs were the biggest business risk in the country. “It’s an emerging criminal act of organizing people from southeast Asian countries to work illegally in Shenzhen,” Huang Yong, a Shenzhen prosecutor, was cited as saying by China News Service. “The workers are obedient, hardworking and never complain about overtime -- in short, they are very attractive for some firms struggling with costs.” China’s Ministry of Public Security conducted a four-month campaign in 2012 that targeted the provinces of Guangxi, Yunnan, Guangdong, Fujian, Hainan and Jiangsu, catching 139 organizers of illegal labor and 3,410 illegal immigrants, according to Xinhua. To contact Bloomberg News staff for this story: Xin Zhou in Beijing at xzhou68@bloomberg.net To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net |
2024-11-11 | Bloomberg | Resolution Revenue Climbs 23% on Friends Provident Wealth Management Unit | Resolution Ltd. , the insurance buyout firm founded by Clive Cowdery , said third-quarter revenue rose 23 percent as sales at its European wealth-management division more than doubled. Revenue at the Friends Provident division was 225 million pounds ($363 million) for the three months to Sept. 30, compared with 183 million pounds a year earlier, the Guernsey, Channel Islands-based company said today in a statement. Sales at Lombard, Friends Provident’s wealth-management unit, climbed 176 percent to 78.2 million pounds. “The Lombard business has benefitted throughout the year from the improving market conditions and returning client confidence across a number of its markets,” Resolution said in the statement. Resolution last month agreed to buy Bupa Health Assurance Ltd., its third acquisition in the U.K. life-insurance market since its initial public offering in December 2008. The firm, which also owns Friends Provident and Axa SA’s U.K. life- insurance unit, plans to build a life insurer worth about 10 billion pounds in the next two years. Resolution shares rose 0.6 percent to 248 pence as of 8:05 a.m. in London. To contact the reporter on this story: Kevin Crowley in London at kcrowley1@bloomberg.net To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net ; |
2024-02-03 | Bloomberg | Romney Doesn’t Shy Away From Wealth as He Stands Next to Trump | Multimillionaire Mitt Romney shared a stage with billionaire Donald Trump as he accepted the backing of the real estate developer and reality television star, the latest sign the Republican presidential frontrunner isn’t shying away from a focus on his wealth. The two men stood together yesterday and praised one another at the Trump International Hotel in Las Vegas, a day after Romney came under attack for his comments about America’s poor. “Our country is in serious, serious trouble,” Trump said, as Romney’s wife, Ann, also looked on. “Mitt is tough. He’s smart. He’s sharp. He’s not going to allow bad things to continue to happen to this country.” Former U.S. House Speaker Newt Gingrich , Romney’s top rival in the Republican race, continued to try to gain advantage from the former Massachusetts governor’s Feb. 1 comment that he’s “not concerned about the very poor” because of the government programs available to them. “There are some very big differences both between me and Governor Romney and me and Barack Obama ,” Gingrich said as he campaigned yesterday in Las Vegas in advance of Nevada’s Feb. 4 caucuses. “I really believe we should care about the very poor, unlike Governor Romney, but I believe we should care differently than Barack Obama.” Gingrich made his comments at a construction equipment manufacturing plant, where the crowd was dominated by factory workers. ‘Trampoline’ Plan He said that, while Romney and Obama think the poor just need a government-provided safety net, he would give them “a trampoline” by tying job training programs to unemployment insurance. Gingrich has sought to cast his candidacy in populist terms, portraying Romney as beholden to Washington politicians and Wall Street bankers. He has attributed his 14 percentage point loss to Romney in Florida ’s Jan. 31 primary to the spending disparity between the two campaigns. Ad spending by Romney and his allies -- mostly for negative spots -- outstripped Gingrich and his forces by more than 5-1 in the state. Julian Zelizer , a political historian at Princeton University , discounted the importance of Trump’s endorsement. “I don’t think it will have a big impact,” he said. “I don’t think Donald Trump is a serious political player. He is great at attracting media attention, but I don’t think he has a huge impact with the electorate.” ‘Elitist’ Image David Damore, an associate political science professor at the University of Nevada-Las Vegas, said the backing could hurt Romney. “I think it plays into that narrative that Romney is an elitist and he doesn’t understand the common people,” he said. Romney, a co-founder of the Boston-based Bain Capital LLC private equity firm, faced fresh questions about whether he is out of touch with less-fortunate people after his comments about the poor in a CNN interview. Romney told reporters later that his remark was taken out of context. In an interview airing yesterday on the “Face to Face with Jon Ralston” television program in Nevada , he said he “misspoke.” Romney, who traveled yesterday for the first time with a U.S. Secret Service detail, told Trump at their joint appearance that he was honored and surprised to have his backing. “There are some things that you just can’t image happening in your life,” Romney said. “This is one of them.” Targeting Obama He also took the occasion to criticize Obama’s jobs record. “He does not understand what it takes to get America working again,” he said. In a reference to Trump, Romney said, “I spent my life in the private sector -- not quite as successfully as this guy -- but successful nonetheless, sufficiently successful to understand what it takes to get America to be the most attractive place in the world for innovators, entrepreneurs and businesses.” Trump told reporters before his appearance with Romney that he likes the candidate’s calls for a tougher China trading policy. “He’s somebody that really understands that China is ripping us off,” he said. Trump, 65, and Romney, 64, have had ups and downs in their relationship. In December, Romney declined to attend a Republican presidential candidates’ debate Trump had proposed in Iowa. The event was later canceled. ‘Small Business Guy’ Gingrich’s campaign issued a news release offering past Trump criticisms of Romney. Included was Trump’s comment in an April 18, 2011, appearance on CNN that Romney “is a basically small business guy” who ”walked away with some money from a very good company that he didn’t create; he worked there. He would buy companies; he’d close companies; he’d get rid of jobs.” Romney’s wealth, estimated in his financial disclosure statement to be as much as $250 million, periodically has emerged as a campaign issue. Romney released his 2010 tax return on Jan. 24 after his previous refusal to do so immediately appeared to hurt him in the Jan. 21 South Carolina primary, which he lost to Gingrich by 12 points. The records showed that, with an annual income of $21.6 million, he paid an effective tax rate of 13.9 percent, lower than for many Americans who make far less. Firing Comment Also in January he said in an off-the-cuff remark that he likes “being able to fire people who provide services to me.” Though he was referring to switching health-insurance companies as a consumer -- not his own employees -- he was put on the defensive. Gingrich, 68, made a reference to the flap yesterday when he said at his Las Vegas event, “I like hiring people.” In December, Romney had to deflect criticism that he is out of touch with ordinary voters after proposing during a candidates’ debate a $10,000 wager with Texas Governor Rick Perry , who has since exited the race. Trump was asked by reporters yesterday whether he had advice for Romney about discussing the wealth issue. “I think he’s actually becoming very comfortable with it recently, more recently,” he said. Trump, who has unabashedly showcased his wealth, told Bloomberg Businessweek last year that he was worth more than $7 billion. Forbes lists him as the 128th richest American, with a net worth of $2.9 billion. Trump, host of “ The Celebrity Apprentice ” on NBC, dropped hints last year he might enter the Republican presidential race before announcing in May he wouldn’t. Since then, he left open the possibility he might seek the White House as an independent if he was dissatisfied with the Republican choice. Other Candidates He said yesterday he has no plans to get into the race, and he thinks it is time for Romney’s Republican rivals -- Gingrich, U.S. Representative Ron Paul of Texas and former Senator Rick Santorum of Pennsylvania -- to exit. “It would be a positive thing if other candidates got out of the race,” Trump said. Obama press secretary Jay Carney was asked at his daily White House briefing with reporters yesterday if the president had sought Trump’s endorsement. “You know, I’m not going to comb over that question,” he responded. To contact the reporters on this story: John McCormick in Las Vegas at jmccormick16@bloomberg.net ; Amanda J. Crawford in Las Vegas at acrawford24@bloomberg.net To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net |
2024-12-08 | Bloomberg | Berkshire’s Bond Holdings May Give Buffett Role in ResCap Plan | Warren Buffett ’s Berkshire Hathaway Inc. (BRK/A) , one of the largest creditors of government-owned Ally Financial Inc., may wind up playing a central role in the restructuring of its Residential Capital LLC mortgage unit. Advisers to Ally, Rescap and the U.S. Treasury Department see Buffett as someone that they may approach about taking an equity stake in the subsidiary as they explore whether to put it into a pre-packaged bankruptcy, said people familiar with the talks. While they haven’t approached Buffett, advisers made preliminary calls to buyout firms to gauge their interest in bidding for the unit in a possible bankruptcy, said the people, who declined to be identified because talks are private. Berkshire is seen as a potential buyer because it has more than $500 million of bonds in Detroit-based Ally and ResCap and previously invested in a commercial-mortgage firm that once was owned by Ally, said people familiar with the talks. The advisers have recently approached firms that last year explored offers for the lender, the people said. “Buffett or a private-equity firm could want a part of this business, especially as the mortgage-origination business picks up over the next few years,” said Jody Lurie, a credit analyst at Janney Montgomery Scott LLC. “Any deal would certainly be difficult, as it would have to be structured so investors felt protected. That could be through a bankruptcy of ResCap.” Berkshire joined Leucadia National Corp. (LUK) in 2009 to buy bankrupt Capmark Financial Group Inc.’s loan-servicing and mortgage business for more than $400 million. Capmark had been owned by GMAC LLC, which was renamed Ally. Buffett hasn’t sought to influence the ResCap process, and advisers intend to have a more complete plan before they approach him, the people said. Ally Bonds Buffett, 81, chairman and chief executive officer of Omaha, Nebraska-based Berkshire, didn’t return a message left with an assistant. Gina Proia, an Ally spokeswoman, declined to comment, as did Matt Anderson of the U.S. Treasury Department. Berkshire had more than $400 million in Ally debt at its insurance units as of June 30, according to Bloomberg data. That includes the Government Employees Insurance Co.’s $275 million holding of Ally’s $1.9 billion of 8 percent notes due in March 2020. ResCap holdings at Berkshire insurers exceed $90 million, the data show. The Ally notes traded at 101.75 cents on the dollar according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. ResCap’s $2.1 billion of 9.625 percent bonds due May 2015 are trading at 63.5 cents on the dollar. Buffett’s firm has ResCap holdings beyond those that are disclosed to U.S. state regulators by insurance subsidiaries, said a person familiar with the matter. The top holder of Ally debt is Pacific Investment Management Co., manager of the world’s biggest bond fund, the data show. Pimco’s Mark Porterfield didn’t return a message seeking comment. Public Offering Berkshire’s bond holdings could give Buffett a central role in restructuring even if he opts against bidding for Minneapolis-based ResCap. Ally may reduce its liabilities if it separates from ResCap, bolstering the parent company’s balance sheet and prospects for an initial public offering. Investors and lenders are concerned about costs ResCap faces from more than 20 lawsuits tied to mortgage securities and a case from the Federal Housing Finance Agency , which claims the firm is among lenders that misrepresented the quality of mortgages later sold to Fannie Mae and Freddie Mac. Advisers are weighing how a ResCap bankruptcy may change Ally’s funding costs , and any decision is probably at least weeks away, said the people. Ally is exploring a separation payment that would help ResCap weather some future losses, including costs tied to disputes with mortgage investors and state and federal regulators, the people said. The solution could cost $2 billion or more, said one of the people. Mortgage Costs Ally and ResCap may face as much as $4.1 billion in expenses tied to mortgage costs, Adam Steer, an analyst, said in September when he was at CreditSights Inc. Steer estimated $3 billion would be needed to resolve disputes from investors who suffered losses on mortgage-related securities packaged by the firm. About $829 million of that sum has already been reserved, according to Steer, who now works at Brookfield Investment Management Inc. The analyst also estimated a $1.1 billion cost that would be Ally’s share of a potential settlement between state attorneys general and the largest mortgage firms over foreclosure deficiencies. ‘Clean Transaction’ “There would be interest in ResCap if the buyers could structure a clean transaction, which may have to be through bankruptcy court ,” said Kirk Ludtke , an analyst at Stamford, Connecticut-based CRT Capital Group LLC. “There is no question that the probability of ResCap filing has increased.” If Ally does pursue a sale of ResCap through bankruptcy it may target buyout firms including Fortress Investment Group LLC (FIG) , Centerbridge Capital Partners LLC and mortgage servicer Ocwen Financial Corp. (OCN) , which all considered bids in mid 2010 in a failed auction for ResCap, the people said. Gordon Runte, a Fortress spokesman, declined to comment. Ocwen Chief Financial Officer John Van Vlack didn’t return a message seeking comment. A call to Centerbridge wasn’t returned. Resolving ResCap would require approval from the FHFA and from the Federal Deposit Insurance Corp., which oversees Ally because it accepts customer deposits, one of the people said. Corinne Russell of the FHFA declined to comment as did FDIC spokesman David Barr. Ally, which is 74 percent owned by the Treasury Department, is seeking to repay $17.2 billion in U.S. bailout funds through an IPO. Ally had almost $182 billion in assets and $162.2 billion in liabilities, for equity of $19.7 billion , as of Sept. 30, according to a company regulatory filing. ResCap’s tangible net worth was $331 million at the end of the third quarter. To contact the reporter on this story: Jeffrey McCracken in New York at jmccracken3@bloomberg.net ; Jonathan Keehner in New York at jkeehner@bloomberg.net ; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net ; To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net |
2024-10-01 | Bloomberg | McDonald's `Mini-Med' Health Plans Probed by Senate | Senator Jay Rockefeller opened a probe into the limited benefit “mini-med” plans that McDonald’s Corp. , the world’s largest restaurant chain, offers employees. Rockefeller, a West Virginia Democrat, asked Scott Beacham , chief executive officer of BCS Financial Corp ., whether the company’s health offerings amount to a good deal for many of McDonald’s low-wage and hourly employees. Closely held BCS Financial, based in Oakbrook Terrace, Illinois, offers limited- benefit plans that cover 30,000 employees of McDonald’s , based about a mile away in Oak Brook, Illinois. Mini-med programs are designed to offer a low-cost way to cover part-time employees with limited benefits. McDonald’s told the Obama administration it may re-evaluate the plans if it can’t get a waiver from new rules governing insurance products. The company said yesterday it will keep offering coverage, and the government has waived some of the new rules. “The products BCS is selling to McDonald’s employees are not likely to protect them against the costs of a major health care episode,” Rockefeller said in his letter. “If this is the case, McDonald’s hourly wage workers are setting aside portions of their paychecks for an insurance product that may not be providing them a good value.” Companies are seeking exemptions from two mandates of the health overhaul signed by President Barack Obama in March. One requires plans to spend at least 80 percent of member premiums on medical care. The other bans companies from capping yearly coverage for each worker. Low-Wage Employees The plans are helpful for companies with workforces that don’t make enough to afford coverage, or for which it might be prohibitively expensive to insure, said Daryl Richard , a spokesman for the Minnetonka, Minnesota-based UnitedHealth Group Inc., which offers limited benefit plans to about a dozen companies. In his letter, Rockefeller asked BCS to provide information on how much of employee premiums actually go toward providing medical care. He also wants to know what limits the plans put on coverage, information about how extensively McDonald’s employees use the plans, and how the company sells the products to the McDonald’s workers. BCS has ties to Blue Cross & Blue Shield insurance plans, through members of its board, according to its website. McDonald’s shares rose 41 cents, or less than a percent, to $74.92 at 4 p.m. in New York Stock Exchange composite trading. The shares have climbed 32 percent in 12 months. To contact the reporter on this story: Drew Armstrong in Washington at darmstrong17@bloomberg.net ; To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net . |
2024-02-22 | Bloomberg | Julius Baer Most Hurt by Kickbacks Ban, Morgan Stanley Says | Julius Baer Group Ltd. (BAER) would probably be the most affected by the elimination of retrocession fees, or kickbacks, that are paid to banks in Switzerland for selling fund products, Morgan Stanley analysts said. A complete removal of retrocessions for all wealth management clients would cut total revenue by about 6 percent and pretax profit by 12 percent at Zurich-based Julius Baer, analysts Hubert Lam, Huw van Steenis and Bruce Hamilton said in a note yesterday. The impact at UBS AG (UBSN) and Credit Suisse Group AG (CSGN) would be equal to about 2 percent of group revenues and 6 percent to 7 percent of pretax profits for each, they estimated. “We are taking note of the developments around retrocessions and that’s a topic we’re taking seriously,” Julius Baer Chief Executive Officer Boris Collardi told investors at a presentation on Feb. 4. He said it was too early to say how changes will affect pricing. Jan Vonder Muehll, a spokesman for the bank, declined to comment further today. A Swiss court ruled last year that banks can’t book retrocession fees on products sold to clients who have their wealth managed on a discretionary basis. Discretionary mandates make up about 10 percent of wealth-management assets at Credit Suisse, about 13 percent at UBS and about 15 percent at Julius Baer, according to the Morgan Stanley report. UBS is Switzerland’s biggest bank, while Credit Suisse ranks second. Julius Baer is the country’s third-largest wealth manager. Repricing Services In the long term, the introduction of the second Markets in Financial Instruments Directive, or Mifid II, or another form of regulation may ban retrocessions altogether “given the ongoing push for reforms on investor protection,” the analysts said. Banks may be able to reprice their services to mitigate the effect from lost retrocession fees, the analysts wrote, adding that uncertainty over the issue may keep revenue margins “under pressure for longer.” They have an overweight recommendation on Credit Suisse and UBS and equal-weight on Julius Baer. Julius Baer took a “small provision” as part of 10.2 million francs ($10.9 million) set aside for various legal risks in 2012 as it assessed the situation concerning the court decision on retrocessions, Chief Financial Officer Dieter Enkelmann said on Feb. 4. To contact the reporter on this story: Elena Logutenkova in Zurich at elogutenkova@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-01-24 | Bloomberg | Austrian Bonus, Class Actions,‘Obscene’ Carry: Compliance | Austria , whose banks’ combined bonus pool is a sixth the size of the figure for Germany ’s Deutsche Bank AG (DBK) , is putting restrictions on bonuses exceeding 30,000 euros ($40,000) from this year. Bonuses paid to “risk buyers” such as traders or loan officers that are above this level or equivalent to more than a quarter of the annual fixed salary must be deferred over a five- year period, the co-head of the Finanzmarktaufsicht regulator, Helmut Ettl, told journalists in Vienna yesterday. If the bank’s economic situation worsens during the five-year period, payments have to be skipped, Ettl said. The rules apply for the first time for bonuses paid this year for fiscal 2012. Austrian banks, focusing on retail banking at home and in eastern Europe, have already used modest average compensation structures. Only 14 employees working for the country’s banks at home and abroad were paid more than 1 million euros in total compensation in 2011, according to an FMA survey of 26 lenders Ettl presented. The banks surveyed had 2,282 employees. Overall, banks paid 590 million euros in bonuses in 2011. Deutsche Bank, based in Frankfurt , said it paid 3.6 billion euros. The FMA is largely implementing European Union regulations, while defining the national threshold, Ettl said. Under the new rules, just 60 percent of bonuses can be paid out immediately, with the remaining 40 percent being phased over five years. For bonuses exceeding 150,000 euros, or 100 percent of fixed salaries, only 40 percent can be paid at once. Special Section: Davos Cameron Pledges Clampdown on Aggressive Tax Avoidance U.K. Prime Minister David Cameron set out his agenda for the Group of Eight summit in June, including tackling extremism, tax avoidance and hunger. He also commented on his vision of a more competitive European Union. He spoke at the World Economic Forum’s annual meeting in Davos, Switzerland. WEF founder Klaus Schwab also spoke. For the video, click here, and for more, click here. Monti, Kenny, Rutte Speak in Davos on Euro-Zone Outlook Italian Prime Minister Mario Monti, Irish Prime Minister Enda Kenny, Dutch Prime Minister Mark Rutte and Denmark Prime Minister Helle Thorning-Schmidt spoke about the outlook for euro-zone economies, banking supervision and unemployment. They spoke at the World Economic Forum’s annual meeting in Davos, Switzerland. The Financial Times’ Lionel Barber moderated. For the video, click here. Kotak Mahindra Urges Caution on New India Bank Licenses Uday Kotak, chairman of Kotak Mahindra Bank Ltd. (KMB) , talked about the Indian banking industry, stocks and economic growth. He spoke with Francine Lacqua and Matthew G. Miller on Bloomberg Television’s “The Pulse” on the sidelines of the World Economic Forum’s annual meeting in Davos, Switzerland. For the video, click here, and for more, click here. Noonan Says Ireland Set to Exit Bailout by End of 2013 Irish Finance Minister Michael Noonan discussed Ireland’s plans to exit its international bailout and return to bond markets. He spoke with Francine Lacqua on Bloomberg Television’s “The Pulse” on the sidelines of the World Economic Forum’s annual meeting in Davos, Switzerland. For the video, click here. Compliance Policy CoCos Allowed for Danish Banks If Are Triggers Strict Denmark’s financial watchdog will let banks issue new hybrid debt instruments to meet tougher capital demands only if the securities convert into equity early enough to avoid eating into regulatory buffers. Danish banks can use contingent convertible bonds as long as they convert before capital levels breach core Tier 1 equity thresholds or in the event individual solvency requirements aren’t met, said Anders Balling, head of the Financial Supervisory Authority’s banking analysis division in Copenhagen. The regulator is trying to take a tougher line on banks to avoid another credit-driven property bubble without squashing Denmark’s economic recovery. Bond investors have demanded a premium from Danish banks since the Nordic country in 2011 became the first in Europe to enforce a resolution framework that pushed losses onto senior creditors. Denmark is exploring the option of allowing more exotic funding vehicles to help banks build their capital buffers as the government commits to its goal of protecting taxpayers from bailouts. For more, click here. Compliance Action IRS Suspends Regulation of Tax-Return Preparers The U.S. Internal Revenue Service suspended its regulation of tax-return preparers after a federal court ruling said the agency lacked authority, removing a tax-compliance tool that was years in the making and raising concerns from the national taxpayer advocate. With the tax-filing season starting Jan. 30, hundreds of thousands of return preparers won’t have to register with the federal government, pass a competency test or meet continuing- education requirements. U.S. District Judge James Boasberg in Washington invalidated the regulations in a decision Jan. 18 and enjoined the IRS from enforcing them. Boasberg, picked for his post by President Barack Obama , wrote that the IRS overstepped its authority by relying on an 1884 law that allowed it to regulate people presenting cases before the Treasury Department. The IRS responded yesterday by suspending the program. The 15-hour annual continuing-education requirement started in 2012 and the testing requirement was taking effect this year. The agency said it is considering the court’s decision and will “take further action shortly.” The rules were designed to impose standards on hundreds of thousands of return preparers who aren’t certified public accountants, attorneys or enrolled agents already licensed to practice before the IRS. The idea, promoted by former Commissioner Douglas Shulman , was to require minimum qualifications and help the agency combat tax fraud. For more, click here. Sovereign Debt, Structured Finance Ratings to Face EU Review The European Union’s top markets regulator said it would review how credit-ratings companies evaluate sovereign debt and structured products, following concerns market volatility increased in the past year. EU lawmakers voted in favor of rules last week that would place curbs on how credit-rating firms update markets about the quality of government debt and give investors the right to sue if they lose money because of poor quality or deliberately distorted credit assessments. The U.S. Securities and Exchange Commission Jan. 22 barred Egan-Jones Ratings Co. from grading government debt and asset- backed securities for 18 months after settling claims the company misled the regulator over how long it had been rating the two asset classes. The plans approved by EU lawmakers on curbing how credit- ratings companies update markets about the quality of government debt are intended to make such updates less likely to roil markets and to give investors recourse when ratings are off the mark. European Parliament legislators backed the plans. Final sign-off by the EU’s 27 governments is needed before the deal can take effect. ICAP Says FSA Investigating Firm as Part of Global Libor Probe ICAP Plc (IAP) , the world’s largest broker of transactions between banks, is being investigated by the U.K.’s Financial Services Authority as part of its probe into Libor rigging. “One of ICAP’s interdealer broker subsidiaries has been notified that it is the subject of an FSA investigation,” the London-based firm said in a statement today. The regulator is examining whether the company helped manipulate the London interbank offered rates for the Japanese yen and possibly U.S. dollar, the Financial Times newspaper reported earlier, citing a March 2012 FSA memo. The FSA has assigned seven of the 50 people working on its investigation to focus on ICAP’s activities, the newspaper said. ICAP is already being probed by Canada ’s Competition Bureau for allegedly facilitating the manipulation of yen Libor by panel banks, according to papers filed with the Ontario Superior Court in May. U.S. Bank Deposits Drop Most Since 9/11 as FDIC Support Ebbs Clients of the largest U.S. banks withdrew funds this month at the fastest weekly pace since the Sept. 11 attacks as a deposit-insurance program ended and customers tapped into their year-end cash hoards. Customers may be moving money no longer insured by the U.S., drawing down year-end balances and investing in advancing equity markets. A Federal Deposit Insurance Corp. backstop, the Transaction Account Guarantee program, or TAG, ended last month, prompting some analysts, investors and trade organizations to predict it could drive funds from the banking system. The transaction-account protections were introduced in the wake of the 2008 credit crisis and had guaranteed about $1.5 trillion in non-interest-bearing accounts above the FDIC’s general limit of $250,000. The program expired Dec. 31. Deposits closed the year at about $5.4 trillion, the highest month-end total in 2012 and more than $500 billion higher than at the end of 2011, according to Fed data. Industry groups such as the American Bankers Association and Independent Community Bankers of America had sought an extension for TAG to keep accounts from being moved. Courts London Whale Case Among Dwindling Securities Class Actions The number of securities fraud class-action cases filed last year fell 19 percent as litigation over mergers and acquisitions and the credit crisis decreased, according to a report. The 152 cases filed in 2012 fell from 188 in 2011 and represented the second-lowest level in 16 years, according to the report by Stanford Law School and Cornerstone Research , a consulting firm. Last year marked an end to securities fraud class-actions related to the credit crisis as no new cases were filed compared to three in 2011, according to the report. Credit crisis cases peaked in 2008 at 100. Federal cases related to mergers and acquisitions dropped to 13 in 2012 compared with 40 in 2010 and 43 in 2011, according to the report. Those cases are now being pursued almost exclusively in state courts. Although there were no class-action credit-crisis cases, according to the report, Wall Street banks are still contending with lawsuits and claims over mortgage securities sold during the housing boom. Class-action securities filings against financial companies fell, according to the report. They were defendants in 15 filings, or 10 percent of all filings, compared with 25 filings in 2011 and 43 in 2010. Stanford Investors Must Repay Bogus CD Profits, Judge Says R. Allen Stanford’s defrauded investors must repay any interest they earned on the bogus certificates of deposit at the heart of the convicted Texas financier’s $7 billion Ponzi scheme, a Dallas judge ruled. About 800 investors had urged U.S. District Judge David Godbey to reject lawsuits by Ralph Janvey, Stanford’s court- appointed receiver, seeking recovery of more than $220 million in profits they’d taken out of Stanford’s scheme before it was shut down by U.S. securities regulators in February 2009. Godbey ruled that while investors have legitimate claims to recover the money they originally invested in a fraud scheme, they have no contractual claim to any interest from those funds because investment contracts with a Ponzi scheme are unenforceable. Stanford, 62, was convicted in March of stealing more than $2 billion in investor deposits at his Antigua-based bank to fund a lavish personal lifestyle and bankroll money-losing private enterprises. He is serving a 110-year sentence in a Florida federal prison while he appeals that verdict. The case is Janvey v. Alguire et al, 3:09-cv-0724, U.S. District Court, Northern District of Texas (Dallas). The criminal case is U.S. v. Stanford, 09cr342, U.S. District Court, Southern District of Texas (Houston). The SEC case is Securities and Exchange Commission v. Stanford International Bank, 09cv298, U.S. District Court, Northern District of Texas (Dallas). Peregrine’s Wasendorf Stole More Than $215 Million, U.S. Says Russell Wasendorf Sr., the founder of now-bankrupt Peregrine Financial Group Inc., stole more than $215 million from the commodity firm’s customers, U.S. prosecutors said. Wasendorf, then 64, pleaded guilty in September in federal court in Cedar Rapids, Iowa , to mail fraud and two counts of lying to federal prosecutors. He faces as long as 50 years in prison at his Jan. 31 sentencing. Acting Iowa U.S. Attorney Sean Berry said in a sentencing memorandum filed yesterday in federal court in Cedar Rapids that while Wasendorf claims the loss is less than $200 million, the “actual loss in this case can be determined with remarkable precision.” Wasendorf’s crimes came to light on July 9. The case is U.S. v. Wasendorf, 12-cr-2021, U.S. District Court, Northern District of Iowa (Cedar Rapids). The bankruptcy case is In re Peregrine Financial Group Inc., 12-27488, U.S. Bankruptcy Court, Northern District of Illinois ( Chicago ). The regulatory case is Commodity Futures Trading Commission v. Peregrine Financial Group Inc., 12- cv-5383, U.S. District Court, Northern District of Illinois (Chicago). Interviews/Speeches Rangel Sees U.S. Tax Overhaul, Blasts Carried Interest U.S. Representative Charlie Rangel, a Democrat from New York, talked about the outlook for an overhaul of the federal tax code this year and the code provision on carried interest, which he called “obscene.” Carried interest is a type of profit-sharing income earned by private-equity managers. Rangel spoke with Bloomberg reporters and editors at Bloomberg’s office in Washington. For the audio, click here. Comings and Goings CFTC Whistle-Blower Chief Rejoins SEC Enforcement Unit Vincente Martinez, who helped start the U.S. Securities and Exchange Commission market intelligence office before stepping down in 2011, is returning to lead the unit responsible for evaluating tips, complaints and referrals. Martinez will rejoin the SEC next month from the Commodity Futures Trading Commission, where he was the first director of the agency’s whistle-blower office. In his prior stint at the SEC, he worked for eight years in the enforcement division and became an assistant director of the market intelligence office when it was created as part of a restructuring of the unit. To contact the reporter on this story: Carla Main in New Jersey at cmain2@bloomberg.net. To contact the editor responsible for this report: Michael Hytha at mhytha@bloomberg.net . |
2024-07-22 | Bloomberg | StanCorp Slumps as Profit Falls on Disability Claims, Missing Estimates | StanCorp Financial Group Inc. (SFG) , the Portland, Oregon-based disability insurer, fell the most since 2008 as profit plunged, missing analysts’ estimates. The insurer dropped $5.72, or 14 percent, to $35.50 at 4:03 p.m. in New York Stock Exchange composite trading. The company had slipped 21 percent this year. Second-quarter net income dropped 54 percent to $18.8 million, or 42 cents a share, from $41.1 million, or 87 cents, as the cost of benefits increased, the company said in a statement late yesterday. Operating earnings, which exclude some investment results, were 61 cents a share, missing the average $1.03 estimate of 11 analysts surveyed by Bloomberg. “Higher-than-expected claims incidence in the company’s group long-term disability insurance business” are weighing on results, Standard & Poor’s said today as it lowered the counterparty credit rating to BBB+ from A- for the firm. The insurer has raised prices to “address the higher claims in the current economic environment,” StanCorp Chief Executive Officer Greg Ness said in the statement. To contact the reporter on this story: Brooke Sutherland in New York at Bsutherland5@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-11-15 | Bloomberg | PZU, Polish Insurer, Posts 21% Fall in Third-Quarter Net, Beats Estimates | PZU SA , Poland’s largest insurer, said third-quarter profit dropped 21 percent as a record dividend reduced its capital and hurt investment income. Net income declined to 704.3 million zloty ($244.1 million) from 892 million zloty a year earlier, the Warsaw-based company said in a regulatory statement. That compares with the 688.5 million-zloty average estimate of four analysts surveyed by Bloomberg. Net income on investments, including interest on bonds, slid 30 percent to 395.9 million zloty in the three months ended Sept. 30, while revenue from sales of shares in which PZU invested slumped 71 percent to 34 million zloty, the company said. The value of the stocks held by the insurer rose 27 percent. PZU, which debuted on the Warsaw stock market in May and overtook Vienna Insurance Group AG as central Europe’s largest publicly traded insurer by market value, had its capital cut by a record dividend of 12.8 billion zloty, part of the settlement of an ownership dispute between the Polish government and Eureko BV. Profit at Vienna Insurance, whose capital is more than twice that of PZU, rose 14 percent in the same period to 94.5 million euros ($129 million). Gross premiums were little changed at 3.55 billion zloty in the quarter, compared with 3.57 billion zloty a year earlier. Compensation paid to clients rose 1 percent. To contact the reporter on this story: Marta Waldoch in Warsaw on mwaldoch@bloomberg.net To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net |
2024-07-23 | Bloomberg | One Microsoft. Four Ways to Integrate Fiefdoms. | One Ford. One Apple. Now one Microsoft. Last week, Microsoft CEO Steve Ballmer unveiled a restructuring designed to unite the organization behind a single strategy and create high-value experiences for their customers. Many more organizational structure changes are likely to come. Why? Because digitization has passed power to the consumer, pressing companies to pull together their old decentralized profit and loss fiefdoms to produce experiences consumers find compelling. As Ballmer wrote in his memo to Microsoft employees, "We will see our product line holistically, not as a set of islands." But changes in organizational structure get you only part way there. Ballmer acknowledged as much when he went on to say, "The final piece of the puzzle is how we work together." Achieving speed and customer centricity depends on a crucial ingredient that's often missing: integration. It's the job of a leader to create it. Integration has two parts to it. The first is to get various functional silos and P&L centers sharply aligned with the specifics of customer requirements. The second applies to the multiple channels a consumer might use as part of that experience — for example, for a bank these would include a website, an ATM, and the lobby of the local branch. The person in charge of online banking might want a different offering than the person leading the branch offices, just as an engineering head might want a different set of product features than a manufacturing VP. Integration means taking into account all of those points of view and making the right trade-offs to give consumers a total end-to-end experience better than the competition. Structure divides; leaders integrate. Transforming an organization into a synchronized high speed decision-making body is no picnic. In my experience, only a few leaders, such as Ford's Alan Mulally and Apple's Steve Jobs, have succeeded in making this crucial transformation. Leaders who want to adapt should consider the following lessons: 1. Understand that 2% of the people in your organization have tremendous impact on the other 98%. I call this the rule of 98/2. Silos have nurtured people with narrow expertise and perspective; so, in many companies, the 2% is ill-equipped for integration. Make sure the 2% have the distinctive skills and personality constructs required. These include the attitude and drive to deliver a winning customer proposition and the ability to synchronize different viewpoints and make the right trade-offs. Pay particular attention to the values of the decision makers. Collaboration must be in their blood. This is a difficult if not impossible shift for those who have been running their own show. 2. Design "integration mechanisms" and operate them with rigor. You as a leader must be hands-on in creating a rhythm for integration. In creating One Ford, Mulally brought his top team together every Thursday. Attendance was mandatory. Most of the team he inherited is intact, yet the divisiveness of fiefdoms that originated with Henry Ford has now disappeared. The weekly discussions have kept the team on the same page strategically and operationally. COO Mark Fields now runs this mechanism. Apple's consumer-friendly innovation and Wal-Mart's quick inventory and price adjustments were the result of similar mechanisms masterfully run by Steve Jobs and Sam Walton respectively. 3. Be sure key performance indicators and incentives reinforce synchronization and integration. Basing a portion of compensation on common goals fosters collaboration. 4. Cultures change when leaders repeatedly and consistently intervene to correct deviant behaviors. It requires discipline and skill to continually demonstrate the behaviors and values conducive to integration and to promptly resolve any underlying conflicts. Through joint work, attitudes get reshaped and energy gets created. Those who cannot adapt begin to opt out. Companies that lack speed and fail to deliver the right consumer experience on a timely basis can go over the cliff very quickly, as some have already done. It is essential to build the new core capability of integration, starting from the CEO throughout the organization. |
2024-10-28 | Bloomberg | Countrywide $500 Million Accord Gets Tentative Approval | Bank of America Corp .’s Countrywide unit won tentative final approval of a $500 million securities class-action settlement with investors in its devalued residential mortgage-backed securities. U.S. District Judge Mariana Pfaelzer, at a hearing today in Los Angeles , set aside objections from the Federal Deposit Insurance Corp., which had argued as receiver of 19 failed banks that the accord disproportionately favors a subclass of the investors. “I’m going to have to write something,” the judge said. “Nothing is final until the court has written an order.” The settlement resolves claims that Countrywide, the largest U.S. mortgage lender when it was taken over by Bank of America in 2008, misled investors in offering documents about the quality of the home loans that were pooled for the securities. Many of the securities had been given the highest credit ratings and lost value when they were cut to junk during the collapse of the U.S. housing market. “I think this a very, very significant case,” Pfaelzer told the lawyers who filed the first class-action cases against Countrywide as far as back 2007. “It was really a very enterprising thing for you to do.” Delinquent Mortgages The $500 million deal is separate from an $8.5 billion settlement pending in state court in New York which resolves claims that Countrywide breached its contractual obligation to replace delinquent mortgages that were pooled for the securities. The class-action settlement also resolves claims on behalf of investors whose securities weren’t held by plaintiffs in the first securities lawsuits and whose claims were dismissed as time-barred by Pfaelzer. The FDIC had objected that those so-called dismissed claims involved the vast majority of the securities and received too small a part of the total settlement. Spencer Burkholz, a lead lawyer for the plaintiffs, said at the hearing that the $500 million settlement had been proposed by an independent mediator. The allocation of the money was based on the strengths and weaknesses of the “live” claims, the dismissed claims and appellate rights, he said. “You don’t need to litigate every dismissed claim up to Supreme Court before you settle them,” Burkholz said. Countrywide’s lawyer, Brian Pastuszenski, said his client was settling the lawsuit for business reasons and the settlement was by no means a concession that Countrywide had violated any laws. The case is Maine State Retirement System v. Countrywide Financial Corp., 10-00302, U.S. District Court, Central District of California (Los Angeles). To contact the reporter on this story: Edvard Pettersson in Federal court in Los Angeles at epettersson@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-03-22 | Bloomberg | Indonesia Rupiah Hits Four-Year High as Inflation Concerns Ease | Indonesia ’s rupiah rose to its strongest level in almost four years after lawmakers voted to delay planned cuts to fuel subsidies, helping contain inflation. Bonds rose for a third day. The proposal was approved on concern higher oil prices will cause inflation to accelerate, Teuku Rifky Harsya, chairman of the parliamentary commission for energy affairs, said yesterday. The central bank said full-year inflation may be less than 6 percent, compared with as much as 6.5 percent if the government had gone ahead with its plan to ban owners of private cars from buying subsidized fuel on Java island from April. “The move to delay limiting subsidized fuel sales will help to slow inflation and that’s giving comfort to investors,” said Lindawati Susanto, head of foreign-exchange trading at PT Bank Resona Perdania in Jakarta. “A stronger rupiah will also help to manage imported inflation.” The rupiah strengthened 0.2 percent to 8,717 per dollar as of 4:16 p.m. in Jakarta, according to data compiled by Bloomberg. It earlier touched 8,707, the strongest level since May 2007. Consumer prices rose 6.84 percent from a year earlier in February, the least in three months, official figures show. January’s 7.87 percent increase was the biggest since April 2009. Japan ’s progress in regaining control of reactors at a nuclear power station crippled by the March 11 earthquake and ensuing tsunami has also “lifted the rupiah,” Susanto said. Radiation containment units at the Fukushima Dai-Ichi plant are intact and the situation “is on the verge of stabilizing,” a U.S. Nuclear Regulator Commission official said yesterday. Indonesia sold 10 trillion rupiah of debt in an auction today, the Ministry of Finance’s debt management office said. The sale drew bids worth 27.9 trillion rupiah, the ministry said in a statement on its website. The government sold 2 trillion rupiah of three-month bills, its first auction of the shorter-term notes; 2 trillion rupiah of bills maturing March 2012; 1.5 trillion rupiah of bonds maturing September 2016; and 4.5 trillion rupiah of bonds maturing July 2031, according to the statement. Ten-year government bonds rose for a third day. The yield on the 8.25 percent note due July 2021 fell nine basis points to 8.20 percent according to closing prices from the Inter-Dealer Market Association. To contact the reporter on this story: Suryani Omar in Jakarta at somar6@bloomberg.net To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net |
2024-08-15 | Bloomberg | Medicaid Cuts Ryan Doesn’t Tout Would Reduce Aid to Seniors | Paul Ryan ’s plan to overhaul Medicare wouldn’t affect today’s seniors. His Medicaid proposal would. While the Republican vice-presidential candidate is careful to avoid touching Medicare benefits for anyone at or near retirement, his budget would impose immediate cuts to Medicaid, the health-care program for the poor that funds nursing-home care and other benefits for 6 million U.S. seniors. “It’s very easy to forget about these people,” said Howard Gleckman, a resident fellow at the Urban Institute , a Washington-based policy research group. “It’s a big, big cut.” The proposed Medicaid changes are often overlooked amid the debate over Ryan’s Medicare plan, which has taken center stage in the presidential contest since the Wisconsin congressman was chosen as Mitt Romney ’s running mate on Aug. 11. It’s politically important because those 65 and older are a crucial voting bloc. “What Paul Ryan and I have talked about is saving Medicare, is providing people greater choice in Medicare, making sure it’s there for current seniors,” Romney said on CBS’s “60 Minutes” on Aug. 12. “No changes, by the way, for current seniors or those nearing retirement.” A double standard exists when it comes to shielding Medicare and Medicaid beneficiaries from immediate cuts, said Representative Henry Waxman of California , the top Democrat on the House committee with jurisdiction over both programs. ‘Consequences’ of Cuts “They care about the votes of seniors who are not poor and they don’t care about the votes and the consequences to seniors who are poor,” Waxman said in an interview. Health-care policy specialists say it’s politically easier to cut Medicaid because most voters don’t understand it. “Most people have no clue what Medicaid means, especially to seniors,” said John Rother , president of the National Coalition on Health Care, a Washington-based group that promotes expanding health-care coverage while controlling costs. Asked for comment, Romney spokesman Brendan Buck pointed to a page on the House Budget Committee website that responds to complaints the plan would hurt Medicaid and other safety-net programs. Ryan is chairman of the House panel. “Rather than micromanage Medicaid from Washington, states will have the freedom to ensure the disabled and those in nursing homes receive the quality care they deserve,” the page says. “Political attacks that question the House Republican budget’s commitment to society’s most vulnerable are rooted in a belief that a distant federal government can better allocate safety net spending than elected leaders closer to the people.” Medicaid Spending At issue is the joint federal-state program that provided benefits last year to 70 million poor children, pregnant women, the disabled and the aged. That includes inpatient hospital services and long-term care for 11 million poor, disabled Americans. The 6 million seniors who are Medicaid beneficiaries consume an outsized share of its budget -- about 23 percent of spending in 2009. That’s primarily because nursing-home care is so expensive. The program covers more than two-thirds of all nursing-home residents in the U.S., according to the Kaiser Commission on Medicaid and the Uninsured. Many middle-income Americans who may be unfamiliar with Medicaid end up relying on the program in their old age because they exhaust their assets. Medicare doesn’t cover long-term care so they turn to Medicaid, which does. “Most of us could end up in Medicaid whether we imagine ourselves that way or not,” Rother said. The program also covers Medicare premiums and other fees for the poorest Americans. $800 Billion Ryan’s plan would make it difficult to maintain these services because it calls for $800 billion in cuts over the next decade, which would be a one-third reduction in projected spending. By 2050, his proposed budget would cut Medicaid funding in half, according to the nonpartisan Congressional Budget Office , while demand for services is projected to climb as the baby-boom generation reaches old age. It would be up to the states that administer Medicaid to decide how to allocate the program’s spending among seniors, poor children and the other beneficiaries. Many Republican governors support Ryan’s plan because it would eliminate many of the strings the federal government attaches to its Medicaid dollars, which they said would allow them to run the program more efficiently. ’Federal Maze’ “Medicaid remains an antiquated, federal maze of regulations and mandates focused on process instead of quality health care,” Republican Governors Association Chairman Rick Perry said in a letter last year. “We know their needs far better than the federal government.” Rother said the elderly would surely face cuts because the reductions would be so steep. “If you’re talking about a third or half of the funding being cut, there’s really no alternative,” he said. “Cuts of that magnitude are impossible to absorb any other way.” “Even with significant efficiency gains” Ryan’s plan could require “considerable” cutbacks if states don’t make up the difference in funding, according to the Congressional Budget Office. That could mean fewer services, greater cost sharing or lower payments to health-care providers -- “all of which would reduce access to care,” the CBO said. Reduced Benefits The Medicaid cuts are partly the result of Ryan’s decision to spare current Medicare retirees from reduced benefits. His plan to offer seniors subsidies to buy private health insurance wouldn’t take effect until 2023 and would affect those born in 1958 or later. Because the changes are phased in, Ryan’s budget postpones the savings that would accrue by revamping Medicare -- of the $5 trillion in spending cuts in the first decade, only $200 billion come from Medicare. Meanwhile, the Medicaid cuts would leave many seniors with few alternatives, Gleckman said. Medicaid recipients are so poor they wouldn’t come “remotely close” to being able to buy long- term care insurance, he said. “If you can’t buy insurance and we’re not going to give you a safety net, what exactly is it that these folks are supposed to do?” he said. To contact the reporter on this story: Brian Faler in Washington at bfaler@bloomberg.net To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net |
2024-12-22 | Bloomberg | Payroll Tax Tiff Times 25 Awaits Congress in ‘Utter Dysfunction’ | The brinksmanship in Congress over a payroll tax-cut extension may end up looking like a quaint disagreement by next December, when lawmakers must grapple with a fiscal policy debate at least 25 times more costly. Unless Congress acts by the end of 2012, income tax cuts will expire, automatic reductions in defense and domestic spending will start and the alternative minimum tax will ensnare millions more taxpayers. The same Congress that can’t find a way to extend the widely supported payroll tax cut beyond Dec. 31 will be seeking to bridge long-held ideological differences. “The prospects are bleak,” said Leonard Burman, a former Treasury Department official who teaches public affairs at Syracuse University in New York. “I’ve never seen such a high level of dysfunction in the 25 years or so that I’ve been paying attention to government.” The year-end 2012 series of deadlines on tax and spending policy stems from Congress’s tendency to push problems into the future with temporary solutions. This year alone, lawmakers have flirted with a federal government shutdown three times, almost defaulted on the U.S. debt for the first time in history and allowed aviation taxes to lapse for two weeks. The income tax cuts, first enacted in 2001 and 2003 under President George W. Bush , were scheduled to expire at the end of 2010 for budgetary and political reasons and were extended two more years by Congress and President Barack Obama. The spending cuts are a byproduct of a 2011 agreement to raise the federal debt limit. Trillions at Stake The $4 trillion in expiring tax cuts and $1.2 trillion in potential spending cuts dwarf the $200 billion at stake in the current fight over the payroll tax cut and other provisions, including expanded unemployment insurance. Those items, if extended for another year, would expire at the end of 2012. House leaders, Senate leaders and Obama are blaming one another for the stalemate. House Republicans insist on a yearlong extension. Senators from both parties backed a two- month extension on Dec. 17 to buy time for negotiations on a longer-term agreement. The potential collapse of the payroll tax-cut deal, which would result in lower paychecks for 160 million U.S. workers in January, caps a year in which approval ratings for Congress have plummeted. A Gallup poll released Dec. 19 found 11 percent of Americans approve of Congress’s work. The yearly average is 17 percent, which Gallup said was the lowest annual congressional approval rating it has ever recorded. “We’ve got some critical issues that are just coming to a head in 2012, and I hope we learn from this experience,” said Representative Tom Reed, a New York Republican and one of the eight would-be House negotiators appointed by Speaker John Boehner on the payroll tax issue. ‘Reckless Policy’ In a telephone interview yesterday, Reed criticized Obama and the Senate for trying to push decisions on policy issues -- such as the Keystone XL oil pipeline from Canada to Texas -- beyond the 2012 election. “It’s amazing to me that grown responsible men and women will defer to politics and support reckless policy, just because the politics are such that it may be in their interest to do it,” said Reed, who entered the House in November 2010. Representative Allyson Schwartz, a Pennsylvania Democrat, said Democratic willingness to cut spending hasn’t been met with an equal spirit of compromise from Republicans on taxes. “This week seems dramatic, but the fact is all year we have been dealing with Republican leadership and a Republican conference that has taken us to the brink of a crisis and an inability to really work in any kind of bipartisan effort,” she said in a telephone interview yesterday. Expiring Tax Cuts Unless Congress acts next year, the top income tax rate in 2013 would rise to 39.6 percent from 35 percent. Dividends would be taxed as ordinary income, and the top rate on long-term capital gains would rise to 20 percent from 15 percent. Tax increases for investment income included in the 2010 health care law are also scheduled to take effect in 2013. In addition to everything else expiring at the end of 2012, Congress also will have to fund the government for the fiscal year that starts Oct. 1, 2012. That issue may linger into December unless lawmakers can reach a pre-election agreement. Furthermore, depending on economic growth, the federal government may again bump up against the debt limit -- a debate that consumed Washington during July 2011. If those issues collide simultaneously, including the debt limit, “it would be like a nuclear device being detonated,” said Kenneth Kies, a Republican tax lobbyist in Washington whose clients include Microsoft Corp. (MSFT) and Pfizer Inc. The political dynamics of fiscal policy will change after the 2012 election, depending on who gains control of Congress and the White House. The new Congress won’t be sworn in until January 2013, and, if Obama loses, his term won’t end until Jan. 20, 2013. ‘Lame-Duck Dynamics’ If Congress can’t resolve these issues before the election, lawmakers will reprise 2010, when a lame-duck Congress controlled by Democrats wrangled over tax policy after Republicans had won control of the House in the election. Under Republican pressure, Obama and congressional Democrats agreed to extend all of the tax cuts instead of ending them for high earners. “Lame-duck dynamics are entirely predicated on what happens in the election,” said J.D. Foster, a senior fellow at the Heritage Foundation , a Washington group that supports limited government. “They may be the same members, but they’ll be there under very different circumstances.” Even Obama, who will be president in December 2012 whether he wins or loses the election, will view issues differently without election pressure, Foster said. Lawmakers are starting to envision scenarios for how the tax and spending issues are reconciled, depending in part on the election results. Deficit Focus Earl Pomeroy , a former Democratic congressman from North Dakota who is now a lawyer at Alston & Bird LLP in Washington, said the national focus on the federal budget deficit will make it more difficult for Republicans to press for an extension of the 2001 and 2003 tax cuts without covering their cost. “For those from the right side of the political spectrum, you’ve got the worst of all worlds,” said Pomeroy, a lobbyist whose clients include Aetna Inc. “If Congress fails to act, you’re going to have a tax increase and steep defense cuts. What we’re seeing with the legislative process is that it’s fallen to a state of utter dysfunction.” Addressing the alternative minimum tax is the one thing that must be done at the end of next year, said Kies, a former chief of staff of the congressional Joint Committee on Taxation. It is a parallel tax system designed to prevent top earners from legally avoiding taxes. Indexed for Inflation The exemption levels aren’t permanently indexed for inflation so, unless Congress works to blunt its spread, millions more taxpayers would end up paying it. The alternative tax is the only issue in play, Kies said, that will affect tax returns filed in early 2013. “Nothing else has to be done,” he said. Reed said he hoped Congress could start debating the provisions expiring at the end of 2012 as early as possible. “They cannot be dealt with post-election in crisis mode,” he said. “These issues, they don’t get better with time. They get worse.” To contact the reporters on this story: Richard Rubin in Washington at rrubin12@bloomberg.net ; Steven Sloan in Washington at ssloan7@bloomberg.net To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net |
2024-11-30 | Bloomberg | Haitong Securities Said to Seek Up to $1.7 Billion in Hong Kong Share Sale | Haitong Securities Co. (600837) , China’s third-biggest brokerage by market value, may raise about HK$13 billion ($1.7 billion) by selling shares in Hong Kong , according to two people familiar with the matter. The brokerage is offering 1.23 billion shares at HK$9.38 to HK$10.58 apiece, the people said, asking not to be identified because the process is private. Warburg Pincus LLC, the buyout firm based in New York , will purchase $210 million of shares in the IPO as a so-called cornerstone investor, according to the people. Companies are planning to sell as much as $7 billion of new shares in Hong Kong by the end of the year, betting on a revival in investor appetite after the value of initial public offerings slumped almost 70 percent this year. Chow Tai Fook Jewellery Group Ltd., controlled by real-estate billionaire Cheng Yu-tung , is seeking to raise up to $2.8 billion. “There will be appetite for China brokerages as the sector is going to expand with the development of new businesses such as asset management,” Xie Jiyong, an analyst at Capital Securities Corp. in Shanghai , said by telephone today. “Haitong Securities is among the top players in the market given its size and balanced business.” Companies have raised $15.9 billion this year from Hong Kong IPOs, compared with $49.1 billion for the same period last year, according to data compiled by Bloomberg. Chow Tai Fook Jewellery received bids for all the stock available to money managers in its first day of order taking, people with knowledge of the matter have said. New China Life Insurance Co., the state-backed insurer seeking as much as $2.3 billion in an IPO in Hong Kong and Shanghai, received enough orders to cover its institutional books for both listings, said two people with knowledge of the transaction. Shares of Haitong Securities fell 2.19 percent to 8.02 yuan in Shanghai as of 11:29 a.m. local time, extending its decline this year to 17 percent. The brokerage’s third-quarter net income fell 46 percent to 493.8 million yuan ($78 million), according to a statement in October. To contact the reporters on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net ; Zijing Wu in London at zwu17@bloomberg.net To contact the editors responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net ; Jacqueline Simmons at jackiem@bloomberg.net |
2024-05-11 | Bloomberg | Emerging Stocks Drop, Head for Biggest Weekly Loss Since | Emerging-market stocks posted the largest weekly loss since November, as Chinese and Indian production data and a $2 billion JPMorgan Chase & Co. trading loss spurred concern global growth will falter. The MSCI Emerging Markets Index (MXEF) lost 1 percent to 971.01 at the close in New York to push its weakly retreat to 4.1 percent, the most since the week ended Nov. 25. Energy, industrial and information technology companies led decliners for the five days as China Shipping Container Lines Co Ltd. (2866) plunged 20 percent. OAO MRSK Holding, the Russian state-run power distributor, slid for a sixth week. Brazil ’s Bovespa (IBOV) retreated 2.3 percent. Chinese industrial output increased 9.3 percent in April from a year earlier, lower than the 12.2 percent median estimate of 32 economists surveyed by Bloomberg. In India , production declined 3.5 percent from a year earlier, less than the 1.7 percent gain projected by analysts in a Bloomberg survey. The U.S. producer price index dropped 0.2 percent in April, the first decline in four months. JPMorgan said “egregious mistakes” and “sloppiness” caused losses for the firm. “It’s been a rough month and a half for emerging-market equities and a lot of that has to do with continued concerns out of Europe and slower-paced economic data out of the U.S. and the emerging-market world,” Tim Hall , who manages about $700 million at Deltec Asset Management, said by phone from New York. “Then you have the JPMorgan incident and that’s a wet rag on an already pessimistic market.” The ‘Worst Flows’ The developing-nations gauge declined for an eighth straight week to its longest weekly losing streak since 2008. The MSCI Emerging Markets Index has fallen 10 percent from this year’s March 2 high. The index trades at 10.2 times estimated earnings and has added 6 percent this year, compared with the 12.1 multiple for the MSCI World Index (MXWO) of advanced nations, which has added 5.1 percent in 2012. The IShares MSCI Emerging Markets Index exchange-traded fund, the most-traded ETF tracking developing-nation shares, fell 3.4 percent during the week to $39.97. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index (VXEEM) , a measure of options prices on the fund and expectations of price swings, gained 9.4 percent to 29.11. Emerging-market equity funds posted outflows of $1.1 billion in the week ended May 9 on renewed concerns about Europe and Chinese growth, Citigroup Inc. analysts led by Markus Rosgen wrote in a report today, citing data compiled by EPFR Global. The “worst flows” were from the Central and Eastern Europe, Middle East and Africa region, while Asia ex-Japan had outflows of $81 million. Brazil’s Bovespa Brazil’s Bovespa benchmark gauge fell for a third week. Cyrela Brazil Realty SA Empreendimentos e Participacoes retreated 5.3 percent and was among leading decliners for the week. MRSK Holding fell 9.2 percent in Moscow following an Interfax report that it may be transferred under the management of Federal Grid Co., which dropped 8.9 percent. Energy Ministry spokesman Dmitry Klokov did not immediately return calls seeking comment, while MRSK’s press service didn’t respond to an e- mailed request. Russia ’s Micex Index grew 0.4 percent, its first five-day gain in three weeks. OAO Novatek, Russia’s second-biggest natural-gas producer, reported first-quarter profit increased 13 percent as output and the price of the fuel rose. Shares of the company grew 4.9 percent in the past week, and was among leading stocks in the Micex Index. (INDEXCF) Asian Stocks The Hang Seng China Enterprises Index (HSCEI) , a gauge of Chinese companies traded in Hong Kong , plunged 6.8 percent, the biggest weekly loss since September. South Korea’s Kospi index and Taiwan’s Taiex Index both fell more than 3 percent during the week. Agora SA (AGO) , Poland’s largest publicly-traded publisher, reported a net loss in the first quarter. The company’s shares retreated 2.8 percent for the week. The WIG20 Index (WIG20) fell 1.4 percent to a second weekly decline. The FTSE/JSE Africa All Share Index fell 0.3 percent as Anglo American Plc (AGL) , a diversified mining company, fell 0.9 percent. BHP Billiton (BIL) , the world’s biggest resources company, dropped 0.3 percent. South Africa’s rand retreated 3.3 percent against the dollar. “Industrial production for emerging nations is declining faster than expected amid the slackening global demand environment,” Aneesh Srivastava, who oversees about $470 million as chief investment officer at IDBI Federal Life Insurance Co. in Mumbai, said by phone. The BSE India Sensitive Index (SENSEX) , or Sensex, declined 3.2 percent, the biggest weekly decline this year. Maruti Suzuki India (MSIL) , the country’s biggest carmaker, tumbled 3.6 percent. The extra yield investors demand to own emerging-market debt over U.S. Treasuries rose 15 basis points, or 0.15 percentage points, to 361, according to JPMorgan Chase & Co.’s EMBI Global Index. To contact the reporters on this story: Christine Harvey in New York at charvey32@bloomberg.net ; Chris Kay in Abuja at ckay5@bloomberg.net To contact the editors responsible for this story: Tal Barak Harif at tbarak@bloomberg.net ; Gavin Serkin at gserkin@bloomberg.net |
2024-10-02 | Bloomberg | Treasury Market Volatility Climbs on Shutdown, Debt-Limit Talks | Treasury market volatility increased the most in six weeks as a U.S. budget impasse forced a partial shutdown of federal services and the government approached its debt limit. Price swings as measured by the Merrill Lynch Option Volatility Estimate Index rose by 9 percent yesterday, the most since Aug. 16. The gauge advanced for a fifth day, the longest run of increases in about a month. The index level was at 87.37, versus the average of 69.07 for the past year. Treasury Secretary Jacob J. Lew said the U.S. has begun using the last measures available to avoid breaching the nation’s debt limit. “Things will remain volatile” as turbulence spreads from the government to the market, said Roger Bridges, who helps oversee the equivalent of about $21.6 billion as the head of fixed income in Sydney at Tyndall Investment Management Ltd., part of Nikko Asset Management Co. “If it’s in the halls of Congress, it’s going to be in the Treasury market.” Ten-year U.S. yields were little changed at 2.64 percent as of 6:55 a.m. in London , Bloomberg Bond Trader data show. The price of the 2.5 percent note due in August 2023 was 98 25/32. Japan ’s 10-year yield slid two basis points to 0.64 percent, the lowest level since May 10. A basis point is 0.01 percentage point. Treasury Performance Treasuries have fallen 2.5 percent this year, according to the Bloomberg World Bond Indexes, reflecting concern the Federal Reserve is planning to trim its $85 billion in monthly bond purchases as the U.S. economy improves. Japan’s debt returned 2.1 percent, the indexes show, after the central bank in April began its own debt-buying program to support the economy, snapping up more than 7 trillion yen ($71.6 billion) of bonds a month. Lew, in a letter to House Speaker John Boehner yesterday, repeated that the debt measures will be exhausted no later than Oct. 17 and urged Congress to extend the nation’s borrowing authority immediately. Once they run out, “we will be left to meet our country’s commitments at that time with only approximately $30 billion,” Lew said in the letter. “This amount would be far short of net expenditures on certain days, which can be as high as $60 billion.” The first U.S. government shutdown in 17 years has done little to dent confidence in markets on speculation the stoppage will end in time for lawmakers to tackle the nation’s debt limit. Stress Increases The Bloomberg U.S. Financial Conditions Index (BFCIUS) rose yesterday for the first time in seven days, increasing 13 percent to 1.325. The gauge measures stress in the markets by combining everything from money-market rates to yields on government and corporate bonds to volatility in equities. Treasuries fell yesterday, with the 10-year yield advancing four basis points, reflecting waning demand for haven assets. Rates on U.S. bills due Oct. 24 were as high as 0.1 percent yesterday, after touching negative 0.01 on Sept. 27. Two years ago, one-month yields climbed to a 29-month high of 0.18 percent as the Aug. 2, 2011, deadline set by Treasury to avoid a default approached. Three-month (USGG3M) rates rose to 0.02 percent yesterday. They touched negative 0.0101 percent on Sept. 27, the lowest level this year. The 2013 average is 0.048 percent. Trading volume at ICAP Plc, the largest inter-dealer broker of U.S. government debt , declined 1 percent to $326 billion yesterday. The average for the past year is $294 billion. ISM Report Treasuries also fell yesterday as the Institute for Supply Management ’s factory index of U.S. manufacturing unexpectedly climbed to the highest level since April 2011. U.S. payrolls probably increased by 180,000 in September, the most since April, after advancing by 169,000 in August, according to a Bloomberg survey of economists. The jobless rate held at 7.3 percent, a separate survey showed. The Labor Department won’t release the employment report as scheduled Oct. 4 if the government is closed, according to a government official who wasn’t authorized to discuss the process and requested anonymity. The Federal Open Market Committee on Sept. 18 left its monthly asset purchases unchanged at $85 billion and signaled that benchmark rates will remain low into 2016. The U.S. will buy as much as $4 billion of notes today. The U.S. shutdown is fueling speculation that the Fed will delay reducing its debt purchases if it hurts the economy. “Yields will go down a bit,” said Allen Lei, a trader of Treasuries in Taipei at Hontai Life Insurance Co., which oversees the equivalent of $6.2 billion. “The shutdown will have some negative impact on the economy.” Lei said he bought 30-year Treasuries yesterday at 3.72 percent. The yield was 3.71 percent today. To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net |
2024-09-27 | Bloomberg | BB&T to Buy Atlantic Risk to Add Insurance in Baltimore Area | BB&T Corp. (BBT) , the bank that owns the sixth-largest insurance broker in the U.S., agreed to buy Atlantic Risk Management Corp. to enter the Baltimore-area market. The transaction for Atlantic, which has 45 employees and handles deals for commercial property-casualty coverage and employee benefits, is expected to be completed in October, Winston-Salem, North Carolina-based BB&T said in a statement today. Terms weren’t disclosed. To contact the reporter on this story: Maryellen Tighe in New York at Mtighe6@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-08-17 | Bloomberg | Life Partners Falls After Attorney General’s Suit | Life Partners Holdings Inc. (LPHI) fell in New York trading after Texas Attorney General Greg Abbott sued the company for allegedly selling unregistered securities. Life Partners, which buys rights to life insurance death benefits and sells them to investors, plunged 6.7 percent to $2.22 at 9:59 a.m. in New York. The Waco, Texas-based company has dropped about 66 percent this year. A hearing was scheduled for today in state court in Austin after Abbott sought a court order barring Life Partners, Chief Executive Officer Brian D. Pardo and President R. Scott Peden from continuing to sell the allegedly fraudulent Securities. The attorney general is also seeking to appoint a receiver. “We deny the allegations in the strongest possible terms,” Pardo said in a statement issued by Life Partners Holdings late yesterday. He also said Texas courts and a federal appeals court had reviewed the companies’ life settlements and ruled they are not securities. To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-04-23 | Bloomberg | Ukraine Debt Costs Poised to Drop, Rival Greece, After Russia Gas Accord | Ukraine’s $40 billion budget-saving deal with Russia may push yields on the former Soviet state’s debt below 10 percent for the first time in more than two years, rivaling borrowing costs in Greece, economists at Nomura Holdings Inc. and Unicredit SpA said. Russia on April 21 agreed to charge Ukraine 30 percent less for its natural gas in an accord that will help reduce the bailout-reliant country’s public deficit to 6 percent this year from 8.8 percent in 2009. The deal, which cements Ukraine’s ties with its neighbor to the east, enables the Kiev-based government to resume its International Monetary Fund program and reassure investors its finances are intact. “Domestic yields should gradually fall to the low double digits and may even go into the high single digits now that the budget deficit will be much smaller,” Ivan Tchakarov, an economist at Nomura in London, said by telephone. Yields on two- year debt may be below 10 percent by August, according to Dmitry Gourov, an economist at Unicredit in Vienna. Ukraine’s efforts to resurrect the economy from last year’s 15 percent contraction are starting to pay off and debt markets are taking note. Credit default swaps on five-year debt have more than halved this year, while the yield on the country’s 2016 dollar bond shed about 5 percentage points in the period. The economy grew an annual 5 percent last quarter, the government estimates, helping the hryvnia gain 11 percent against the dollar since a low at the beginning of September. Sentiment Improving Investors demanded 14 percent to hold 20 million hryvnia ($2.53 million) in notes due 2012, at an April 21 auction. That compares with an average yield of 25.55 percent at a Jan. 20 auction for the same maturity debt. The yield on Greece’s two year debt soared to more than 10 percent yesterday after the European Union’s Luxembourg-based statistics office said its budget deficit may exceed 14 percent of gross domestic product. Credit default swaps on Ukraine’s five-year debt were yesterday overtaken by CDS on Greek debt, with the Greek five- year contract surging 151 basis points to a record 638.9, compared with 555 on Ukraine’s debt, according to CMA prices on Bloomberg. Russia’s support is “definitely constructive to Ukrainian assets, as risk sentiment continues to improve,” said Luis Costa, an emerging market strategist at Citigroup Inc., in a note to clients. Market Reassurance In exchange for Russia’s gas subsidies, Ukraine will let the Moscow-based government keep its Black Sea Fleet base 25 years longer than the existing contract allows. President Viktor Yanukovych said the total value of Russia’s support is $40 billion, with assistance amounting to $3 billion this year and $4 billion in 2011. The IMF on April 21 raised its estimate for Ukraine’s economic growth this year to 3.7 percent from 2.7 percent previously. That compares with 4 percent projected growth in Russia and a 2 percent contraction in Greece, the fund estimates. “Yields on domestic paper will moderate further and the mere existence of a deal with the IMF will give markets reassurance that the new government might be more willing to implement fiscal tightening,” said Tchakarov. “Good news.” The government of Prime Minister Mykola Azarov says it has obtained a new $12 billion loan with the IMF running 2 1/2 years. The program will replace the existing $16.4 billion agreement, of which $10.6 billion has been paid out. The IMF hasn’t confirmed the arrangement. Ukraine’s long-term domestic debt is rated B at Standard & Poor’s, five levels below investment grade. S&P rates Greece’s domestic debt BBB+, three grades above junk. For Related News and Information: Top Stories: TOP <GO> Stories about Ukrainian economy: TNI UKR ECO <GO> Industrial production: UAIPYY <Index> HP <GO> Emerging market view: EMMV <GO> Top Stories: TOP <GO> |
2024-04-23 | Bloomberg | Travelers Profit Falls on Catastrophe Costs | Travelers Cos., the property insurer added to the Dow Jones Industrial Average last year, said first-quarter profit dropped 2.3 percent as the cost of catastrophe claims increased more than fivefold. Net income fell to $647 million, or $1.25 a share, from $662 million, or $1.11, in the same period a year earlier, the New York-based insurer said today in a statement. Operating income, which excludes some investment results, was $1.22 a share, missing the $1.38 average estimate of 19 analysts surveyed by Bloomberg. Travelers, led by Chief Executive Officer Jay Fishman, 57, is competing for business with Chubb Corp. and American International Group Inc. as demand for commercial coverage drops and industry rates decline. At the same time, insurers face claims from first-quarter catastrophe damage including record rainfall in the U.S. Northeast. “Weather had a big impact on our results,” said Brian MacLean, chief operating officer, in a conference call today. Travelers faced “a very active catastrophe quarter.” The insurer slipped 41 cents to $53.38 at 4:15 p.m. in New York Stock Exchange composite trading. The company gained 33 percent in the past 12 months, compared with the 41 percent advance in the 30-company Dow benchmark. Travelers earned 3.6 cents per each premium dollar in the first three months of 2010, compared with 9.4 cents in the same period last year on the higher catastrophe costs. Premium revenue dropped about 1.3 percent to $5.2 billion from $5.3 billion. Catastrophe Costs Travelers had catastrophe costs of $471 million before taxes, compared with $83 million a year earlier. Storms broke rainfall marks in New York City, Boston and Providence, Rhode Island, last month. Hundreds of people fled their homes as rivers and drains backed up and President Barack Obama declared parts of Rhode Island and Massachusetts disaster areas. First-quarter catastrophe costs also included losses from a February earthquake in Chile. The 8.8 magnitude quake, along with the accompanying tsunami, killed at least 486 people, toppled bridges, downed power lines and smashed factories. The insurer’s book value, a measure of assets minus liabilities, rose 1.8 percent to $53.50 per share from $52.54 at the end of 2009. The company raised its dividend 9.1 percent to 36 cents from 33 cents. The dividend increase is the second in the past half year, after Fishman maintained a 30-cent payout for six straight quarters in the depths of the financial crisis. Private Equity Investment income advanced 29 percent to $610 million after taxes as Travelers’ non-fixed income holdings, primarily private equity, returned $44 million, the company said in a presentation on its Web site. Last year, the investment group that includes leveraged-buyout and hedge funds and real estate partnerships had a $113 million loss in the first quarter. The LBO market, where acquirers purchase companies using mostly debt financing, is recovering after collapsing in 2007 when underwriters got stuck with $200 billion of loans they couldn’t sell as credit markets froze. Travelers pulled $294 million from reserves before taxes, up from $258 million in the year-earlier period, as the insurer again lowered the amount it estimated it would need to pay claims from past quarters. That trend contrasts with AIG, which posted a fourth-quarter loss after having to boost reserves. Travelers repurchased 27 million shares in the first quarter for $1.4 billion. The insurer bought back $3.3 billion of shares in 2009 and said in January it expects to repurchase as much as $4 billion this year. ‘A Terrific Bite’ Travelers has increased prices for renewing commercial policies to protect revenue as businesses cut jobs and worksites, reducing the need for coverage. Industrywide, U.S. property and casualty insurance sales dropped the most in five decades last year, according to the Property Casualty Insurers Association of America. Policy sales fell 3.7 percent to $419 billion, a third straight annual decline. “The recession cut into many of the drivers of premium, things like retail sales, payrolls, the number of autos that get sold,” said Michael Murray, an assistant vice president for financial analysis at Verisk Analytics Inc. who collaborated on the study. “The recession took a terrific bite out of the demand for insurance.” The insurer said it raised renewal rates in its three business segments in the first quarter. Industry rates for U.S. commercial insurance fell 5.3 percent in the first quarter and have dropped each quarter since 2004, according to the Council of Insurance Agents and Brokers. To contact the reporter on this story: Jamie McGee in New York at jmcgee8@bloomberg.net. Enlarge image Jay Fishman, CEO of Travelers Cos Dawn Villella/Bloomberg A file photo shows then St. Paul Cos. Chairman, President & CEO Jay Fishman posing at company headquarters in St. Paul, MInnesota. A file photo shows then St. Paul Cos. Chairman, President & CEO Jay Fishman posing at company headquarters in St. Paul, MInnesota. Photographer: Dawn Villella/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-12-23 | Bloomberg | Santos Obtains $1.2 Billion in Debt Financing to Help Fund LNG Projects | Santos Ltd. (STO) , the Australian energy company building the $16 billion Gladstone liquefied natural gas project in Queensland state, obtained $1.2 billion in debt facilities backed by three government export credit agencies. The financing means Australia ’s third-biggest oil and gas producer has more than $7 billion of funding available, Andrew Seaton, Adelaide-based Santos’s chief financial officer, said today in a statement. Export credit agencies from Australia, Canada and Italy helped obtain the loans. Santos is among energy companies in Australia building or planning about A$200 billion ($203 billion) of LNG ventures to meet rising Asian demand for the fuel. Aside from Gladstone, Santos is also involved in the proposed Bonaparte LNG project off northern Australia with GDF Suez, and is a partner in the $15.7 billion Exxon Mobil Corp.-led LNG venture in Papua New Guinea. The new facilities include a $280 million loan from Australia & New Zealand Banking Group Ltd., HSBC Holdings Plc and Citigroup Inc., which was supported by Italian state-owned export-credit agency SACE SpA, according to the statement. The same banks also provided a facility of as much as $250 million backed by Australia’s Export Finance & Insurance Corp. ANZ, Bank of Tokyo-Mitsubishi UFJ Ltd., Commonwealth Bank of Australia , National Australia Bank Ltd. and Export Development Canada provided a $670 million facility, which matures in 2019, according to the statement. To contact the reporters on this story: James Paton in Sydney at jpaton4@bloomberg.net ; Sarah McDonald in Sydney at smcdonald23@bloomberg.net To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net |
2024-02-17 | Bloomberg | Canada December Employment Insurance Report (Text) | The following is the text of Canada's employment insurance report for Dec. released by Statistics Canada. In December, 659,700 people received regular Employment Insurance (EI) benefits, down 9,400 (-1.4%) from November and the third consecutive monthly decrease. The number of beneficiaries declined in every province and territory, except the Northwest Territories. Employment Insurance claims little changed To receive EI benefits, individuals must first submit a claim. In December, 249,000 initial and renewal claims were received, a modest increase of 970 (+0.4%) from the previous month. In Quebec, the number of claims increased by 3,500 (+4.9%) in December, offsetting much of the decline in November. In Ontario, the number of claims rose by 970 (+1.2%), the third consecutive monthly increase. In all other provinces, fewer people filed a claim in December or no change was noted. Decreases in claims were most pronounced in Saskatchewan (-8.1%) and New Brunswick (-5.6%). There has been little overall change in the number of claims since July 2010. Claims provide an indication of the number of people who could become beneficiaries. Beneficiaries down in all provinces The number of regular beneficiaries declined in every province in December. This was the third consecutive monthly decrease for 9 of the 10 provinces, Nova Scotia being the exception. The most notable declines in December were in Ontario, Quebec, British Columbia and Nova Scotia. In Ontario, the number of beneficiaries decreased by 3,600 (-1.7%) to 206,800. In Quebec, it fell by 2,100 (-1.1%) to 186,000, while in British Columbia, it declined by 1,500 (-1.8%) to 78,900. In Nova Scotia, the number of people receiving benefits decreased by 1,100 (-3.2%) to 33,200 in December, more than offsetting the increase in November. Sub-provincial and demographic overview Employment Insurance data by sub-provincial region, sex and age are not seasonally adjusted and are therefore compared on a year-over-year basis. Continued year-over-year declines in most large centres Between December 2009 and December 2010, the number of regular beneficiaries fell by 87,100 (-11.8%) at the national level, with declines in 117 of the 143 large centres (see map). The number of large centres reporting year-over-year declines has been relatively stable over the past nine months. Large centres are those with a population of 10,000 or more. In Newfoundland and Labrador, the number of beneficiaries declined in all five large centres. The fastest rate of decline occurred in Labrador City, which registered fewer beneficiaries in all 12 months of 2010 on a year-over-year basis. In St. John's, the number of beneficiaries fell by 730 to 4,600, the largest of nine consecutive months of year-over-year declines. In Quebec, the number of regular beneficiaries fell in 27 of the 33 large centres between December 2009 and December 2010. The fastest declines occurred in Lachute, Granby, Saint-Georges, Saguenay, La Tuque, and Sorel- Tracy. Montreal recorded 6,100 fewer beneficiaries, the 10th consecutive month of year-over-year declines. The number of beneficiaries was little changed in the census metropolitan area of Quebec. In Ontario, most large centres posted declines, most notably Greater Sudbury, Guelph, Belleville, Tillsonburg, and Kitchener-Cambridge-Waterloo. In Toronto, the number fell by 16,600 to 71,300, the 10th consecutive month of year-over-year declines. In Alberta , all 12 large centres had fewer beneficiaries in December compared with December 2009. The pace of decline was fastest in Brooks, Camrose, Red Deer, Grande Prairie, Medicine Hat and Calgary. The number of beneficiaries fell year-over-year for the ninth consecutive month in both Calgary and Edmonton. In Calgary, the number fell by 6,700 to 13,000, while in Edmonton , it declined by 3,500 to 13,900. In British Columbia, most large centres had fewer beneficiaries in December than a year earlier. The rate of decline was most pronounced in Fort St. John, Port Alberni, Campbell River and Prince George. In Vancouver , 32,400 people received regular benefits in December, down 3,700 from a year earlier. The number of beneficiaries fell by 600 to 3,900 in Victoria. Demographic groups Faster decline in the number of beneficiaries among men than women Between December 2009 and December 2010, the number of male EI regular beneficiaries fell by 14.9% to 398,800, the 10th consecutive month of year-over-year declines. The pace of decline was fastest among men under 25 years of age (-19.1%) and those aged 25 to 54 (-17.5%). The decline among men aged 55 and over was much slower (-2.7%). Over this year-long period, the number of female beneficiaries decreased by 6.5% to 250,100, the seventh consecutive month of year-over-year declines. The most prominent decline was among women under 25 years of age (- 15.6%), followed by an 8.5% decline for those aged 25 to 54. In contrast, there was a 5.4% increase among women aged 55 and over. Note to readers All data in this release are seasonally adjusted unless otherwise specified. Each month, Statistics Canada provides analysis of the current labour market situation, using Employment Insurance (EI) statistics and other sources. Earlier this month, the Labour Force Survey (LFS) provided a picture of overall labour market conditions, including unemployment, total employment and those affected by changes in the labour market. In this release, Statistics Canada provides additional sub-provincial detail through the EI statistics. Details by industry will follow with data from the Survey of Employment, Payrolls and Hours. EI statistics are produced from an administrative data source from Human Resources and Skills Development Canada. These statistics may, from time to time, be affected by changes to the Employment Insurance Act or administrative procedures. The number of regular beneficiaries and the number of claims received for November and December 2010 are preliminary. In this release, large centres correspond to those with a population of 10,000 or more. The number of beneficiaries is a measure of all persons who received EI benefits from December 5 to 11. This period coincides with the reference week of the LFS. EI statistics indicate the number of people who received EI benefits, and should not be confused with data coming from the LFS, which provides information on the total number of unemployed people. There are always a certain proportion of unemployed people who do not qualify for benefits. Some unemployed people have not contributed to the program because they have not worked in the past 12 months or their employment is not insured. Other unemployed people have contributed to the program but do not meet the eligibility criteria, such as workers who left their job voluntarily or those who did not accumulate enough hours of work to receive benefits. The change in the number of regular EI beneficiaries reflects various situations, including people becoming beneficiaries, people going back to work, and people exhausting their regular benefits. |
2024-07-28 | Bloomberg | Schaeffler to Start Continental Merger in 2011 With All Assets | Schaeffler Group, Continental AG ’s debt-laden majority shareholder, may begin a merger of the two companies at the end of next year that will keep all units intact, Chief Executive Officer Juergen Geissinger said. “We’ll be ready for it in late 2011,” Geissinger told reporters in Munich last night. “At this time there are no considerations that any of our divisions would not be part” of a joint company, he added. Schaeffler, based in Herzogenaurach, Germany, has about 12 billion euros ($15.6 billion) in debt from a hostile takeover in 2008 that left it with 75 percent of Continental’s shares. Schaeffler isn’t talking with any investors to take a stake in the company or buy Continental assets in exchange for debt relief, Geissinger said. That is “not a priority,” he said. Geissinger said he expects sales at the world’s second- largest roller-bearing maker to grow more than 10 percent this year to over 8 billion euros. The closely held company’s 2010 operating margin will probably be higher than 10 percent compared with 5 percent last year, he said. “Even when compared with Continental’s, those margins don’t look bad at all,” said Frank Schwope , an analyst at NordLB in Hanover who recommends buying Continental stock. Continental fell 66 cents, or 1.3 percent, to 48.65 euros at the close of trading at 5L30 p.m. in Frankfurt. The stock has gained 33 percent this year, valuing the company at 9.7 billion euros. Near Capacity Most of Schaeffler’s factories are running near capacity as demand for the company’s engine components, clutches and transmission systems is set to balloon 20 percent in Asia this year with growth in China reaching 40 percent, the CEO said. Asia accounts for 25 percent of revenue, he said. Schaeffler announced plans last week to invest 300 million euros in Asia over “the next few years” and build factories in China and India. There is “no rush” to repay bank credit after the company in August extended its loans by as much as six years, Geissinger said, adding the company’s proceeds will be used for investments. Continental’s debt of 8.2 billion euros stems from buying Siemens AG’s VDO automotive-electronics division in 2007. Schaeffler reorganized its structure on June 28, moving its auto and industrial-component operations, as well as its Continental stake and about 7 billion euros of its debt, into a new holding company. The new Schaeffler GmbH will be supervised by a 20-member supervisory board. Continental , Europe’s second-biggest car-parts supplier, is tightening cooperation with its biggest shareholder on product development. The Hanover, Germany-based company has developed gasoline-engine turbochargers which Schaeffler will begin manufacturing later next year. It’s “currently not necessary” for Schaeffler to sell Continental shares, Geissinger said. “No one has ever said we necessarily need 75 percent,” he added. To contact the reporters on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net ; Oliver Suess in Munich at osuess@bloomberg.net. Schaeffler Group chief executive officer Juergen Geissinger. Photographer: Charles Crowell/Bloomberg //<![CDATA[ $(document).ready(function () { $(".view_story #story_content .attachments img.small_img").each(function(){ var self = $(this); if (self.width() != 190){ self.width(190); } }); }); //]]> |
2024-08-28 | Bloomberg | Assurant Pushed by SEC on Disclosure of Force-Placed Risk | Assurant Inc. (AIZ) , facing reviews into whether it overcharges for insurance that some homeowners are compelled to buy, expanded disclosure about its profits after an inquiry from the U.S. Securities and Exchange Commission. Premium revenue from so-called force-placed coverage was $36 million in New York and $54 million in California in the first six months of this year, New York-based Assurant said in its second-quarter regulatory filing after the correspondence with the SEC. The coverage accounted for 89 percent of profit at Assurant’s specialty property unit this year through June 30, according to the filing. California, Florida and New York are pressing force-placed insurers to cut premiums amid inquiries into whether firms including Assurant and QBE Insurance Group Ltd. (QBE) charge too much. The National Association of Insurance Commissioners , an organization of state regulators, held a hearing on the coverage this month, and Assurant said other watchdogs may examine the business, also called lender-placed insurance. “The company has experienced an increase in the number of inquiries from departments of insurance and other regulators,” Assurant said in a letter to the SEC dated June 29 and released today. “If in the aggregate such reviews lead to significant decreases in premium rates for the company’s lender-placed insurance products, our results of operations could be materially adversely affected.” Assurant slipped 1.7 percent to $33.47 at 4:01 p.m. in New York, the biggest decline in the 24-company KBW Insurance Index. The insurer has dropped 18 percent this year. Mortgage Holders Force-placed coverage is typically selected by lenders and paid for by borrowers, and the business expanded as homeowners missed payments amid the financial crisis. It protects the mortgage holder from storm damage and vandalism when homeowners stop paying for their prior policies. Assurant and Sydney-based QBE control at least 90 percent of the U.S. market, Kevin McCarty, Florida’s insurance commissioner, said this month. The SEC asked Assurant Chief Executive Officer Robert Pollock, 57, in a June 15 letter for additional disclosure about revenue in New York and California. The commission said July 31 that it finished its review after responses from the company. The correspondence is typically made public after the completion of an evaluation. “Like all registered companies, our filings are subject to review by the SEC,” Robert Byrd , a spokesman for Assurant, said in an e-mail. “We will continue to work cooperatively with regulators at the national and state level.” To contact the reporter on this story: Zachary Tracer in New York at ztracer1@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-04-20 | Bloomberg | Stocks, Commodities, Euro Gain on Earnings, German Data | Stocks extended a weekly advance after earnings beat estimates at companies including General Electric Co. and Microsoft Corp. and German business confidence unexpectedly improved. Commodities gained and the euro strengthened while Treasuries were little changed. The Standard & Poor’s 500 Index climbed 0.1 percent at 4 p.m. in New York, paring a gain of as much as 0.8 percent as Bank of America Corp. slumped and Apple Inc.’s retreat since April 9 grew to 9.9 percent. The Dow Jones Industrial Average added 65.16 points. The Stoxx Europe 600 Index (SXXP) rose 0.5 percent and the euro appreciated 0.6 percent to $1.3212. Oil added 0.8 percent to $103.05 a barrel. Ten-year Treasury yields were little changed at 1.96 percent after gaining three basis points. Microsoft contributed the most to the S&P 500 ’s advance and GE was the fourth-biggest influence after they reported profit that exceeded the average analyst estimate. Germany ’s Ifo institute said its business climate index rose to 109.9, a nine- month high, adding to evidence Europe ’s largest economy can weather the debt crisis. Economists forecast a drop, a Bloomberg survey showed. “On the back of some weaker recent economic data, the earnings story continues to showcase that companies can wring out some profits here,” James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “Most companies now understand the environment, so they’ve acclimated to a fairly modest recovery, but a recovery nonetheless. They’ve figured out how to manage their businesses accordingly.” Market Leaders The S&P 500 posted a weekly gain of 0.6 percent after slumping two straight weeks. Health-care companies, consumer- staples stocks, utilities and telephone operators, among the industries considered least dependent on economic growth for earnings, led gains this week after reports on home sales and jobless claims tempered optimism in the economy. The index (SHCOMP) tumbled 4.3 percent from an almost four-year high on April 2 through April 10 amid concern Europe’s debt crisis was spreading and China ’s economic growth was slowing. It has rebounded 1.5 percent since then and is up almost 10 percent for the year. GE rose 1.2 percent after earnings were helped by profit growth in its energy infrastructure business. First-quarter adjusted profit of 34 cents per share was higher than the average 33 cents estimated in a Bloomberg survey. Schlumberger Ltd., the world’s largest oilfield-services provider, climbed 2.7 percent after profit rose 38 percent as the number of U.S. rigs drilling for oil reached a record. Microsoft surged 4.6 percent as better-than-estimated sales of Windows and Office software for businesses. Earnings Season Among other stocks rallying after reporting earnings, Hanesbrands Inc., Honeywell International Inc. and McDonald’s Corp. gained. SanDisk Corp. tumbled 11 percent after forecasting second-quarter sales that fell short of some analysts’ estimates. Tempur-Pedic International Inc. sank 21 percent after the maker of luxury mattresses reaffirmed its forecasts for earnings and sales in 2012, which fell short of analysts’ estimates. U.S. stocks pared gains in the afternoon as Apple and Bank of America led technology and financial shares lower. Apple lost 2.5 percent, falling for the eight time in nine days. Bank of America slumped 4.7 percent after Michael Mayo , an analyst at Credit Agricole Securities, advised selling the shares. A Stoxx 600 gauge of banks rallied 1.1 percent to help lead gains among the 19 industry groups. Societe Generale SA (GLE) gained 3.5 percent as Bank of America upgraded the shares. The Stoxx 600 rose 1.7 percent this week, following four consecutive weeks of losses. Euro, Pound The euro rose 0.5 percent against the yen, climbing for the fourth consecutive day. The pound appreciated 0.5 percent to $1.6131 after a report showed U.K. retail sales increased at the fastest pace for more than a year last month. The FTSE 100 Index added 0.5 percent. The S&P GSCI gauge of commodities gained 0.6 percent. Copper climbed 1.9 percent to $3.7065 a pound. Copper traders are bullish for the first time in six weeks on mounting confidence that demand will accelerate in line with economies at a time when mining companies are already failing to keep up with consumption. Eleven of 29 analysts surveyed by Bloomberg expect the metal to climb next week and 10 were neutral. The Shanghai Composite Index in China reached its highest level in more than a month amid speculation of a reserve ratio cut in the coming weeks. A cut in reserve-requirement ratios may be a first option as China eases monetary policy, the China Securities Journal reported today, without citing anyone. Investors expect easing even as limited loosening over the past four months indicates leaders want to maintain a clampdown on inflation and property prices. Emerging Markets The MSCI Emerging Markets index drifted between gains and losses, falling 0.1 percent at the end of the day. The Kospi (KOSPI) in South Korea dropped 1.3 percent and Taiex (TWSE) in Taiwan retreating 1.5 percent. Russia’s Micex added 0.6 percent, as Turkey ’s ISE National 100 Index climbed 0.5 percent. Europe’s governments were told the onus for fixing their debt woes lies with them as the Group of 20 warned the two-year crisis still threatens global growth. With finance chiefs from the G-20 meeting today in Washington , those from Canada and Australia joined the IMF and U.S. in pressing Europe to intensify efforts to quell the turmoil as it spreads to Spain. The G-20 cited “the situation in Europe” first in a list of drags on the world economy, according to a draft statement obtained by Bloomberg News. The yield on the 10-year Spanish bond was up four basis points at 5.96 percent after earlier rising to more than 6 percent for the third day this week, with the similar-maturity Italian yield climbing five basis points to 5.66 percent. Credit-default swaps on Spain touched a record and the cost of insuring French and Italian government debt climbed to the highest levels since January as countries struggle to tame their budget deficits. Swaps on Spanish debt jumped as much as 16 basis points to a record 514, before reversing gains and trading little changed at 501. To contact the reporters on this story: Daniel Tilles in London at dtilles@bloomberg.net ; Whitney Kisling in New York at wkisling@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net |
2024-12-28 | Bloomberg | Look Past Taxes to Fix Global Puzzle of Inequality: Clive Crook | Democrats in the U.S. have decided to make inequality a central issue in next year’s elections. I’d question whether that’s good politics. Even in hard times, American voters aren’t easily persuaded by appeals to class interests. Yet even setting electoral tactics aside, a focus on inequality seems unlikely to lead to better policy, especially if you look at how current U.S. policy choices stack up against those of other advanced industrialized economies. The reason is that inequality isn’t one issue but a writhing bundle of issues. Unpack it and you see there’s no easy remedy. It demands more thought and humility than most politicians can muster. For the American left, the question comes down to the incomes of “the 1 percent” and their taxes. Even if, like me, you think that a rapidly widening gap between rich and poor calls for a response and that progressive taxes are ethically correct, this obsession with the peak of the income pyramid is much too simple-minded. Growth in the highest U.S. incomes has been stunning, to be sure. A recent study by the Congressional Budget Office found that the after-tax incomes of the top 1 percent of U.S. households almost quadrupled in real terms between 1979 and 2007. The income of the median household -- again after taxes and transfers, and adjusted for inflation -- went up just 35 percent. On the same basis, incomes of the lowest 20 percent of households managed an increase of only 18 percent. The Inequality Mystery In less than three decades, the 1 percent’s share of after- tax U.S. incomes more than doubled, from 8 percent to 17 percent. The change is not unique to the U.S. -- inequality has increased almost everywhere -- but the surge in the very highest incomes is especially startling in America. Why is it happening? Nobody quite knows. The combination of global markets and new technology has increased the earning power of star athletes and entertainers. The pay of top executives has soared, too. That might be because the most successful companies have grown bigger and more difficult to run: With more at stake, companies are willing to pay more for top talent. Globalization increases the returns to innovation, and the U.S. is the world’s leading innovator. If top incomes were surging only for reasons like that, few would complain: Americans believe in pay for performance. Unfortunately, huge rewards for disastrous incompetence have also become common. Pay for no performance points to a failure of corporate governance. The finance industry, with its oversized paychecks, has expanded mightily -- not to the country’s obvious benefit, and partly thanks to hidden subsidy. The point is, some instances of very high pay are fair and efficient, and some aren’t. Do you raise taxes on all high incomes, regardless? If that’s all you do, you leave the underlying failures (of corporate governance, financial regulation and so on) unaddressed. Also, heavier taxes have practical limits. There’s collateral damage to incentives. The rich can afford to be clever about tax shelters, so higher rates raise less revenue than you think. Push tax rates too high and the super-rich can simply leave. Perhaps you think the U.S. taxes the rich so lightly these issues don’t apply. Think again. By international standards, the overall tax burden in the U.S. is low -- mainly because there’s no national sales tax -- but contrary to popular opinion the top marginal rates of income tax (adding in state income taxes, where applicable) are not much out of line. Tax the Middle If anything, rich Americans contribute a greater share of taxes than do their peers in other industrialized nations. The top 1 percent of U.S. taxpayers paid 40 percent of federal income taxes in 2007. The top 1 percent of British taxpayers paid 24 percent of the corresponding total. A new report by the Organization for Economic Cooperation and Development shows that in the middle of the last decade -- i.e., after the Bush tax cuts were introduced -- the U.S. income tax was about as strongly redistributive as income taxes in Canada , Denmark , Finland , the Netherlands and Sweden. You might have noticed that the CBO report on top incomes was widely quoted, but one finding got less attention: Between 1979 and 2007, “the federal individual income tax became slightly more progressive.” The awkward truth is that the U.S. income tax system is anomalous not because it taxes the rich lightly but because it taxes everybody else lightly. I grant you, because the rich in America have done so well, they can afford to pay more taxes regardless. Yet with notable exceptions (such as the carried interest loophole for some financial executives), it’s wrong to say that the U.S. tax system has been rigged in favor of the rich. Overall, despite the Bush tax cuts, the opposite is closer to the truth. The OECD’s international comparisons tell you some other interesting things. For instance, at the bottom of the income distribution , unlike at the top, U.S. policy is an outlier. In most industrial countries, social benefits such as unemployment insurance and other cash supports are easier to get and more generous than in the U.S. -- and typically two or three times more powerful in reducing inequality. This difference is at least as striking as divergent rates of growth in top incomes. Why does it command so much less attention? One reason is that American liberals find high incomes more upsetting than poverty. It’s an instance of how distorting the preoccupation with inequality can be. An enlightened liberal agenda should include higher taxes on the rich -- and higher taxes on the middle class as well. That agenda needs those revenue streams not to punish the 1 percent but to pay for low-wage subsidies, other supports for the working poor and a more effective safety net. It would prioritize K-12 education, vocational training and other main avenues of opportunity for the less well-off. It would attack rent-seeking, broken corporate governance and hidden subsidies to industries that don’t add value. These things would narrow the gap between rich and poor. Focus too narrowly on inequality, though, and you might forget the rest. If you do that, you will have forgotten why inequality matters. (Clive Crook is a Bloomberg View columnist. The opinions expressed here are his own.) To contact the writer of this article: Clive Crook at clive.crook@gmail.com. To contact the editor responsible for this article: James Gibney at jgibney5@bloomberg.net . |
2024-10-17 | Bloomberg | Samsung Life Shareholder Selling 4 Million Shares, Terms Show | Units of CJ Corp. (001040) are selling 4 million shares in Samsung Life Insurance Co. for as much as 349.2 billion won ($307 million), according to terms for the deal obtained by Bloomberg News. The shares are being offered at 85,500 won to 87,300 won apiece, the terms showed. That’s a discount of 3 percent to 5 percent to today’s closing price, according to the document. Nomura Holdings Inc. is arranging the sale. To contact the reporter on this story: Fox Hu in Hong Kong at fhu7@bloomberg.net To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net |
2024-03-21 | Bloomberg | Don't Make DeMarco a Scapegoat for the Housing Mess | Nine state attorneys general have just asked President Obama to fire Edward DeMarco , acting head of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. They say: "FHFA's refusal to adjust its policies to allow for principal forgiveness and forbearance stands as a major impediment to addressing the foreclosure crisis." This isn't a new accusation. Commentators such as Felix Salmon and Paul Krugman have been calling for DeMarco's removal for quite a while. Gretchen Morgenson has defended him: He's just doing his job, she says. DeMarco's position on principal reduction is mistaken, but he shouldn't be made a scapegoat for all that's gone wrong with the administration's policies on housing. Blame that larger failure on Treasury Secretary Tim Geithner and the president himself. DeMarco's critics are right that principal reductions for underwater borrowers -- those who owe more than the value of their house -- would help even now to revive the housing market by reducing defaults and relieving the downward pressure on house prices from foreclosures. They would have helped even more before 2009, when the downturn was at its most severe, as John Geanakoplos and Susan Koniak explained. Avoiding foreclosures is crucial. Nothing suppresses home values like squatters and drug dealers moving in next door as homes are abandoned. Foreclosures also increase the supply of houses for sale. Atif Mian, Amir Sufi, and Franceso Trebbi found they were responsible for 20 percent to 30 percent of the decline in house prices from 2007 and 2009. Foreclosures drive down prices, which puts more borrowers underwater, which increases foreclosures, which drives down prices, and so on. This vicious circle slowed the recovery after 2009 and is still doing so. The foreclosure rate has lately declined -- thanks partly to lawsuits over fraudulent documentation -- but new notices are still being sent out at a rate more than 125 percent higher than in 2005. House prices, the main component of middle class-wealth, are still nearly 30 percent below their peak in mid-2006. Housing construction has rebounded, but it's still slow by historical standards. There's still a role for principal reduction. DeMarco says he has to stay within the limits of his authority, and he's looking out for taxpayers. His agency's own analysis cast doubt on the second point, but DeMarco discounts that finding because of concern that other borrowers would be encouraged to default. Many other experts, including Sheila Bair, former chairman of the Federal Deposit Insurance Corp., understand moral hazard but believe principal write-downs are worth the risk. This focus on DeMarco, though, distracts attention from a bigger issue -- the government's failure to address problems created by the structure of the housing-finance market. There are two important questions: Why couldn't borrowers and lenders come to mutually beneficial deals to write down loans, and why were the government's efforts so unhelpful? In the days before widespread securitization, banks kept most mortgages on their balance sheets. This encouraged them to work with their borrowers to avoid default -- by lengthening the period of repayment, reducing the interest rate and lowering the amount of principal owed. What bank wants to get stuck with a house that must be rented out or sold at a steep discount? Securitization changed all that. Loans were divided into tranches, and the tranches were sold in bundles to multiple investors. Modifying loans became far more complicated, and different investors had widely varying interests in the outcome. Perversely, some even preferred foreclosures to principal modifications. Banks originating and then selling the mortgages typically held onto the second liens (such as home-equity loans). These loans would be entirely wiped out in any principal modification. Banks also own "servicers," companies that collect payments from borrowers and distribute them to investors. These are paid a fixed percentage of principal outstanding, so modifications cut their income. Also, servicers like foreclosures, as Neil Barofsky, the former Special Inspector General of TARP, explained in Bailout : Fannie Mae and Freddie Mac bought more than one-third of all the toxic "private-label" mortgage securities issued during the go-go years. This gave the government a chance to put a stop to "tranche warfare" by coordinating investors and encouraging deals that best served everyone's interests. The chance was missed, not because DeMarco stepped in but because nobody with sufficient authority thought the idea worth pursuing. The government could also have used TARP money to buy mortgages directly and modify them on its own terms. Several insider accounts say TARP got the approval of Democrats in Congress only because of promises that the money would be used for this purpose. Top Republican economists have advocated spending large sums on mortgage write-downs. So a bipartisan plan wasn't impossible. TARP had money left over after the capital injections and liquidity guarantees for the banks. The Obama administration did set up some loan-modification schemes, including the Home Affordable Modification Program and the Home Affordable Refinance Program. They were badly designed and didn't work. HAMP may even have caused more foreclosures than it prevented. In Bull by the Horns Bair is scathing: "HAMP was a program designed to look good in a press release, not to fix the housing market." (I wrote a longer summary of the problems with HAMP here .) DeMarco wasn't involved. I wonder if the attorneys general are attacking him to divert attention from their own failings. As Barofsky has explained , the widely trumpeted settlement they reached with the banks over fraudulent foreclosure practices was a very bad deal. (Matthew C. Klein is a contributor to the Ticker. Follow him on Twitter.) |
2024-04-16 | Bloomberg | Warehouses Win Investors as Unsung Internet-Trade Heroes | The growth of Internet shopping in Europe is luring investors such as Axa Real Estate and Blackstone Group LP (BX) to the cinder-block world of warehouses, where yields are beating showy storefronts and sleek offices amid a space shortage. “Net effective rents could grow by as much as 20 percent over the next four years,” Philip Dunne, president for Europe at San Francisco-based Prologis Inc (PLD) ., the world’s largest warehouse owner, said of the company’s portfolio in the region. “In wider Europe, with a population bigger than the U.S., we have four-and-a-half times less modern product. That gives you some sense of the scale and opportunity for growth.” Europe needs 25 million square meters (296 million square feet) of new distribution and storage warehouses in the next five years, about 11 percent of existing modern space, to keep up with Internet sales growth, Jones Lang LaSalle Inc. said last month. The assets generate annual income that’s 2 percentage points higher than offices and shops in Europe relative to their value and a lack of space will lift prices, said Remy Vertupier, manager of the Logistis fund run by AEW Europe, a unit of Paris- based Natixis (KN) Global Asset Management SA. Axa Real Estate, Europe’s largest property manager, plans to add logistics centers even as it sells some of its malls. The company estimates that 90 percent of retail growth in the U.K., France and Germany will come from online shopping in the next four years. The unit of Paris-based Axa SA, Europe’s second- largest insurer, managed 45 billion euros ($59 billion) of real estate at the end of 2012. Retail Shift “We will be reducing retail on a selective basis, keeping the core assets,” Axa Real Estate Chief Executive Officer Pierre Vaquier said in a March interview. “It’s due not only to the economic environment, but also to the structural change that is happening in retail” because of the Internet. Internet retail sales in Europe are expected to grow about 50 percent to 191 billion euros from this year through 2017, according to a report last month by Forrester Research Inc. Investment in European warehouses increased 13 percent last year to about 10 billion euros, BNP Paribas said in a report last month. Norges Bank Investment Management, the Norwegian company that runs the world’s largest sovereign wealth fund, bought 50 percent of a European warehouse portfolio from Prologis (PLD) last month for 1.2 billion euros. A joint venture formed to manage the 195 distribution and storage buildings said it may buy more portfolios or individual properties. Construction Slowdown Developers probably won’t relieve the space shortage anytime soon because rents are still too low to justify speculative construction and banks in Europe are holding back on lending for projects, Prologis’s Dunne said in an interview. A lack of construction in the U.S. has helped rents at “big box” assets of 250,000 square feet or more outperform the rest of the industrial market since the country’s recession ended in 2009, Chicago-based Jones Lang said. Rental returns from warehouses are beating other types of real estate and outpacing assets that typically attract pension funds and insurers. Annual rental income from U.K. logistics centers equaled about 6.8 percent of building values last year, according to Investment Property Databank. That compares with 5.8 percent for stores and 5.5 percent for offices. U.K. 10-year gilts have an annual return of about 2 percent. Total return for U.K. warehouses, a combination of changes in real estate values and rental income, was 0.6 percent last month compared with 0.4 percent for office buildings and 0.2 percent for stores, IPD said. Grosvenor’s Expansion Grosvenor Group Ltd., the London-based property company owned by the Duke of Westminster’s family trusts, wants to expand its warehouse portfolio and is seeking partners to help it develop and purchase the buildings, Chief Executive Officer Mark Preston said in an interview today. This type of property is attracting North American investors including Toronto-based Brookfield Asset Management Inc. (BAM/A) and Blackstone of New York. LogiCor, set up by funds managed by Blackstone, has spent about 1.5 billion euros acquiring 26 million square feet of warehouses in the U.K., France and Poland since starting up last year. “Our goal is to at least double” the size of its portfolio “over the next couple of years”, LogiCor President and Chief Executive OfficerMo Barzegar said in an interview. LogiCor can buy properties with cash and then secure bank financing later which gives it an advantage over competitors, he said. For properties worth more than 100 million euros “we are very, very competitive because of our ability to move quickly and close” deals quickly, he said. ‘Four Walls’ Warehouse tenants like Amazon.com Inc (AMZN) ., the world’s largest Internet retailer, typically want little more than “four walls and a roof with loads of doors and a deep truck court,” said Dunne of Prologis. That means building warehouses costs about an eighth as much as offices and a fifth of the price of shopping malls, according to data compiled by London-based real estate consultants Davis Langdon. “Amazon is the one everyone watches, but there are a number of other operators out there,” he said. “You’ve got companies like Zalando in Germany, Docdata (DOCD) , another e-commerce provider, and a number of grocery retailers operating e-commerce through their facilities.” Faster Deliveries Amazon.com wants to lease about 20 U.K. warehouses of 5,000 square meters to 10,000 square meters to allow same-day delivery, Jones Lang said in a March report. Goodman Group , the world’s second-biggest industrial property manager by market value, has developed more than 580,000 square meters of warehouse space for Amazon in Europe and plans to construct a further 225,000 square meters across two logistics centers for the Internet retailer, the company said in its annual report in September. Amazon didn’t respond to a request for a comment. Goodman has gained about 21 percent in the last six months compared with an 11 percent increase in Australia ’s S&P/ASX 50 Index. Prologis advanced 15 percent in New York trading in the same period, beating a 9.5 percent rise for the S&P 500 Index. Investors such as life insurers and pension funds are looking to buy infrastructure such as warehouses because the income generated by the properties fits well with obligations like paying out pensions, Prudential Plc Chief Executive Officer Tidjane Thiam said at the Economist Insurance Summit in February. More M&A? Growing online sales may lead to mergers and acquisitions in the warehousing industry, JPMorgan Chase & Co. said in a note to investors last month. Europe’s retail-focused real estate investment trusts should buy logistics property companies so they can offer tenants both stores and warehouse space to supply Internet sales , the analysts said. While rental income at logistics centers beats other types of properties, average selling prices haven’t kept up. Europe’s income-producing warehouses sold at yields of 7.5 percent at the end of 2012, up from 7.4 percent a year earlier, according to Jones Lang, indicating a decline in prices. Yields for office buildings fell to 5.2 percent from 5.3 percent and shops declined to 5 percent from 5.1 percent. Values were held back last year as the euro region’s economy shrunk by 0.5 percent and large transactions in Portugal, Spain and Italy became “almost non-existent,” BNP Paribas said in the report. A lack of development caused by the economic uncertainty over the past three years has led to a supply shortage of prime assets that allowed landlords to reduce incentives to tenants significantly, it said. LogiCor is looking at investing in Spain because “there’s practically no debt available”, Barzegar said, and “there might be some good opportunities in those markets to acquire assets at very attractive pricing.” German Targets Valad Europe Plc, owned by its management and funds operated by Blackstone, plans to buy German logistics buildings as the country’s economy continues to grow, Chief Executive Officer Martyn McCarthy said in a March interview. The company remains interested in U.K. assets even as the economy struggles, he said. Online purchases and demand for modern facilities supported the German market in 2012, when new rentals were second only to the record level reached a year earlier, BNP Paribas said. Frankfurt and Hamburg accounted for the biggest increase for warehouses larger than 5,000 square meters. LogiCor is also “keen to get a foothold” in Germany, Barzegar said. Brookfield Deal Brookfield is in talks to buy London-based industrial developer Gazeley Ltd. from closely held Economic Zones Worldwide FZE, and may reach an agreement as early as May, according to a person with knowledge of the talks who declined to be identified because the discussions are private. A deal would give Brookfield an entry into the European warehouses market, where Gazeley owns properties and development sites, mostly in the U.K. and France. Segro Plc (SGRO) , the U.K.’s largest publicly traded owner of industrial properties, plans to sell an office park in England for more than 200 million pounds ($306 million) according to two people with knowledge of the talks. It will use the proceeds to buy logistics properties around major ports and airports in Europe, one of the people said. AEW Europe is seeking to double its logistics assets to two billion euros and may achieve that by the end of 2017, Chief Investment Officer Rob Wilkinson said in an interview. The company’s Logistis fund has 1 billion euros in assets. “There is a core group of players that occupy much of the space,” he said. “But to work with them you need a certain scale and critical mass.” Across Europe, rents are 10 percent to 15 percent lower than they need to be to justify speculative development, Dunne said. Some markets have virtually no modern buildings and that’s a critical component for rental growth, he said. Those areas include the West Midlands and London in the U.K., German cities like Frankfurt, Munich and its Rhine-Ruhr region. “It’s not going to be a gold rush. It will be very selective,” Dunne said. “It means the market isn’t going to be flooded with product, it’s going to be controlled.” To contact the reporters on this story: Neil Callanan in London at ncallanan@bloomberg.net ; Patrick Gower in London at pgower@bloomberg.net To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net |
2024-10-01 | Bloomberg | Lawsky Says ‘So Be It’ If Transparency Harms Bitcoin | New York ’s top banking overseer said any regulation of the nascent Bitcoin industry has to include transparency on who does the trading of the virtual currency, and if that hurts a business dominated by anonymous transactions, “so be it.” Benjamin Lawsky , superintendent of New York’s Department of Financial Services, said he doesn’t have an opinion about the viability of Bitcoin as a digital currency. In an interview with Bloomberg editors and reporters, he said his primary concern involved adding anti-money-laundering safeguards. Lawsky said his goal in sending out subpoenas to almost two dozen digital currency companies this summer was not to “squelch out” the fledgling industry; it was to make sure the proper know-your-customer guidelines were in place. “Virtual currencies may ultimately turn out to be a very big thing that people want to use,” Lawsky said in an interview with Bloomberg TV. “Right now, it feels as if the major advantage they’re providing is anonymity. We’ve learned over the years that if you see huge international transactions over the Internet, anonymous, it can often become a haven for money launderers, terrorists.” The Rise of Bitcoin In starting his investigation into the payment practices of the virtual currency industry, Lawsky inserted himself into a discussion among national regulators about appropriate disclosure practices for Bitcoin and similar digital products. In August, members of the Bitcoin Foundation, a trade group, met with members of the U.S. Treasury Department’s Financial Crimes Enforcement Network and other regulatory officials to discuss the digital currency. Terrorists, Narco-Traffickers If people are using Bitcoin for legitimate financial transactions, transparency rules won’t harm the industry, Lawsky said in the Bloomberg meeting. Lawsky, 43, sent subpoenas to startup companies in the virtual currency industry in August, asking for specific information about how the industry could monitor the transactions taking place. “We as regulators need to have protections in place,” Lawsky said. “We need to make sure records are being created. If you don’t, it becomes a real haven for these anonymous transactions, where you have terrorists, narco-traffickers engaging in actions that prosecutors someday could never find out about.” In the two years since he became superintendent of New York’s Department of Financial Services, formed when Governor Andrew Cuomo combined the departments of banking and insurance, Lawsky is best known for threatening to pull the banking license of Standard Chartered Plc (STAN) for violating statutes related to dollar-clearing transactions for Iranian clients. Now, with his investigation into money transmission practices in the realm of digital currency, Lawsky is once again using his New York platform to play a role in shaping national policy. To contact the reporters on this story: Greg Farrell in New York at gregfarrell@bloomberg.net ; Erik Larson in New York at elarson4@bloomberg.net To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net |
2024-06-28 | Bloomberg | European Stocks Fall as EU Leaders Hold Summit | European stocks retreated after Spain’s bond yields surged and Germany ’s unemployment rate rose more than forecast as a two-day summit of the region’s leaders started in Brussels. Barclays Plc (BARC) plunged 16 percent after fines for falsifying London interbank-offered rate submissions sparked speculation lawsuits will follow. Commerzbank AG (CBK) sank 7.2 percent as the lender issued new shares. The Stoxx Europe 600 Index slid 0.5 percent to 244.67 at the close in London, after earlier dropping as much as 1.3 percent. The benchmark measure has fallen 10 percent from its high in March , paring its gain for the year to 0.1 percent , as the euro area’s sovereign-debt crisis threatened a slowdown in global growth. The volume of shares traded on the gauge was 9.1 percent higher than the average of the last 30 days, according to data compiled by Bloomberg. “We expect these discussions to draw a road map for fiscal, financial and political union, but we do not anticipate any major decisions on concrete short-term measures to reduce market stress beyond what has already been agreed,” wrote Guillermo Felices and Sara Yates, strategists at Barclays in London , in a report to clients. “We are not alone in having limited expectations.” Stocks retreated as Spanish bonds declined for the fourth day, sending the yield on benchmark 10-year securities to more than 7 percent earlier today, for the first time since June 20. German Unemployment German unemployment climbed in June for the fourth month this year. The number of people out of work in Germany rose a seasonally adjusted 7,000 to 2.88 million, the Federal Labor Agency said. Economists had predicted an increase of 3,000, according to the median of 30 estimates in a Bloomberg survey. European Council President Herman Van Rompuy , European Central Bank President Mario Draghi and European Commission President Jose Barroso have prepared a 10-year road map for the euro area, which they will discuss at today’s summit. The blueprint includes common banking supervision, deposit insurance and a “criteria-based and phased” move toward joint debt issuance. The document also suggests that the EU impose upper limits on annual budgets and debt levels for the 17 nations that use the euro. National benchmark indexes declined in 9 of the 18 western- European markets. The U.K.’s FTSE 100 Index lost 0.6 percent, France ’s CAC 40 Index slid 0.4 percent and Germany’s DAX Index retreated 1.3 percent. Barclays Slumps Barclays plunged 16 percent to 165.6 pence, its biggest decline since March 2009, as a gauge of European lenders posted the biggest drop on the Stoxx 600 (SXXP) , losing 2.4 percent. Chief Executive Officer Bob Diamond came under pressure to resign after the second-largest bank by assets was fined $451 million for attempting to manipulate the inter-bank lending rate, know as Libor. “We expect that the cost of lawsuits related to Libor manipulation will dwarf the fines imposed on Barclays,” said Sandy Chen, a banks analyst at Cenkos Securities Plc in London. “Since RBS, HSBC and LLoyds have also been named in lawsuits, we expect they will also face significant fines and damages.” Royal Bank of Scotland Group Plc (RBS) declined 11 percent to 206.4 pence, HSBC Holdings Plc (HSBA) slid 2.6 percent to 558.2 pence and Lloyds Banking Group Plc (LLOY) sank 3.9 percent to 29.94 pence. Spanish Banks Spanish and Italian lenders also retreated as Spanish bond yields climbed and Italy paid the most to sell 10-year debt since December at a bond auction. Italy sold 5.42 billion euros ($6.7 billion) of five- and 10-year bonds, near the maximum 5.5 billion-euro target for the sale. The Treasury priced the 10-year debt to yield 6.19 percent, up from 6.03 percent at the previous auction on May 30. Bankia decreased 3.9 percent to 90 euro cents and Banco Popular slid 2.6 percent to 1.69 euros in Madrid. Banca Monte dei Paschi di Siena SpA (BMPS) fell 3.5 percent to 18.5 euro cents and Banca Popolare di Sondrio Scarl (BPSO) lost 1.6 percent to 4.65 euros. In Germany, Commerzbank dropped 7.2 percent to 1.26 euros after the nation’s second-largest lender issued about 176.5 million euros in new shares to satisfy bonuses awarded last year. The capital increase also strengthens the bank’s core Tier I capital by 213.8 million euros as the Basel 3 regulatory requirements come into force globally. Ladbrokes, Vivendi Ladbrokes Plc (LAD) tumbled 12 percent to 152.7 pence, its biggest slide since October 2008, after the gambling company said a decline in online profit will be worse than predicted because of poor gambling margins and delays to technology upgrades. Ladbrokes said digital profit in the first half will drop to half the amount it generated a year earlier. Vivendi jumped 5.5 percent to 14.20 euros after people familiar with the matter said Chief Executive Officer Jean- Bernard Levy intends to step down. Levy, 57, plans to depart after seven years at the helm of the Paris-based telecommunications and media company, said the people, who asked not to be identified before an announcement. Ageas (AGS) jumped 9 percent to 1.47 euros after the insurer formerly known as Fortis said it will receive a one-off payment of 400 million euros from ABN Amro Group NV in a settlement of legal proceedings concerning mandatory convertible securities. To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net |
2024-12-10 | Bloomberg | Beating 26% Joblessness Spurs IDC Bond Sale: South Africa Credit | The Industrial Development Corp., a state-owned South African lender, plans to sell bonds to private investors for the first time in 30 years, raising as much as 12 billion rand ($1.38 billion) for projects to cut unemployment. The company has raised 3 billion rand in funding by issuing five-year notes directly to the government’s Unemployment Insurance Fund that pays annual interest of 5 percent. That compares with a yield on the government’s 8.25 percent securities due September 2017 of 5.91 percent. President Jacob Zuma has made his top priority reducing a 25.5 percent unemployment rate, the highest of 61 countries monitored by Bloomberg. The IDC, as it’s known, is loosening its purse strings to boost investments in projects with the greatest potential to create jobs by building up a 100 billion-rand lending pool over the next five years, according to Finance Director Gert Gouws. That will raise its level of debt to about 40 percent of equity through 2017 from 15 percent. “The IDC has not been fulfilling its developmental mandate because it has been too conservative and averse to lend,” Jason Lightfoot, who helps manage the equivalent of $12.6 billion of fixed-income funds at Cape Town-based Futuregrowth Asset Management, said by phone Dec. 7. The decision to boost funding is long overdue and should be accelerated to a debt-to-equity ratio of 60 percent, he said. Project Opportunities The IDC may raise between 10 billion rand and 12 billion rand through bond sales to private investors within five years, with the first issuance planned in the fourth quarter of next year, Gouws said in an e-mailed response to questions Dec. 4. “The IDC is proactively identifying and funding new project opportunities,” he said. “The IDC’s funding requirements will continue to dictate the pace of our borrowings.” The company provided a record 13.5 billion rand in financing to 293 projects in the year through March 2012, a 55 percent increase on the previous financial year. It estimates the investments helped create or sustain about 45,900 local jobs. The lender hasn’t previously needed to raise much debt because it generated sufficient cash and profit to fund most of its lending. The company helps entrepreneurs who cannot access bank finance because they lack adequate security and provides funding for projects that meet government’s development goals. Private Placements The IDC agreed to sell 5 billion rand of 14-year bonds to fund renewable-energy projects to the state-owned Public Investment Corp., or PIC, with the first 500 million rand allocated on Nov. 7. The funds, which will be drawn down as needed over 24 months, will help the IDC finance 7.6 billion rand of renewable energy projects. The Pretoria-based PIC oversees pension funds of government employees with about 1.3 trillion rand in assets. The IDC may make further private-bond placements with the PIC, while accessing another 1 billion rand from the Unemployment Insurance Fund in 2013, Gouws said. It also plans to secure more funding from banks and development finance institutions, such as the European Investment Bank , African Development Bank and China Development Bank. Yields on the government’s five-year notes have dropped this year by 148 basis points, or 1.48 percentage points, to 5.91 percent as of 10:50 a.m. in Johannesburg. The premium investors demand to hold the debt rather than similar-maturity U.S. Treasuries narrowed four basis points to 531 from 651 at the beginning of the year. ‘Market Funding’ Total debt will probably climb to more than 30 billion rand by 2017 from 13 billion rand, Gouws said. About 5 billion rand worth of debt will be raised next year over and above funds obtained from the PIC and UIF, he said. “The market would love to have the opportunity to have a look at the IDC and potentially invest in their bonds,” Simon Howie, who heads South African and frontier-market credit at Investec Asset Management, which manages the equivalent of $89 billion, said by phone from Cape Town on Dec. 7. “It was disappointing for everyone to see a bond arranged for the IDC and placed entirely with the PIC. It should be accessing market funding.” To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net |
2024-04-26 | Bloomberg | Biggest Banks Beating Estimates Can’t Hide 13% Drop in Revenue | The biggest percentage drop in quarterly revenue in three years, driven by lower lending and reduced fees, is damping investor appetite for shares of the six largest U.S. banks. Net revenue at the six lenders -- Bank of America Corp. (BAC) , JPMorgan Chase & Co. (JPM) , Citigroup Inc. (C) , Wells Fargo & Co. (WFC) , Goldman Sachs Group Inc. (GS) and Morgan Stanley -- fell 13.3 percent in the first quarter from a year earlier, according to data compiled by Bloomberg. Pretax pre-provision profits, which exclude taxes, loan-loss provisions and one-time items and are considered a better gauge of profitability than earnings, slid 40.2 percent. While five of the banks beat analysts’ estimates, and JPMorgan and Wells Fargo reported record quarterly earnings, anemic revenue and a steady drop in pre-provision profits have kept investors at bay. Since JPMorgan reported earnings on April 13 with a 67 percent rise in net income to $5.6 billion, the KBW Bank Index (BKX) of the 24 largest U.S. banks has fallen 3.5 percent as the Standard & Poor’s 500 Index climbed 1.6 percent. “You’re seeing people backing off of exposure to this space because of the lack of loan growth and poor revenue growth,” said Paul Miller , a former examiner for the Federal Reserve Bank of Philadelphia and an analyst for FBR Capital Markets in Arlington, Virginia. “It’s not a sell-off -- it’s more of a slow drift down. These stocks are going to trade very weak” until their loan books and revenue start to grow. ‘Why Bother?’ With unemployment stuck above 8 percent, housing prices falling again and restrictions on how much they can charge for services, U.S. lenders are underperforming the broader market. That’s true even as more than 80 percent of the first 28 institutions to report quarterly earnings met or beat analysts’ estimates, Melissa Roberts and Elissa Niemiera, analysts at KBW Inc., wrote in an April 20 research note titled “Taking Some Heat Even If You Beat.” Average loans among the largest banks fell 6 percent in the first quarter from last year, according to the KBW analysts. “Loans still make up half of bank revenues and loan growth is negative,” Brian Foran and Glenn Schorr , analysts at Nomura Holdings Inc. in New York, wrote in an April 14 note. “We have spent the last few weeks on the road visiting investors. The overwhelming feedback on banks has been ‘Why bother?’” JPMorgan, Wells At JPMorgan, almost half of the New York-based bank’s earnings came from the release of reserves previously set aside to cover bad loans. Net revenue at the second-largest U.S. bank dropped 8.9 percent to $25.2 billion. Pre-provision profit fell 30.5 percent to $9.6 billion, the biggest drop since JPMorgan acquired Bank One Corp. in 2004. Shares have fallen 4.4 percent since the bank reported earnings. Wells Fargo shares have slipped 5 percent since the San Francisco-based lender reported a 48 percent gain in first- quarter net income on April 20 to a record $3.8 billion. Net revenue at the fourth-largest U.S. bank by assets fell 5.2 percent, average outstanding loans declined by more than 5 percent and pretax pre-provision income slid 23.4 percent. At least $1 billion of Well Fargo’s record earnings came from releasing reserves that had been set aside for bad loans. “A lot of the earnings growth was driven by continued reduction in loan-loss provisions, which the market has largely discounted,” said Jason Goldberg , a senior bank analyst at Barclays Capital in New York. “Investors’ attention has shifted to overall revenue or pretax pre-provision net revenue.” ‘Lack of Visibility’ Bank of America, the largest U.S. bank by assets and the only one of the six to miss analysts’ estimates, declined 5.3 percent after recording its first profit in three quarters on April 15. Net revenue at the Charlotte , North Carolina-based lender fell 17.2 percent from a year ago to $26.97 billion and pretax pre-provision earnings fell 55.1 percent to $6.9 billion, the biggest drop among the top six banks. While New York-based Citigroup’s $3 billion profit beat analysts’ per-share estimates by 1 cent, net revenue fell 22.4 percent to $19.7 billion and pre-provision earnings plunged 47.9 percent to $7.1 billion. Shares are up 2.3 percent since the bank, the third-largest by assets, reported on April 18. Goldman Sachs, which beat analysts’ estimates by 75 cents a share, also failed to generate investor enthusiasm. Shares are down 1 percent since the New York-based bank, the fifth-largest by assets, posted a 21 percent drop in first-quarter profit to $2.7 billion on April 19. “Investor sentiment around the brokers centers almost entirely around the lack of visibility into the profit model going forward,” Barclays Capital analysts led by Roger Freeman told investors in an April 20 note. Falling Fees Morgan Stanley (MS) , operator of the world’s largest brokerage, is down 1 percent since the New York-based bank reported April 21 that first-quarter earnings fell 45 percent to $968 million. Revenue dropped 16 percent to $7.6 billion from $9.1 billion a year earlier. Fee income on deposit accounts, asset management and securitization at federally insured banks has been falling, according to data from the Federal Deposit Insurance Corp. Deposit-account fee income across the industry fell by 20.7 percent in the fourth quarter from a year ago, the FDIC said in its most recent quarterly banking report. Banks are also losing fee revenue from new federal rules that limit the types and amounts of fees they can charge consumers, analysts said. Lower Lending Lending has remained stagnant or is still contracting at most U.S. banks, according to the FDIC. Real estate loan balances at all FDIC-insured institutions, which represent more than half of outstanding bank credit, fell 4.4 percent in the fourth quarter to $4.27 trillion from $4.46 trillion last year, the FDIC said. New loans are earning significantly less yield, also cutting into revenue. “You just have a persistent low-interest-rate environment, so as assets roll off, you’re putting new assets back on at a lower rate,” said Barclays’s Goldberg. The impact can be seen on the combined pretax pre-provision profit of the six biggest lenders, which has fallen in each of the last four quarters compared with the same period a year earlier, according to Bloomberg data. The drop in the first three months of this year was the largest since the first quarter of 2008. Bloomberg figures exclude litigation and other non-operating expenses and income and may differ from those reported by the banks. While banks have said credit-card lending will start to grow, investors have a hard time believing them, Foran and Schorr, the Nomura analysts, wrote. “There are some real positives that are more than cosmetic |
2024-08-20 | Bloomberg | Crop Outlook Dimming as July Heat Compounded Drought Damage | U.S. corn farmers hurt by the worst drought in a generation probably will harvest smaller crops than the government forecast this month, based an analysis of dry spells in the past 42 years. In the five drought years since 1970, farmers on average harvested 85.4 percent of the acres planted, U.S. Department of Agriculture data show. That’s below the 90.6 percent that the USDA predicted for this year on Aug. 10, when the agency cut its output forecast by 17 percent following the hottest July since 1936. The annual Professional Farmers of America survey of more than 2,000 fields in seven Midwest states starts today. Moderate to exceptional drought conditions covered 51 percent of the nine-state Midwest region as of Aug. 14, compared with less than 1 percent a year earlier, government data show. Corn and soybean crop conditions are the worst since the last drought in 1988, according to the USDA. Corn futures have surged 60 percent since mid-July, boosting the cost of making livestock feed, ethanol and food products. “In a year like this, the only yield surprises are to the downside,” said Michael Cordonnier, the president of Soybean & Corn Advisor Inc. in Hinsdale, Illinois , who sampled crops in eight states from Nebraska to Ohio during the week ended Aug. 3. “The number of acres harvested this year will fall.” The USDA, which in July predicted a record corn crop after farmers planted the most acres since 1937, cut its forecast to 10.779 billion bushels, down 13 percent from 12.358 billion last year. The soybean forecast was reduced 12 percent to 2.692 billion bushels, down from 3.141 billion in 2011. Further Cuts U.S. corn harvests were below normal during the drought years of 1974, 1976, 1980, 1983 and 1988, USDA data show. On average, farmers have collected 89.2 percent of the planted acres since 1970. Cordonnier said the USDA will have to cut its corn estimate by an additional 5.3 percent and soybeans by 2.3 percent. Output from the U.S., the world’s largest grower and exporter of both crops in 2011, will drop for a third straight year. The USDA will next update its forecasts on Sept. 12. “It’s a catastrophe,” said John Cory , the chief executive officer of Rochester, Indiana-based grain processor Prairie Mills Products LLC. Cory, who predicted in July that corn output would fall below 11 billion bushels, now expects a harvest as low as 9.5 billion bushels. He said the soy harvest may fall below 2.5 billion. Yield Damage After the worst U.S. drought since 1956, corn plants that farmers will begin harvesting next month are maturing three times faster than the five-year average, and the rate of pod development by soybeans is 19 percent above normal, USDA data show. Rapid development cuts yield potential and reduces the benefits of rains the past two weeks, Cory said. The 20th annual Pro Farmer tour will include about 120 grain buyers, analysts, traders and farmers as crop scouts to survey fields in Ohio, Indiana , Illinois, Iowa , Nebraska, South Dakota and Minnesota. Corn-yield estimates and soybean-pod counts will be reported daily and then incorporated into a national crop forecast by Pro Farmer on Aug. 24. “The heat was the big problem this year for corn pollination,” when kernels were forming on cobs in July, said Kevin Rempp, 54, who farms about 1,200 acres of corn and soybeans with his father near Monetzuma, Iowa. Rempp predicted corn yields in Iowa, the biggest U.S. producer, will drop 30 percent from last year and soybeans will be 10 percent to 20 percent lower. “I have farmed for more than 35 years, and this crop is the hardest to predict because yields are extremely variable across each field.” Prices Rally Corn futures for December delivery rose 0.5 percent to $8.1125 a bushel at 8:12 a.m. on the Chicago Board of Trade. The price reached an all-time high of $8.49 on Aug. 10. Soybean futures for November delivery advanced 0.7 percent to $16.57 a bushel on the CBOT. The most-active contract reached a record $16.915 on July 23. Drought has affected 87 percent of U.S. corn, 85 percent of soybeans, 63 percent of hay and 72 percent of cattle, the National Climatic Data Center said on Aug. 16. Rain Relief Increased rain from South Dakota to Ohio and cooler weather than the record-setting heat of July will reduce the chances for additional cuts in the government’s corn forecast and may mean a boost for soybeans, said Dale Durchholz , the senior analyst for AgriVisor LLC in Bloomington, Illinois. The government’s crop forecasts this month reflected the biggest August reductions since at least 1974. In 1988, the final corn forecast increased 9.1 percent from the August estimate and soybeans gained 4.8 percent rains helped to boost yields, Durchholz said. The wetter August weather pattern may be tied to rising eastern equatorial Pacific Ocean waters and the emergence of an El Nino weather condition, Gail Martell, the president of Martell Crop Projections in Whitefish Bay, Wisconsin , said in a report Aug. 16. “The rains have at least stabilized the corn crop, and soybeans may add a few bushels,” Durchholz said. “The big USDA cuts probably account for most of the drought losses.” Misleading Appearance Thriving, green soybean plants next to fields of brown and dead corn may be a sign that yield potential is lower than expected, Bill Wiebold, a soybean agronomist at the University of Missouri in Columbia, said in a report on Aug. 8. Visually healthy fields may be the result of high nitrogen levels in leaves because there are fewer pods to fill with soybeans, Wiebold said in the report. The plant requires a steady flow of water moving up roots to the pods to produce beans. The prolonged drought may have caused soybean blossoms to abort and no pods for the seeds to develop. “When there is no water, the system stops working,” Wiebold said. “That has happened in many soybean fields. We just have not experienced anything quite like this before.” Donna Jeschke, 59, who farms about 3,600 acres with her husband, brother and nephew about 80 miles southeast of Chicago near Mazon, Illinois, said she expects the farm’s corn yields will be 50 percent below the five-year average of 190 bushels an acre, while soybean yields may fall 15 percent. Damaged crops may not mean losses for growers as government-subsidized crop insurance and higher prices helps to partially preserve farm income, the Federal Reserve Bank of Chicago said in a report Aug. 16. “Crop insurance will allow farmers to pay their bills and buy inputs to plant crops the next year,” Jeschke said. “Farmers have to be optimists and look ahead to better weather next year.” To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net |
2024-08-02 | Bloomberg | BofA Claim Surge Said to Include Non-Countrywide Loans | Bank of America Corp. ’s surging claims for refunds on faulty mortgages in the second quarter stemmed partly from loans made by the bank and its Merrill Lynch unit, in addition to the company’s Countrywide subsidiary, said two people with direct knowledge of the matter. The backlog of new claims from private investors probably will increase in the months ahead, according to the people, who asked for anonymity because mortgage disputes are private. The firm regards grounds for the demands as weaker than those triggered by Countrywide loans, the people said. Bank of America said last month that total demands for buybacks from mortgage-bond investors and insurers surged more than 40 percent in three months to $22.7 billion. The Charlotte , North Carolina-based company, ranked second by assets among U.S. lenders, has already committed more than $40 billion to resolve disputes on faulty loans and foreclosures, and shareholders are pressing the bank to stem the bleeding. “Whether it’s private investors or the government, folks are going to scour every delinquent loan to try and find defects,” said Jefferson Harralson , an analyst at KBW Inc. with a market perform rating on the lender. “Countrywide loans were dealt with first, but the non-Countrywide loans still have a significant chance of being put back to them.” Progress has been made in talks to break an impasse over refunds with Fannie Mae (FNMA) , which accounted for the bulk of previous claims, the people said. A settlement isn’t close and may not happen, and the company is comfortable with its reserve levels, they said. The lender has climbed 29 percent this year in New York trading, compared with a 58 percent decline in 2011. Wider Scope Of about $11 billion in requests from government-sponsored enterprises as of June 30, $10.1 billion were from Fannie, said a person with direct knowledge of the figures. About 70 percent of claims from the Washington-based mortgage firm were for loans in which borrowers made at least two years of payments, indicating the bank probably isn’t at fault, the person said. The newest claims from private investors expand the focus to loans made by the main bank division and Merrill Lynch, which have attracted relatively little attention in past cases. Most repurchase demands are attributed to Countrywide, whose lax standards and subprime loans were blamed by lawmakers and regulators for fueling the housing bubble and subsequent financial crisis. Outstanding claims from private investors jumped 77 percent to $8.6 billion in the second quarter, mostly from trustees of mortgage-bond pools that weren’t included in an $8.5 billion settlement announced last year, Bank of America said last month. Investor Concern Claims reflect the unpaid principal balance. Actual losses are typically reduced to a fraction of the demands after the bank proves some claims are invalid, negotiates settlements on others and seizes collateral. Bank of America settled for about 2 percent of total claims in the $8.5 billion accord. Jerry Dubrowski , a Bank of America spokesman, declined to comment. Analysts repeatedly questioned Chief Executive Officer Brian T. Moynihan , 52, during the bank’s quarterly conference call about the demands, including the extent of future losses and why claims continue to rise on loans made as long as six years ago during the housing bubble. Bank of America had become the biggest home lender after the 2008 purchase of Countrywide, whose specialties included subprime loans. Lenders typically have sold mortgages to investors with a promise to buy them back if underwriting flaws were found. Insurance companies that backed mortgages got similar assurances, and some have won settlements from banks as defaults swelled. Bank of America has been anticipating a rise in claims from private investors and building repurchase reserves, Chief Financial Officer Bruce Thompson has said. Ultimate losses from that group will be “well below $1 billion,” he said. To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net ; Rick Green at rgreen18@bloomberg.net |
2024-02-24 | Bloomberg | AIA Group Profit Drops 41% on Stock Losses | AIA Group Ltd. (1299) , the third-largest Asia-based insurer by market value, posted a 41 percent drop in annual profit as stock investment losses overshadowed growth in new business. The shares advanced to a six-month high. Net income fell to $1.6 billion, or 13 cents a share, in the 12 months to Nov. 30, from $2.7 billion, or 22 cents a share, a year earlier, the Hong Kong-based company said in a statement to the city’s stock exchange today. Fourteen analysts surveyed by Bloomberg estimated an average profit of $1.66 billion. Chief Executive Officer Mark Tucker has been trying to rebuild the insurer operating in 15 Asian markets by boosting the profitability of new businesses and agent productivity. The company’s value of new business, the measure of the projected future profitability of new policies that Tucker has focused on, surged 40 percent last year to $932 million. “Overall this was a very strong set of numbers, on average in-line or ahead of market consensus,” Barclays Plc analysts Mark Kellock and Thomas Wang wrote in a research note today. “We see further operational upside as AIA continues to improve productivity, business quality and profit margins.” The shares rose 1.6 percent to HK$27.85 as of 9:59 a.m. in Hong Kong trading, the highest since Aug. 4. They have gained 21 percent since the stock started trading on Oct. 29, 2010, outperforming Hong Kong-quoted shares of peers China Life Insurance Co., Ping An Insurance (Group) Co. and Prudential Plc. AIA’s operating profit after tax, before the investment losses, climbed 13 percent to $1.9 billion. It declared a final dividend of 22 Hong Kong cents per share. New Business The growth in the value of new business was ahead of analysts’ consensus estimate of $870 million, driven by a bigger-than-expected 4.6 percentage point expansion in new business margin to 37.2 percent, according to the Barclays note. “We have continued to deliver strong growth in our key performance measures,” said Tucker, 54, in the statement. “The potential exists for continuing global economic uncertainties to have a negative impact upon Asian economic growth rates and consequently upon AIA’s business.” Embedded value of AIA increased 10 percent to $27 billion from a year earlier, according to the statement. The estimate of the economic value of life insurance business using actuarial and investment assumptions is used to value life insurers. AIA was hurt in 2008 by troubles at its bailed-out biggest shareholder American International Group Inc. (AIG) and uncertainties surrounding its attempted takeover by Prudential Plc in 2010. Asia Growth Without external economic shocks having a major impact on Asia , Tucker said that the region’s wealth and low insurance ownership together with future economic growth will drive the demand and expansion of AIA’s products and services. AIA recognizes all of the fair value changes of its equity investments in the profit and loss account, the Barclays analysts said in a Feb. 22 report. The insurer reported $207 million of net losses from equities after tax, against the $853 million gain the year before. Insurers like AIA suffered losses on stock market investments as the European debt crisis clouded the global economic outlook and dented investor confidence, sending the MSCI Asia Ex-Japan Index (MXASJ) down 19 percent last year. “Apart from new business contribution, investment return remains the biggest swing factor” for embedded value and profit after tax growth, Goldman Sachs Group Inc. analysts Mancy Sun and Philippa Rogers wrote in a Feb. 8 report. Its mark-to-market losses on investments will have been “fully reversed” by this morning, Tucker said during a call with reporters today. Well Capitalized American International Group Inc., AIA’s biggest shareholder, posted a $1 billion mark-to-market gain on its AIA stake as it reported a 77 percent jump in fourth-quarter profit yesterday. AIG still owns 33 percent of AIA after selling a majority stake in the Asian insurer in its 2010 initial public offering to repay a 2008 government rescue that totaled $182.3 billion. A lockup on its holdings will be lifted in April, according to the Barclays report. AIA’s free surplus, a measure of excess capital over what is required to be held by regulators, surged 19 percent to $5.9 billion. Solvency Ratio Its solvency ratio, which measures the actual capital against the minimum capital requirement, stood at 311 percent. The insurer plans to maintain a strong balance sheet, capital position and cash level in light of continued market swings in the foreseeable future and conservative regulators, Tucker said. He declined to comment on reports on its interest to buy ING Groep NV’s Asian business in a deal that may be valued at more than $6 billion. “If it makes sense, if we find it adds value to shareholders, if it’s financially viable, we will look at opportunities,” he said of potential acquisitions. “But we’re 99 percent focused on organic growth.” AIA asked investment banks to advise it on the possible bid, two people with knowledge of the matter said last month. South Korea and Japan , where AIA is weak, contributed 80 percent of ING Asia’s earnings last year and 75 percent of gross written premiums and new business sales, the Credit Suisse analysts wrote in a Feb. 14 report. To contact the reporter on this story: Bei Hu in Hong Kong at bhu5@bloomberg.net To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net |
2024-02-22 | Bloomberg | Citigroup ‘Defrauded’ Fannie, Freddie: Whistle-Blower | Citigroup Inc. (C) , which last week admitted breaking Federal Housing Administration rules and paid a fine, also violated regulations for home loans sold to Fannie Mae (FNM) and Freddie Mac (FRE) , according to a whistle-blower’s complaint. The bank “defrauded, falsified information or misled federal government entities” by selling or securing insurance for mortgages with defects such as improper appraisals and not reporting them as required, Sherry Hunt, a Citigroup quality- assurance vice president, said in her complaint, which was unsealed yesterday. It was filed under the False Claims Act in federal court in Manhattan in August. Hunt’s charges formed the backbone of the U.S. Justice Department’s case against Citigroup, which paid $158.3 million in a Feb. 15 settlement and admitted that it certified loans for FHA insurance that didn’t qualify. Her complaint provides additional details into the bank’s broken mortgage-processing system. In last week’s agreement, the government reserved the right to pursue criminal and other charges related to mortgages originated or underwritten by Citigroup and not insured by the FHA. “Everyone is a little bit guilty for not keeping an eye on the processes and doing what we should have been doing,” Hunt said in a telephone interview from her home in Silex, Missouri. “Managers have to take ownership of their area, know what’s going on and make sure they’re doing the right thing.” Loans Repurchased As a whistle-blower, Hunt’s share of the settlement will be $31 million before taxes and attorney’s fees, she said in a Feb. 15 interview. For Citigroup, the third-largest U.S. bank by assets, the high defect rates could be costly. It might be forced to buy back substandard mortgages sold to government-controlled Fannie and Freddie, who buy or guarantee most U.S. mortgages. Last year, Citigroup repurchased 6,600 loans from government buyers, an 89 percent increase from 2010, according to a presentation on its website. The bank set aside $1.2 billion to buy back defective mortgages as of the end of 2011. That’s the most ever, and up from $969 million in 2010. “We take our quality-assurance processes seriously and have pro-actively undertaken process improvements to ensure that they are as strong as possible,” Sean Kevelighan , a Citigroup spokesman, said in an e-mailed statement. Andrew Wilson , a spokesman for Washington-based Fannie Mae, and Chad Wandler, a spokesman for McLean, Virginia-based Freddie Mac, declined to comment. Flawed Mortgages Hunt said Citigroup knowingly vouched for the quality of loans that were “deficient” in income documentation, had incomplete borrower job histories, appraisal problems, errors in closing paperwork, missing credit reports and miscalculated maximum mortgage amounts, among other flaws. Some managers’ compensation was tied in part to reducing the defect rate, Hunt said. CitiMortgage Inc., Citigroup’s home-loan unit, is run by Sanjiv Das, who was hired by Chief Executive Officer Vikram S. Pandit, 55, in July 2008. Das reports to consumer-banking head Manuel Medina-Mora and Eugene McQuade, head of Citibank N.A., the bank’s deposit-taking unit. Both Das and Pandit are former Morgan Stanley executives. During an April 7, 2010, meeting with Freddie Mac executives at the main Citigroup mortgage-processing facility in O’Fallon, Missouri, Mike Mazanec, head of CitiMortgage’s Fraud Prevention and Investigation unit, said all loans flagged for possible fraud were resolved within 15 to 30 days -- “a false statement,” Hunt said in the complaint. ‘Systemic Failure’ In fact, in a list of about 1,000 loans referred to the fraud unit because they were suspected to be fraudulent, many were more than a year old and some were eventually erased from the Citigroup computer system, according to Hunt’s complaint. Attempts to reach Mazanec for comment at a telephone number listed under his name were unsuccessful. Hunt cited an “overall systemic failure” in her complaint that she said in a May 2011 letter to the Securities and Exchange Commission “threatens the thin ice the entire market is treading on.” The letter was also released yesterday. For certain types of home loans, Citigroup’s “defect rate” -- the rate at which the underwriting raised questions -- was 80 percent, said Hunt, 54. Taxpayer Lifeline Fannie Mae and Freddie Mac have survived on taxpayer aid since September 2008, when losses from failing home loans forced them into government conservatorship. Since then, the companies have drawn more than $180 billion from a U.S. Treasury Department lifeline. Today, they guarantee about $100 billion worth of new mortgages a month, about three- fourths of all single-family home loans. Hunt said she was hired by Citigroup in 2004. She said she worked for Richard M. Bowen III, the former Citigroup underwriter who testified in April 2010 to the Financial Crisis Inquiry Commission, the panel created by Congress to investigate the causes of the 2008 financial meltdown. The case is U.S. ex rel. Hunt v. Citigroup Inc., 11-cv- 005473, U.S. District Court, Southern District of New York ( Manhattan ). To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net. To contact the editor responsible for this story: Gary Putka at gputka@bloomberg.net . |
2024-10-15 | Bloomberg | October Calm Keeps Market Swings Below Monthly Average | Even with a deadline looming for the U.S. to avoid a debt default, it’s been a comparatively calm October for financial markets. Daily swings in the Standard & Poor’s 500 Index (SPX) have averaged 0.78 percent so far this month, down from 0.9 percent for Octobers over the last eight decades and less than a quarter the moves in 1929, 1987 and 2008, data compiled by Bloomberg show. Bank of America Corp.’s Market Risk Index that uses options to forecast fluctuations in equities, currencies and bonds reached minus 0.74 last week, the lowest since May 21. Confidence that Congress will reach an accord to reopen the government and keep debt payments flowing has limited volatility even after the S&P 500 rallied 20 percent since December and 153 percent since March 2009. Bank of America’s measure of future risk has slipped from a one-year high of 0.3 percent in June and is lower than the level from August 2011, when investors faced the another threat of American default. “There’s a lot less fear,” Jim Russell, who helps oversee $112 billion as a senior equity strategist for U.S. Bank Wealth Management, said by phone from Cincinnati. “Most investors look at Washington now and kind of look through this series of headlines and events. We know you have to reopen the federal government eventually and you have to raise the debt ceiling.” Gaining Momentum Shares climbed for a fourth day yesterday as Democrats and Republicans in the Senate voiced optimism about ending the impasse. While BlackRock Inc. and Fidelity Investments have reduced holdings of the riskiest U.S. Treasury maturities in money-market funds, the S&P 500 is within 20 points of a record. The S&P 500 erased its decline for October after rallying 3.3 percent in the last four sessions. While daily changes in the benchmark index are almost twice the mean for September, they’re small for a month that has seen the biggest swings in U.S. equities, according to data compiled by Bloomberg. Of the 10 most volatile months on record for the S&P 500, five were Octobers, according to data compiled by Bloomberg. The most extreme was in 2008, when the S&P 500 rose or fell an average of 3.88 percent a day following the bankruptcy of Lehman Brothers Holdings Inc. Market Crashes Stock market crashes in October 1929 and 1987 caused the market to move more than 3.5 percent a day, on average, data compiled by Bloomberg show. Equities posted a monthly plunge of 20 percent in the Crash of 1929 prior to the Great Depression and slumped 22 percent in October 1987, including a 20 percent drop on Oct. 19 known as Black Monday. Failure to reach a timely solution on the debt-ceiling followed by a default on American government debt would be historically unprecedented, causing investors to sell stocks, Michael James at Wedbush Securities Inc. said. That is prompting hedging with securities tied to the Chicago Board Options Exchange Volatility Index (VIX) , which increased 2.2 percent to 16.07 yesterday even as stocks advanced. The VIX added 4.2 percent to 16.74 today at 10:01 a.m. in New York. “In case something doesn’t occur and there is a technical default, the market could go into a significant short-term decline,” James, a Los Angeles-based managing director of equity trading at Wedbush, said yesterday in an interview. “Portfolio managers are buying the VIX as a means of a portfolio hedge in case of a default because the potential downside would be meaningful.” VIX Options Volume on VIX options soared to a single-day record of 1.78 million on Oct. 8 as traders bought contracts that rise when stock swings increase. About 1.14 million calls changed hands and more than 639,000 puts, data compiled by Bloomberg show. Still, the VIX has erased its increase since the government shutdown began Oct. 1. The gauge moves in the opposite direction as the S&P 500 about 80 percent of the time. Stock swings will narrow by December as a resolution is reached on the debt ceiling and the Federal Reserve continues its quantitative-easing program, Susquehanna Financial Group LLLP’s Trevor Mottl, wrote in a note yesterday. The Federal Open Market Committee left its bond buying program unchanged in September. The central bank’s decision to keep purchasing $85 billion in mortgage and Treasury debt a month dimmed odds that government debt yields would rise substantially over the rest of the year. Political Resolution “We expect that continued QE, at least through the end of the year, should lead to decreasing S&P 500 volatility as we approach year-end, provided that politicians in Washington arrive at a resolution on the debt-ceiling sometime between Oct. 17 and Nov. 1,” Mottl, Susquehanna’s New York-based head of derivatives strategy, said. Bank of America Merrill Lynch’s MOVE Index, a measure traders’ expectation for the pace of swings in bond yields based on volatility in over-the-counter options on Treasuries maturing in two to 30 years, was 77.11 on Oct. 11, below the average level of 72.46 for 2013 so far, and below the year’s peak of 117.89 on July 5. The $5.4 trillion a day foreign exchange market has mirrored the signals from the debt markets, with traders scaling back projections for volatility in currencies from the U.S. dollar to the Indonesian rupiah. “The debt-ceiling issue is leading many to believe that the Fed will stay on hold for longer,” Sebastien Galy , a senior foreign-exchange strategist at Societe Generale SA in New York, said via phone yesterday. “More broadly, the hit to growth and sentiment may have similar impacts on other central banks. Expansive central bank policies tend to crush implied foreign exchange volatility.” Currency Swings A JPMorgan Chase & Co. index of global foreign-exchange volatility that tracks options on currencies of major and developing nations was 8.22 percent yesterday, down from a high this year of 11.77 percent on June 24. The bank’s index, tracking implied volatility of the most actively traded currencies and those of emerging markets, averaged 12.03 percent over the past five years. Implied volatility, which traders quote and use to set option prices, signals the expected pace of swings in the underlying currency. “Global markets are second guessing the outcome of the negotiations by assuming that something will happen before the Oct. 17 deadline,” Abhinandan Deb, the London-based head of European equity derivatives strategy at Bank of America, wrote in an e-mail yesterday. “The alternative could be just too ugly to contemplate.” To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net ; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net ; Liz Capo McCormick in New York at emccormick7@bloomberg.net To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net |
2024-12-22 | Bloomberg | Panamericano Suspends Payout of Local Bonds After Injunction | Banco Panamericano SA , the Brazilian lender bailed out after allegations of accounting fraud, suspended payments of four local bonds after it was granted an injunction from a Sao Paulo state court. The Sao Paulo-based bank said today in a regulatory filing that it filed a lawsuit against bondholders on Dec. 19 to get the injunction to withhold payments because the securities have “atypical” rates and maturities. The court’s decision issued on Dec. 20 affects payment of certain private bonds, known as certificados de depositos bancario, that were issued in 2005, 2006 and 2008. Panamericano, which is controlled by Banco BTG Pactual SA and Caixa Economica Federal, said in the filing that it’s “fully able to pay the bonds, which are properly accounted for” on its financial statement. The bonds can’t be resold by holders, according to the filing. The lender’s former controlling shareholder, Grupo Silvio Santos , had to borrow 2.5 billion reais ($1.35 billion) in November 2010 from the nation’s bank deposits insurance fund, or FGC, after allegations of accounting fraud arose. BTG Pactual bought Silvio Santos’s stake in the bank in February, assuming 3.8 billion reais in debt. Valor Economico reported yesterday that Panamericano won the injunction to withhold payment of 21 million reais of private bonds suspected of being part of a fraud. To contact the reporters on this story: Karen Eeuwens in London at keeuwens@bloomberg.net Francisco Marcelino in Sao Paulo at mdeoliveira@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-11-08 | Bloomberg | Largest Oil-Tankers Curb Weeks of Losses as Fuel Price Falls | Crude tankers shipping almost 20 percent of the world’s oil curbed seven weeks of losses as declining fuel costs helped owners contending with the biggest fleet growth in three decades. The ships delivering 2 million barrel cargoes of Saudi Arabian oil to Japan , a benchmark voyage, made positive returns of $694 a day today, according to data from the Baltic Exchange in London. Charter costs slumped so low since Sept. 21 that rates didn’t cover the cost of crew, insurance or other operating costs, causing owners to contribute an average of about $3,500 a day to fuel expenses, bourse calculations show. “The fact this benchmark is so seldom positive just shows how dreadful the market is right now,” Will Leslie, head of tanker derivatives at ACM-GFI, a London-based broker of contracts used to hedge shipping rates, said by e-mail today. “There are too many ships and unfortunately I don’t think we’re going to see a massive shift to higher earnings.” The fleet’s capacity expanded more than three times faster than cargo demand since 2008, after owners added the most new vessels to the fleet since the start of the 1980s, according to data from Clarkson Plc (CKN) , the world’s largest shipbroker. Fuel fell 7.6 percent to $613.76 a metric ton since the end of August, according to data compiled by Bloomberg. The decline is giving a bigger boost to earnings than any short-term contraction in ship supply, according to Arctic Securities ASA, an Oslo-based investment bank. Global Benchmark The Saudi Arabia-to-Japan route is a benchmark for freight swaps that traders use to bet on, or hedge, crude oil shipping costs. The contracts for December are trading at $1.70 a barrel compared with $1.44 a barrel this month, according to data from Marex Spectron Group, a London-based broker of the contracts. The Baltic Exchange’s earnings formula doesn’t take into account the fact ships cut speed to lower fuel consumption. The largest oil tankers , known in the industry as very large crude carriers, or VLCCs, can earn about $11,000 a day by sailing on the empty leg of journeys at 10 knots, compared with a typical speed of about 13 knots, Arctic analyst Erik Nikolai Stavseth said in a report today. The vessels need about $10,670 to cover crew, insurance and other operating costs, according to Moore Stephens LLC, a U.K.- based consultant. Rates for the vessels will average $21,000 this year, according to 14 analyst estimates compiled by Bloomberg. Supply Shrinks Frontline Ltd., the biggest operator of the ships, led by billionaire John Fredriksen , said Aug. 29 it needs $23,900 a day to break even. Shares of the Hamilton, Bermuda-based company gained 0.8 percent to close at 18.39 kroner ($3.21) in Oslo trading. The supply of VLCCs available for charter over the next four weeks contracted by two to 78, Marex Spectron said in an e- mailed report today. That compares with 87 vessels at the start of the month, Marex data showed. Charter costs for VLCCs on the benchmark voyage added 2.7 percent to 37.75 industry-standard Worldscale points today, exchange data showed. Yesterday they gained the most in almost three months. The Worldscale system is a method for pricing oil cargoes on thousands of trade routes. Each individual voyage’s flat rate, expressed in dollars a ton, is set once a year. Today’s level means hire costs on the benchmark route are 37.75 percent of the nominal Worldscale rate for that voyage. VLCCs carry about 17.3 million barrels a day of crude, according to Clarkson data. Global demand will be 89.7 million barrels a day this year, according to the International Energy Agency , a Paris-based adviser to oil-consuming nations. The Baltic Dirty Tanker Index, a broader measure of oil- shipping costs that includes vessels smaller than VLCCs, added 0.8 percent to 667, according to the exchange. To contact the reporter on this story: Rob Sheridan in London at rsheridan6@bloomberg.net To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net |
2024-03-28 | Bloomberg | FHA Bailout Risk Looming After Guarantees: Mortgages | (Corrects forecasted decline of home-price index in third paragraph of story published March 27 and clarifies that Moody’s Analytics has no position on FHA’s solvency.) The Federal Housing Administration won’t be able to earn its way to financial health this year, increasing the chance it will need a taxpayer bailout, based on an updated forecast from Moody’s Analytics, which provides the agency’s housing-market analysis. The U.S. government mortgage-insurer, which guarantees $1.1 trillion in home loans, had been counting on “robust growth” in home prices to help rebuild its insurance fund after paying out $37 billion to cover defaults the past three years, according to its annual report to Congress, filed in November. It won’t get that growth until 2014, according to the latest outlook from Moody’s Analytics. One measure of the market, the S&P Case-Shiller Home Price Index, will decline 2 percent in fiscal 2012, said Celia Chen , a Moody’s Analytics housing economist who updated her estimate after providing the housing-market forecast for the FHA’s annual actuarial report. Moody’s Analytics hasn’t taken a position on the FHA’s future solvency, said Mark Zandi , the company’s chief economist, in an e-mail. “The FHA’s economic projections are surreal,” said Andrew Caplin, a New York University economics professor who has testified to Congress on the agency’s finances. “They must believe there will be very few readers in Congress able to critically review such a complex report.” Actuaries’ Projections In their annual review, the FHA’s actuaries -- risk analysts who specialize in insurance -- used earlier projections that called for increases of 1.2 percent in 2012 and 3.8 percent in 2013. The agency, which backs mortgages that cover as much as 96.5 percent of a home’s value, is sensitive to changes in home prices. While the insurance fund’s 2012 outlook called for net growth of about $9 billion, that will drop if home prices decline, according to the FHA’s November report. By law, the fund is supposed to hold 2 percent of its portfolio in reserve; as of Sept. 30, it held only 0.24 percent, or $2.6 billion, according to the report. While the FHA issues an annual report and hasn’t updated its outlook since the new Moody’s forecast, Carol J. Galante, the acting FHA commissioner, says there’s no indication that home prices will fall to a level where the agency would need help from the U.S. Treasury. “The independent actuaries rely on the best available data that most closely reflects our portfolio to estimate how the market will behave in the future,” Galante said in a statement yesterday. “All things considered, we’re doing everything we can to remain in positive territory and to avoid needing additional support from the Treasury.” Deeper Than Predicted Losses will be deeper than the FHA predicts, in part because the agency uses a home- price index that excludes distressed sales, Caplin said. Distressed sales, which refer to sales at prices lower than what borrowers owe on their mortgages, will make up 40 percent of transactions this year, Chen said. Excluding them produces a rosier forecast on sale prices and may mean the agency is underestimating potential claims, Caplin said. “They can’t even track their data correctly,” Caplin said in an interview. “Not knowing how to measure the performance of your borrowers is tragic and profoundly wrong.” White House Plan The White House submitted a budget plan to Congress this year that would have provided the FHA as much as $688 million from the U.S. Treasury, the first bailout in the agency’s 78- year history. The money wasn’t needed because the FHA will get almost $1 billion from the government’s $26 billion settlement with the five biggest U.S. mortgage servicers over alleged foreclosure abuses, according to Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, which oversees the FHA. Mortgage servicers collect monthly payments and manage the foreclosure process. As the FHA tripled its home-loan insurance to $1.1 trillion since 2007, defaults and expected defaults drained its cash reserve below the 2 percent legal threshold the last three years. The reserve is a cushion to offset possible future losses and is held in addition to $29 billion the agency has set aside to pay expected claims. Caplin and others say the FHA’s plan to grow out of its cash squeeze amid rising property values won’t work. Taxpayers will be on the hook for between $50 billion and $100 billion “over many years,” says Joe Gyourko of the University of Pennsylvania ’s Wharton School. Improved Credit Quality FHA officials dispute that conclusion, and note that they’ve taken steps to improve the credit quality of borrowers and to increase premiums and fees. The agency’s role in U.S. housing grew as private mortgage insurers retreated after the credit contraction of 2008. The FHA, created in 1934 to help low- and moderate-income people buy homes and to stabilize credit markets, insured 30 percent of U.S. house purchases last year, up from 4.5 percent in 2006. It charges lenders and borrowers a fee to guarantee that mortgages will be paid. “To be clear, FHA is not broke,” Galante told a House Financial Services subcommittee hearing on Feb. 28. To help bring in more money, the FHA will increase the premiums it charges most borrowers by 0.10 percentage points, starting April 9. For borrowers with homes worth more than $625,500, the hike will be an additional 0.25 percentage points, as of June 11. Upfront fees will also rise, to 1.75 percent of the loan from 1 percent, effective April 9. Rate Reductions President Barack Obama said Feb. 1 he wants to reduce rates on FHA refinancings for about 3.4 million eligible FHA homeowners. Their upfront fee would drop to 0.01 percent from about 0.55 percent and their annual premiums would be cut to 0.55 percent from 1.2 percent. The net effect of the hikes and proposed discounts would add a total of $1 billion to FHA receipts in fiscal years 2012 and 2013, Galante told a Senate subcommittee March 8. The agency’s reserve fund -- the amount held back after making provision for expected claims -- declined from 0.53 percent of its total portfolio in 2009, to 0.5 percent in 2010 and 0.24 percent last year. For single-family mortgages, which make up 94 percent of the portfolio, the 2011 reserve was just 0.12 percent. “The FHA clearly didn’t allocate enough capital to the loans it insured from 2007 to 2010,” said Morris A. Davis, a professor of real estate and urban land economics at the University of Wisconsin-Madison’s School of Business. Expected Claims Apart from the reserve account, the FHA had budgeted $29 billion for expected claims at the end of fiscal 2011, about $900 million less than the agency will need, according to its actuary’s estimates. The FHA said in November it wouldn’t set aside the additional $900 million, an action that would have reduced its capital reserve further. Over the last three years, the agency paid out $37 billion in claims -- more than it expected and more than double the preceding three years -- and “has not yet seen the peak of claim expenses,” which could come this year, according to the annual report. Property values are important to the FHA insurance fund. Negative equity -- homeowners owing more on their mortgages than their houses are worth -- is one of the most important triggers of defaults, Gyourko wrote in a November 2011 paper , “Is FHA the Next Housing Bailout?” published by the American Enterprise Institute , a Washington think tank that advocates for limited government. Tax Credit The FHA will lose at least $10 billion more than it projects on 2009 and 2010 loans to first-time homebuyers who also took advantage of an $8,000 tax credit, Gyourko says. The credit was offered as part of Obama’s $787 billion economic stimulus package. Gyourko called the credit a form of down-payment assistance, and noted that borrowers who receive such assistance are more likely to quit paying their mortgages. Raphael Bostic, HUD’s assistant secretary for policy development and research, called Gyourko’s assessment “completely false and irresponsible” in the agency’s blog, The HUDdle. About 1 million first-time buyers used FHA insurance during the 13 months the tax credit was available, and their “failure rate” is less than 1 percent, he wrote. The FHA was more accepting of arguments raised by Caplin and others, who say its actuary wasn’t correctly estimating risk for so-called streamline refinancing. The program moves borrowers from one FHA loan to another and doesn’t require updated property appraisals. Negative Equity Caplin and six other researchers estimated that as many as 71 percent of FHA borrowers who streamline-refinanced in Los Angeles County, California , in 2009 owed more than their houses were worth, according to a February 2010 paper. Using the FHA actuary’s methodology, only 1.5 percent of the streamline refinanced borrowers would have had negative equity, Caplin said. For its 2011 estimates, the FHA’s actuary, Integrated Financial Engineering Inc. of Rockville, Maryland , changed its approach to try to capture home values after the refinancings, said Barry Dennis, the firm’s president. The change was one of several that increased the insurance fund’s potential payouts as of Sept. 30 by about $6 billion. “Some borrowers have streamline-refinanced 10 times,” Dennis said. Not Far Enough Caplin said the change didn’t go far enough. The actuary counts each refinancing as a “successfully terminated mortgage,” he said. If a borrower refinances three times, the FHA counts that as three successful payoffs, Caplin said. That makes the agency’s performance look better -- and that history helps shape estimates of future losses, he said. “The refinance is just a rate reduction, it’s not a successfully terminated mortgage,” Caplin said. “Ask yourself if we’re creating sustainable homeownership. How many borrowers are ending their reliance on FHA?” Dennis said his firm’s approach uses FHA performance data to determine whether loans have had trouble in the past. While a refinancing removes risk from one year’s projections -- the year in which the original loan was made -- it adds risk in the year of the new loan, he said. “It’s the same risk in the portfolio; it’s just in a different year,” Dennis said. “We’ve continued to improve our modeling.” Gauging the Market Caplin, Gyourko and others also question how the FHA gauges the condition of the housing market. The agency uses the Federal Housing Finance Agency index, which shows that home prices have declined 15 percent from a March 2007 peak. Another measure, the Case-Shiller index, shows that values have declined 34 percent since a July 2006 peak. The FHFA index is more appropriate because the properties it tracks tend to be in the same geographic areas where the FHA insures mortgages, according to the agency’s annual report to Congress. Also, it said the Case-Shiller index “includes concentrations of properties subjected to subprime loans, and those sold in distress sales,” which aren’t in the FHFA index. Distressed sales tend to drive down home prices. Using the FHFA index “is just one of the many choices FHA makes that are completely unjustified and that coincidentally make the situation appear better than it is,” Caplin said in an interview. Integrated Financial Engineering’s Dennis said he “wouldn’t argue that the FHFA index is perfect.” “Some have suggested that the FHA use an FHA-specific home-price index,” he said. One change in the FHA’s approach this year may help improve the quality of its mortgages. It will spend more time and money checking for potential wrongdoing by mortgage originators, said Helen R. Kanovsky, HUD’s general counsel. ‘Limited Resources’ Until recently, FHA officials chose to direct their “limited resources” to examining loan servicing rather than loan origination, Kanovsky said. In general, the agency trusts lenders to certify the quality of mortgages it guarantees and to report paperwork flaws or possible fraud. On Feb. 9, Charlotte , North Carolina-based Bank of America Corp. agreed to pay $1 billion to settle claims it failed to do so, while on Feb. 15 Citigroup Inc. (C) admitted it certified loans for FHA insurance that didn’t qualify and will forfeit $158 million. Some of that money will compensate the FHA for claims it paid for defaulted home loans certified by Citigroup and Bank of America’s Countrywide mortgage unit. The FHA can negotiate indemnification agreements in which the loan originator reimburses the agency for losses to its insurance fund. It typically requests indemnifications after a loan goes bad or when there are basic underwriting problems with the mortgage, such as missing paperwork or fraud. Over the last seven years, the agency has averaged 1,282 indemnification agreements a year out of an annual average of 993,355 total loans guaranteed -- a little more than 0.1 percent. To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net. To contact the editors responsible for this story: Gary Putka at gputka@bloomberg.net ; Rob Urban at robprag@bloomberg.net . |
2024-08-21 | Bloomberg | White Mountains Offers $308 Million for IDB’s CLal Stake | White Mountains Insurance Group Ltd. (WTM) offered to pay 1.1 billion shekels ($308 million) for IDB Development Corp.’s 55 percent interest in Clal Insurance Enterprises Holdings Ltd. (CLIS) The offer will expire unless accepted by 5 p.m. today in Tel Aviv , White Mountains (WMT) said in a letter included in a regulatory filing yesterday. The transaction would have to be completed by May 31. IDB Development Chairman Nochi Dankner is seeking to sell assets as the company struggles to pay creditors. White Mountains Chief Executive Officer Ray Barrette highlighted his ability to complete a transaction quickly. The company already has holdings including Sirius International Insurance Group and a majority stake in One Beacon Insurance Group. “Our extensive experience in the insurance business and good relations with insurance regulators around the world make us a reliable party to close this transaction,” Barrette wrote. White Mountains has $5 billion in capital, about $1 billion of which is immediately available for new investments, he wrote. The Hanover, New Hampshire-based company’s shares have advanced 8.7 percent this year. IDB said yesterday that it had agreed to sell 32 percent of Clal to Hong Kong-based JT Capital Management Ltd. for about for 1.47 billion shekels. Dankner’s company faces a court deadline in Tel Aviv to sell a stake in Clal by today. An unidentified Thai investor withdrew an offer for the insurer last week. To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-07-20 | Bloomberg | WaMu Would Agree to Bank Failure Probe With No Long Delay, Attorney Says | Washington Mutual Inc. , the former parent of the biggest U.S. bank to fail, will agree to a new investigation of the collapse by a bankruptcy court examiner under certain conditions, a lawyer for the bank said. As long as an examiner does not cause a long delay in the company’s plan to distribute more than $6 billion to its creditors, WaMu would agree to a new investigation, company attorney Susheel Kirpalani today told the judge in Wilmington, Delaware, overseeing the company’s bankruptcy. Shareholders want U.S. Bankruptcy Judge Mary F. Walrath to order a broad investigation of WaMu’s assets, including the value of a potential lawsuit against JPMorgan and the Federal Deposit Insurance Corp. for their role in the 2008 collapse of Washington Mutual Bank. “An investigation needs to be more than a whitewash,” shareholder lawyer Justin A. Nelson said in court. “It is inappropriate to limit the scope to simply whether the settlement is fair.” WaMu, based in Seattle, said an investigation should be limited and last no longer than 75 days. Shareholders have proposed giving an examiner 120 days to decide the scope of any investigation. A settlement expires Aug. 30 that would split almost $10 billion in cash and tax refunds with JPMorgan and the FDIC in exchange for WaMu’s promise not to sue them. Shareholders oppose that settlement. Their proposal would mean an investigation would not be finished by the time the settlement expired. The case is In Re Washington Mutual Inc., 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington). To contact the reporters on this story: Steven Church in U.S. Bankruptcy Court in Wilmington, Delaware, at schurch@bloomberg.net . |
2024-09-20 | Bloomberg | WellPoint to Vie With State-Run Health Markets | WellPoint Inc. (WLP) , the largest insurer by enrollment, is buying a private health-insurance exchange to compete for employers with the U.S. state-run marketplaces set to open in 2014 under President Barack Obama’s health-care overhaul. WellPoint and two nonprofit health insurers purchased a 78 percent stake today in Bloom Health, a closely held benefits company in Minneapolis, for an undisclosed sum, WellPoint said. Bloom is a two-year-old online marketplace that offers a menu of health plans to about 20,000 workers at almost 50 companies. Using a private exchange such as Bloom would limit an employer’s costs and provide consistency compared with separate state-run exchanges, each with their own regulations, said Ken Goulet, chief executive officer of Indianapolis-based WellPoint’s commercial business unit. “We see this as a way of preserving the employer-based market by providing some predictability in health-care costs,” Goulet said in a telephone interview. WellPoint rose 16 cents to $67.26 at 4 p.m. in New York Stock Exchange composite trading. The state-run marketplaces where people will select health insurance plans are central to the Obama administration’s goal of expanding coverage to as much as 95 percent of Americans. The Congressional Budget Office expects 24 million people to obtain insurance through exchanges by 2014. U.S. Employers A study by New York-based consulting firm McKinsey & Co., said that as many as one-third of U.S. companies are considering giving up employer-sponsored health plans. Instead, they would send their workers to state-run exchanges for coverage, paying a federally mandated fine. Employers have battled rising health-care costs, which in recent years have grown twice as fast as the consumer price index. Under the Bloom model, companies pay employees a fixed amount to cover a portion of their health-care coverage and workers provide the rest based on the plans they select. Goulet said the Bloom exchange allows employers to maintain their tax deduction on the money paid annually into an employee’s health reimbursement account to help cover the cost of insurance. It also allows workers to pick a plan that suits their health-care needs and how much they are willing to spend, he said. 401k Concept The idea of the private health-care exchange and its defined contribution model is similar to the trend in retirement benefits in which employers have been abandoning defined benefit pension plans for the relative financial safety of a 401(k) that allows companies to control how much they spend. WellPoint’s partners in the Bloom purchase are Chicago- based Health Care Service Corp., the largest U.S. customer-owned insurer, and Blue Cross Blue Shield of Michigan , based in Detroit, which already held a minority interest in the private exchange. They bought the stake from Sandbox Industries Inc., a Chicago-based venture capital fund, and a joint venture of Blue Cross Blue Shield plans that invests in start-up health-care companies. Health Care Services currently operates in Texas , Illinois , New Mexico and Oklahoma. It now will be able to offer employers choices of health plans in the 19 states where Bloom operates, said Martin Foster, president of plan operations at HCSC. The markets covered by Bloom represent about 60 percent of the U.S. population, Goulet said. All 50 States “Our objective is to be in all 50 states in the next year,” Goulet said. Bloom’s customers generally are companies with about 100 to 1,000 employees, said Abir Sen, chief executive officer of Bloom. Unlike competitors who primarily cover the retiree populations of larger employers, Bloom covers workers still on the job, Sen said. Extend Health Inc. of San Mateo, California is the largest private exchange covering 300,000 participants. Its customers include Union Pacific Corp. (UNP) in Omaha, Nebraska , and U.S. automakers Ford Motor Co. (F) , General Motors Co. (GM) and Chrysler Group LLC. To contact the reporter on this story: Pat Wechsler in New York at pwechsler@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-01-18 | Bloomberg | U.S. Regulators to Defend Volcker Rule Ban on Proprietary Trades | U.S. House Republicans pressed regulators on the merits of a proposal to ban banks from trading for their own accounts, as one official acknowledged the rule could put banks including Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. at a competitive disadvantage. Banks without U.S. operations could benefit because foreign jurisdictions haven’t adopted measures resembling those proposed in the Volcker rule, Acting Comptroller of the Currency John Walsh said today at a House Financial Services joint subcommittee hearing in Washington. “U.S. banks competing with these foreign banks will operate at a competitive disadvantage,” Walsh said in his prepared remarks, responding to a question from the panel’s Republican members. Regulators have been on the defensive since the Federal Reserve and three other agencies released a first draft of the rule in October. Lawmakers, financial firms and international regulators have faulted the 298-page proposal as too complex and potentially damaging for financial markets. “The proprietary trading prohibition in the Volcker Rule statute itself will undoubtedly affect the trading behavior of banking entities,” said Fed Governor Daniel K. Tarullo. “Indeed, that is what Congress intended.” Proprietary Trading The proposed rule named for former Fed Chairman Paul Volcker , who championed the idea as an aide to President Barack Obama , would ban banks from proprietary trading while allowing them to continue short-term trades for market-making or hedging. It also would limit their investments in private-equity and hedge funds. The rule, required by the Dodd-Frank Act, must be in place by July 21. Congress included the rule in Dodd-Frank to curb risky trading by banks that benefit from deposit insurance and Fed discount window borrowing. Financial firms, in comment letters to regulators and in public statements, have said the rule may restrict market liquidity, specifically in corporate bonds. The measure as proposed by regulators would be a “self- inflicted wound,” House Financial Services Committee Chairman Spencer Bachus said at today’s hearing. “The rule’s impact on market liquidity, access to credit, the cost of capital and job creation will unnecessarily stifle the growth of businesses that operate far from Wall Street, and hamper the ability of asset managers, pension funds and insurance companies to grow their portfolios for millions of individual investors,” said Bachus, an Alabama Republican. Overly Complex Republicans and Democrats at today’s hearing echoed the banking industry’s view that regulators have created a measure that is overly complex and difficult to understand. “The result of their efforts is a proposed rule that is nearly 300 pages long, and asks more than 1,300 questions for comment from market participants,” said Representative Shelley Moore Capito, a West Virginia Republican who leads one of the two subcommittees holding today’s hearing. “This has led to significant confusion -- and I will put myself in that boat -- and many unanswered questions over the consequences.” Representative Barney Frank , a Massachusetts Democrat, said the complexity stems in part from regulators’ efforts to meet the needs of the financial industry. “A very simple rule could have been formulated, but it would not have accommodated the concerns you have of the financial institutions,” said Frank, who led the Financial Services Committee during the talks that yielded the regulatory law that bears his name. “So to some degree they are complaining about you having accommodated them.” Goldman Sachs Goldman Sachs Chief Financial Officer David Viniar addressed the Volcker rule during an investor call after the company reported fourth-quarter financial results today, saying the Wall Street firm wants to ensure the measure doesn’t inhibit “the free flow of capital and the growth of the U.S.” “We want to make sure that the market making rules are not written in such a way that they make it so onerous for us and not just us but for all the firms to continue our market making function,” Viniar said. Consumer groups and Volcker rule supporters have leaned on regulators to stick to the implementation timeline and fought assertions that the measure will damage capital markets. Financial firms’ arguments “are all founded on the irrational assumption that, once bank proprietary trading ceases under the Volcker Rule, others will not expand to meet demand,” Wallace C. Turbeville, a former Goldman Sachs banker, said in testimony prepared for the hearing on behalf of Americans for Financial Reform , a coalition of consumer groups, labor unions and civil rights law firms. ‘Specious’ “It is specious to the point of misleading to suggest that the needs for liquidity currently provided by banks will not be filled,” Turbeville said. Tarullo called the proposal released by regulators “the most feasible,” knocking down alternatives including self- reporting of violations of principles-based rules by covered firms or creating “definitive bright lines” on what type of trading is permitted or banned. “The more nuanced framework contained in our proposal was designed to realize some of the advantages of both of these approaches while minimizing their potential adverse effects,” Tarullo said in prepared remarks. Regulators Pressured Representative Randy Neugebauer , a Texas Republican who leads one of the two panels holding today’s hearing, has joined Bachus and other lawmakers in calling on regulators to resubmit the proposal and consider extending the implementation timeline. “If the proposed regulations are implemented in their current form, those regulations will dramatically reduce liquidity across multiple markets, which will in turn make it more expensive for businesses to borrow, invest in research and development and create jobs,” Bachus and a group of lawmakers wrote in a Dec. 7 letter to regulators. Regulators, bowing to pressure from lawmakers and industry groups including the Financial Services Roundtable and the U.S. Chamber of Commerce, announced in December a 30-day extension of the comment period to Feb. 13. The extension also gave the Commodity Futures Trading Commission time to complete its largely similar proposal, which was released for comment on Jan. 11. To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net ; Cheyenne Hopkins at Chopkins19@bloomberg.net. To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net |
2024-07-21 | Bloomberg | MetLife Seeks to Avoid Banking Rules by Selling Deposit-Gathering Business | MetLife Inc. (MET) , the biggest U.S. life insurer, is exploring the sale of its deposit-gathering business to avoid tighter regulation that comes with bank status. “We do not believe it is appropriate for the overwhelming majority of our business to be governed by regulations written for banking institutions,” Chief Executive Officer Steven Kandarian said today in a statement. MetLife is seeking to avoid stronger federal oversight imposed on banks after government bailouts in 2008 prompted Congress to increase regulation through the Dodd-Frank Act. New York-based MetLife, which opted against accepting U.S. Treasury Department capital, said it got about 2 percent of operating earnings from its banking unit in the first quarter. “This would be positive,” said Randy Binner , an analyst with FBR Capital Markets, who has an “outperform” rating on MetLife. “Previously, the conventional wisdom was that Met was a bank holding company, and it was going to be difficult to change that reality.” MetLife rose $1.15, or 2.8 percent, to $42.04 at 4:15 p.m. in New York Stock Exchange composite trading. The company has fallen 5.4 percent this year. MetLife said the business that may be sold includes savings accounts , certificates of deposits and money-market accounts. The insurer plans to continue lending through its residential mortgage business. MetLife Bank began in 2001 and expanded through acquisition in 2008. The unit had total assets of $15.6 billion, including $9.3 billion in deposits as of March 31. ‘Unequal Competitive Grounds’ “This is such a small portion of their business, and yet under Dodd-Frank and various other issues, the tail might wag the dog,” said John Nadel, an analyst at Sterne Agee & Leach Inc., who has a “buy” rating on MetLife. Being regulated as a bank holding company “would put them on very significant unequal competitive grounds against all the companies they compete against day to day.” MetLife and Prudential Financial Inc. (PRU) , the second-biggest life insurer, are pushing federal regulators to refrain from applying bank capital standards to insurance companies. Newark , New Jersey-based Prudential isn’t a bank holding company and, like rivals, including MetLife, has insurance operations regulated by individual U.S. states. “In a highly competitive global insurance marketplace, it is imperative that MetLife be able to operate on a level playing field with other insurance companies,” Kandarian said. The Federal Reserve , which regulates bank holding companies, had no comment, said Barbara Hagenbaugh , a spokeswoman. Kandarian wasn’t available for an interview, said Christopher Breslin , a spokesman for MetLife. Systemically Important MetLife may face scrutiny as a so-called systemically important financial institution, or SIFI, whether or not it retains the banking assets. MetLife and Prudential have said that because of their size they may be labeled SIFIs by federal regulators. While SIFI designations would subject the companies to tighter standards, the rules may be less strict on MetLife if it isn’t a bank holding company, Binner and Nadel said. To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-09-18 | Bloomberg | Buffett’s 9% Heinz Dividend Means 3G Cutting Jobs, Mini-Fridges | HJ Heinz Co.’s longtime leader Bill Johnson stood in the Veranda ballroom at the Four Seasons Hotel San Francisco , addressing the ketchup maker’s top 50 executives for the last time. Around the corner in a smaller room, his successor as chief executive officer, Bernardo Hees, waited to tell some of the same managers whether they still had jobs. What was slated as an annual leadership meeting became an opportunity for Hees to dismiss 11 senior executives , according to three people familiar with the gathering, who asked not to be identified because it was private. The June 17 session was about a week after Heinz’s $23.3 billion sale to Warren Buffett ’s Berkshire Hathaway Inc. (BRK/A) and Jorge Paulo Lemann ’s 3G Capital. Since taking over at the Pittsburgh-based ketchup maker, Hees eliminated hundreds of jobs , grounded corporate jets and pulled the plug on mini-fridges at the office. Savings will help pay down $12.6 billion in borrowing supporting the deal. “The more cuts, the more quickly they can reduce the debt,” Dave Novosel , an analyst at Gimme Credit LLC, said in an interview. “It makes the math work better.” The management turnover contrasts with Berkshire’s normal approach. When Buffett buys a company, he typically leaves senior employees in place and commits to holding the business forever. The practice makes Berkshire a buyer of choice for many sellers, he’s said. Heinz isn’t “the classic Buffett playbook, which is buy a great business and pretty much leave it alone,” said Jeff Matthews , a Berkshire shareholder and author of books about the company. Buffett’s Dividend Annual interest expense at Heinz probably doubled to $560 million since the takeover, Novosel said. Omaha, Nebraska-based Berkshire also holds $8 billion in preferred stock that receives a 9 percent dividend, or $720 million a year. Managing those costs falls to 3G. While Buffett committed more than $12 billion to the deal and has 50 percent of the common equity, Lemann’s firm is in charge of operations at the world’s largest ketchup maker, which also sells Ore-Ida potato snacks and had 31,900 employees at the end of its fiscal year. An August memo obtained by Bloomberg News outlines new rules. They limit printing to 200 pages a month per employee and restrict color pages to “customer-facing purposes.” Employees can spend no more than $15 a month on office supplies and are expected to reuse items such as box files. To save on electricity, mini-refrigerators “are not permitted moving forward” and staff should rely on appliances in common areas. Such measures suggests there’s not much fat to trim, said Noel Hebert, chief investment officer at Bethlehem, Pennsylvania-based Concannon Wealth Management. Under pressure from investor Nelson Peltz in 2006, Johnson embarked on a plan to lower expenses by $355 million. Consumer Focus “When you start getting down to the amount of paper you can use, it’s telling you the obvious stuff is gone,” said Hebert, whose firm manages about $250 million. Heinz shook up leadership to promote accountability and faster decision making, according to a statement from Michael Mullen , a spokesman who declined to comment on the analyst’s estimates or accounts from people who requested anonymity. “Heinz will reinvest more of our dollars where they directly impact our business -- in our brands and our products, and most importantly, in benefiting our consumers,” he said. Employee spending on business trips was limited to $45 per day for food and incidentals, two of the people said. The aviation department, which included two leased aircraft and a company-owned Gulfstream IV, was shut, according to one. Office Jobs Office jobs have been a particular target for Hees. About 600 were cut in the U.S. and Canada , the company said in August, the month it announced about 250 positions were in jeopardy in the U.K. and Ireland. Heinz expects annual savings of about $150 million from 1,200 job cuts, according to a filing last week. Management set a goal for margins of about 30 percent on earnings before interest, taxes, depreciation and amortization, one person said. That’s akin to profitability at Google Inc. and Apple Inc. and double what food makers like Mondelez International Inc. and Kellogg Co. make, data compiled by Bloomberg show. Heinz’s margin was about 17 percent in the fiscal year ended April 28. Heinz posted $2.01 billion in Ebitda last year on $11.5 billion in revenue. After interest, capital expenditures , dividends and other costs, the company generated $325 million in free cash flow , according to Novosel. He estimates the figure will fall to $250 million this fiscal year on payments to Buffett and creditors. 3G Managers 3G has a playbook for costs dating to the early 1980s, when Lemann’s longtime partner Carlos Alberto Sicupira ran Brazilian retailer Lojas Americanas SA. There, according to a 2004 Harvard Business School case study, Sicupira implemented zero-based budgeting to control costs. The approach requires managers to develop annual budgets from scratch, rather than use the previous year as a baseline. Some managers found zero-based budgets an effective tool in their examination of costs, according to Donald Sull, who co-wrote the case study and is now a professor at the London Business School. Hees ran Burger King Worldwide Inc. for 3G before taking over at Heinz. Paulo Basilio, a 3G partner, was named Heinz’s chief financial officer in June. The new head of operations is a 14-year veteran of All America Latina Logistica SA, which Lemann and his partners once controlled. Craziness Shunned The cuts at the 144-year-old company pushed some executives to weigh leaving Heinz, the people have said. The new management sought to build spirit by embroidering employees’ shirts with the ketchup maker’s logo and has proposed composing a company song, one person said. Some of the expense-cutting push echoes values Buffett instilled at Berkshire. The billionaire has been drawn to businesses, like auto insurer Geico, that are low-cost operators, and celebrates a culture of thrift. Hiring and acquisitions increased Berkshire’s workforce by 6.5 percent to about 288,500 last year, he told shareholders in a March letter. “Our headquarters crew, however, remained unchanged at 24,” he wrote. “No sense going crazy.” In opening remarks at the San Francisco meeting, Hees discussed his intention to take Heinz public again, the people said. Burger King returned to the stock market in 2012, less than two years after 3G bought the Home of the Whopper. Buffett’s Plan Buffett “has no plans to ever sell a share of Heinz stock,” his assistant said in an e-mail. The billionaire declined to comment on job cuts or Matthews’s remarks. Steve Lipin, an outside spokesman for 3G who works at Brunswick Group, declined to comment. By going private, Heinz eliminated a common-stock dividend that cost $666 million last year. 3G pushed for the deal to be completed ahead of schedule to avoid a quarterly payout, said two people familiar with the transaction. Even with added interest expenses, Heinz has steady cash flow to cover obligations and reduce leverage, said Gimme Credit ’s Novosel. That helped win record-low borrowing costs for a U.S. junk-rated business in March. Heinz’s 4.25 percent notes due in 2020 traded at 94.38 cents on the dollar on Sept. 13 to yield 5.21 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Novosel estimated in a July note that Heinz will be able to pay down about $250 million of debt this fiscal year without tapping its cash pile. Still, lowering leverage “is going to be a long-term project,” he said. To contact the reporter on this story: Matthew Boyle in London at mboyle20@bloomberg.net ; Noah Buhayar in New York at nbuhayar@bloomberg.net To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net ; Celeste Perri at cperri@bloomberg.net |
2024-09-05 | Bloomberg | Yuan Forwards Gain a Second Day on Optimism Economy Stabilizing | Yuan forwards advanced for a second day on speculation reports on factory output and trade will add to evidence that a slowdown in the world’s second-largest economy is bottoming out. The People’s Bank of China raised the yuan’s daily fixing for the first time in three days ahead of data next week that may show exports and industrial production increased in August, according to separate Bloomberg surveys. The official manufacturing Purchasing Managers ’ Index jumped to a 16-month high in August, according to a report on Sept. 1. “Domestic economic indicators are a bit more stable,” said Suan Teck Kin, an economist at United Overseas Bank Ltd. in Singapore. “The appreciation path for the renminbi is continuing despite what’s happening in the emerging-market space.” Twelve-month non-deliverable forwards rose 0.04 percent to 6.2312 per dollar as of 10:52 a.m. in Hong Kong , according to data compiled by Bloomberg. The contracts earlier reached 6.2295, the highest since May 29, and last traded at a 1.8 percent discount to the onshore spot rate, which was little changed at 6.1190 in Shanghai. The PBOC raised the yuan’s reference rate by 0.05 percent to 6.1696 per dollar. The currency is allowed to diverge a maximum 1 percent from the fixing. The yuan has appreciated 1.8 percent this year, the only currency showing a gain among 24 emerging-market exchange rates tracked by Bloomberg. Enhance Coordination China’s growth is still unbalanced as wealth management products and trust businesses bring systemic risks, Hu Xiaolian , the central bank’s deputy governor, said at a conference in Beijing today. China must enhance coordination between monetary policy and regulatory policies, Hu said. In Hong Kong’s offshore market, the yuan traded at 6.1135 per dollar, compared with 6.1137 yesterday, according to data compiled by Bloomberg. One-month implied volatility in the onshore yuan, a measure of expected moves in the exchange rate used to price options, fell one basis point, or 0.01 percentage point, to 1.06 percent. Sheng Songcheng, head of PBOC’s statistics and analysis department, said conditions and timing are gradually maturing for China to accelerate the opening of the yuan’s capital account, China Securities Journal reported today. The U.S. is ready to stop its monetary-stimulus policy and this may bring changes to global money flows, according to Sheng. To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net |
2024-08-06 | Bloomberg | Berkshire Profit Jumps on Buffett's Goldman Sachs Investment, Derivatives | Berkshire Hathaway Inc. (BRK/A) said second- quarter profit rose 74 percent on gains from Chairman Warren Buffett ’s investment in Goldman Sachs Group Inc. (GS) and improved returns from derivatives. Net income advanced to $3.42 billion, or $2,072 a Class A share, from $1.97 billion, or $1,195, a year earlier, the Omaha, Nebraska-based company said yesterday in a statement. Operating earnings, which exclude some investment results, were $1,640 a share, beating the $1,624 average estimate of three analysts surveyed by Bloomberg. Buffett, who is also chief executive officer, is seeking deals with the cash he collects from Goldman Sachs and other firms that turned to Berkshire when traditional sources of financing dried up in 2008. The $5 billion investment in New York-based Goldman Sachs paid annual interest of 10 percent. Repayment of the funds led to an after-tax gain of about $806 million in the second quarter. “He was pretty smart,” said Paul Howard , director of research at Solstice Investment Research in Glastonbury, Connecticut. “When you’re willing to go against what the masses are doing, that’s when you make your money.” Book value, a measure of assets minus liabilities, rose in the three months ended June 30 to $163 billion from $160.1 billion on March 31. Cash holdings climbed to $47.9 billion on June 30 from $41.2 billion at the end of the first quarter. Credit-Default Swaps Credit-default swaps, in which Buffett bets on the solvency of borrowers, gained $142 million after posting a $320 million loss a year earlier. The loss on equity derivatives narrowed to $271 million from $1.8 billion in last year’s second quarter. Berkshire receives coupons of at least 10 percent on more than $7 billion that Buffett invested in 2008 in General Electric Co. and Wm. Wrigley Jr. Co. Buffett’s 2009 investment in Swiss Reinsurance Co., which was repaid in January, gave Berkshire a 12 percent dividend. Buffett agreed in March to buy Lubrizol Corp., an engine- additives maker, for about $9 billion. That deal, following Berkshire’s $26.5 billion takeover of railroad Burlington Northern Santa Fe last year, positioned the company to benefit from an expansion in trade inside the U.S. and internationally. Buffett has said he’ll consider acquisitions outside the U.S., and he visited Korea and India this year. Burlington Northern contributed $690 million in net earnings in the second quarter, compared with $603 million a year earlier. The railroad said yesterday it will pay a $750 million dividend this month. Equity Derivatives Berkshire has declined 11 percent on the New York Stock Exchange this year. The company faces a sluggish U.S. economy , declining world equity markets and reinsurance claims tied to Japan ’s biggest earthquake. Berkshire said the equity derivatives loss was due to a weakening in the U.S. dollar. Buffett uses the contracts to place long-term bullish bets on stock indexes in the U.S., Europe and Asia. Buffett’s firm spent $3.62 billion on equities and $2.78 billion on fixed-maturity securities in the quarter. He sold about $200 million of stocks and $488 million of fixed-income holdings. The stock portfolio rose to $67.6 billion at the end of the second quarter from $63.2 billion on March 31, as Buffett speculates the U.S. will avoid slipping into a second recession. “I see nothing that indicates any kind of a double dip,” Buffett said in a Bloomberg Television interview last month. “I would bet very heavily against that.” Stock Portfolio Berkshire’s holdings of stocks it labeled “commercial, industrial and other” jumped 39 percent in six months to $15.5 billion at the end of the second quarter. Buffett hired former hedge fund manager Todd Combs last year to help him pick stocks. Berkshire added a stake in MasterCard Inc. in the first quarter, the only publicly disclosed addition to its U.S. stockholdings this year. The company hasn’t filed its second-quarter stocks statement yet. Berkshire boosted its holdings of foreign government securities 8.7 percent in three months to $13.3 billion on June 30, on an amortized cost basis. Pretax net investment income, which includes stock dividends, bond coupons and interest payments on investments in GE and Wrigley fell 6 percent to $1.4 billion at Berkshire’s insurance operations. Underwriting Insurance underwriting profit swung to a pretax loss of $9 million compared with a gain of $716 million a year earlier. The gain at Geico fell by about half to $159 million on the higher frequency of claims and an increase in catastrophe costs as the U.S. was struck by an above-average number of tornadoes. Berkshire Hathaway Reinsurance Group, which specializes in large risks, had a loss of $354 million, compared with a gain of $117 million. Earnings from Berkshire’s MidAmerican Energy Holdings decreased 7.7 percent to $215 million as profit slumped at PacifiCorp., a power-producing unit. PacifiCorp. operates in the U.S. Northwest, a region where increased hydroelectric and wind generation helped push down electricity prices. Pretax earnings at Marmon climbed 25 percent to $273 million. The business, purchased from the Pritzker family in 2008, has operations including railroad tank cars and the production of wire and cable products. Profit at furniture stores, jewelry shops and the candy business climbed 64 percent to $46 million. To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net |
2024-01-04 | Bloomberg | Taiwan Dollar Trades Near One-Week High on U.S., German Data | Taiwan ’s dollar traded near the strongest level in more than a week after economic data from the U.S. and Germany boosted optimism that global growth is intact. Bonds were steady. The MSCI Asia-Pacific Index (MXAP) of stocks rose 1.1 percent after reports yesterday showed U.S. factories expanded in December at the fastest pace in six months and Germany’s unemployment fell more than forecast. The central bank will maintain order in the currency market if irregular volatilities occur, the monetary authority said in a statement on Dec. 29, “We’ve been getting positive U.S. economic data recently, and that has led to some weakness in the greenback,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan in Taipei. “The central bank has indicated the Taiwan dollar will stay stable in the coming months.” The island’s dollar was steady at NT$30.290 against its U.S. counterpart and touched NT$30.180 earlier, matching the Jan. 2 level which was the strongest since Dec. 22, according to Taipei Forex Inc. The yield on the 1 percent bonds due January 2017 was little changed at 0.993 percent, prices from Gretai Securities Market show. Inflation (TWCPIYOY) accelerated to 1.1 percent in December, from 1 percent in November, according to the median estimate of economists surveyed by Bloomberg before data due tomorrow. The government sold NT$40 billion ($1.3 billion) of five- year notes at 1 percent yesterday, matching the median estimate in a Bloomberg survey. That compared with a rate of 1.08 percent at an October sale of similar-maturity securities. The offer drew a bid-to-cover ratio of 2.13 times, the highest since 2010. The overnight money-market rate (NTON) , which measures interbank funding availability, was steady at 0.4 percent, according to a weighted average compiled by the Taiwan Interbank Money Center. To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net |
2024-05-31 | Bloomberg | Republicans Attempt to Repeal Taxes for U.S. Health Law | Efforts to repeal taxes imposed by President Barack Obama ’s health-care law advanced in Congress as Republicans sought to save medical-device makers $29 billion in levies and consumers $4 billion in out-of-pocket drug costs. The U.S. House Ways and Means Committee voted 23-11 to eliminate a 2.3 percent tax on hip implants, pacemakers and other devices sold to hospitals; and voted 24-9 to end a ban on the use of pretax flexible spending accounts to buy nonprescription medicines such as Johnson & Johnson’s (JNJ) Tylenol. Obama’s almost $1 trillion, 10-year plan to overhaul the health-care system passed Congress in 2010 without a single Republican vote. The law, known as the Affordable Care Act, is being challenged before the Supreme Court. It is expected to expand insurance to more than 30 million Americans after its main provisions take effect in 2014, funded partly by taxes, product discounts and other costs agreed to by drug companies, hospitals and insurers in exchange for increased business. “The GOP continues to strongly oppose the ACA and is always searching for ways to prevent the implementation of any tax or fee that would help pay for this law,” said Steven Irizarry, a partner at the Washington-based lobbying firm Roberti White LLC. “It doesn’t hurt that it’s an election year, and that the ACA continues to remain as unpopular as ever.” The Joint Committee on Taxation has said that repealing the two provisions of the health law would cost the government almost $34 billion through 2022 in lost revenue. The Republican- led Ways and Means Committee sent the bills to the House for a vote next week. The repeals must pass the Senate, controlled by Obama’s fellow Democrats, and gain the president’s signature to become law. Cost Burdens Device makers say they can’t afford the industry tax, which is set to take effect next year. The Advanced Medical Technology Association , a Washington-based lobby group representing Medtronic Inc. (MDT) , Boston Scientific Corp. (BSX) and other device makers, says the levy will push companies to other countries and hurt innovation. “This tax will harm the device and diagnostics industry’s ability to invest in hiring and medical progress,” Wanda Moebius, a spokeswoman for AdvaMed, said in an e-mail. “We are pleased repealing it has generated strong momentum.” House Speaker John Boehner , an Ohio Republican, echoed the arguments today, telling reporters that unless repealed, the tax “will drive up the cost of health care in America and drive many of these companies overseas.” The tax applies to all devices sold in the U.S., even those made in other countries, said Representative Sander Levin of Michigan , the top Democrat on the Ways and Means Committee. Bottom Line “In full public view this issue was vetted,” Representative Richard Neal, a Democrat from Massachusetts , said. “It was transparent and the industry by and large bought in as long as the tax was applied to foreign competition, that was the bottom line.” Two Democrats voted to repeal the tax, Representatives Ron Kind of Wisconsin and Shelley Berkley of Nevada. Other Democrats were sympathetic to the device industry while stopping short of supporting the repeal because Republicans hadn’t proposed how to pay for eliminating the tax. “Without the pay-for it makes it difficult to proceed,” Representative Xavier Becerra , a Democrat from California, said. A Senate bill, S. 17, the Medical Device Access and Innovation Protection Act, to repeal the tax has 26 sponsors, all Republicans. Minnesota Democrats Amy Klobuchar and Al Franken , who haven’t signed on to the bill, have said they support relieving the burden on device makers in some way. Medtronic, the world’s biggest maker of heart-rhythm devices, is based in Minneapolis. St. Jude Medical Inc. (STJ) , No. 2 in the market for those devices, is based in St. Paul , Minnesota. Drug Accounts The House bill is H.R. 436, the Protect Medical Innovation Act of 2011. The bill to reverse the over-the-counter prohibition is H.R. 5842, the Restoring Access to Medication Act. The Joint Committee on Taxation estimated allowing over- the-counter medicines to be included as flexible spending account expenses would cost the federal government $4 billion in anticipated revenue from 2013 through 2022. Every dollar spent on nonprescription medicines saves the U.S. health-care system as much as $7, a total of $102 billion each year, according to a Booz & Co. study released in January by the Consumer Healthcare Products Association. The association serves as the Washington lobby group for over-the-counter drug companies, such as Allegan, Michigan-based Perrigo Co. (PRGO) A third bill today, the Medical FSA Improvement Act, or H.R. 1004, lets employees cash out unused flexible spending dollars, as much as $500, and have it taxed as wages. Under current law, employees must forfeit money they don’t use. To contact the reporter on this story: Anna Edney in Washington at aedney@bloomberg.net To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net |
2024-06-16 | Bloomberg | Kotak’s Shanbhag Says RBI May Continue to Raise Interest Rates | Sudhakar Shanbhag, the Mumbai-based chief investment officer at Kotak Mahindra Old Mutual Life Insurance Ltd., comments on the outlook for India ’s debt and equity markets after the central bank raised rates for the 10th time since start of 2010. The Bombay Stock Exchange’s Sensitive Index fell 0.6 percent to 18,024.30 at 1:22 p.m. local time, set for its lowest close since May 25. The Reserve Bank of India lifted the repurchase rate to 7.50 percent from 7.25 percent, extending the longest streak of monetary tightening in a decade after inflation accelerated. Shanbhag, who managed about $1.9 billion in assets at the end of March, made his comments in an e-mail. "The latest readings on inflation and industrial output are making the balancing act between growth and inflation more challenging. "The RBI has chosen inflation control as its main focus at this point of time and will most probably continue on the rate tightening mode until clear signs of inflation control are in sight." On the debt market : "The overhang of supply and probable slippages in the fiscal deficit numbers are in consideration as well as the growth moderation, which can impact long-term interest rates. "If the fiscal deficit numbers can be managed around the budgeted level, it can be a surprise to the market." On stocks: "The equity markets have largely discounted the higher inflation, interest rate environment and lesser growth relative to the previous year. The markets have absorbed a series of negatives and held up well over the last three to four months. "In the immediate future, a good monsoon and foreign funds flows can give a positive trigger to the market," while "global uncertainty and continued lack of progress on the development front locally can lead to corrections." To contact the reporter on this story: Shikhar Balwani in Mumbai at sbalwani@bloomberg.net ; To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net . |
2024-10-08 | Bloomberg | Protest-Friendly ‘Hipsters’ Dance With Midler to Put On Show | “F*cking Hipsters” at the New York Musical Theatre Festival is so of-the-moment it could have been inspired by the Wall Street protests now in their third week. In truth, it was conceived a year ago. A tuneful, comic concoction, it’s about an idealistic Brooklyn indie rock band encountering cynical greed that almost tears it apart. “In our show, the community wins,” said book writer Keythe Farley (who also wrote “Bat Boy: The Musical”) in an e- mail. “I hope that will be true for our country as well.” As the demonstrators camp out in Zuccotti Park a few blocks from the New York Stock Exchange, the show’s fictional band cohabitates in a Williamsburg, Brooklyn, loft. No one captures the occupiers’ do-it-yourself ethos better than Brandon Wardell , who produced the musical, is the lead actor and plays guitar and ukulele in the fictional band. (Wardell also acted in and was among the producers of Broadway’s “Catch Me If You Can.”) He and a producing partner, Randy Spence, invested some of their own savings toward the roughly $30,000 budget. They also raised $5,680 from 99 people via Kickstarter , the same Internet site through which “The Occupied Wall Street Journal” collected $55,000 and counting from contributors as of Friday afternoon. A few Broadway producers also chipped in. West Coasters Farley created “Hipsters” with fellow Los Angelenos Lori Scarlett and John Ballinger. Director and choreographer John Carrafa sat on the festival jury and helped select “Hipsters.” He said he liked it so much he decided to stage it himself. Because actors are paid just $500 for the NYMF run, many missed rehearsals to take more lucrative gigs. Carrafa himself pulled a near-all-nighter before the first preview, choreographing Bette Midler in an Acura car commercial on Long Island. “That’s how I make money, so I can do this,” he said. Holly Coombs, associate producer, drove a U-Haul truck the morning of the first preview with instruments and sets from a Chelsea rehearsal studio to the theater on West 42nd Street. “I’ve never driven in New York,” Coombs said. “I was terrified. Needless to say, I bought the $11 of insurance.” Farley said the song “F*ck On!” was inspired by recent protests in Wisconsin. He’s in solidarity with the Wall Street protesters. “If I hadn’t been so busy getting the show on its feet,” he said, “I’d have been down there marching with them.” “F*cking Hipsters” is at 1 p.m. today at 555 W. 42nd St. Information: http://www.nymf.org. To contact the writer of this column: Philip Boroff in New York at pboroff@bloomberg.net. To contact the editor responsible for this story: Manuela Hoelterhoff at mhoelterhoff@bloomberg.net . |
2024-06-18 | Bloomberg | Nalbandian’s On-Court Tantrum Is First to Bloody Tennis Official | David Nalbandian injured a line judge’s leg, the first time a tennis player bloodied an official during a tournament on the professional circuit. Police are investigating the incident. Nalbandian was disqualified from the June 17 Aegon Championships final at the Queen’s Club in London for kicking an advertising board into the leg of Andrew McDougall. London police said yesterday that they are looking into an assault complaint made against the player by an unidentified person. The 30-year-old Argentine, who was once ranked as high as third in 2006, may lose sponsors as he attempts to climb back from a season-opening ranking of No. 64. He’s 39th in the world before he forfeited the final of the Wimbledon tuneup against Marin Cilic of Croatia. “If I was advising one of his sponsors, I’d be telling them to drop him today,” Frank van den Wall Bake, who advises companies including Queen’s sponsor Aegon NV (AGN) on sports marketing, said in an interview from Hilversum, Netherlands. “In the top of tennis, this to my knowledge has never happened before,” None of Nalbandian’s sponsors, which include Argentina ’s Banco de Cordoba, had immediate reaction to the case. Aegon, an insurance company based in The Hague , Netherlands, said it wasn’t pleased. “It is shame for those watching from the stands and on TV that such a great game, and such a great tournament, was ultimately decided in this manner,” Mark Locke, a company spokesman, said in an e-mail. “This is a decision that has been made, through due process, by the ATP.” Nalbandian is scheduled to play at Wimbledon, the season’s third Grand Slam tournament, beginning June 25. There was no immediate comment from that tournament on his behavior or status for the event. Bloodied Nalbandian was leading 7-6 (7-3), 3-4 against Cilic when he was defaulted for unsportsmanlike conduct after reacting angrily to a break of serve. McDougall suffered a bloody gash to his shin where he was hit by the board. The Metropolitan Police said they were investigating a complaint against Nalbandian without identifying who filed it or whether they had spoken with the player. Nalbandian turned pro in 2000 and has earned close to $11 million in prize money. He was the Wimbledon runner-up in 2002. He’s also sponsored by racket manufacturer Yonex, French beauty brand Guinot and Argentine insurance company Rio Uruguay Cooperativa De Seguros Limitada, according to his website. Nalbandian won’t receive prize money of 36,100 pounds ($56,579) and 150 ranking points for reaching the final at Queen’s. He apologized to the crowd and McDougall after the outburst. He was also issued a 10,000 euro ($12,623) fine by ATP supervisor Tom Barnes for unsportsmanlike behavior. No Other Option “Once I saw the injury, no, that was not a judgment call,” Barnes told reporters. “I didn’t have any other option.” Barnes said it’s not the first time he’d seen an incident like the one at Queen’s on the men’s tennis tour, although it was the first time in a final and also the first time blood was drawn. “Per our normal procedures, the incident will be fully reviewed by the ATP,” Kate Gordon, a spokeswoman for the men’s tour, said in an e-mail. Seven-time major singles champion John McEnroe was the first tennis player to be disqualified in a Grand Slam event for misconduct since the sport went professional in 1968 when he was tossed from the 1990 Australian Open for breaking a racket and cursing after a call went against him. Wimbledon History In 1995, Britain’s Tim Henman was disqualified from Wimbledon in the men’s doubles, after he struck a ball girl following a missed shot. In the semifinals of the 2009 U.S. Open , an outburst over a foot-fault call cost thirteen-time Grand Slam singles champion Serena Williams the match against eventual champion Kim Clijsters. In last week’s French Open final, top-ranked Novak Djokovic of Serbia received a verbal warning from the chair umpire after breaking a courtside bench with his racket. Russian-born Anastasia Rodionova, who now represents Australia , was disqualified from the Cincinnati Open in 2007 for hitting a ball toward several fans who were supporting her opponent, Angelique Kerber of Germany. Down 0-1 in the deciding set, Rodionova smashed a ball that hit the front of the stands during a changeover, and was defaulted. In a televised court-side interview two days ago, Nalbandian initially apologized to the crowd, before criticizing the men’s tour. “I’m very sorry, I’m very sorry to do that,” he said, as parts of the crowd applauded. “But sometimes you get very frustrated here, on court, and it’s tough to control that. And sometimes I do mistake -- I agree with that. So it’s a very tough moment to end a final like that. But sometimes we feel so much pressure from the ATP, trying to play a lot of tournaments.” To contact the reporter on this story: Danielle Rossingh at the London sports desk on drossingh@bloomberg.net To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net . |
2024-03-21 | Bloomberg | Record China Bank Profits to Be Overshadowed by Bad Loans | China ’s biggest banks , set to post record profits for a fifth year, may report 2011 results marred by an increase in bad loans as an economic slowdown and faltering property market trigger defaults by borrowers. Industrial & Commercial Bank of China Ltd. , the world’s most profitable lender, and its four biggest local rivals may post a 15 percent increase in combined fourth-quarter net income when they report this month, according to analyst estimates compiled by Bloomberg. Their non-performing loans rose for the first time since the third quarter of 2008, the banking regulator said last month. China’s efforts to bolster banks’ risk buffers and curb inflation following a two-year, $2.7 trillion credit boom have pushed up funding costs, slowed the economy and triggered defaults, prompting Standard & Poor’s to warn March 12 that a jump in bad loans may curb profitability. Fresh evidence of mounting defaults may clip the average 42 percent rally in shares of the banks in Hong Kong over the past five months. “It’s time to take profits off the table,” said May Yan, a Hong Kong-based analyst at Barclays Capital Inc., who cut her rating on the industry to “neutral” last month, citing weakness in the economy and banking sector. “The rebound of NPLs is not temporary. It’s the beginning of a worrisome trend.” Rising Bad Loans Non-performing loans at Hong Kong-listed Chinese banks, which include Beijing-based ICBC, China Construction Bank Corp. and Agricultural Bank of China Ltd. (1288) , may rise an average 40 percent in 2012, Yan forecast. The bad-loan ratio at the five biggest banks could climb to about 1.9 percent in 2013 from 1.1 percent in 2011, she said. The economy expanded 8.9 percent last quarter, or at the slowest pace in 2 1/2 years, as Europe ’s debt crisis curbed export demand and the property market weakened. The slowdown has extended into this year, with factory output in the first two months rising the least since 2009, while home prices posted the worst performance in a year, data showed this month. Still, China’s 3,800 banks had fourth-quarter net income of $35.4 billion, a third more than the total earnings of 7,357 U.S. lenders including Bank of America Corp. and JPMorgan (JPM) Chase & Co., data from the China Banking Regulatory Commission and the Federal Deposit Insurance Corp. showed. The five largest Chinese banks accounted for 139.5 billion yuan ($22 billion) of profit, according to the analysts’ estimates. Roads, Bridges The earnings have been driven by accelerated loan growth after China’s government unveiled a 4 trillion-yuan stimulus package to bolster the economy following a slump in global equity and credit markets in 2008. That triggered an explosion in credit to local governments and property developers, and a surge in investments in infrastructure such as roads and bridges. A year after the boom ended in 2010, defaults began to climb. Bad loans at China’s five largest banks rose to 299.6 billion yuan as of Dec. 31, from 287.9 billion yuan at the end of September, according to data from the regulator in February. The non-performing loan ratio remained at 1.1 percent, it said. The actual increase in defaults is probably higher than the official data because lenders write off the worst assets at the end of the year, China International Capital Corp. analysts Mao Junhua and Luo Jing wrote in a note last month. Missed Repayments Mountain China Resorts Holdings Ltd., a partner of Club Mediterranee SA in China, said last week that it failed to repay 30 million yuan of bank loans on time. Shandong Helon Co., the fiber maker that in December became China’s first company to lose its investment-grade credit rating , missed 397 million yuan in loan payments in January. Publicly traded Chinese banks’ bad loans may jump 26 percent this year as the economy slows, while profit growth will be cut by almost half, to 15 percent, and the average net interest margin may shrink 4 basis points from last year’s 2.7 percent, CICC forecast. A basis point is 0.01 percentage point. “We are monitoring the NPL trend very, very closely, but it’s far from the stage of sending everybody into a panic,” said Yang Jianxun, a Shenzhen-based fund manager at Dacheng Fund Management Co., which oversees the equivalent of $12.7 billion. “The problem will be contained and banks’ valuations are still attractive from a long-term perspective.” Shenzhen Development Bank Co. (000001) , the first Chinese lender to report full-year earnings, posted a 26 percent increase in fourth-quarter non-performing loans following increased lending to smaller businesses, which have higher default rates, President Richard Jackson said on March 8. Bankruptcies, Suicides Among its branches, the ratio is the highest in Wenzhou , reflecting the difficulties faced by entrepreneurs in the coastal city, the bank said. More than 80 indebted businessmen in the small exporters’ hub disappeared, committed suicide or declared bankruptcy from April through September because of loans due to informal lenders, the official Xinhua News Agency said in October. Property companies listed in China and Hong Kong face a worse cash shortage this year than in 2008, when China’s house prices fell for the first time since people were allowed to own homes, CEBM Group Ltd., a Shanghai-based investment advisory firm, said in January. Residential prices will need to see a “meaningful correction” by falling 20 percent to 30 percent from last year’s peak before the government relaxes property rules, Qu Hongbin , an economist at HSBC Holdings Plc, said on March 19. May Avert Crash Prices may post a “single-digit” decline this year, billionaire developer Vincent Lo, chairman of Shui On Land Ltd., said in an interview in Beijing on March 8. The market won’t see a crash, he said. Premier Wen Jiabao , who this month pared the 2012 economic growth target to 7.5 percent, said home prices remain far from a reasonable level and relaxing restrictions on sales could cause market “chaos.” While Chinese banks’ bad debt have increased, total lending is growing faster. The ratio of non-performing loans to total credit should be “stable” after lending grew 15.8 percent last year, Morgan Stanley predicted in a March 7 note. Agricultural Bank, the nation’s third-largest lender, may report tomorrow that fourth-quarter profit rose 16.6 percent to 28.84 billion yuan, according to a Bloomberg survey of analysts. Construction Bank, the second-largest, is set to report a 29 percent gain on March 25. ICBC may say on March 29 that earnings rose 14 percent while Bank of China Ltd. (3988) , ranked No. 4, will probably post a 2 percent increase in profit. The four banks are all based in Beijing. Lower Valuations Shanghai-based Bank of Communications Co., the fifth- largest lender, may post a 6.9 percent increase in net income on March 28. The five banks are trading at an average 6.1 times their estimated earnings in 2012, compared with 9.5 times at New York- based JPMorgan and 13.8 times at Charlotte , North Carolina-based Bank of America, according to data compiled by Bloomberg. Standard & Poor’s warned last week that China’s banks could face a slump in earnings growth in 2012 due to a slowing economy, falling property prices and the challenges of refinancing “sizable” local government debt. The banks’ reported bad-debt ratio tied to local government financing vehicles is “not possible” unless they’re rolling over debt, said Liao Qiang, a Beijing-based S&P analyst. He estimated last year that as much as 30 percent of loans to such entities may sour without central-government support, and will probably be the biggest source of non-performing assets for the industry. Local Governments Yunnan Highway Development & Investment Co., a financing vehicle of the southwestern province, in April told creditors including Construction Bank (939) and ICBC that it wouldn’t be able to make principal payments on about 100 billion yuan of loans, Caixin Online reported in June. The provincial government later promised to assume payment. In northern Liaoning province, about 85 percent of local government financial vehicles didn’t have sufficient income to pay principal and interest payments on debt due in 2010, Caixin said in September, citing a speech by the head of the provincial audit office. China’s first audit of local-government borrowing showed 80 percent of their 10.7 trillion yuan of debt at the end of 2010 was bank loans and more than half will mature in 2011- 2013. More than 35 billion yuan of money borrowed for local development went into the stock and property markets or prohibited projects, the audit showed. The credit boom also sapped lenders’ finances. BoCom said last week it plans to raise 56.6 billion yuan in a private placement to boost its core capital adequacy ratio above the 9.5 percent minimum required under the new capital rules. Agricultural Bank’s core capital ratio at 9.36 percent as of Sept. 30 was also below the mandatory minimum. To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net |
2024-01-25 | Bloomberg | Goldman, Morgan Stanley Cut by JPMorgan on Capital Requirements | Goldman Sachs Group Inc. (GS) and Morgan Stanley were cut by an analyst at JPMorgan Chase & Co. (JPM) on concern that a U.S. regulatory proposal may make the banks’ capital requirements stricter than European rivals. The regulation draft released last month is an example that U.S. investment banks “operate with ongoing un-coordinated regulatory headwinds, reducing the competitiveness against European investment-bank peers,” Kian Abouhossein wrote in a note to investors today. He cut both New York-based firms, the U.S. banks most reliant on trading, to “neutral” from “overweight.” The proposal addresses a mandate from the Dodd-Frank Act to remove credit ratings from banking rules. Alternatives to credit ratings could lead to increased capital requirements, specifically from higher risk weightings for securitizations and corporate debt exposures, Abouhossein wrote. The regulation draft would likely cut his estimate for Goldman Sachs’s Basel III Tier 1 common-equity ratio at the end of this year to 8.5 percent from 9.7 percent, and Morgan Stanley (MS) ’s to 9.1 percent from 9.9 percent, Abouhossein wrote. That would limit the banks’ ability to repurchase shares, he wrote. The proposal was released in December by the Federal Reserve , the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. It’s part of a U.S. effort to implement global capital rules revised in 2009 by the Basel Committee on Banking Supervision, which coordinates global regulation. The so-called market-risk rules, which cover assets on bank trading books, were supposed to be in place by the end of 2011. A European Union version went into effect Dec. 31. The Dodd- Frank Act’s credit-ratings ban slowed the process in the U.S. as regulators devised an alternative. Congress barred ratings after firms including Moody’s Investor’s Service and Standard & Poor’s gave their highest grades to mortgage-backed securities, which allowed lenders to treat them as risk-free. The proposed rules could be revised after a public comment period that ends Feb. 3. A final version may be published a few months later, according to regulators. To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net |
2024-12-08 | Bloomberg | Bachus Selected by Republicans as Wall Street Overseer | U.S. Representative Spencer Bachus has been selected by House Republicans to become chairman of the House Financial Services Committee when his party takes power next month. The Alabama lawmaker, who has been the panel’s top minority member since 2007, was chosen during a closed-door conference meeting in Washington today. He will replace Representative Barney Frank , the Massachusetts Democrat who led the committee during the worst financial crisis since the Great Depression and spearheaded the regulatory overhaul that bears his name. Bachus, 62, is aligned with Republicans pushing for free markets and less-intrusive regulation. From the beginning of debate over what became the Dodd-Frank law, he led opposition to measures such as resolution authority to wind-down failing firms, calling them “back-door bailouts.” He also fought against the Consumer Financial Protection Bureau, and questioned the legality of President Barack Obama ’s appointment of Harvard Law School Professor Elizabeth Warren to an advisory position. “We are committed to going title by title through the 2,300 page Dodd-Frank Act to correct, replace or repeal the job- killing provisions that unnecessarily punish small businesses and community banks that did nothing to cause the financial crisis,” Bachus said today in a statement. ‘Oversight Role’ Bachus said he plans to “reinvigorate the committee’s oversight role,” aligning with fellow Republicans including Representative Darrell Issa of California, the incoming chairman of the House Oversight and Government Reform Committee, who have pledged to keep watch on Obama administration initiatives. Bachus received the endorsement of the Republican Steering Committee in a closed-door vote yesterday, helping clear the way to his selection by the full group of House Republicans. The slate chosen by the panel -- made up of House leaders, incoming committee chairmen and members representing different parts of the country -- is traditionally accepted by the conference. “Members of our new majority have made a pledge to America to focus on the American people’s priorities -- helping small businesses create jobs, cutting spending, repealing the job- killing health care law, protecting life and reforming the way Congress works,” Representative John Boehner of Ohio, the incoming House speaker, said yesterday. The new chairmen are “committed to advancing these priorities,” he said. Representative Ed Royce of California mounted a challenge to Bachus’s bid to lead the committee that oversees Wall Street, citing his own leadership in efforts to rein in Fannie Mae and Freddie Mac before losses linked to subprime mortgages forced the government-backed firms into U.S. conservatorship. Royce and Bachus made presentations to the steering panel last week. ‘Many Challenges’ “I would like to congratulate Congressman Spencer Bachus on his selection as chairman of the Financial Services Committee,” Royce said yesterday in a statement. “During this critical time in our capital markets and our economy, I am committed to working with the chairman and members of the committee to address the many challenges we face.” Bachus received $752,200 in the 2009-2010 election cycle from individuals and political action committees aligned with finance, insurance and real-estate companies, according to the Center for Responsive Politics. Frank, who will remain the senior Democrat on the panel, received $986,657 over that same period. Bachus relied on his fundraising ability and relationships with Financial Services Committee members in the race for the chairmanship. The top seven Republicans on the panel -- the six ranking subcommittee members and the vice chairman -- signed a Nov. 5 letter supporting his candidacy. He led a Republican effort against Obama’s financial overhaul bill that “succeeded in driving the reform debate and denying the Democrats the political ‘win’ they so desperately needed in the wake of other unpopular Obama administration initiatives like health care and the stimulus,” the lawmakers said in the letter. To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net. To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net |
2024-11-14 | Bloomberg | U.S. Credit Swaps Rise to Highest in 3 Months; Eaton Sells Debt | A gauge of U.S. corporate credit risk reached the highest in more than three months before President Barack Obama meets with lawmakers in an effort to reach a budget accord to avert the so-called fiscal cliff. The Markit CDX North America Investment Grade Index, a credit-default swaps benchmark that investors use to hedge against losses or to speculate on creditworthiness, climbed 1.8 basis points to a mid-price of 108.5 basis points at 5:49 p.m. in New York, according to prices compiled by Bloomberg. That’s the highest close since 109 basis points Aug. 2. Investors are concerned that policy makers’ inability to reach an agreement to avoid $607 billion in tax increases and spending cuts may weaken the economic recovery and impair companies’ ability to repay debt. Obama called for Congress to immediately pass an extension of the Bush-era tax cuts for the first $200,000 of annual income for individuals and $250,000 for married couples. He said the rates on earnings above those levels should be allowed to rise when they expire at the end of the year. “The market is feeling a bit weaker and is focused much more in the U.S. on the fiscal cliff,” Dorian Garay, a money manager for an investment-grade debt fund at ING Investment Management, said in a telephone interview. “Both Europe and the fiscal cliff are large risks right now.” Obama met with a dozen corporate executives after the press conference and sits down with Democratic and Republican congressional leaders Nov. 16 for opening talks on taxes and spending. Fed Purchases Spanish workers staged a second general strike this year as unions across Europe prepared the biggest coordinated protests yet against budget cuts. A number of Federal Reserve officials said the U.S. central bank may need to expand its monthly purchases of bonds after the December expiration of its program of swapping short-term Treasuries for longer-term debt, according to minutes of their last meeting released today. The credit-swaps index typically rises as investor confidence deteriorates and falls as it improves. The contracts pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt. MBIA Swaps Contracts tied to MBIA Insurance Corp. were the most actively traded U.S. company swaps by gross notional value for the week ended Nov. 9, according to the Depository Trust & Clearing Corp. , which runs a central credit-swaps repository. Bank of America Corp. yesterday said it is seeking to buy the majority of a $329 million issue of parent company MBIA Inc. (MBI) bonds to block the company’s efforts to distance itself from the cash-strapped insurance unit. The total gross notional value of all single-name contracts rose 22 percent to $120.8 billion last week, according to the New York-based DTCC. Eaton Corp. (ETN) , the equipment maker that is acquiring Cooper (CBE) Industries Plc, sold $4.9 billion of securities in five parts to help fund its purchase, according to Bloomberg data. The company agreed in May to buy Cooper, a maker of electric-distribution equipment, for $11.8 billion. The average relative yield on investment-grade debt climbed 1 basis point to 1.3 percentage points, according to data compiled by Bloomberg. Neiman Marcus Credit swaps protecting the debt of Neiman Marcus Group Inc. dropped 46.7 basis points to 339.2 basis points as of 3:30 p.m. in New York, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. The contracts decreased the most since June 2009, Bloomberg data show. The company set the interest rate it will pay on a $500 million add-on term loan it’s seeking to refinance debt, according to a person with knowledge of the transaction. The debt, due in May 2018, will pay interest at 3.5 percentage points more than the London interbank offered rate, said the person, who asked not to be identified because the information is private. The risk premium on the Markit CDX North America High Yield Index, a measure of U.S. speculative-grade corporate debt risk, rose 12 basis points to a mid-price of 563.7 basis points, Bloomberg prices show. To contact the reporter on this story: Peter Rawlings in New York at prawlings@bloomberg.net To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net |
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